Case Study Key Issue 2

Question 1

Was the provisional sum for the welfare unit defined or undefined? Who determined the value of the provisional sum?

Answer 1

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.

Question 2

Why did the design of the welfare unit change? Who was this driven by?

Answer 2

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.

Question 3

Why was there such a significant increase in price from the original provisional sum figure?

Answer 3

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.

Question 4

What were the % increases you were seeing in material rates and what materials were showing the largest increases?

Answer 4

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.

Question 5

How did you assess the inflated costs?

Answer 5

I assessed the inflated costs by comparing them against recently benchmarked data. This was taken from our in house cost database, Pulse.

Question 6

Please describe the change control process that was adopted for this project?

Answer 6

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.

Question 7

Did the contractor advise that the change in design could lead to a project overrun?

Answer 7

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.

Question 8

You mention ways to control project finances, how would this have been done?

Answer 8

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.

Question 9

What was the price of the steel staircase as an individual item?

Answer 9

This was priced at approximately £10k. Around 1/8th of the cost of the welfare unit.

Question 10

Why would value engineering have led to a delay in programme, but the two-story design not?

Answer 10

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.

Question 11

What separate contract was considered for use for re tendering of the project?

Answer 11

This would have been tendered under a JCT Minor Works contract due to the contract value being below £250k.

Question 12

Why would a principal contractor need to be appointed if the works were re-tendered?

Answer 12

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.

Question 13

Can you elaborate on the cost control exercise that you undertook and how this was presented to the client?

Answer 13

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.

Question 14

Did you estimate how long the delay would have been with option 3? When would completion have been if the project was re tendered?

Answer 14

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.

Question 15

How did you benchmark the inflated costs?

Answer 15

These were benchmarked against recently tendered projects from our in house cost database, Pulse.

Question 16

Other than benchmarked data, what other methods could you have used to ensure the costs were competitive?

Answer 16

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.

Question 17

How reliable is benchmarked data?

Answer 17

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.

Question 18

Where did you get the information from to make the relevant uplifts for time, location etc?

Answer 18

I used BCIS to make the relevant uplifts. They have indices on their website from which you can calculate the relevant uplifts.

Question 19

What would be the benefit of excluding the use of provisional sums?

Answer 19

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.

Question 20

How did you agree project variations with the contractor?

Answer 20

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.

Question 21

What are the methods for valuing change?

Answer 21

Bill rates
Star rates
Dayworks
Schedule 2 Quotation

Question 22

How do you maintain a high level of service?

Answer 22

I maintain a high level of service by communicating effectively with the client.

I act within my scope of competence at all times.

Question 23

Was advising on projected programmes outside your scope of competence?

Answer 23

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.

Question 24

How did you communicate effectively with contractor and client?

Answer 24

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.

Question 25

Since you completed this project, have you managed another project with such tight timelines?

Answer 25

No, this project has had the tightest timelines of any project that I have worked on so far.

Question 26

How did you decide that the cost of the welfare unit was competitively priced when you suggested a provisional sum allowance of £25,000?

Answer 26

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.

Question 27

What factors outside of your control led to inflated costs?

Answer 27

Covid 19
Brexit

Question 28

How did you manage market volatility during the Covid-19 crisis?

Answer 28

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.

Question 29

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?

Answer 29

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.

Question 30

Are there any factors in the current day which may be leading to inflated costs?

Answer 30

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.

Question 31

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?

Answer 31

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.

Question 32

What was considered in your forecast final account? Were there any risks to this final account forecast?

Answer 32

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.

Question 33

How did you manage to keep the project under budget with such a large overspend on the welfare?

Answer 33

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.

Question 34

Is there any other risk associated with Option 3, i.e., client’s breach of contract?

Answer 34

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.

Question 35

How did you ensure there was no programme overrun when instructing the provisional sum?

Answer 35

This was discussed with the contractor, and they advised that they could complete the work within the stipulated contract period.

Question 36

Key Issue 2 relates to cost increases due to material rates increasing - how did you advise on this risk?

Answer 36

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.

Question 37

How did you prepare a robust budget with an underdeveloped design?

Answer 37

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.

Question 38

Why did the welfare facility not require a lift or disabled access?

Answer 38

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.