Case Study Flashcards
What was the 2m3/day based on for Option 2?
Site and delivery team. I engaged and trusted their experience and expertise. I also believe it is an assumption, a reasonable assumption for the purpose of this estimate.
Carried out independent research if not.
What is an unchartered service?
It’s a service that was unknown. It was not on the drawings. If you find an unchartered service, work should be stopped.
You mention buildability. What is this?
What qualifications do you have to advice on buildability?
Whether a project can be built and reflect the concept and design. Can it meet design, time, budget.
No qualifications. I speak to the Delivery Team.
Why did the Subcontractor not allow or foresee the S61 notice?
S61 allowed for longer, however their were complaints from the residents about previous work noise, so the local authority revised the S61 down to 2 hours only.
Surely with Option 3 you would just use the 40 day duration originally planned?
I get what you mean, and I did consider this, however, 2 factors:
- I assumed 6 hours per day whereas the Subcontractor had originally done 8.
- Also, there was a new interface issue on site, which wasn’t there before.
If something went wrong who would be liable?
MD - Answer (Matt / Efi)
I believe this answer is whoever owns ownership of the risk / design.
Why do you have an EWN on the programme? Are they required?
No they are not required. It’s choice.
They can be shown to show logic, however they should not drive any other activity.
The planners like to show them on HS2.
What is a Key Date?
A date by which work is to meet the condition stated in the Contract Data. They are inserted by the client at the tender stage.
What is a Defect?
What is a Defect Certificate?
What is a defects date?
What is the defect correction period?
Defect is:
- part of the works not in accordance with the WI
or
- not in accordance with law or the design.
Defect Certificate:
- list of defects the Supervisor has notified before the defects date that have not been corrected.
defect date:
- how long the Contractor (Subbie) will be liable to rectify defects in the works. It is 104 weeks on our contract.
defect correction period:
- is the period in which the Contractor must rectify a defect which has been notified.
Why did you choose Option C?
- Encourages good management / open communication & COLLABORATION between the parties.
- Because of SHARED ownership of risk, there is a willingness to cooperate to resolve issues amicably and work together.
- Can lead to better / quicker / more EFFICIENT ways of working, and therefore improvements in price and programme. The incentivisation to chase efficiency ties back to our responsibility (ROC Rule 5) to the client and public taxpayer.
- It should be noted, with the Option C, the payment mechanism works so that costs are more reflective of actual cost incurred than say, a lump sum price. They can be higher or lower. Either way, they are more reflective of REALITY which I believe is fair for the Subcontractor and also Client which shows them VfM, particularly as we single-source to this particular Subcontractor.
- Back-to-back with MWCC so can pass down main option clauses more easily.
Conclusion, although you may have greater ‘Risk and Cost Uncertainty’ under the Option C, you may actually end up with a lower price overall. At least one that is more reflective of reality.
Why did you choose an Option C over an Option A?
Just to start on risk allocation, usually where the scope is well defined, you would use an A or B. However, for this package there were a few things to note:
RISK
- risk was well fairly well defined. Because the scope had changed so much due to updated Ground Movement Assessments, there was still as risk that this may change again, though unlikely. The Subcontractor themselves expressed concerns around pricing this also.
- also, even though we say scope is well defined, it was deemed there was an interface and programme risk with other packages.
CE/QTE
- Less incentive for collaboration to help mitigate risks. The Subcontractor will issue a CE if it is one, and wait for it to be approved to put in a QTE with higher risk allowances.
- CE / QTE Exploitation (Explain, in next Q).
- We did an internal audit on CE QTEs on an already live Option A and Option C package for this Subbie. For similarly natured scope, quotes were 30% higher, on average on the Option A, which shows how they inflated those QTEs due to risk.
Conclusion, although Option A may have more Cost Certainty, the cost may be higher than a C.
You mention that with the Option A, the subcontractor might exploit the recoverability of CEs. What do you mean by this? Can you not do this with an Option C?
The factors to this are Risk & Cost.
Option A allocates more risk to the Subcontractor. They price a lump sum price so take the risk on that price. The only way they can recover additional money is through CEs.
Yes, you can do this on an Option C also, however, with the Option A they will price the QTE for the CE with more risk than they would with an Option C, which naturally means a higher price. Once the CE is agreed and implemented, they can’t recover more.
That’s what I mean by CE exploitation… it’s the quoted value of the CE.
Also, it’s worth nothing that with Option A they would be paid the value of the implemented CE, HOWEVER, with Option C they wouldn’t. It would increase their target, but they would still only be paid Defined Cost.
We did an internal audit on CE QTEs on an already live Option A and Option C package for this Subbie. For similarly natured scope, quotes were 30% higher, on average on the Option A, which shows how they inflated those QTEs due to risk.
Why is the Option A low financial risk to the client?
Subcontractor takes the risk and prices assumptions in its lump sum price. If something happens, that’s not a CE, they won’t recover it. This is different to, say, an Option C or E, where they get paid their Defined Cost.
What did you mean by ‘Under the A, the Subcontractor showed no intention to find price efficiencies & there is a lack of incentivisation to outperform’?
This was a reference to the values of their change. Their quotes were excessive due to higher risk inclusions (Explain). They may have internally found price efficiencies but at no benefit to us under the Option A when we are paying the agreed lump sum.
Performance - not as collaborative as a C due to shared risk.
Why did you not consider the other NEC options B or D?
These were not the Options that the commercial team were preferencing. A, C & E were the preferences so this task was to provide analysis on those 3.
However, a re-measurable option like B & D were not used because the quantities required were unlikely to change. The scope was mainly monitoring work, as opposed to major excavation work, so the re-measurement benefit of a B or D would not have been utilised. Had we had large amounts of excavations lets say, we know what the scope is, we just don’t exactly know what the quants are, then B would be useful, but this wasn’t the case.
