Pre‐project peer reviews in GMP/lump sum contracts

Abstract

Purpose

A “pre‐project peer review” (PPPR) is conducted by a construction company or CM‐at‐risk firm to mitigate or reduce project risks prior to committing to a guaranteed maximum price (GMP) or lump sum. The purpose of this paper is to find out the common PPPR practices that may affect the outcome of a GMP/lump sum contract and to provide guidelines to the construction industry for PPPR implementation.

Design/methodology/approach

A survey was administered to the top 400 construction companies listed by Engineering New‐Record that also includes the top 100 construction management firms. The closed survey method was used. Respondents were asked to select from multiple answers to each question. The survey preparers worked on the predetermined answers carefully to ensure that respondents are comfortable with their selections. For some questions, respondents were allowed to provide their own answers in addition to the selection.

Findings

Even though conducting formal PPPRs is not common practice in the industry, the results confirm the necessity and importance of this process in GMP or lump sum contracts. The other findings provide information about the current practices related to PPPR implementation. For example, more companies prefer conducting PPPRs on an informal basis; the PPPR team in most companies is composed of professionals in the local office with day‐to‐day responsibilities; the cost of PPPRs is included in the budget as part of overhead; and finally, a follow up process to PPPRs is conducted by many companies and is considered to be a critical by even those companies that do not conduct PPPRs.

Originality/value

A literature survey indicates that there are no published studies related to PPPRs. The study reported in this paper fills this gap.

Citation

Kaplanogu, S.B. and Arditi, D. (2009), "Pre‐project peer reviews in GMP/lump sum contracts", Engineering, Construction and Architectural Management, Vol. 16 No. 2, pp. 175-185. https://doi.org/10.1108/09699980910938046