FIXED PRICE FORMULA

Bovis has built Manchester's new indoor arena on a fixed price lump sum contract.

For Bovis, the pioneer of fee contracting, it was a radical departure from its normal operations. At the time of the contract announcement, surprise was expressed by rivals at the shift in strategy by the company.

Despite many of these competitors prophesying doom at the outset of the contract, it has gone smoothly. 'The project has been working very well,' said Peter Roberts, Bovis' project manager. 'It hasn't been adversarial at all.'

The key to this appears to have been the value engineering deals which Bovis has operated with not just the client and the designers, but also with its subcontractors, all of whom have been on fixed price contracts. But has there not been heated negotiations for extras and variations between Bovis and their subcontractors?

'We've had discussions,' said Roberts enigmatically. 'There is always risk to take on these contracts and we have shouldered a little more than usual.'

'We have had to accommodate some variations but you have to set up the packages right. Working on this sort of contract has not been very different from a normal project, we have the same sort of cost controls, but it does make you a bit more thorough.'

Would Bovis work on this basis again? 'In the right circumstances,' said Dennis Bate, managing director of Bovis North. 'If our client wants a fixed price and providing it's procured in the right manner - yes. We would have to have all the information and we wouldn't do it on a single stage basis.'

In this case the project was conceived in conjunction with developer Vector Investments, set up by the Inter City Property Group which Bovis had worked with over a number of years, and with an agreed fee in the early stages. Only once the concept had won approval and the design was known was the fixed price negotiated. So both partners were comfortable with this sort of arrangement.