Case Study

Question 1

Why was Option C chosen for this project?

Answer 1

• The contract was awarded under the AMP6 Framework Agreement which uses an amended NEC3 ECC standard form of contract (either main Option A, C or E)
• Additionally, I was not involved in the procurement of the project
• However, I can appreciate why main Option C was chosen for this project given
  o The detailed design was within the contractor’s scope to undertake and so a BoQ could not be produced and thus main Option D used
  o The scope of work was not developed enough to enable use of a lump sum type contract (Option A and B) where the Contractor would have to price significant risk (i.e. state of existing equipment)
  o Therefore, in these circumstances the client is happy to share the financial risk with the Contractor via a pain/ gain share mechanism as opposed to paying a premium for cost certainty
  o Additionally, the nature of the work (MEICA) is technically complex

Question 2

What were the Z-Clause amendments for this project

Answer 2

• There were no Z clause amendments, only framework amendments to the NEC3 ECC conditions of contract which include amendments to timescales, deemed acceptances and CEs for example

Question 3

How was the project tendered to ensure best value was achieved?

Answer 3

• The project was directly awarded to a Construction Delivery Partner under the AMP6 Framework Agreement
• Given the CDP has previous experience of delivering MECIA type work
• The CDP was required to tender for the Framework Agreement which ensures value for money is achieved
• Additionally, a pre-tender estimate is produced which is used to benchmark the Contractors price and facilitate in negotiations
• Additionally, the CDP is also required to produce an Activity Schedule enabling further analysis of their price

Question 4

How does the form of contract vary from the standard NEC3 or 4 contract at that time?

Answer 4

• Main differences include amendments to:
  o time scales,
  o deemed acceptances
  o Defects (i.e. don’t pay for correction of Defects at all)
  o Take over (i.e. use doesn’t constitute)
  o Compensation Events removed (i.e. physical conditions, weather and take over before completion)

Question 5

What was the role of the PM on the project in relation to this issue?

Answer 5

• First and foremost, the PM action of assessment of CEs was delegated to the QS-
  To act impartially and as stated in the contract (10.1)
• With that in mind, provide input into the CE assessments
• To take receipt of the commercial advice on contractual procedures and implement recommendations at the various stages by
  o issuing instructions from revised quotations
  o communicating/notifying the Project Manager’s assessment
• Taking receipt of the cost reports and ensuring there is enough sanction

Question 6

Why were there so many revised quotations for the CE?

Answer 6

• There were 3 revised quotations instructed
  o The first was instructed given the Contractor had used the wrong Accepted Programme and there was scope to implement the CE via an accepted quotation
  o The second was instructed as the Contractor had not addressed other comments e.g. activity durations but progress was made during meetings and so there was still scope to implement the CE via an accepted quotation
  o The third was instructed after the £681k quotation as the Escalation requirements came into play and it needed to be demonstrable to senior management those efforts at a project level to resolve the dispute had been made by giving the contractor an opportunity to provide a revised quotation in light of the meetings convened

Question 7

What was the escalation process?

Answer 7

• After the numerous meetings with the contractor and presentation of the Project Manager’s assessment of the CE in attempts to resolve the dispute at a project level
• Including a review by the Managing QS from both Parties which did not resolve the matter
• The Project Manager notify his assessment via a General Communication
• The CDP then issued a GC in response requesting for the dispute to be referred to the first stage of the Escalation process
• Following which I had to produce a report for the Integrated Delivery Team
• During the course of meetings convened by the Integrated Delivery Team the CDP submitted the actual cost/ retrospective assessment of the CE which disrupted the Escalation process

Question 8

Why did you feel this issue required legal counsel?

Answer 8

• Given the contractor was now relying upon case law to support a revised position
• I acknowledged that this matter had grown outside my area of expertise
• Additionally, it was also evident that the matter had grown outside the scope of the Escalation process to resolve
• Therefore, legal counsel was required to provide advice on how the matter should be handled

Question 9

What was your interaction with this particular part of the issue

Answer 9

• I was responsible for
  o arranging a meeting with the client’s external legal team
  o providing information in relation to the matter to the legal consultant
  o Leading the meeting with the external legal consultant
  o Seeking agreement to pursue alternative advice to provide assurance
  o Drafting questions for the KC barrister

Question 10

What was the cost to the client for all the input from you and the PM on the project? Was this covered off in your fees?

Answer 10

• Both the Project Manager and myself are staff members of the client organisation and so there were no fees involved in relation to our input into this matter

Question 11

Explain your understanding of the Healthy Buildings case noted in this case study

Answer 11

• In summary the client, NI Housing Executive, instructed a change to the scope of asbestos surveys being carried out the by the consultant, Healthy Buildings
• The Consultant notified a CE and
• After the work has been completed, the client requested quotations
• The quotations provided by the consultant were rejected by the client who assessed the CE as zero
• The client then asked to see the consultants actual cost records but the consultant refused
• The issue went to adjudication and later to court
• The court held that the CE should be assessed based on actual cost where the contractual provisions for assessing the CE had not been followed and the relevant works completed

Question 12

On the initial quotation, why did you believe that option 2 was a viable solution without your intervention or assessment?

Answer 12

• For clarity Option 2 would involve myself producing the Project Manager’s assessment with the Project Manager

Question 13

What was the risk of instructing a revised quotation?

Answer 13

• The risks associated with instructing a revised quotation at this point were low
• However, risks include:
  o Delay in resolution of the CE – creating some uncertainty
  o Distracting the contractor from delivery of the work
  o Increased costs with managing the revised quotation
  o It could also strain relationships if the Contractor believes their quotation is fair (however wasn’t using correct Accepted Programme) and
  o With hindsight, the potential risk of the contractor seeking reimbursement of their actual cost causing more disruption and effort to resolve the CE

Question 14

What were the ‘failure to address other comments’ by the contractor?

Answer 14

• Mainly the more subjective matters such as:
  o Activity durations used in the impact programme assessment and the logic
  o Assessment of risk allowances e.g. further design works
  o Assessment of design time
  o Inconsistencies with durations in the impacted programme and that included in the quantum assessment i.e. labour/ install discrepancy

Question 15

What did you do to assess the quotations to ensure they were competently submitted in terms of cost?

Answer 15

• Ensured quotations were assessed in accordance with contractual provisions such as
  o In accordance with the SCC
  o Fees were applied correctly and correct percentage was used
  o Framework rates used where applicable (e.g. design)
  o Risk allowances met the bar of having a significant chance of occurring (e.g. further design works)
• Ensured
  o All equipment listed was needed and related to the instructed works by liaising with PM and Supervisor
  o All plant and materials listed needed and related to the instructed works by reviewing drawings and liaising with the PM and Supervisor (i.e. drawing showed only 1 actuated valve, 2 had been priced)
  o Ensuring subcontract quotations were obtained together with scope to ensure no cross over or duplication and kit framework rates were used where applicable

Question 16

Can you clarify how many quotations where received, as its slightly confusing (you have noted WTE-35, QTE-43 and QTE-52) for the reader

Answer 16

• There were 4 quotations received in total
  o The initial quotation
  o 2 revised quotations including the £681k quotation and the
  o Unsolicited actual cost quotation received during the Escalation process for £1.3m

Question 17

The second revised quote (QTE-52) was significantly more on both cost and programme implications, why was this?

Answer 17

• Due to the wider issues on the framework
• The contractor had increased activity durations and the logic in their impacted programme which in turn increased the contractor’s quantum assessment

Question 18

What were the remaining risks for this second option if instructed?

Answer 18

• Mainly, that senior management would consider no effort has been made and the project team has jumped to conclusions and not made an effort at a project-level to resolve the dispute and also it would
• Have removed any potential of the contractor revising their position

Question 19

Why were the submissions late?

Answer 19

• It was not ascertained why the contractor did not submit a revised quotation within the prescribed time period

Question 20

What was the time restriction in the contract?

Answer 20

• Within 3 weeks of being instructed to provide a revised quotation

Question 21

What was the benefit of having such restrictions in place?

Answer 21

• To ensure CEs are dealt with quickly and proactively

Question 22

What was the PM’s assessment of the claim?

Answer 22

• £160k and 0 days
• This revised as a result of wider settlement negotiations to £232k and 0 days

Question 23

Why was the claim (QTE-60) so much higher and longer in impact?

Answer 23

• Due to the wider issues on the framework
• The contractor had increased activity durations and the logic in their impacted programme which in turn increased the contractor’s quantum assessment
• Contractor was claiming the quotation was based on actual cost for the work

Question 24

What is the supporting position on the Healthy Buildings case for both parties?

Answer 24

• Contractor
  o Position was that the CE had not been implemented despite most of the work being complete and therefore the Healthy Buildings case supports their revised position that it should be assessed based on actual cost
• Project Manager
  o The set of circumstances in the Healthy Building case are of contract to this matter, additionally
  o The CE was not implemented due to the Escalation agreement that the PM would communicate his assessment via a General Comuincation as opposed to implementing it such that the Integrated Delivery Teams can meet to find a resolution

Question 25

What was the view of the legal counsel once initially discussed?

Answer 25

- That it failed to take account of the differences in circumstances such as: o The fact a CE was notified o A quotation was sought o Forecast quotations received and a o Project Manager’s assessment undertaken before completion of the associated works

Question 26

What was the advice given?

Answer 26

- In summary, that the CE assessment should be assessed based on actual cost given it had not yet been implemented and the works were largely complete - Despite the agreed Framework escalation process of the Project Manager communicating his assessment of the CE via a GC instead of implementing it on CEMAR

Question 27

Why would you challenge the legal advice?

Answer 27

- Mainly, because it did not take account of the circumstances that were of contrast to the Healthy Buildings case, coupled with - The risk of setting a precent across the framework, opening the floodgates to other matters that are in Escalation

Question 28

What would be the alternative advice option? Are you just looking to get the answer you want by looking for alternatives?

Answer 28

- It was agreed that Kings Counsel would be sought on the matter - Ultimately, I was looking for assurance on the advice given due to the wider risk across the Framework and - Advice that would clearly take into account the specific circumstances - To ensure this I produced a timeline of events for the KC barrister together with providing contemporaneous records and - Questions worded in such a way that the specific circumstances would have to be considered in the advice

Question 29

What was the cost of the legal counsel and likely costs the Employer would be liable for?

Answer 29

- £13k for the KC advice - £3 for external legal advice - The Employer was liable for these costs

Question 30

What was the outcome of all investigations?

Answer 30

- In summary, the KC advice supported my view that the Healthy Buildings case is not of any application were the parties have complied with the contractual machinery to make an assessment based on forecast costs and where the contractor is given opportunity to submit a quotation - This advice positively assisted in wider framework settlement negotiations

Question 31

What are the reasons for a Project Manager undertaking his own assessment?

Answer 31

- Contractor misses submission deadline - Contractor makes incorrect assessment - Contractor does not provide alterations to Accepted programme - Contractors latest programme is not accepted

Question 32

What are the options for response for the Project Manager when responding to a quotation under clause 62.3?

Answer 32

*An instruction to submit a revised quotation *Acceptance of the quotation *Notification that a proposed instruction will not be given or *Notification he will be making his own assessment

Question 33

What is SCADA?

Answer 33

*Supervisory Control and Data Acquisition * A control system design that uses graphical interfaces for easy monitoring and management of machines and processes.

Question 34

What is ADSL Comms Links?

Answer 34

*Asymmetric Digital Subscriber Line *Enables fast data transmission

Question 35

What is a PLC?

Answer 35

*Programmable Logic Controller *Allows for control and monitoring of processes using inputs and outputs (I/Os)