Case Study Flashcards

Question

Issue 2 How were the site investigation works dealt with: 1 when LLC first discovered (before the re-procurement happen) 2 site investigation carried on during design and build tender

Answer 1

1 paid on cost reimbursable basis (option E) 2 works continued under same contract as above

Answer 2

-Done with open book tendering, so contractor provided COMPETITION AT SUBCONTRACTOR LEVEL with subcontractor quotations eg for materials, surveys -Ensure pre agreed framework rates were used (COMPETITION FOR RATES) eg staff, prelims, plant, labour gangs already done through competitive process Understand where the competition was ^ - -Ensuring value for money even though only one contractor -Ensure tendered costs align with scope and programme -Value got money report once agreed

Answer 3

Advantages: - Speed of appointment - No tender analysis required - Process allows for early contractor involvement Disadvantages: - Contract negotiations could be lengthy and therefore cause delays - Cost premium due to lack of competition - Heavy reliance of trust between parties - No competition with other contractors

Answer 4

-Best used when scope of works cannot be determined -Basically used for convenience of assessing lots of jobs -But on this occasion, Project X should probably should never have been used under this pricing method

Answer 5

Employer’s requirements not fully formed and so not 100% sure there would be no changes

Answer 6

In the end, the profit was shared with the contractor But it can be argued that this was offset by the contractor working more collaboratively to get under budget (as priced with open book accounting)

Answer 7

Jobs through rate card initially procured through works orders But bespoke projects are let under NEC contracts -So site investigation works under option E -Then main works procured through Option C

Answer 8

Stage 2 for straight project with simple connections Stage 3 when engineering information required such as on projects with lots of turns, complicated connections, thrust blocks

Answer 9

• If client reduce time associated with procurement of each project -encourage collaboration • Financial benefits, eg maximum OH&P • Efficiency benefits, eg procurement team on hand to advise • Public sector clients would generally use frameworks for procurement

Answer 10

Service connections have standard times based on value (client doesn’t have briefs for these jobs and TW aim to complete in 40 days) For mains, programme is provided by the contractor and a careful consideration of requirements

Answer 11

No (service and mains) Only if they are procured as ‘bespoke projects’

Answer 12

Advantages: -Much more efficient procuring multiple jobs -Flexibility of different contracts -Tailored to meet the needs of the project - Disadvantages: - Can create ambiguity/conflict with legislation if not properly drafted - Can be expensive and high admin to draft - Can have conflicting clauses - No experience of lessons learnt as the contract is new - Risk may be unevenly distributed between parties and uncertain -No case law for disputes

Answer 13

-This was required for service and mains jobs due to the absolute cost certainty that was provided -£417k was unusually large, they are usually £30-40k or so -if client wanted to pay in instalments to ease cash flow then would need to apply through major projects, but more costly as more design fees, risk etc factored in

Answer 14

Disadvantages -Reduced competition once entered and contractor feeling ‘comfortable’ and paying premium on tenders -Rigid contract terms that don’t respond to changing needs, hinder innovation -Creates barriers for diverse range of suppliers eg smaller/specialist contractors who could be better suited to particular jobs than framework provider -lack of renegotiation and stuck with them for duration of contract -Rigid contract terms with lack of flexibility for mini contracts -Long and expensive procurement cycle -Complex and highly administrative so easy for things to be missed -More expensive if not a regular flow of work -due to long length, a greater risk of lack of continuity from those who tendered to those working on them -in this particular one the high volume was difficult to maintain cost control, especially if contractor trying to recoup losses -limited pool of capable contractors, especially in water industry.. so getting a competitive price is hard -legally complex

Answer 15

-Streamlined procurement process that prevents re-qualifying and streamlines tendering eg with pre agreed rates -Allows a partnering arrangement that facilitates collaboration and mitigation of disputes -Client has access to a mobilised and ready supplier(s) -More competitive rates with promise of regular work -Reduces costs associated with shorter tendering period for each project -Flexibility as can tender different contracts within it -Minimise disputes if framework is standard form and parties grow to understand it -Can always benefit from ECI without separate engagements

Answer 16

-lack of standard clauses are unfamiliar between the parties which can lead to disputes -ambiguities can occur and no proven case law for disputes -no standard risk allocation -very high admin to draft and operate… and so easy to miss things -hesitance from contractors due to unfamiliarity and perception that client is using it to transfer risk -expensive and time consuming to draft

Answer 17

Issue 1: no, it was missed due to insufficient time Highlights so many moving parts/high admin of this bespoke contract Issue 2: yes

Answer 18

-When a project has niche requirements or complex features eg TW basis for charges didn’t use typical NEC schedule of cost components but a set of bespoke rules -much more efficient as simplify procurement of lots of small jobs without going though whole procedure. In this case used a hybrid of framework and TSC -bespoke term that allowed ‘any client identified in works order’ to be a beneficiary -flexibility of different payment arrangements -allocate risks in ways that suit circumstances. -if would heavy amend standard forms of contract, as not recommended do so this as modification of complex web of clauses can cause uncertain risk allocation and legal uncertainty.

Answer 19

No, but every client engaged through service was a beneficiary of the contract so could enforce the Contract (Rights of Third Party) act Note: there was NO ASSIGNMENT after contract, any fault of contractor’s construction would be Thames Water’s risk

Answer 20

-Yes, I flagged up that there was no assumption for the amount of excavation per m of pipe rate, so flagged that 1.5m should be assumed (standard depth) -Lack of flexibility of substantiation that could be received eg councils had different ways of invoices for parking bays/road closures -Lack of clarity of agreement of new rates (The site setup ambiguity was missed -Mechanism for agreeing new rates had lack of clarity as would be dealt with eg Dstc 1 bespoke would work -There was insufficient time

Answer 21

-System was that only a bespoke project would be used if a project met vague criteria, such as: -non-standard connections -challenging site conditions -building elements eg bridge/WB -bespoke client requirements So Project X bypassed these checks, when in reality it should have been tendered In response, a system was developed for a more detailed checklist, which also considered value and programme requirements

Answer 22

-Negotiation between the two parties -I prepared a forecast, and with prior approval from the senior commercial team, offered: 1 that will pay the overhead fee of 5% on the disputed value to cover contractor’s expected overheads (as this was not stated in risk register) 2 increase of advance payment bond value (payment on account) to facilitate cash flow The contractor did not accept and it went to mediation, which I prepared information for but was undertaken by The Senior Commercial team

Answer 23

-Adjudication

Answer 24

Yes, although mediation is a voluntary process (not required by statute), it was included as Stage 1 contractual process in the contract following negotiation -Stage 2 was adjudication

Answer 25

Can be as a stage 2 ADR (after stage 1 mediation), but in this case: ADJUDICATION IS ITS OWN PROCESS, any construction contract can go straight to adjudication. So process is: -Party makes a claim to CRYSTALLISE dispute -Party provides Notice of Adjudication -Within 7 days, that same party issues a Referral Notice which states grievance and desired outcome …..Simultaneously, adjudicator appointed by Adjudication Nomination Body (eg RICS) or referring party within this 7 days -Within 7 days of the Referral Notice (second one) the Responding party responds with their side of the story -Within 28 days the adjudicator decides Timescales can be extended with agreement of all parties to a maximum of 42 DAYS OVERALL

Answer 26

BCIS All-In TPI Q1 2023 - 379 Q1 2018 - 326 Current index / old index = uplift

Answer 27

Issue 1: -Test out all scenarios prior to commencement of contract -Challenge lack of detail in tender rates build up -Focus more on a collaborative agreement Issue 2: -Greater communication with operations team Not me: -sufficient time to draft bespoke contracts -importance of employer requirements -sufficient system to allocate jobs to contract to use SoR pricing mechanism

Answer 28

The commercial delivery of a schedule of rates framework contract How to procure and construction 2000 projects while maintaining sufficient cost control and meeting delivery timescales

Answer 29

-Inherited framework and given short period to read -As part of a team, I was responsible for reading and testing out scenarios, but not the production of the documents -I identified issues such as that there was no assumption for the amount of excavation per m of pipe rate, so flagged that 1.5m should be assumed (standard depth) -Lack of flexibility of substantiation that could be received eg councils had different ways of invoices for parking bays/road closures -Lack of clarity of agreement of new rates (The site setup ambiguity was missed

Answer 30

-On the work management system, which is a system that allows a quick processing of jobs based on the design and photos from contractor -Items were either ‘accepted’ or ‘disputed’ -Accepted items were paid on an interim basis (monthly) -‘Disputed items’ went into a log of items that required further substantiation. So for re-measurable pipe, fixed cost connections or cost reimbursable costs; some sort of substantiation was required….. which was stated in the comments For site setup costs, these were disputed on basis they were invalid -So all project were paid

Answer 31

-There is a running ledger/account of all disputed items -Contractor either accepts this dispute (and the item is closed), or they provide further substantiation -There are monthly meetings on the status of the dispute

Answer 32

-Possibly could impact cash flow, but ‘disputed’ items were deemed outside of the scope and therefore should be accounted for by the contractor -There were other mechanisms that helped contractor, such as a risk allowance (from risk register) that paid a value annually if flow of work did not reach a certain amount -Contractor failure was a risk to client but had a mechanism for step in rights of contractors to step in and do works Don’t mention payment on account, these should be paid on basis that works have been assessed and just pending a little bit more additional information, so NOT FOR UN-ASSESSED JOBS… should not be paying anything on account if haven’t assessed it

Answer 33

-All ‘disputed’ items are recorded and categorised by what rate they, eg site setup, pipe, connection -These are addressed in monthly RISK REDUCTION WORKSHOP meetings between TSU’s commercial team and The Contractor where they are all looked at holistically and the rates with the most disputes are the highlighted and measured are implemented to reduce the list -The contractor would implement measures to tackle these disputes such as providing photographs, substantiation (invoices) etc

Answer 34

-Used a CONSTRUCTION INDEX only, taking into account the prices of the rates at the END of the previous contract … and uplifting it with the index at the MIDPOINT of the new contract -Didn’t need to use a tender index as we already had the values at the ‘date of tender return’ -So was only an inflation of END OF OLD CONTRACT to MIDPOINT OF NEW CONTRACT Note: the construction index used was BCIS general building cost index ——- Note: TPI is your TENDER price inflation, it doesn’t give you your build cost inflation which should be to the mid point of construction Note: -Tender inflation applies to cost increases between the base date of a cost estimate and the tender return date (Essentially anticipates price changes before a contract is signed) -Construction inflation applies to increases from the tender return date to the midpoint of the construction period. (Basically anticipates changes during the actual construction phase)

Answer 35

-If at Order of Cost Estimate stage then advise on properly considered percentage against each category. For example Design Development risks include for ‘changes in estimating data’ -In Cost Planning stages then can identify actual risks in risk register -Inolement a contingency plan -Monitor price indices in terms of labour and materials… and legislation changes -Discuss with contractors -Appropriate general contingency budget for UNFORESEEN risks -Gleeds doing market research, has analytics team, as well as building information bank of local knowledge from offices

Answer 36

-Took all the ‘disputed’ costs of the mobilisation rates and instead of accepting the entire value, I paid the £162 on all of these jobs (value of the newly agreed rate) -For other disputes, these were revisited following any substantiation (invoices or photographs of pipe) which could then be paid through the system -The contractor did NOT reapply for the costs, the ‘disputed’ items remained on the system and were simply revisited once substantiation provided -Required a very strong tracking/record system

Answer 37

-I did not advise on the technicalities of the design, as this would be outside my competence and invalidate any PI insurance -Although I said “I considered advising that no re-design would take place”, I was advising on its COST/PROGRAMME/QUALITY IMPLICATIONS -During tender I assessed whether design with IN ACCORDANCE WITH SCOPE/EMPLOYER REQUIREMENTS -TSU was the designer under CDM (in-house design department) but I personally was not a designer

Answer 38

Requirements were based on a concept design, performance specifications, and assumptions.. so scope/requirements not fully developed and I advised on a 50% pain gain to mitigate the pricing risk As it happened it turned out to be a good decisions as the increase in cost from variations caused the

Answer 39

-Delays in long lead materials for complicated fittings -Delays in getting water pipe shut from local council -Subsequent delay in traffic management

Answer 40

-The client paid the fixed price of £417k, so the £356k that I tendered with wasn’t actually reported to them.. this was an internal cost only for profit purposes.. and so it effectively created a larger headroom to produce a profit Note: Always bare in mind that I’m controlling/managing EXPECTATIONS around final cost against how much money client has and the decisions they make in the process of contract to make sure it falls within overall budget

Answer 41

-Did negotiated tender and then went into a report that said ‘we are going to sign a contract for £356k’

Answer 42

-Depending on scope, a purchase order is raised for that project -Contractor applies with relevant line items -All processed/accepted mains & Servs items are included into a payment notice and paid monthly -Bespoke projects in a separate section of payment notice ——— -Mains& Servs are remeasurable so no changes as such, unless a change in scope then is a variation order with the extra rate items that are needed -Bespoke projects use NEC contract compensation events

Answer 43

-Preparing work risk assessments method statements -Wearing PPE -Adhering to contractor’s site rules. -Attending site inductions. -Ensuring health and safety was discussed at meetings. -Reporting visible risks for example traffic management issues.

Answer 44

Following a risk assessment, the propping/bracing method was used to to unusual shape, depth and soil conditions

Answer 45

Yes Although they are consultants, I wrote in case study that they were ‘in-house’ because they were specified under framework contract as TW designers But technically the design consultant company could be switched from the Project X contract under TW to under the contractor Contractor has to pay the newly novated designers but it’s just for document approval (contract states that contractor must accept this for document approval… and any further services if their design doesn’t comply) A COLLATERAL WARRANTY SIGNED BETWEEN THAMES WATER AND NOVATED DESIGNERS (now at contractor)

Answer 46

With a COLLATERAL WARRANTY

Answer 47

The contractor was responsible for all design, even the parts TSU did at concept stage To a ‘reasonable skill and care’ standard (NEC default) as in accordance with the employer’s requirements and ‘fitness for purpose’ would be unreasonable

Answer 48

Mains connection part of wider housing development works Common in water projects

Answer 49

Not sufficient time Concept design already done Prelims are already pre agreed as in framework

Answer 50

-A simple ‘straight’ design with no complicated connections .. so in theory COULD price under a SoR -But didn’t take into account the high value of the project -Clients application stated they wanted speed and cost certainty (over a higher price as tariffs have built in profit)… so this somewhat influenced TSU’s decision to go through this route

Answer 51

-Contractor’s tender (30 days) consolidates the design AND them providing a price (As opposed to TSU designing it and then still needing the 30 days tender) -Contractor can also do site investigation on LLC through a separate cost reimbursable contract using FRAMEWORK RATES

Answer 52

-Prompt response time from contractor’s tender (had 80 days in total .. check this against other flash cards) -Contractor within framework so encouraged to price collaboratively … target cost reigned in any change of opportunistic cost -Negotiations were undertaken promptly (me and Senior QS) and within this, I advised on an extra ‘budget incentive’ (7%) to be included in works order for all costs the contractor gets below the client budget AND IF meet programme timescales

Answer 53

-Under framework, contractor must provide VE options if possible -Contractor better placed to deal with the risk of low level concrete -Contractor better placed to develop design (buildability) -Single point of responsibility ensured the closest coordination between design and construction, and prevent delay

Answer 54

-They differ where in Novation the design consultant is no longer liable for design in first stage, while in a Consultant Switch they still are liable……… -Designers were technically part of (embedded) in the in-house design team And so a consultant switch could not be chosen (and hold the consultant liable for the whole design) because they worked in conjunction with internal TW designers… but to remedy this a collateral warranty was put in place to pass them the responsibility of DESIGN COMPLIANCE, so basically if faults in the new design connection then TW can claim (Also a higher risk of conflict of interest with a consultant switch) Practice answer: “a consultant switch wasn’t chosen because they are embedded in the internal design team, and so exact liability couldn’t be placed on the consultant for the design…. However, once they were novated, a collateral warranty was put in place to tie them to the liability of DESIGN COMPLIANCE of the new design”

Answer 55

Design consultants had good knowledge of TW asset standards Could pass over drawings Specialists in water design compliance

Answer 56

-Checked during tender negotiation process with internal TW designers -Checked during quality inspections PM and Supervisor (network service technician)

Answer 57

That they will design with ‘reasonable skill and care’ to ensure design compliance… which mirrors their obligations in original contract (Reasonable skill and care = act how a competent architect would act) Not ‘fitness for purpose’ as this is different than their obligations in the original contract … and they would not agree to this

Answer 58

Issue 1: -Rule 2, reflect on work done -Rule 5, did not dissuade contractor from undertaking ADR Issue 2: -Rule 2, reflect on work done -Rule 3, understand clients needs and objectives, agree timescales, in a timely manner

Answer 59

-Change of pipe route -More detailed connection -Deeper excavation with larger plant -Larger temporary works for excavation -Change in sequencing/construction strategy of work (do all excavation first and then put in pipe/connection.. to save time by simultaneously testing for LLC)

Answer 60

-double acting brace system Uses bracing struts with hydraulics to put pressure on both sides of a piston to control movement in both directions, holding up the trench sheets -made of steel

Answer 61

-Herras fencing: for security -Chapter 8 traffic barriers: for health & safety Excavation technique: stepped

Answer 62

Water Act 1989 (paved way for privatization of water and sewerage companies Water Industry Act 1991/2014 (sets out framework of companies duties, and powers of Ofwat) -Water companies are legally obligated to provide connections -Can only object if would threaten ability to meet existing and future water needs.

Answer 63

-can leave designers feeling they have mixed loyalties -difficulty determining where liability lies for design work carried out before novation. -designer may be more interested in design while contractor more interested in cost/programme -Potential conflict of interest where designer is answerable to contractor AND client - but should only be contractor

Answer 64

Principal designer was switched from TSU to the contractor Note that The Client (developer) was completely hands off… and so TSU acted as the ‘Client’ under CDM / BSA TW ARE ALWAYS THE ‘CLIENT’ UNDER CDM Note: CDM states that Client is deemed to be the Principal Designer, unless an appointment is made in writing, otherwise they retain this role.

Answer 65

-Servs have smaller plant -Servs have shorter programme (and so less labour/prelims) -Servs has less TM and shorter citation -Servs has smaller working area/compound -Servs have no temporary works -Servs require less fencing -Servs dont usually require welfare

Answer 66

Under the contract, they can issue a formal letter to ‘crystallise’ the claim My report/recommendation and formal communication draft advised my senior team on how to respond.. and following the contractor rejecting it, entered into: -Negotiation, where I outlined the points in my report from the contractor -This then went to mediation, the first formal stage of ADR, where it was resolved. I didn’t take part knowing this, but my report was used as TSU’s argument. Mediator was CEDR Note: NEC formal stages are adjudication and arbitration, but this contract favoured mediation first

Answer 67

-Getting it resolved before end of financial year -Acknowledging the contractual ambiguity -Acknowledging mix of work more heavily Servs based than predicted -Acknowledging risk allowance insufficient and not in spirit of contract -Tender analysis revealed £162 wouldn’t have affected outcome award

Answer 68

Lack of detail of plant, materials, labour used, so could not build up a ‘bottom up’ unit rate with first principles Therefore had to do a ‘top down’ adjustment of the current rate

Answer 69

Original rate allowed for 9 hours of site setup The historic data I gathered of a sample of 50 random Servs jobs determined that average time to mobilise was 1.2 hours So 1.2 hours is 13% of 9 hours So did 13% of the £1216 rate to get the £162 rate This translates to a cost to TSU of approx £250-£300k annually… but better than £2 million

Answer 70

-That agreeing this rate would not have changed the outcome of the original tender…. By doing a retrospective tender analysis: -inputting the £162 uplift into the model forms in submission and determining that it would not have affected it -The tender was based on proximity to benchmarked rates, and not lowest price

Answer 71

-Within the tender submissions, the tenderers were required to populate their proposed rates against several ‘model forms’ ie a variety of different types of service and mains connections -I added in the £1216 to the winning contractor’s model forms and noted that it would ‘push them down’ 2 places in the affordability of their projects -Tender was weighted to 60% to pricing, so would have affected it

Answer 72

-Because if the contractor won the dispute (or got some sort of payout eg the £162 rate) and it was the next financial year, then these would not be able to be allocated to their specific jobs -so this would count as general OPEX costs to the business.. and so essentially deducted from any profit made on this contract (Because TW operates on an end of year spend basis) -So basically if costs were paid from this dispute after April, then would be loss -In terms of the wider picture, would contribute to TSU’s debt and difficulty in securing funding -Also look unfavourably by Regulatory Body who may limit the increase in tariffs

Answer 73

Costs will be absorbed into the average of all projects So want the lowest possible increase in costs to prevent customer prices from increasing

Answer 74

Operating expenditure -the ongoing costs a business incurs to run its daily operations (eg rent, salaries, marketing) -So An OPEX loss would increase this and basically be an increase in these general operating costs because they can’t be allocated to a specific job (as TSU works on an end of year spend basis) -conversely, CAPEX (capital expenditure) are one-time investments in long-term assets

Answer 75

Based on the estimates approx value of £20m For each £1m below the £20m, contractor will receive their fee on half of it So if provided with £18m worth of work, this is £2m below, so contractor will get their fee (9.38%) on £1m, which is £93,800

Answer 76

Approx £20m

Answer 77

-Duration (from historical data) x -Labour used (framework rates) -Staff used (framework rates) -Plant used (framework rates) -Prelims (framework rates) + -Materials (subcontract quotes) -Temporary works (subcontract quotes) -Disposal of LLC (subcontract quotes) + -Traffic management (framework rates + local authority costs) + -Internal staff (timesheets) + Overheads and profit

Answer 78

-As paid through the tariffs, The Client is basically paying a premium for cost certainty (and guaranteed speed) -So TSU have to keep to this price once it has been quoted/paid unless The Client drives any changes -Here, a ground conditions risk occurred which was a risk of TSU Note: under this framework (SoR), the contractor does not have the traditional risk of ground conditions… they are basically expected to show up and do the simple jobs There generally no site investigation needed, apart from on some bigger jobs like Project X where it is paid on a cost reimbursable basis using framework rates eg gang rate x hours (dayworks), fixed price trial holes etc

Answer 79

-Took historic data from major projects of same value threshold (like level 2 project finance) -Got of the % of costs of job that were apportioned to traffic management (6.6%) and internal staff (7.8%) and applied it to Project X estimate internal staff includes eg commercial, PM

Answer 80

-Internal TSU staff costs not included in the tender -Dealt with separately in a cost report -So although final construction price was £388k compared to £418k budget, a bit of this was eroded with extra commercial staff eg QS doing the tendering -But won’t be as many internal staff costs as it was a D&B so contractor did design

Answer 81

-Held discussions with contractor on viability -Spoke to internal design team on rough timelines -Looked at historic data of tender periods -Noted the procurement timescales in contract -As well as getting a target cost pain share, I offered an incentive budget (7%) to contractor for any final cost below the budget paid by client, and meeting programme timescales

Answer 82

-Assessed its compliance with the employer’s (TSU’s) requirements / scope -Technixal aspect passed to actual TW designers

Answer 83

Could identify other items that were being ‘disputed’ eg: -unavoidable costs were substantiation hadn’t been provided for road closures -extra over costs above 1.5m depth -that a larger 600mm rate was needed -could also identify the accuracy of the meterage contractor applying for, value of dispute for each connection/pipe diameter etc

Answer 84

It was a payment coordination system A report was ran with every job (approx 2000 annual) AQS’ / Payment coordinators would assess projects based off drawings / pictures and match the contractor’s applied value with the correct rates and quantities All paid value would go into contractor’s monthly payment notice All ‘disputed’ values would remain so until the contractor accepted it, or provided further substantiation Every month the figures were summarised and discussed between myself and SQS’s

Answer 85

There was a lack of communication for operations (PM/NST) to flag up items that would have cost implications (eg they assumed it was covered in rates) So I developed a checklist to identify items that would cause costs to be paid over and above the schedule of rates eg LLC, TM Although jobs that were tendered had an EWN system, the SoR jobs didn’t utilise this… so this checklist protocol was based on that

Answer 86

No, it would have taken too long ECI wasn’t required as basically already done: -concept design by TSU -site investigation mostly done by contractor

Answer 87

This was enforced by the regulatory body so that only agreed overheads & profit could be gained by TSU Prevented TSU from using their position as a monopoly to have excessive profits under: -The Water Act 2014 -Competition Act 1998 Maintains cost neutrality

Case Study Flashcards

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