Why New Zealand is ready for the two-stage Managing Contractor approach
By Olivia Pearson and Cameron Dorward
There is a procurement approach quietly reshaping how complex buildings get delivered across the Tasman, and New Zealand is closer to embracing it than we sometimes realise. The two-stage Managing Contractor (MC) model — a distinct delivery model, not a flavour of D&C — has been giving Australian clients price certainty, programme certainty and better buildings for years, on precisely the kinds of projects our market is now being asked to deliver. It is a model built for the moment we are in: one that rewards collaboration, protects design quality, and gives every party at the table a clear reason to make the project succeed.
The idea in one paragraph
In Queensland practice the MC is typically appointed after design has been developed to around 30% (Schematic (AU) or Preliminary(NZ)) design by consultants working directly for the client under a client-side project manager, Development Approval (AU) or Resource Consent (NZ) is lodged and granted. The initial tender sets a target construction sum and a target completion date, and the MC is awarded on non-price criteria plus tendered management fees and margin. From that point the design team works under the MC, who leads design development to around 80% (Mid of detailed design) in conjunction with progressive client reviews and scope confirmations— driving both, scope and design definition and, creating project delivery certainty through buildability reviews, sequencing, programming and site logistics, cost planning, risk and opportunity assessments, and long-lead procurement considerations, all while the design is still shapeable. At 80% Design the MC submits a full tender as a Guaranteed Construction Sum (GCS) or for the context of NZ we will call it a Fixed Price Lump sum (FPLS), expected to come in below the original target. If the client accepts, Stage 2 moves to final documentation, subcontract packaging, construction and commissioning.
Consultant arrangements under the MC vary. Sometimes the whole team novates across. Sometimes the client retains only the architect or a specialist consultant and the MC brings in the rest — potentially including D&C subcontractors for some trades, typically building services and façade elements. The common thread is a single point of design leadership sitting with the contractor who will build the project.
What Clients get
The most striking thing about the model is how much of what clients say they want, it actually delivers.Â
Price certainty at the right moment. The commercial position is anchored early — target construction sum, target completion date, management fee (including consultant fees) and margin set at appointment — then firmed into a FPLS once the design is developed enough to justify it. The client is not paying for the contractor’s worst-case fears, and the contractor is not pricing an incomplete design it has not seen with high levels of uncertainty.Â
A better building. With the contractor leading design development, materials, sequencing, plant strategy, temporary works, procurement and trade logistics all get considered while they can still influence and improve the outcome. Value engineering happens organically as the design develops, rather than being applied later to strip it out cost the client can’t afford.Â
Real agency during design. Clients see cost implications develop in real time and can make choices — principal requirements and design brief adjustments, specification changes , programme priorities — before they become variations. The conversation moves from “how much will that change cost me?” to “here are the options, here’s what we recommend and why, which one do you want?”Â
A team pulling in the same direction. With the contractor engaged early and rewarded a project for a well-developed design, incentives align from the outset. The design team gets a genuine buildability partner. The client gets a project team working together on the same problem, rather than a supply chain assembled to bid against each other.Â
What contractors and designers get
The benefits are not one-sided, and that is part of why the model is durable.Â
Contractors get certainty that their preconstruction expertise is being paid for as professional work, not absorbed as a cost of bidding. They get to shape the buildability of the design they will construct —   reducing programme, delivery risk and lifting the quality of the delivered asset. And they get a commercial position anchored from appointment, rather than one defended through variations.Â
Designers get an active buildability partner from day one, working alongside a contractor with the cost, programme and constructability intelligence to keep design decisions grounded. Complex detailing, coordination and long-lead specification decisions can be made once, with contractor input, rather than reworked under late buildability advice and construction site delivery pressures. This provides the designers with confidence that the design will not be subjected to endless optioneering and wheel spinning, and inefficient design development. This creates productivity gains for design consultants and once industry confidence is cemented around the MC approach, cheaper fees for the client. Â
Novation is intentional, forecast and engineered into the appointments from the outset, ensuring the professional-indemnity position can be worked through at the front of the project.Â
The appetite is already here
The encouraging news is that this way of working is not foreign to New Zealand — it is already showing up in fragments on the projects that need it. In a recent conversation with a client who had delivered a large build project, they described a Preconstruction Services Agreement (PCSA) their contractor had been engaged under, with the full design team employed under the contractor. The client paid a combined management and consultant fee against a single invoice through preliminary and developed design, with preliminaries-and-general, margin and a target cost brought together at around 70% design.
That is close to the shape of the Managing Contractor model, and a strong signal that New Zealand contractors and clients are already reaching for a two-stage structure when the project warrants it. The Australian MC approach takes it one step further by anchoring the commercial position — target construction sum, target completion date and management fee — at appointment, with the FPLS firmed at 80% DD. That earlier anchoring is what gives the client full certainty of the contractor’s incentives from day one, and gives the contractor the clearest possible reward for developing a well-shaped design.
The direction of travel is right. The opportunity is to make it more deliberate.
ECI, and where the MC model steps further
New Zealand has been running Early Contractor Involvement for some time, and ECI has done useful work in getting contractor’s practical delivery perspective into the room earlier. In practice, though, the NZ ECI role has often been advisory — the contractor consulted on constructability, sequencing and cost, but without contractual responsibility for how the design completion lands or the delivery implications it produces. Valuable input but limited in the impact it can have on the overall outcome and the project delivery certainty so importantly required by the development client.
The Managing Contractor model takes the same instinct — get the contractor in earlier — and gives it teeth. The contractor is not just advising the design team; the contractor is leading design development, accountable for the final design outcomes and their related programme and cost implications, culminating in the agreed FPLS, and rewarded a project for a well-developed design. The MC is the necessary next step for New Zealand teams that have already seen what early contractor input can add, and want a delivery model that lets that input actually drive and deliver the project outcomes.
How the model stays honest
Every procurement model needs guardrails, and this one has a well-tested set: competitive selection at Stage 1 on target construction sum, margin, target completion date, capability, methodology, team and management fee; a clear FPLS gate at around 80% Detailed Design, with the ability to retender if the number is not acceptable; risk is surfaced, priced and tested during design development including programme outcomes; and objective quality benchmarks such as mock-ups and performance specifications that keep design development distinct from scope change.
The FPLS gate deserves an honest note. Not every project converts at FPLS stage (doesn’t happen often) — that is the point of the gate — and when a project does not convert, the design team and contractor have to move on from work they have invested in, even though the contractor is paid for its work up to that moment. That is a feature of the model, not a bug: it protects the client’s ability to walk away if the number is not right, and keeps tension in the pricing the contractor puts on the table.
These guardrails are practical, translatable, and easy to embed in New Zealand contract structures. They are the reason the model continues to earn its place on major Australian public work.
Where the model earns its place
The Managing Contractor approach is at its best on projects where the cost of getting the design wrong is greater than the cost of a longer preconstruction phase — hospitals, custodial facilities, campuses, complex civic and cultural work, technically demanding commercial buildings and large-scale residential developments. These are the projects where buildability advice during design pays back many times over, and where price certainty at the right moment is genuinely valuable to the client.
Straightforward, repeatable typologies with a mature brief may not need the same preconstruction investment — and that is fine. Matching the model to the project is part of the discipline. For the projects that do warrant it, four things set the model up for success.
- The principal’s requirements — scope, performance outcomes, budget envelope, approvals status, quality benchmarks and non-negotiables — need to be clear before appointment.
- The commercial position needs to be anchored at signing.
- Fitness-for-purpose obligations need to be reconciled with the design team’s professional-indemnity cover.
- The entire market — contractors, consultants and clients — benefit from developing the muscle for genuine collaborative preconstruction through repeated projects and honest post-completion reviews.
None of these are new asks. They are already good practice on the best-run New Zealand projects. The MC model simply gives them a contractual home.
A model New Zealand is ready for
New Zealand construction has never had more talent, more digital capability or more appetite for collaborative delivery than it does now. Our contractors are more sophisticated in their preconstruction offering. Our design teams are increasingly fluent in BIM-led coordination and early buildability. Our clients — public and private — are rightly demanding better project delivery certainty from their professional teams, they are asking better questions about how projects get delivered and what genuine partnership looks like. All of the ingredients are here.
The Managing Contractor approach is a natural next step. It offers price and programme certainty at the point where those things can actually be committed to. It pays the design team properly for design work rather than for losing bids, and pays the contractor for the buildability expertise it usually absorbs as a cost of tendering, and rewards both with a project if targets are met. It gives the client real decision-making power during design, full line of sight into cost and programme as the design and cost develops, and a fully developed building on the other side. And it is proven at scale, across sectors and across governments of different political stripes on the other side of the Tasman.
New Zealand contractors and clients are already reaching for something similar through PCSAs on the projects that need it. The opportunity now is to embrace the model deliberately — to give it a name, a shape and a place in our procurement toolkit for the complex projects that warrant it. The certainty and the collaboration our sector keeps talking about are available. They are on the other side of a better process, and that better process is very much within reach.
How the two-stage Managing Contractor model answers the pressure points of a current single-stage D&C tender.
| Under current single-stage D&C | Under the two-stage Managing Contractor model |
|---|---|
|
Design development pushed into RFP responses, with large numbers of consultants doing rushed quality design work unpaid — a market-wide productivity loss. |
Preconstruction expertise is engaged and paid for as professional work, not absorbed as a cost of bidding. There is also adequate time to develop the design response. |
|
Tenderers often restricted from talking to incumbent consultants — pricing blind to known project risks and previous discussion history. |
The design team works under the MC through design development, so project knowledge is widely communicated and discussed. |
|
Incomplete site investigations at tender leave gaps in responsibility that surface later. |
Investigations, buildability and risk are identified and worked through during design development, before the GCS is fixed. |
|
Future MC design still leans on client-procured reports — the client keeps performance risk it thought it had transferred. |
A single point of design leadership sits with the contractor who will build, developed to around 80% DD before the FPLS is committed. |
|
Contractors cannot properly engage subtrades or specialists at tender for fear of exposing IP through uncontrolled industry communication channels to competitors. |
With the MC appointed, subtrade and specialist input can be brought in openly and transparently during design development, improving the design response and with it, project outcomes. |
|
Heavy tagged qualifications used to shield the contractor from vague or subjective PPR and scope wording. |
The commercial position is anchored at appointment — target sum, target date, management fee, agreed margin — then firmed into a FPLS once the scope and responding design are developed enough to justify it. |
|
To recover losses, contractors are left with little choice by to chase the lowest-cost conforming specification, to mitigate design development losses and maintain expected project margins. |
Value engineering engineers value into the design development, rather than being applied later to strip it out. The client benefits from these savings as part of the FPLS agreement. |
|
Disputes often follow when principals seek betterment against undefined PPR clauses. |
Objective quality benchmarks — mock-ups, performance specifications — keep design development distinct from scope change. |
|
MCs or subcontractors carry unforeseen D&C risk; clients pay again when a contractor fails. |
Risk is surfaced, priced and tested during design development. At the FPLS gate the client sees a fully developed number and can accept, retender or walk — so unforeseen D&C risk is either provisioned for in the price or exposed before commitment, rather than buried in a lump sum that fails later. |
Sources
- Infrastructure NSW, Procurement Methods Guidelines — nsw.gov.au
- Queensland Government, Department of State Development, Two-Stage Managing Contractor Procurement Methodology — qld.gov.au
- Australian Government Department of Defence (2026) Prepare tender documents: Managing Contractor Contract. Available at: https://www.defence.gov.au/business-industry/procurement/panel-arrangements/dip-major-construction/how-to-engage/managing-contractor-contract
- Office of the Victorian Government Architect, Procurement of Buildings and Infrastructure — vic.gov.au
- Massey University, A Contractual Framework for Two-Stage Early Contractor Involvement in New Zealand — massey.ac.nz
- Anderson Lloyd, Guide to Construction Law in New Zealand — nz
Written by: Olivia Pearson and Cameron Dorward
Olivia Pearson is a senior construction and property professional based in the Auckland, with experience across Architecture (Registered Architect), design management, digital delivery, and business development on major projects in New Zealand, Australia, and internationally. She writes on procurement reform, digital construction, and governance in the built environment.
Cameron Dorward is a 30-year experienced property development and construction professional based in Auckland. He has diverse and broad leadership experience across client-side development strategy and delivery; consultant-based project and design management; design and contractor procurement; construction site management and delivery; and business management, across major projects and businesses in New Zealand and internationally.