Case Study Key Issue 2 Flashcards
Was the provisional sum for the welfare unit defined or undefined? Who determined the value of the provisional sum?
The provisional sum for the welfare unit was a defined provisional sum.
The value of the provisional sum was determined by reviewing the cost that was used in a similar project for the client in 2019. The design of the welfare was similar and therefore relevant uplifts were applied in terms of time, location and inflation to arrive at an overall figure.
Why did the design of the welfare unit change? Who was this driven by?
The changes were driven by the client who was in direct contact with the contractor through the Employer’s Agent. I was unaware of the changes until the costed package was received.
Why was there such a significant increase in price from the original provisional sum figure?
There was a significant increase in the cost as the design had developed from single storey to two storey. This included the inclusion of an external steel staircase.
At the time, the market was highly volatile and materials such as steel were massively inflated. The price had increased from around £1,800/t to £2,500/t, a 39% increase. Other typical construction materials had also increased, such as bricks and blocks. MEP elements were also heavily inflated.
What were the % increases you were seeing in material rates and what materials were showing the largest increases?
I was seeing % increases of around 40% on steel, with brick and block at around 10%. This was also driven by the shortage in materials during the period. MEP elements were also heavily increased, with an increase of around 20% seen.
How did you assess the inflated costs?
I assessed the inflated costs by comparing them against recently benchmarked data. This was taken from our in house cost database, Pulse.
Please describe the change control process that was adopted for this project?
If there was a design change from the ER’s, the EA would request a cost in relation to this change.
The contractor would provide a quotation for the change which I would review and provide my commentary on. An example of a change which I managed was secondary steel connections, where the bill rate was used.
If I was happy with the costs submitted, the EA would instruct the change.
This would then be updated within my financial statement to provide the client with an understanding of their financial position and projected final account.
Did the contractor advise that the change in design could lead to a project overrun?
The contractor advised that the welfare unit was not on the critical path and therefore they could complete the works within the remaining programmed period.
You mention ways to control project finances, how would this have been done?
This was done by having an effective change control process which included regular cost reporting to keep the client informed on the forecasted final account. This gave them the opportunity to make informed decisions on the project.
What was the price of the steel staircase as an individual item?
This was priced at approximately £10k. Around 1/8th of the cost of the welfare unit.
Why would value engineering have led to a delay in programme, but the two-story design not?
The value engineering process would have led to in depth discussions with the design team to first identify potential areas for value engineering.
This would have led to further discussions to agree on the appropriate omissions, agreeing that these were appropriate for the project and did not compromise the client’s objectives.
What separate contract was considered for use for re tendering of the project?
This would have been tendered under a JCT Minor Works contract due to the contract value being below £250k.
Why would a principal contractor need to be appointed if the works were re-tendered?
This would have been because there would have been two contractors on site and the CDM regulations state that a principal contractor must be appointed.
Can you elaborate on the cost control exercise that you undertook and how this was presented to the client?
This involved updating my financial statement with all of the current project instructions, whilst including any other anticipated variations to give the client an understanding of their financial position.
The contractor had provided buildability input at the start of the scheme and omitted the need for a large section of temporary works which saved in the region of £100k.
Did you estimate how long the delay would have been with option 3? When would completion have been if the project was re tendered?
I did not go into that depth of detail as once the cost control exercise was completed, it was clear that the project could be completed on budget even with the inflated costs.
How did you benchmark the inflated costs?
These were benchmarked against recently tendered projects from our in house cost database, Pulse.
Other than benchmarked data, what other methods could you have used to ensure the costs were competitive?
I requested that an open book approach was adopted, ensuring that all costs were visible to me.
I could have also gone to the market myself and requested a series of quotations as a comparable.
How reliable is benchmarked data?
The issue with benchmarked data is that it needs to be regularly updated. Without updating for the relevant factors i.e. time, location and inflation, it is not reliable.
The comparable data may not be exactly the same as well, there may be variances in contract type, procurement route etc which would affect the costs.
Where did you get the information from to make the relevant uplifts for time, location etc?
I used BCIS to make the relevant uplifts. They have indices on their website from which you can calculate the relevant uplifts.
What would be the benefit of excluding the use of provisional sums?
If provisional sums were excluded, it would mean that the costs were fixed by the contractor. This would mean that there could be less variance to the final contract sum.
Although, in saying that, the change in design to the welfare unit would have led to a change as the design varied from that in the ER’s.
How did you agree project variations with the contractor?
These were agreed by the contractor submitting costs to which I reviewed and provided my commentary on. The majority of variations were easily agreeable as bill rates were used to price the variations.
Where necessary, I carried out measurement checks and informed the EA on the accuracy of the variation.
What are the methods for valuing change?
Bill rates
Star rates
Dayworks
Schedule 2 Quotation
How do you maintain a high level of service?
I maintain a high level of service by communicating effectively with the client.
I act within my scope of competence at all times.
Was advising on projected programmes outside your scope of competence?
No, as QS’s, we regularly provide guidance on appropriate tendering strategies. This involves looking at the time periods associated with each of the tendering options to coincide with the client’s main drivers.
How did you communicate effectively with contractor and client?
I ensured that I was eloquent, and my messages were short, precise and clear.
Where possible, I would use diagrams to elaborate on my point and ensured that the message was understood.
When I produced my financial statements, I called the client to run through the document and address and queries they may have had.
Since you completed this project, have you managed another project with such tight timelines?
No, this project has had the tightest timelines of any project that I have worked on so far.
How did you decide that the cost of the welfare unit was competitively priced when you suggested a provisional sum allowance of £25,000?
I decided that the unit was competitively priced as the provisional sum of £25,000 was based on a single storey development.
I benchmarked the costs against our in house data and confirmed that the rates used were in line with current market rates.
What factors outside of your control led to inflated costs?
Covid 19
Brexit
How did you manage market volatility during the Covid-19 crisis?
Market volatility was managed by requesting that any orders for materials on the critical path were made early, with the aim of preventing project delay.
Fluctuation provisions were also included within the contract. Fluctuation provision B allowed for changes in labour and material costs which were prevalent during the covid 19 crisis.
If the contractor could not procure any materials during the Covid-19 crisis, did they have any recourse in the contract that would protect them?
The force majeure contract clause was a means of protection during covid 19. This would allow for an extension of time relating to the material delay.
Are there any factors in the current day which may be leading to inflated costs?
The ongoing war in Ukraine has led to inflated costs in the UK. The shortage of fuel and certain food items has led to inflation throughout the country.
Was it considered to complete the internal welfare post contract to give time to drive cost down, but allow the main extension to be complete on time?
It was proposed as an option, but the client wanted to have all works complete by October to avoid disruption during the busy Christmas period.
What was considered in your forecast final account? Were there any risks to this final account forecast?
As we had been in discussion with the contractor and EA throughout the process, we had visibility on project variations and instructions. This therefore allowed us to account for any changes and present a realistic figure to the client at final account stage.
How did you manage to keep the project under budget with such a large overspend on the welfare?
The contractor provided buildability input in relation to a section of temporary work. The original proposal was to remove the existing external face of the building and construct temporary protection internally.
The contractor provided a solution whereby the original façade could remain in place, and they would amend the existing foundations and steelwork connections to allow for this.
This provided a saving of around £100k.
Is there any other risk associated with Option 3, i.e., client’s breach of contract?
Option 3 was discussed with the main contractor on site and they advised that they would be happy for us to re tender the work under a separate contract if we could not agree on a cost.
How did you ensure there was no programme overrun when instructing the provisional sum?
This was discussed with the contractor, and they advised that they could complete the work within the stipulated contract period.
Key Issue 2 relates to cost increases due to material rates increasing - how did you advise on this risk?
I advised the client that the market was volatile and that we were seeing inflated project costs. I advised the client that we should include a project contingency to account for potential price increases.
How did you prepare a robust budget with an underdeveloped design?
The budget for the welfare facility was based on a similar design that had been completed for the client in 2019. The cost of this item was used, and the relevant uplifts were made in terms of time, location, and inflation.
Why did the welfare facility not require a lift or disabled access?
Planners didn’t question it or building control. I am not a designer and assumed it would be designed to regulations.
There were other disabled facilities on site and an access statement assessed the users and usage of the building. It deemed that disabled personnel would not use the facility and if they did there were similar amenities on the ground floor.
