Economic Value Added Assignment Example | Topics and Well Written Essays - 500 words

Economic Value Added - Assignment Example There are two main types of financing for a business, debt and equity financing. When accountants calculate net income, they deduct the interest expense (which is the cost of the debt capital). However, the cost of the equity is not taken into account. Therefore, the net income exaggerates the ‘true’ net income in economic terms. This flaw is overcome by the EVA method. A positive EVA indicates that value is being created i.e. value of the company increases by that amount. On the other hand, a negative EVA indicates that value is decreased and the company is now worth less than the initial capital employed (which is the assets from which earnings for the year are generated). (Russell) A value of zero means a sufficient achievement because shareholders have earned a return that just compensates for their risk. The term â€Å"Operating Capital† used in the EVA formula on the last page accounts for the interest-bearing debt, preferred and the common stock used to acquire the company’s net operating assets. In easy terms, it is the capital which was used to acquire net plant and equipment plus the net current assets. EVA = (Operating capital) * (ROIC – WACC) i.e. a firm adds value if it’s ROIC – Return on Invested Capital is greater than the WACC – Weighted average Cost of Capital. However, if WACC goes beyond the ROIC, then new investments in the operating capital will actually reduce the firm’s value. EVA is an estimate of a business’s true economic profit for the year, and if differs sharply for accounting profit. Accounting profit is basically determined without imposing any charge for the cost of equity capital and is therefore an overstatement in economic terms. However, EVA determines the residual income after accounting for all the cost of capital (debt and equity both) and provides a much better performance measure to the stakeholders. Misra, Anil and Kanwal Anil. "Economic Value Added (EVA) as the most

Response paper Essay Example | Topics and Well Written Essays - 750 words - 2

Response paper - Essay Example Then it is necessary to believe that it was compiled in the period when Jesus' disciples were alive. The mention of a murder in a temple that was found common in both Mathew and Luke indicates that the earlier version of "Q" was compiled after that, i.e. after the winter of 67/68. The usage of things in "Q" source by Mathew and Luke states that a Greek version of the text was also available before them. The most accepted form about the existence of "Q" is two-source hypothesis which was proposed by modern thinkers like Tuckett, Taylor (1953, 1959). This argument might have come from the fact that the composition of "Q" happened in different times and by different people. The first source can be considered as the earliest and the second source being the latest. The proclamations of judgment at the beginning and end of the document were directed against Israel. The usage of Greek in the source suggests that it can be the work of Galilean followers of Jesus. But there is a chance of Greek Diaspora outside the Galilean area contributing to text in "Q" like Paul who persecuted the Church with his Greek synagogues. This again confirms the time of compilation of the "Q" to the time of aftermath of winter of 67/68. ... 2. In what ways does God spell evoke the "silent film" era What might be its purpose for doing this Answer: The God spell evoked the "silent film" era in a manner of establishing the Jesus' command and divine authority. As the films were silent or narrated by background voice, the teachings and scriptures were minimized and the characterization of the Jesus as divine authority and his ascension to right hand of God was considered as the motto of the films. In doing so it reestablished the proclamation of divine authority than the scriptures and gospel. In silent film era more dramatization was required to exhibit the divineness of Jesus as there was very less chance of conversation. Though there was a conversation, it might present in the form of dialogues appearing on screen or a narration on backdrop. So the dramatization of events and the miracles used to play a major and key role in establishing the divineness of Jesus. The baptism of Jesus by John, the miracles of Christ, his crucification, resurrection, ascension come to the people in different ways in different era of the cinema. The God spell takes us to the dramatic and spiritual form of Jesus rather than historical Jesus in the latest films. In this manner it evokes our imagination about Jesus which can be compared with the sort of imagination that was formed in the minds of people by Jesus films in silent era. For instance in silent era more angles, more miracles, less gospel were used to fill the movie. As the time passes by the angles number decreased in the movies and the importance of scriptures increased there by. Though in God spell the singing of scriptures takes place, the importance was given for metaphoric baptism and for ascension

The analysis of the business strategies of Gene one Research Paper

The analysis of the business strategies of Gene one - Research Paper Example Moreover frequent changes in leadership in the Food and Drug Administration have further increased investors confidence in the same. Thus the board has made it a point to increase the company’s growth target by 40%. However this is not possible to happen without the company being made public in the coming three years. However, this is not free from some hurdles. It involves costs in the form of IPO capital for the new developments, costs in the form of advertisements and huge marketing expenses to retain success in the market. There is also an issue that investors have been becoming increasingly cautious about the biotech investments because of a prevailing scandal in human genome sequencing. Despite of the fact that it is a different company this is sure to create negative publicity for the industry at large. This would have to be overcome by showing that it possessed the leadership capacity and technology which was required to operate in future. Stakeholder Perspectives/Ethi cal Dilemmas The idea was to develop two new breakthrough technologies along with the development of six new and innovative products which would be based on the current technology. However, this would necessarily mean need for new technical expertise and skills which would consequently make the prevailing human expertise obsolete and redundant and this would consequently have impact on the employees in the organization. Changing the technology application and usage might call for job cuts and company downsizing. However, the situation would confront with certain ethical dilemmas and constraints. Job cuts would spoil the reputation of the company largely and abrupt changes in the present job structures and... The paper throws light on considerable opportunities for growth considering the high growth phase of the industry segment that the Gene One operates. However, in order to realize the ambitious goals of the company it is very essential to ensure organizational excellence. This calls for effective leadership skills on the part of the leader of the organization. The business leader must essentially have the vision and long term planning skills in order to ensure business growth. The leader must follow a democratic approach in dealing with the employees. This would ensure participation from all the quarters of the organization that would instill greater trust and confidence among the employees. In addition to this effective leadership in the organization would also ensure greater job satisfaction that would lead to motivation among the employees of the organization. This is very important as employees or the human resources are the ultimate assets for any organization and the success of an organization is highly dependent upon the performance of the workforce. Finally, there should be careful planning and co-ordination as well as risk management techniques that can help in monitoring and evaluation. An effective leader must also ensure complete responsibility of the entire project so as to ensure long term sustainable competitive edge for the organization in the long run so as to help make Gene One a corporate giant as well as a formidable brand in the global market and help maintain sustainability and profitability in the long run.

Personal journal entry Essay Example | Topics and Well Written Essays - 250 words - 1

Personal journal entry - Essay Example However, all the formatting methods must adhere to the required method selected by the institution for consistency. If these standards were not available, there would be chaos in writing because many methods of writing would be available and that would these would not be following a particular consistent strategy making it difficult to communicate between different individuals. In fact, there would be no communication because the formatting methods applied enable understanding and consistency. The audience determines the content and how the message needs to be delivered. One cannot generalise the message and the audience because every message must have be tailored to a specific audience. Selection of words while writing can depends on the formality, so that if the audience has high level of formality it is important to avoid using words with similar denotation that have different connotations like â€Å"aren’t mad† and â€Å"are not angry.† In terms of tone, the appropriate tone of word selected should match with the purpose of that word with the audience. The tone relates to emotion, attitude, seriousness, or humour. One should use humour when it is appropriate and resonate with the audience. The most important part is to avoid using slang word or using personal digressions in any form of

How is alienation portrayed in each character in both films, Sunset Term Paper

How is alienation portrayed in each character in both films, Sunset Boulevard and Mildred Pierce - Term Paper Example In the modern viewer’s perspective, one could get the historical background even without reading about it. Sunset Boulevard is a movie in the 50’s which portrays alienation in the main characters which would be the thesis of the paper together with a similar analysis of Mildred Pierce, another movie produced in 1945. In the first movie, the two main characters will be the foci of our discussion as they depict alienation in the movie. Joe Gillis, the male protagonist who is also the storyteller is one character who has shown most characterizations of alienation in the movie which started with his avoidance of the car dealers, knowing they are redeeming Gillis’ car to the company because of his failure to pay his monthly dues. Since he knew he was not able to pay his dues on time with his unsold scripts, he tried to escape the towing of his car by running and hiding away from them. When the young man lived in with the female protagonist, Norma, who was more than tw ice his age, he avoided his friend Artie Green and his girlfriend, Betty Schaefer. The latter is a reader who fell in love with his fiance’s friend, Gillis. She had been trying to contact the writer, wanting to collaborate on a script Gillis was not able to sell. Afraid that his friends might find out that he is living with an old woman, not to mention, a star who faded years ago, he tried to avoid the company. He even went to the point of telling the reader she could take his script and make it her own saying he abandoned writing altogether, trying to get rid of the Schaefer who was suggesting they write a script together. Wanting to get rid of the lady, he always spoke rudely to her but despite his efforts, the reader finally encouraged him to write as he himself can not forget his passion in writing. Despite this, he did not make known where he was staying and what circumstance he really was in until the lady confessed of her affections to him and was later called by Norma who was suspecting Gillis. The fear that his friends might laugh or make fun of him being clothed and pampered by an old woman could have been a reason for the young man not to reveal his status and alienating himself from his friends. Norma, on the other hand isolated herself from the world, keeping herself in the mansion after her fame faded. She lived a lonely life, dreaming about a beautiful life she could still live and hiding from the reality that she is not as famous anymore as she was before. Living on her past and living in a future comeback to the movies was her way of escape, abandoning the realities of the present. At the end of the movie, she abandoned reality altogether when she became delusional after killing Gillis. During the police’s interrogation, Norma seemed unable to hear anything, seemingly in a world so far away. Upon hearing the word ‘camera’ and being made to believe she was shooting for a movie, the actress reacted. Mildred Pierce is a story of a strong and ambitious woman who wanted the best for her children. The setting depicts the economic status during the time of the making of the film in 1945. After the war, unemployment was high and families were trying to get back to the life they once had. During this time, women were still believed to be more useful in the house while men were supposed to be working to bring home food for the family. However, it was also during this time that women were fighting for

Additive Layer Manufacturing for Aerospace Parts Essay Example for Free

Additive Layer Manufacturing for Aerospace Parts Essay ES Technology has revealed that additive layer manufacturing (ALM) for direct part production has been embraced by a number of manufacturing sectors, not least the aerospace industry The ability to produce components in a range of materials including hot-work steels, stainless steel, cobalt chromes and Inconel, plus titanium and aluminium alloys, presents the aerospace industry with large potential for direct part production using ALM. ALM has already been used to produce small and medium-sized aerospace components, and having realised the potential of the process, aerospace manufacturers are seeking to produce larger, more complex parts. Material Solutions operates an ALM applications development centre with a particular focus on the aerospace sector. Carl Brancher of Material Solutions, said: ALM in high-performance materials is well suited for complex thin-walled structures in gas turbines. However, as a new technology it is not yet well understood or validated by potential users and, like all manufacturing processes, to get the best from metal ALM requires the designer to understand the process capabilities and materials mechanical properties, he added. Brancher said Materials Solutions is bridging this gap by providing manufactured parts, consulting (principally to the aerospace market), and working with equipment and materials vendors to develop the technology for mass production. See more:Â  Masters of Satire: John Dryden and Jonathan Swift Essay The collaboration between Material Solutions and its industry clients has so far led to the production of a range of components over the last three years. This programme has now reached the limit of component size that can be produced using the existing Material Solutions ALM systems. With the continuing pressure from aerospace manufacturers to develop the capability to produce larger parts, Material Solutions turned to Concept Laser to explore the potential for building larger components using Concept Lasers M3 linear system. The fundamental principles of the M3 linear make it a novel development in the world of ALM. Unlike other machines the M3 linear does not have fixed optics but a combination of galvo scanning mirrors and linear direct drives to move the scanning head. Already used to build larger volume components, the M3 linear has all of the pre-requisites for up-scaling to enable production of the types of components envisaged by the aerospace industry. It is not only the physical attributes of the system that lend themselves to production of large components but the process control and laser scanning strategy already developed by Concept Laser, which will eliminate the potential pitfalls of accuracy errors on large components. Having established the potential of the M3 linear machine, Material Solutions set out to design a test component that would qualify certain build criteria and which could also be used to educate and inform aerospace designers of Additive Friendly design features and techniques. These include reducing supports and using larger flowing radii to assist in reducing the time to build and subsequently, component production and finishing costs. The test part incorporates many features such as small diameter holes, threaded features, thin rib sections and areas of thick material section all typically found in aerospace components. The greatest challenges for Concept Laser were that a component of this size had never before been built and added to this the part was required in an unexpectedly short timescale. The finished component demonstrates the current capabilities of the technology in terms of size (300mm diameter), accuracy and surface finish. While this part does not yet satisfy the ultimate demands of aerospace manufacturers it clearly confirms the capabilities of the process, the scalable potential of Concept Lasers M3 linear machine and the sound base which Concept Laser have for further development of the M3 linear for large aerospace components. There are also practical aspects to be considered when building large parts. Larger volume components require greater volumes of powder and hence a robust and stable platform to accommodate the weight. Having then built a large volume, and potentially very heavy component, safe and easy removal is essential. The M3 linear machine is built around a substantial fabricated framework and already incorporates a removable build module enabling the module and component to be easily positioned under an overhead crane if required. The success of this exercise and the current collaboration between Material Solutions and Concept Laser will be used to define the future strategies that will eventually see parts manufactured by ALM techniques leave the laboratory and take to the air.

Novating design team to a contractor

Novating design team to a contractor Synopsis Clients within the Construction Industry prefer to use the JCT Design Build Contract rather than other traditional procurements methods. Novation is a process that allows Clients to oversee the early stages of design development of a project and then transfer the responsibility for the design to a Contractor after the contract has been awarded. By transferring the responsibility to the Contractor through novation the Client takes minimum risk contractually while retaining an influence on project design from the initial stages. This process transfers maximum risk to the Contractor as he becomes responsible for all future design of a project and all past design completed up to the point of a contract being awarded, this includes any design errors. Both Contractors and Designers must work together closely on any design and build project, but particularly when novation has taken place. For a project to be profitable and be completed on time it is essential that there is a good working relationship between Contractor and Designer. Research to establish if the process of novation has an adverse affect on the working relationship between Contractor and Designer was conducted. The aims were to identify factors that may affect the working relationship of the two parties and to understand the opinions of both Contractors and Designers about what affect novation has on their working relationship. The objectives of the research were to highlight specific problems within the process of novation and recommend improvements to industry. To achieve this research in the form of a literature review, questionnaires and an interview with Contractors and a Designer was performed. The report recommendations are aimed at Clients to hold more pre-contract meetings with Contractors not just Designers, and understand the criteria a Contractor follows when appointing a Designer to ensure compatibility between parties when in Design and Build contract together. Acknowledgements I would like to express gratitude to the following people and organisations for their time, knowledge and support in assisting the in the successful completion of this research project: My final year Supervisor Dr Ron Craig of the Civil and Building Engineering Dept of Loughborough University, for constructive criticism and guidance throughout the process of developing the dissertation. HBG UK Ltd for using a lot of Commercial Managers, Design Co-ordinators, Legal Correspondents and Personnels time in completing the literature review and aiding in the data collection. The Commercial Manager of the second Contracting Company questioned The Architect questioned for his experience and opinions of the process of novation. Mr Andrew Moss for proof reading the final draft of this report and suggesting possible alterations. Chapter 1 Introduction 1.1 Introduction to Subject The Design and Build form of J.C.T contract (please see chapter 4.0) has become more popular with construction Clients that employ Contractors to construct new buildings and/or renovate existing structures. The Authors research has shown that the percentage of contracts tendered for under a Design and Build form of J.C.T has increased over the last five years. In conjunction with this the traditional form of JCT contract has decreased in popularity with Clients. In many cases the designs which make up part of the contract between the Client and Contractor, under JCT Design and Build, are completed by a Design Team on behalf of the Client before the contract between the Client and Contractor is made. To ensure that the Contractor who successfully tenders for a project retains the Design Consultant that the Client employed prior to the contract being made it is sometimes necessary for a Client to novate (please see chapter 5) the design team across to the Contractor. The purpose of this report is to investigate into the problems, if any, with the process of novating a design team to a Contractor from the Client and suggest solutions. This report will also detail the affects on the working relationship between the Contractor and the Designer, and how novation either aids or hinders the working relationship 1.1.1 Aims of Chapter One To introduce the Dissertation subject area. The reasons behind the investigation of this Dissertation. To outline the work carried out and a description of the contents of the Dissertation. Detail a well constructed hypothesis that the investigation will either prove or disprove. To outline a guide to the report, and introduce each individual chapter. To detail the aims of the report and the objective that must be achieved to meet the aims. 1.2 Rationale behind I nvestigation The interest into the investigation of Are there always problems with novating a design team to a contractor? came about after the Authors industrial placement. While working on site for a Contractor on a J.C.T. Design and Build contract where the design team was novated it became apparent to the Author that there were many differences of opinions between the Designers and the Contracting Company. The main items of debate and disagreement between the Contractor and the Design Team were the Clients requirements. In the Authors experience there was a large difference of opinion of how design changes and/or variations should be treated between the Design Team and the Contractor. Whilst profit-driven Contractor seemed to always look for the cheapest and most cost effective way of bridging any design problem; where as the Design Team gave the impression that they were more concerned about the aesthetics of the design and the Clients design opinions rather than the buildability and cost. Many design variations that were requested by the Client, or those forced upon the Contractor were not always as the Contractor had specified to the Design Team. The Contractor felt that his time was wasted by the Consultant not designing elements as originally specified. The working relationship between the Contractor and the Designer seemed to deteriorate from the project start date, until beyond the design completion stage. After the Author had asked other members within the Contracting Company about the novation of a Designer to the Contractor it became apparent that the relationship between Contractor and Designer was similarly affected on other projects. The Author had discussions with the Client of the project he was placed on. The Client stated that more building work was being undertaken using the J.C.T. Design and Build form of contract as this reduces the risk to the client and/or the person funding the project. The Author found that under Design and Build more risk was placed on the Contractor, and that management techniques had to change to appropriately manage higher risk projects. He also realised that as more contracts were being made under the Design and Build form of contract with the Designers being novated to work for the contractor a greater knowledge of the subject area would be beneficial to the Author in the management of Design and Build contracts. 1.2.1 Originality of Thought The Author had discussions with his Supervisor before commencing the research about the subject matter. A hypothesis was agreed upon that gave the Author scope to research areas of the process of novation in design and build contracting that have not previously been discussed in an undergraduates research project for the Supervisor. The process of novation being used in the design and build contract has recently become popular with Clients. The aim of the research is to establish if Contractors and Designers have not yet fully adapted to the change and improvements in the working relationship between the parties must be made to ensure that they remain competitive and profitable. 1.3 Subject Definition Novation is a process in which [1]a contract between party A and party C is turned into a new contract between party B and party C. This process can only be achieved if all three parties agree that novation can take place. A Deed of Novation[2] is commonly used to terminate a contract between parties A and B, and then create a new contract between parties A and C. There are standard legal documents, blank deeds of novation, which are available as downloads from the internet, for example at (www.citysolicitors.org.uk/legal_activities as of 28/03/06). A deed of novation has been used for many years before it became popular with Clients in the construction design and build context. It is used in the sale of manufacturing companies, where components made are used by other larger companies. For example, the purchase of a windscreen wiper company by a new owner whilst retaining the commitment to an existing customer car manufacturer. Novation has many other wider applications other than construction; Porsche in their latest brochure[3] offer a novated lease for their new motor cars. In this case an Employee of a company (the lessee) signs a lease agreement with Porsche (the lessor). A Deed of Novation, then supplied by Porsche, is signed by Porsche, the Employee and the Employer. This then transfers the responsibility for the payment to the Employer. Novation is used in a construction context where the relationship between two parties has developed over time and the introduction of a third or new party is necessary. There then needs to be provision to contractually protect the existing parties in the relationship. 1.4 Report Intention The intention of this report is to investigate how the working relationship between the Contractor and the Designer novated to the Contractor from the Client could be improved to their mutual benefit, and to the benefit of the Client. However, the report may show that there is no improvement to be made, and that the process of novation as it presently stands is adequate. 1.4.1 Aims To identify clearly factors that may affect the relationship between the Contractor and the Designer under novation To discover any adverse characteristics that may cause a poor working relationship between the Contractor and the Designer To clearly understand the opinions of Designers and Contractors that has been involved with novation To understand the attitudes of Designers and Contractors towards novation To clearly understand the definition of novation and the context in which it is used within the construction industry To identify any differences in attitudes between Contracting Companies towards novation under a J.C.T. Design and Build contract To understand why Clients now prefer to use the Design and Build form of contract rather than the Traditional contracts they favoured to use To identify why Clients within construction novate the Design Team across to the Contractor 1.4.2 Objectives To highlight specific problems within the process of novation that requires improving To investigate how the process of novation may differ between contracts and/or with varying Clients To identify differences between the Contractors and Designers opinion of novation under the J.C.T. Design and Build Contract To highlight areas within construction where it is necessary to use novation in Design and Build contracts To advise the Contracting Companies of the most economic way of managing a Design Team that has been novated by a Client To identify if a Contractor and Designer have a better working relationship, i.e. have a greater understanding of each others objectives and needs, under a traditional contract rather than novation under a Design and Build Contract 1.4.3 Hypothesis The working relationship between Contractor and Designer is adversely affected by Novation. 1.5 Overview of Research Methodology The methodology of the research for this project will take the form of the following; please see the methodology in chapter three for a detailed discussion on the report methods used: A review of past and current literature concerning the background of novation within the construction industry. A review of specific literature concerning the working relationship of a Contractor and Designer. Discuss the definition of novation within construction, and where it is most commonly used in the industry. Design a questionnaire to send out to a selected Contractor and a Designer. Design an interview format and questions for a specific Contracting Company to answer on the subject of novation. Design an interview format and questions following the results of the previous interview to issue a separate questionnaire to a different Contracting Company to analyse company differences. Analyse results gathered in the interview to form a conclusion about the effect of novation in construction. Make suggestions or recommendations to the industry and Clients within the construction industry. 1.6 Overview of Main Conclusions The Authors completed research shows that there are ten factors that could adversely affect the working relationship between a Contractor and a Designer under a novation agreement. The Author found through analysing an interview and questionnaires completed by two Contractors and an Architect that the reasons for novation having an adverse influence on the working relationship of a Contractor and Designer were that: The time allowed for Contractor to Tender is not increased The loyalty of Designer to Client remains evident after novation to the Contractor There is usually a large distance between the Designers head office and the project Insufficient design fees are allocated at the tender stage There is an increased risk of error in design There could have been a previously poor working relationship between the parties The Designer may be inappropriate for the project The performance of the Designer is not consistent throughout the process of completing the design Novation is usually late or rushed from the Client There is an increased probability of conflict between the two parties The Author found that many of these factors were specific problems which could be attributed to the process of novation under a design and build project. Therefore, the results support the hypothesis of the research. However, additional research is required if the hypothesis is to be proven to be correct. 1.7 Guide to the Report Chapter One: Introduction This section introduces the study and outlines the hypothesis, aim and objectives of the research. It indicates the origin of the Authors interest in the subject, why the hypothesis was chosen, and describes the methodology that was followed. Chapter Two: Literature Review This section examines the literature research conducted by the Author. It is an investigation into the definition of novation, and describes where it is used within the construction industry. This section details the current view of the contractor in a novation agreement. Chapter Three: Methodology This section of the report describes the methodology which was used to conduct this research. It shows how the information was collected. It also includes the topics covered within the interview and the design of questionnaires that were employed. Chapter Four: Design and Build Contracts This section describes the forms of J.C.T. contract used and highlights the advantages and disadvantages to the Design and Build form of JCT contract. It provides an introduction into Design and Build and details the differences between the Employers Requirements and Contractors Proposals that are a key feature of the Design and Build contract. Chapter Five: Novation This section of the report describes in detail the uses of novation within a construction context. It gives a definition to the process of novation as used in a Design and Build situation. This chapter details the conflict of interest the Contractor and the Designers tend to experience due to novation. It illustrates the problems that may arise in the design, payment of design fees and the varying levels of the Consultants performance. Chapter Six:Analysis This section of the report is the analysis of the questionnaires sent to Clients within the building industry and their Project Managers and the Designers. It analyses the interviews conducted with the contractors and additional information gathered. Chapter Seven: Conclusion This section of the report presents the Authors conclusions based upon the findings within the analysis chapter of the report. It suggests solutions to the aims and objectives set out in the introduction, criticises the hypothesis around the report was based and highlights the possibility for further research. Chapter 2 Literature Review 2.1 Introduction The literature review is a comprehensive analysis of all relevant articles, books and publications to this research project. Derek Swetnam[4] describes the literature review as a report; That is central to the dissertation and in all styles of work it has a number of functions: It shows that you have read widely around your chosen topic It demonstrates your critical understanding of the theory It acknowledges that work of others It informs and modifies your own research The Literature review in this chapter is broken down into eight sub-headings. The chapter talks about the description of novation, then goes on to describe where novation is used today both in and outside the construction industry. The literature review describes the process of a Designer being novated to a Contractor. The final section of this chapter discusses and analyses in what way the literature which is reviewed is relevant to the Authors research project. 2.1.1 General Aims To break down the causes of the problem highlighted in the hypothesis into logical stages. To collect and analyse previous research and literature to further investigate the subject area of this project. To research any previously made recommendations. Make recommendations which have been concluded from a detailed literature review. 2.2 Aim of This Literature Review What is the description of Novation and in what context was it used before in construction? Where is Novation used today outside of construction and what is its main purpose? What other uses are there of Novation within construction other than a Designer being novated to a Contractor? When did Novation of a Designer to Contractor become popular with Clients in the construction industry? Have there been problems with the novation of a Design team to a Contractor in the past? When is Novation practical in construction contracts? What are the risks to the Contractor in the novation process? 2.3 Contents of Literature Review 2.3.1 Description of Novation David Janssens[5] stated that: Occasionally, an Employer may stipulate that the successful Contractor is to engage one or more of the Employers consultants to complete the design and detailing of the project in the post-contract stage. Such consultants are employed by Contractors under novation agreements, i.e. a novation agreement is a new agreement in substitution of a previous agreement between the Consultant and the Employer. Novation exists when an agreement or contract between two parties is going to be broken and a third party enters to take the place the agreed or contract role of the party which is leaving the agreement or contract. Novation can also exist when a third party enters into an agreement or contract without any other party leaving. Jeremy Hackett[6] stated that: Novation is a legal concept, formally providing for the re-employment of a Consultant by the Contractor, as part of the contract agreement between the Employer and Contractor. Should the Contractor merely choose to re-employ the same individuals who have previously sat the other side of the interview table from himself that would not be novation, but its effect would be very similar. 2.3.2 Uses for Novation. Novation is not only used within the construction industry, the use of novation in law is much more commonly used in the buying and selling of manufacturing companies. In this context a novation agreement maybe drawn up by lawyers of a manufacturing company which intends to sell to buyer whilst still retaining the same business clientele. In this instance a customer of the business being sold would be novated across to the new buyer of the business, this ensures that the customer can always source what ever item the new buyer manufactures. Ann Arbor[7] Stated that: A hospital in Texas is taking electronic commerce beyond purchase orders and usage reports to adoption of digital contract management. The sooner hospitals are able to sign up to participate in new contracts, the sooner they are able to access contract pricing. Using the enhanced form management program, materials managers can submit forms online where suppliers can approve them, also online. In this example a hospital in Texas is using the agreement of novation over the internet to sign up for new contracts much faster than it was able to previously. This has benefited materials managers the most as they are able to source cheaper or higher quality materials from differing suppliers and simply transfer the agreement they have with one supplier to another using novation. 2.3.3 Alternative uses of Novation within construction. The section above discusses how different forms of novation are implemented in areas other than the construction industry. However, within the realms of construction there are many more uses for the novation agreement to be used. The use of novation within construction has only been commonly used during the past decade or so, the main reason for this is the introduction of the JCT Design and Build Contract which made the novation of Designer to the Contractor much easier for the Client. Before the introduction of Design and Build Contract novation was present in the same format it exists today in other industries as mentioned above. If during the construction process a Client was unable to fund any further necessary works and there was a willing buyer to stand in for the Client, it may be in the interest of the entering party to continue to use the existing Contractor. The easiest and least time consuming way to do this would be using the Novation agreement. The second way in which novation occurred in a construction context before the introduction of the Design and Build Contract was if the Contractor was suffering from financial issues or the relationship between himself and the Client has been irreparably affected in someway. If a situation like this occurred it was beneficial for the Client to take on board a new Contractor through a novation agreement. This removed the necessity for the remaining works to be re-tendered, and the likelihood that the Client would have to pay an excess for the works to be completed. 2.3.4 When did novation become popular with Clients Jim Smith[8] stated that: The choice of a procurement method is probably the single most important decision the client makes, other than the decision to build. The various procurement methods can be described, as defined by Masterman (2002), under these three distinct categories: Separated and co-operative. Integrated. Management orientated. In the last few years and particularly within the past decade the procurement methods for contractors have been moving away from the more traditional contracts as described above. The change to a procurement method which uses the second and third categories above has largely been Client-driven; the main reason for this is that the Contractor has to accept a high level of risk if he is to tender successfully for a project. As more design development has been shifted across to the Contractor it is becoming easier and more cost effective for the Client to shift higher levels of risk to the Contractors. The Design and Build contract and all its variations have expanded considerably to accommodate a Clients needs in recent times. The Royal Institution of Chartered Surveyors (RICS) [9] in 2000 stated that: Design and build and its variations have expanded considerably in the last decade. It has increased dramatically in the 1990s going from a 10 percent share during the 1980s up to a 35 percent share of the construction procurement market, with management contracting declining to a 10 percent share. Chan stated[10] that: 21% of private Clients in the UK use the Design and Build system, of which 42% commonly use Design-Novate and Construct for their projects. Design-Novate and Construct has also been widely adopted in Australia and Hong Kong. David Jaggar[11] Stated that: The major advantages of design and build are that all the risks, both financial and period for completion, are transferred to the design and build contractor, with the client only dealing with one organisation, so eliminating the complexities and frustrations of dealing with a range of separate organisations. The approach also overcomes the problem of the separation of design and construction, so saving overall time and allowing the design to reflect improved buildability in the construction solution. The argument against this is that a Contractor may be taking a higher percentage of higher risk projects. However, as a Client is off loading a lot more risk than what was traditionally not possible in the past they are able to fund much more projects and engage a lot more designers. The result of this is that the Contractor has more work to tender for and a much higher chance of winning projects as more tenders will be processed. 2.3.5 Issues arising from using Novation in construction. Jim Smith[12] stated that: There is considerable debate as to the merits and demerits of the approach and it is fair to say that many design professionals were unhappy about the approach, not least because there was a reduction in their own influence and independence. However, a valid view put forward, which undoubtedly design and build suffered from in the 1980s, was that the quality of the final building was often inferior and the role of design was devalued, as the design and build contractors shaped the design to suit their particular methods of construction. More recent views from clients noted above indicate that they were satisfied with the quality of their completed design build projects. The Design Manager of a Contracting Company plays a critical role in the development of design to determine a contract value for a project. The role involves being able to balance cost and quality and time constraints within a framework. This is an essential skill for all Design Managers or Project Co-ordinators. The Design Manager will work closely with the Commercial Manager at the tender stage of a Design and Build contract when novation of the Design team is being used by the Client. It is crucial that both managers work together to reduce the amount of design and financial risk the contractor will have to carry through the contract period if the tender submission is to be successful. Allinson[13] states that: The developments in the construction industry, the continuing specialisation of professions and the rising application of alternative procurement methods have all contributed to the gap between design and management, but they have also emphasised the need for a design professional with management and technological skills. The management of the process should ensure a successful and deliverable project When Design and Build contracts first became widely used by Clients in the 1990s Contractors tended to manage the building works in the same way they managed traditional contracts. Here a Project Manager was responsible for the development of the construction and concluding the outstanding design issues as well as resolving any building sites day-to-day issues. Project Managers were supported by a number of other managers such as Services Engineers, Site Management and Quantity Surveyors. Jim Smith[14] states that: However, a single reporting source on all aspects of design and cost has not always benefited the client, contractor or the project. Projects have been organised in a very flat structure with numerous lines of responsibility reporting directly to the project manager. The larger projects would have over half a dozen separate factions directly beneath the project manager, including the above stated managers, structure coordinators, documentation managers, tendering coordinators, contract administration, project administration and occupation health safety and rehabilitation (OHSR). In practice, this structure has proved to be an inefficient and ineffective form of management on many projects.