Case Study Level 3

Question 1

How did you present your advice to the client in respect of the procurement strategy for the closure stores?

Answer 1

Initially I presented a written outline via email to ensure my advise was formally recorded. I then set up a meeting with the client to expand upon my written outline in the form of a presentation, which encompassed:
- summary the scope of the project in functional terms
- recap of the client’s and project objectives
- details of the strategy
- how the strategy would assist in achieving the client’s and project objectives
- SWOT analysis
- timelines
- lines of responsibility

Question 2

Under what form of contract were the contractors contracted / appointed?

Answer 2

3 of the 5 contractors were client approved contractors, already part of a JCT SBC Framework Contract. So, they were contracted via the call-off mechanism under the framework.

The other 2 were approved vendors, as they had carried out work under a different remit for the client already. However, they were not signed up to the framework.

The Client’s In-House Procurement Team decided to issue the contractors with a Standard PO based on the total of their tender values for each store, prior to starting on site. The PO is accompanied by the client’s T&C’s.

Question 3

Why were PO’s used and not contracts for each batch?

Answer 3

The client approved contractors were instructed under a ‘call off’ mechanism under their Framework Contract with the client.

However, the new contractors were not part of this contract and the Client’s In-House Procurement Team decided to issue the contractors with a Standard PO per store based on the agreed tender, prior to starting on site. The PO is accompanied by the client’s T&C’s.

Question 4

As the programme was over an extended period, how did you deal with inflation in the contractor prices and overall budget?

Answer 4

Obviously the tender was fixed price. But the contractors were aware of the duration of the programme from the outset, so they were able to price for their within their tender.

Question 5

On Key Issue 1, through your chosen option, did one contractor win more than others and how did you manage the allocation?

Answer 5

So, the allocation was split fairly evenly between 4 of the 5 contractors, with them having between 20-29% of the stores each.

However, Contractor 10 had much less of the stores at circa 3% of the programme. This is because they were awarded the Northern Ireland Region, which had less stores closing than any other region. In addition, they were a regional contractor as oppose to national.

Question 6

How did the agreed/approved budget compare with the current/final projections?

Answer 6

The projected concluded at 47% under the approved budget.

Question 7

Why does the client use a JCT SBC contract for their framework?

Answer 7

The client prefers to use one form of JCT contract for all of its works in existing stores. The Standard Building Contract was deemed sufficient by the client’s and their legal team for covering all types of works, ranging from minor works to re-fits.

Question 8

You mention the call-off mechanism under the Framework. Can you tell me a bit more about that?

Answer 8

The Call-Off Instruction relates to contract information that varies from project to project, for example the works, site address, the contractor and other roles, the contract sum, possession, completion and IVD dates, insurance, LDs and Sections.

Question 9

What was your role in relation to payment?

Answer 9

As the QS on the project, my role was to validate the contractor’s valuation applications for payment.

In the event the contractor did not submit their application by the IVD, I was required to undertake the interim valuation at the request of the contract administrator.

Question 10

What were the key dates within the contract relating to payment?

Answer 10

The contract stipulated the 24th of each month as the IVD, which was the contractors deadline to submit their IV application for works up until the due date, which is 7 days past the IVD.

Question 11

You mention design development risk being born by the contractor as a strength. Do you think that’s a fair allocation of risk?

Answer 11

With any risk, it should be allocated to the party most capable of managing it and dealing with it.

This risk related to the fluctuation in scope with reference the general store-to-store environments, i.e. one store may have a dis-used storage area with a significant amount of waste to remove, whereas another store may be well-kept. So by the same token, it was a win-some loose-some approach, which prevented administrative time and costs in dealing with these works on a store by store basis.

Of course, any substantial changes in scope which would be deemed as a variation were dealt with us such.

Therefore, I did deem this a fair allocation.

Question 12

In relation to the core objectives, what was the waiting of each objective?

Answer 12

In relation to the core objectives -

As the time objective was a legal / contractual obligation under the agreement between the client and the landlord, this objective was first priority.

Following on from that, was the cost objective. As mentioned this was not a profit-making project for the client, so keeping expenditure to a minimum was important.

The quality objective came hand in hand with both the cost and time objective. As, scope needed to be kept to a minimum in light of the cost objective, but it also needed to meet the requirements set out by the lease agreement.

The confidentially objective was intertwined with the other objectives, and needed to be considered throughout.

Question 13

How were defects dealt with under the JCT SBC Framework, especially as these are closure stores?

Answer 13

Contractually, the rectification period is 12 months, triggered by Practical Completion. But in reality, following Practical Completion, the client would then hand the unit back to the Landlord and upon the Landlords acceptance of the unit, the client was no longer in possession. Therefore, following Landlord acceptance and agreement of the final account, the Final Certificate was issued, which marked the end of the rectification period.

Question 14

What did the JCT SBC Framework say about Final Accounts?

Answer 14

The contract states the FA must be submitted no later than 6 months after PC. Although this what was contractually required, because of the fast-paced, low value, high volume of works, the rules of engagement with contractors was for them to submit their FA’s for works completed that month in line with the IVD date.

Fortunately, this was adhered to by contractors. But if it wasn’t, the CA could instruct me to ascertain the FA value based on my own information.

Question 15

What did the JCT SBC say about latent defects?

Answer 15

The contract did not specify limitation periods for latent defects, but the statutory limitation period outlined in the Limitation Act 1980 applies.

As the construction contract is executed as a deed, the limitation period is 12 years from the date of breach.

Question 16

Under the JCT SBC contract you mention, who was responsible for insurances?

Answer 16

The client was responsible for arranging insurance on behalf of the contractor under option C, which is intended for works in or extensions to existing structures.

Question 17

What are the insurance options under JCT SBC?

Answer 17

Option A & B deal with the insurance of the works for new build projects, where either the contractor or the employer takes responsibility for insuring the works.

Option C is intended for works in extensions in or to existing structures and provide that the employer arranges insurance on behalf of the contractor.

Question 18

In terms of the 31% cost reduction you mention, what did this consist of?

Answer 18

Cost reductions to relating to reduced consultant fees, both my own service and for project management services.

Then, in terms of contractor costs, this was largely surrounding prelims. Due to the batch release of stores, and them being located within one region, this allowed for cost efficiencies through economies of scale - such as one fleet of vehicles, one labour gang etc

Question 19

How did the Purchase Order format address ‘typical construction issues’?

Answer 19

In all honesty, it didn’t. The client had a pre-existing working relationship with these contractors, albeit under a different remit, for upwards of 10 years. So the client and their legal team felt it was low risk instructing them, despite my efforts to say otherwise.

The PO was the client’s standard purchase order that they use for suppliers. So, it did not provide for payment mechanisms, insurances or final accounts for example. Instead, I captured these as part of the tender documentation and rules of engagement.

Question 20

How were insurances dealt with, who was responsible?

Answer 20

As it involved the closure of stores and working within existing buildings, it was insurance option C under JCT - which covers works to existing buildings and is arranged by the employer on behalf of the contractor.

Question 21

What is the type of insurance arranged under Option C?

Answer 21

It’s an ‘all risks insurance’, which is against physical loss or damage to work executed and site materials.

But it excludes the cost of repairing, replacing or rectifying the property which is defective sue to wear/tear, deterioration, etc, or any work executed or materials lost or damages as a result of a defect in design, planning, specification, materials or workmanship.

Question 22

In the case of returning the unit back to shell, or the more involved strip outs, how was the potential risk of asbestos managed?

Answer 22

So, on these stores an R&D survey was instructed and undertaken prior to contractors starting on site, after store employees were aware of store closure.

Question 23

How were the stores measured in terms of size?

Answer 23

The IMPS2 measure is part of the client’s in-house data, kept and maintained by their in-house Estate’s Surveyors.

The NDSA is the non-dispensing sales area, which includes the whole store less the dispensary. This was included as part of the tender documentation, and used as a basis for tender, explaining to contractors that the 30m2 dispensary was on top of the NDSA.

The SAG sizes (or store area groupings) are familiar to the client, and how they classify their stores so it was important to them that these were used.

Question 24

How did you present your cost reports to your client?

Answer 24

I would issue these via email, but present these to the client project manager in a weekly meeting.

During this, I would begin with an overview of the forecast costs against the budget, stating exclusions and qualifications. I would provide the number of stores at final account stage as a % to give the client an idea of the risk profile.

Due to the volume of stores, we wouldn’t go through the detail of 331 stores, but I would highlight key changes in the period, along with any variations raised.

Question 25

You mention as part of your role you issued Payment Certificates? Were you the contract administrator?

Answer 25

No, I was the QS. So, these were more payment recommendations to the Contract Administrator for them to certify.

Question 26

You mention the programme was split into regions, can you give example of the regional differences you saw in the tendering levels?

Answer 26

Well, for the London & South East England Region, this was particularly inflated due to the restrictions surrounding London-working, such as access, ease of unloading and working permits for such areas.

However, from region to region, the cost difference was not significant, as the contractors were regional contractors, operating in and around the regions tendered for.

Question 27

So, you say the client’s key objective related to time and handing back the units to the Landlord and this was a legal requirement to do so. As lead QS, how was this managed?

Answer 27

So early on in the project, I highlighted this as a risk to the client initiated a discussion surrounding liquidated damages.

From these discussions, I was able to ascertain that realistically, the risk reward ratio for the contractor would had been too imbalanced, given the LD’s the contractor would have faced per store versus the likely profit they were making - it wouldn’t have been feasible.

So, I suggested to the client that this could have been better managed as part of the programming. So, we, as a team, ensured that within the overall programme there was at least a 2 week lapse from contractor completion to the client’s handover back to the Landlord to account for any issues.

Question 28

In terms of risk management, what did you see as the key risks involved in a rollout of this size and how were these risks captured and managed?

Answer 28

So, from the outset there was risk surrounding the volume of stores

• there was risk of contractors being overworked, as I mentioned in my presentation, I was able to manage this risk by controlling the regions the contractors tendered for
• the client had already set the budget, and I had no real gage from the client as to what this was based on which presented a risk as to whether this was sufficient. So, I checked the client’s budget through benchmarking against the previous rollout undertaken; and it was fortunately sufficient
• then, in relation to project administration, dealing with the Final Account and payment of 331 had risk of becoming a time-consuming exercise. So, I agreed with contractors that on a set date nearing month-end they would submit their application of completed stores that month, for agreement and payment. So, in effect, I had 5 Final Account / payments per month as oppose to 30-40.