Technical - Level 3 Flashcards
(163 cards)
Procurement & Tendering
Wendover Road
What were the client’s requirements?
-Public procurement = traditional for comparison, inf framework for competition (over incumbent). See other flash card
-Quality = traditional for quality/design control (reputational risk), inf framework for guaranteed ability/resources (over external tender)
-Programme = inf framework for speed/less familiarisation and come in at earlier design stage (over external tender)
-Cost = traditional for certainty, inf framework for competitiveness (over incumbent)
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Procurement compliance - high risk
-Must comply as funded by public client and NRSWA (TW)
-Mitigated by: competitive infrastructure framework to tender to a sufficient standard to ensure VFM, follow 2015 regulations, traditional procurement to allow easy comparison of tenders and demonstrate value for money through competitiveness, eg in design and build you can’t compare different designs as well and justify eg choosing the most expensive even if it’s the best
Programme - high risk
-Must meet date as part of wider HS2 development so no delay in appointing contractor
-Although traditional procurement isn’t the quickest: Mitigated by tendering through infrastructure framework… current framework quickest but infrastructure framework next best option
Reputational damage - high risk
-High profile stakeholders and residents not in support of project
-Mitigated by: client retaining design control with traditional procurement, infrastructure framework ensuring good reputation/technical ability of contractors (ability to phase works around highway construction)
Commercial (VFM) - medium risk
-Ensure VFM for procurement rules and save money
-Mitigated by: Tender from more competitive infrastructure framework, Single stage cost certainty, traditional procurement for cost certainty, 50% tender weighting on price
Operations (contractor technical knowledge) - low risk
-Contractor must have technical knowledge and large resource availability, Must meet asset standards/flow rate/no leakages
-Mitigated by: tender from infrastructure framework as ensures contractor knowledgable, early procurement of contractor to help in earliest design stage possible
Note: another option was open/selective tendering, which although offers best competitive price and procurement compliance , it is slower to procure, slower for contractor to familiarise,
Procurement and Tendering
Wendover Road
Why did you advise on single stage tendering?
-Sufficient information/employer’s requirements available to obtain price of all works, collaboration not required
-Get most competitive price, two stage less competitive as contractor already embedded
-Provides earlier cost certainty
-Faster
-Not a complex project
Downsides:
-If not sufficient information then can lead to variations during construction. In this case should use two-stage
-Cannot benefit from ECI
Procurement and Tendering
Magdalen College
Why did you advise on two stage tendering?
Summary:
-Non crystallised employer’s requirements for firm price
-Benefit from contractor ECI to develop three solutions before main works
-Complex project and ECI provides VE options for value for money
-Provides cost/design certainty because … less assumptions/subcontract prices (not estimates)/contractor knows risks
-Reduces disputes: ECI collaboration is less adversarial than single stage as design/specifications clearer
-Allow earlier start on site
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-Employer’s requirements have not crystallised (site conditions, flood remediation, and finer details of diversion connections)
-Contractor/specialist input required to develop these requirements, goes hand in hand with NEC X22 two stage process
-Used on complex projects to facilitate ECI/early collaboration before sufficient information available which also increases scope for VE
-Reduces chance of variations as contractor part of early design
-Provides design and cost certainty , enhanced by eg less assumptions/qualifications, getting subcontractor prices rather than estimates, contractor can assess risks
-Reduces possibility of disputes over inaccurate design/specifications
-Two stage provides best value for money by contractor providing best solution/buildability and whole life options (part of qualitative bid)
-single stage not suitable as design has to be well developed for this to occur.Two stage suits design and build procurement better as contractor contributes more
First stage allows contractor to 1.price for known works, and 2. submit details under a PCSA including aspects regarding project preliminaries, method statements, design, overheads, and profit.
Second stage should then be a process of using the criteria agreed in the first stage. But often will be more items not previously considered so will need negotiations e.g where sub-contractors are used.
Procurement and Tendering
Magdalen College
What are the downsides of two-stage tendering?
Summary:
-Less competitive price as no competition (albeit gives more certainty)
-Slower as need second stage to finalise details
-More admin effort and upfront cost
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Downsides:
-Although more certain price, can lead to an overall higher price due to lack of competition
-Slower for D&B procurement (where there is already an overlap) so the two stages almost cancels it out, only really quicker for traditional procurement
-If try to get contractor involved too early this can reduce cost certainty
-More administrative effort
-Increased upfront costs
Procurement and Tendering
Magdalen College
How did you ensure a competitive price in two stage tendering?
Summary 2:
-In the ECI/first stage (Option E) competitive price by contractor TENDERING for their rates of eg pipe fixing per m, staff rates, design rates… and competitive subcontract quotes
-For second stage (Option C), the client sets the BUDGET to be used as the BUDGET INCENTIVE
…as well as the pain/gain from the TARGET COST that the CONTRACTOR tenders for
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-Client must set a BUDGET to account for entire works (calculated by pre-tender estimate) prior to tender with contractor which will be used as BUDGET INCENTIVE for contractor to design within this budget (10%)
So contractor will get this share if they are below the CLIENT’S figure.
(The budget is for extra cost control in such an early stage of project as easy for contractor to inflate the target cost at this stage)
-There is also Pain/gain from target cost contract
And so contractor will get the 50% share for being below THEIR figure
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Note:
Option C is budget incentive AND target cost share for contractor
Option E is budget incentive only
Option E is usually used for the stage 1 because at that early stage it is very difficult to predict amount of resources needed accurately. Once a price has been agreed for the construction phase, ECC Option C is chosen because it is a risk-sharing contract
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-Incentive budget, offering contractor further share of final cost below ‘Budget’ (estimated project cost agreed for whole works at the first stage)
Maybe:
-Portion of pre-construction fee contingent on award of main works
Procurement and Tendering
Magdalen College
Why not separate contracts for ECI and main works?
Summary:
-Integration of preparatory and main works to maximise collaboration and VE… rather than a separate PCSA
-At concept design so needed contractor to develop main works design along with remedial works
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-Client wanted integration of early works to provide value engineering for main works
-I advised on an X22 clause which is only for NEC options C and E, and Magdalen was option C so it worked.
I advised this over the other option of a separate PCSA for the ECI works BEFORE the main contract is let because:
-It facilitated collaboration (imperative in ECI)
-Significant overlap eg contractor input on abandonment, flood remediation could affect diversion route/connections
-Condition of current mains determine how much of it reinforced
-Extent of pumping station upgrade and surface runoff measures can affect programme/sequencing
All interlinked
Procurement and Tendering
Magdalen College
Why did you advise on two-stage to maintain design control?
Summary:
-Client can evaluate technical submissions before detailed main works proposals in second stage, so maintains control even in D&B
-High profile/complex job with large potential for disruption so programme coordination required
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-Two stage allows client to evaluate technical capabilities / technical (design) submission before inviting them to submit detailed proposals .. so helped TW ensure design quality even though a D&B project
-Complex design of diversion and proximity to highway, large POTENTIAL FOR DISRUPTION so close programme coordination required in accordance with design, also a large diameter job (600mm)
-High profile/influential stakeholders, and so high reputational risk
-Sufficient time allowed for two-stage to take place
Procurement and Tendering
Magdalen College
Why did you advise on a design & build procurement route?
Summary:
-not a well developed scope/design (so can’t do traditional) so provided employers requirements
-Contractor expertise to develop these requirements with proposals (buildability)
-contractor would take design risk
-and would under a single point of responsibility, coordinate works packages with VE proposals
-Improves cost certainty with contractor contributing to design earlier eg site conditions / key subcontracts in place instead of estimates quotes
-Speeds up two-stage tender as contractor designs preparatory and main works together
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-Project would benefit from contractor expertise by selecting specialists and considering alternative construction methods (buildability). The client wanted works to be INTEGRATED as certain works eg pipe remediation technique/extent of repairs can affect programme and even main works eg extent of pipe that needs to be replaced / water pumping station location
-I advised client they wouldn’t want to take take design risk for works, and so contractor can take it, as they are also experts in the ECI stuff so good to take that risk
-Single point of responsibility for variety of works (flood prevention and main works)
-Improves cost certainty as contractor involved earlier on and more clear on risks eg site conditions and key subcontracts can be in place instead of estimates quotes
-Also provided cost certainty earlier in project
-Good for complex projects if used with two stage tendering (see other flashcard …client can control element of design). Conversely, if one-stage tender then better if a simple project
-This project wasn’t particularly complex, just a large variety of different works. So would really benefit from contractor expertise and under a single point of responsibility
-Above could be achieved as there was sufficient information for employer’s requirements, but not enough for full design (so couldn’t do traditional)
-Provided speed to meet programme requirements
-Two stage tendering was needed on this job so design and build speeds it up
*Even though it’s the client’s job it’s TW’s responsibility to deliver the project eg procurement and tendering, and so design is their risk unless passed to contractor
At TW: DESIGN IS NEVER CLIENT’S RISK?
Procurement and Tendering
Wendover Road
What are the disadvantages of design & build?
-Price/cost certainty only as good as quality of information/employer’s requirements provided. If they’re poor then variations will occur
-Client relinquishes an element of design control e.g choosing specialist subcontractors so not generally suitable for complex projects
-Contractor can price in risk
Procurement and Tendering
Wendover Road
Why did you choose the Infrastructure Framework?
Summary
-Public: more competitive than incumbent framework
-Programme: faster than external tender
-Quality: bigger pool than incumbent, guaranteed technical ability over the eternal tender
-Cost: more competitive price than expected incumbent
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-Not as quick as incumbent framework (direct award as only 1 contractor) but provided wider competitiveness to meet procurement rules
-Not as competitive as external selective tendering but was much quicker, especially as external selective had to adhere to public procurement rules when in framework all tenderers had gone through PQQ stage requirements
-All tenderers been through vetting terms of ability and resources
The best ‘middle ground’ option
Procurement and Tendering
Wendover Road
What effect did public procurement have on this project?
Summary:
-Inf framework for sufficient competitiveness
-Inf framework faster as PQQ/ITT stage could be skipped: (minimum time limits of 30 days for PQQ… also wouldn’t have to draft scoring criteria)
-Traditional for easy comparison, D&B time consuming to justify best option if most expensive
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-The infrastructure framework (and incumbent framework) already met public procurement rules
-External selective tendering would need to adhere to the rules, such as being MEAT (not just lowest price), publish criteria/weighting and ITT and contract terms if known, lots of detail in specification for tenderers, meet minimum time limits of 30 days for PQQ and 30 days for contractor’s to return
-So it’s most competitive but much slower, especially because of procurement rules.
Public Procurement Regulations 2015 because so can see how Local Authority spent money. Also TW made contribution from public funds (NRSWA)
-Contributed to choosing traditional procurement route: Easier to compare like for like tenders and demonstrate value for money through competitiveness, eg in design and build you can’t compare different designs as well and justify eg choosing the most expensive even if it’s the best
Procurement & Tendering
Magdalen College
What were the client’s requirements?
Summary 2:
-Time: met by D&B, offsetting 2 stage tender
-Cost: reduction from ECI VE
-Cost: certainty from ECI input
-Quality: from D&B input and ECI proposals… also design control from 2-stage tender
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Summary:
-Quality: lots of different works so needed contractor to design and build from ECI stage. Two stage would provide design control for client
-Cost: contractor provide buildability/VE options to reduce cost
-Cost certainty: two stage would provide early cost certainty of remedial works with solutions eg subcontract costs instead of estimates, clearer on risks
-Programme: design and build will speed up two-stage as remedial works to be done while finalising main works design
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-Quality: high performance needed (900 litres a second/manhole spill analysis, pumping station efficiency), wastewater so strict H&S requirements, upgrade of sewage pumping station (new pumps/pipes/valves/systems/control panels) so complex, flood remediation/prevention, upgrade of pipes, abandonment
High profile stakeholders so high quality imperative
-Value for money (cost) - Two stage provides best value for money by contractor providing best solution/buildability and whole life options (part of qualitative bid),
-Cost certainty, so two stage would provide early cost certainty of remedial works and subsequent rates for main works, also cost certainty as ECI will allow contractor to be more clear of risks (such as site conditions) and key subcontracts in place rather than estimated quotes, all aided by natural cost certainty of traditional route
-Speed (programme) - not a top priority therefore two-stage tendering chosen, although still to some degree as first phase to be complete before start of football season (near a stadium). Contractor doing ECI stuff while design complete could speed up pre-construction time over normal traditional route.
Procurement and Tendering
Magdalen College
Was this through a framework or external selective tendering?
External selective tendering due to variety of works
Eg also includes contractors who didn’t win the frameworks
Procurement and Tendering
Magdalen College
When would you advise on ECI?
Summary:
-scope/requirements not well developed
-Buildability and VE proposals
-Integration of remedial and main works
-Facilitate collaboration for cost and design certainty
-Quicker start on site and procure long lead materials
-worked well with target cost and 2 stage tender
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-Preperatory/flood prevention/spill analysis/pipe remediation/manhole fixing (after spill analysis) works.. client wanted INTEGRATION of these with the main works as these earlier works could affect main works eg the programme sequencing or extent of pipe that needs to be replaced / water pumping station location
-Contractor can use experience to propose value engineering to reduce costs, compress programme, improve sequencing and overall buildability… earlier it happens the bigger the impact
-Facilitates collaboration and reduces number of variations. The earlier in design contractor gets involved the bigger the impact
-Creates a strong focus on Client’s objectives at the outset
-improve safety/environmental performance
-ECI allows quicker start on site eg for site clearance so can speed up project
-Provide a more reliable ‘Budget’
-Allows contractor to procure long lead materials
-If the project is NEC option C or E, as X22 clause only available on these contracts as these options are best suited for collaboration where involving the contractor early in the design process is most beneficial, whereas options A and B (priced contracts) have less need due to their fixed price nature.
-X22 clause goes hand in hand with 2 stage tendering
-X22 essentially allows contractor involvement into project before full design or price has been established, enabling contractor to take part in design development and early construction
Procurement and Tendering
Magdalen College
What was the ECI process?
Summary 2:
In first stage (ECI), Contractor tendered for under OPTION E:
-Proposals for REMEDIAL works with tendered staff rates (used in second stage)
-Development of scope/design of MAIN WORKS using tendered staff rates (used in first to stage only)
(Then in second stage they tender for constructing main works under Option C)
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Summary:
-Used on this D&B project where employer’s requirements not developed for contractor to calculate realistic price. So contractor tenders a fee for ECI and completing main works design (currently at stage 2) along with SOR that can be used to establish price for second stage tender.
-Contractor proposals against ECI deliverables
-Contractor provide staff rate for ECI staff and those carried on in main works
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-TW establish scope/objectives and prepare tender criteria
-Contractor provides Stage 1 (ECI) price against required deliverables (for Magdalen was early works) and a forecast of entire Stage 2 main works.
All based on TW current design*
Used on design and build projects where employer’s requirements not sufficiently developed for contractor to calculate realistic price. So contractor tenders a fee for designing it (or completing design) along with a schedule of rates that can be used to establish the construction price for the second stage tender.
-Stage 1 works carried out and TW give notice to proceed to Stage 2
-Contractor tenders for main works against completed TW design
- Contractor could also include any proposals for Stage 2 with a forecast (either VE proposals or changes if their ECI works discover changes needed to main works)
Procurement and Tendering
Magdalen College
How was the first stage appointment made?
Summary 2:
Under Option E:
-Contractor tenders competitive rates for REMEDIAL works (pipe fixing per m, staff etc….to be used for BOTH STAGES) and competitive subcontract quotes
-Contractor tenders competitive rates for developing scope/design (for FIRST STAGE ONLY)
-As this stage progresses and the contractor develops the scope/design, they build up the activity schedule for stage 2….. this is COLLABORATION
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Summary:
-One contract with ECI, but NEC allows first stage (remedial) as Option E, and second stage (main works) as Option C
-Client must set a BUDGET for entire works (calculated by pre-tender estimate) prior to tender with contractor which will be used as BUDGET INCENTIVE for contractor to design within this budget (10%)
-Contractor tender for design/construction of remedial works against deliverables/works packages… eg with subcontractor/supplier costs or on open book basis to produce a target cost
…And so contractor will also get the 50% share for being below THEIR figure
-Provide staff and remeasurable rates (eg slip lining per m) for remedial works….. and also general staff rates to be used at remedial AND main works stage
-Can offer value engineering proposals for main works
-Budget helps decide if happy to proceed to stage 2
-This was through a quantified ACTIVITY SCHEDULE and TARGET COST so based on open book accounting.
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Note: BUDGET set by client, TARGET COST set by contractor
Note: Option E is BUDGET ONLY, Option C is BUDGET AND TARGET
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I advised on one contract with NEC X22 (ECI) clause instead of other method of where a PCSA is undertaken BEFORE the main contract as:
-All work interlinked so wanted under one contract
-X22 possible on Options C and E
-Facilitated collaboration better as under one contract
Stage 1 included an appendix with design TW had done, pre-construction information, list setting out where schedule of rates items for Stage 1 items can be applied to Stage 2 e.g flood remediation per m.
Contractor provided in their submission these rates, staff rates, preliminaries, Stage 1 proposals, Stage 2 forecast, break down of work into different packages, CV’s
Contractor’s services include:
-Helping client develop design (paid through design fees per day)
-Helping client with method of construction (flood remediation, pipe fixing etc)
-Obtaining prices for these works through eg subcontractor/supplier costs or on open book basis
This was through a quantified ACTIVITY SCHEDULE (with remeasurable rates), and OPTION C (TARGET COST) so based on open book accounting.
Procurement and Tendering
Magdalen College
How was the second stage appointment made?
Summary:
Under Option C
-Contractor tenders to construct the project which they developed the scope/design for in first stage
-Tendered on open book basis, as well as using the staff rates agreed in first stage
-Incentivised by budget set by client in first stage (INCENTIVE BUDGET)… and the pain/gain saving from TARGET COST
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-Contractor tenders to develop TW’s concept design of main works/construction method…
-rates already agreed for specialist staff, remeasurable slip lining rate, surveys , subcontract costs etc … this stage is negotiation of the quantities
-Replacement of assumptions with firm prices, adjustment of incentive budget
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-TW provided full detailed design at this stage for contractor to price
-Changes to design could allow Contractor’s Stage 2 forecast (done at Stage 1) to be repriced through change procedure. In this case it is really just replacing ‘assumptions’/qualifications’ made by contractor with firm prices eg of connection details so will need some negotiation to iron this out
-Though second mostly a mathematical me exercise using pricing agreed at first stage
-On Magdalen, rates already agreed for specialist staff, remeasurable work eg pipe fixing, flood remediation per m/m2, some subcontractor costs eg surveys.
Procurement and Tendering
Magdalen College
How did you advise on the qualitative criteria of the submission?
Summary:
-Importance of QUALITY of submission rather than lowest price, so advised on 60% quality and 40% price, meet MEAT
-Of this 60% I advised higher weighting on project management and delivery (method statement, solution proposals, VE proposals, how contractor measure success eg leakage analysis and efficiency of pumping station (litres per second)
-Next highest weighting on H&S as was wastewater and deep excavation work using harnesses.
-Then on quality record/experience and VFM
-Then on supply chain eg subcontractors and their experience
-Then on sustainability
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-Advised TW’s procurement policy favoured ‘most economically advantageous tender’ as well as importance of quality of submission rather than lowest price, so advised on 60% quality and 40% price
-Of this 60% I advised higher weighting on project management and delivery: focusing on method statement, solutions provided by contractor, VE proposals, how contractor would measure success eg leakage analysis and efficiency of pumping station (litres per second)
-Next highest weighting on H&S as was wastewater and deep excavation work using harnesses.. so close look at RAMS
-Next highest on quality record and value for money
-Next highest in supply chain eg their experience
-Next highest in sustainability
Procurement and Tendering
Magdalen College
Why did you recommend the winning contractor’s tender?
Summary:
Although winning bidder had higher cost it provided:
-Better track record / specific experience in critical areas
-Tested supply chain
-Clear proposals against packages with no normalisation needed, not many assumptions against requirements so clearly understood requirements
-Good VE options to reduce initial cost and also whole life costing
-Good H&S record
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Although winning bidder had higher cost it provided:
-Experienced/tested supply chain provided greater confidence of cost certainty. Cheaper tenderer had untested supply chain so greater risk of variations
-Provided clear proposals against the criteria without normalisation needed, showing they understood requirements. Other tenderers not always clearly defined against criteria
-Superior track record in critical project aspects eg sewer infiltration reduction preventing surface runoff, pipe remedial works, ground soil contamination removal
-Good VE options to reduce initial cost and also whole life costing
-Good H&S record
Procurement and Tendering
Magdalen College
What ECI works did contractor do on this job?
-Sewer infiltration reduction: identified through leakage analysis near pipes/manholes to allow work to be done on:
-Ground remediation
-Pipe fixing (slip lining by slipping new pipe inside old, full sewer lining with resin membrane), improving jointing techniques
-Same as above on manhole repair
-Surface water separation eg natural drainage with landscaped grassy areas
-Sewer overflow screens
-Cleaning/scouring of pipes
-Install pressure monitoring valves/NAV’s
-Wet well cleaning (in pumping station)
-Fitting equipment in pumping station (BUT TW DID ITS DESIGN) though contractor could offer solutions if needed
Above based on labour, plant, and subcontractor quotes
SEE CESMM4 CLASS Y
Contract Practice
Cherry Tree Lane
Why did you advise on X22 early involvement?
Summary:
-ECI for Phase 2 started tendering half way through Phase 1 for enabling/temp works design before starting on Phase 2
-More uncertain works so option C and ECI X22 work well together - Contractor could compress programme and provided VE option
-ECI allowed procurement of long lead materials
Note: the ECI was option C for first AND second stages of ECI as was CLIENT led design (can only use option C)
Conversely, Magdalen College ECI was CONTRACTOR led, so first stage was Option E while second was Option C
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NOTE: ECI TYPICALLY USED ON DESIGN & BUILD AS ASSUME CONTRACTOR WILL CONTRIBUTE TO THE DESIGN DURING DESIGN STAGES - THIS PROJECT FOLLOWS THIS
Basically, contractor does full design for Phase 1 (diversion) and for Phase 2 (reinforcement/replacement) does a little bit of temp works design
-ECI used for Phase 2 (option C) to provide little transition period between Phase 1 and Phase 2.
-X22 clause goes hand in hand with 2 stage tendering. ECI for Phase 2 started tendering half way through Phase 1 for enabling/temp works design before starting on Phase 2
-Sped up work which was useful due to DELAY BETWEEN FRAMEWORKS
-Advised ECI over a PCSA (which would have a separate contract in between phases) as just needed a little overlap between phases so separate contract unnecessary where same contractor will be doing work directly linked to main works
-Also better than having Phase 1 (Option A) and Phase 2 (Option C) contracts running simultaneously as Phase 1 needed to be completed before Phase 2 started (because diversion determined when could access old pipes that needed to be reinforced/replaced)
…..but enabling works (eg site preparation ) COULD start.
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-ECI facilitated collaboration and reduced variations
-Contractor could compress programme and provided VE options
-Provide a more reliable ‘Budget’ for Phase 2
-ECI allows contractor to procure long lead materials
-Phase 2 is NEC option C which allows X22 (along with option E) as these are contracts best suited for collaboration/involving contractor in design asap is most beneficial, whereas options A and B (priced contracts) like for Phase 1 have less need due to their fixed price nature.
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Why in different phases:
I advised ideally their requirements should be complete (no provisional sums) and work required in the Works Information, ideally slowing tender until they know. So THIS IS WHY SPLIT INTO 2 PHASES
Phases 1 and 2 are SEPARATE CONTRACTS, cannot be in same one as messes with defined cost/activity schedule etc
Contract Practice
Cherry Tree Lane
How does a Design and Build route being chosen affect NEC option?
-Fits better with activity schedule options, so Option A (lump sum) or Option C (target cost). This is because design wouldn’t have been developed so you wouldn’t be able to produce a bill of quantities
-Traditional lends itself well to Option A or Option B if the design is at a detailed enough stage to procure bill of quantities.
Technically can use all options but others are cost reimbursable so have less cost certainty (used when scope less clear)
Contract Practice
Cherry Tree Lane
For Phase 1, why did you choose Option A over Option C?
Summary:
-Happy with scope that no changes (Stage 3 design), BOQ not far off so a contractor could get a realistic price
-Provided cost certainty
-Risk register costs low
-Simple project under design and build procurement route (so contractor can control easy)
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-In Option A the financial risk sits with contractor (Lump Sum) so Client needs to be happy with no scope changes. Thames Water previously designed project to RIBA Stage 3 and did surveys under previous framework so I advised that best to have lump sum rather than sharing profit in target cost.
-I assessed the client’s well defined works information AND risks in the risk register and decided that Phase 1 should be lump sum
-Suitable for design & build route as contractor has control of activity schedule and can easily define activities, making it easy for client to see how price determined. Note: D&B chosen to facilitate speed due to framework transition delay
-Bill of quantities wasn’t too far off so happy with scope/requirements that it was sensible/realistic for contractor to price
-Cost certainty required by client, risk appetite was happy that wouldn’t be any more design/scope changes. Lump sum tends to be used on simpler projects as easier to achieve this rigid scope, and this project wasn’t hugely complicated
-Note: Options A and B use short schedule of cost components for CE’s only (using pre determined people rates included in tender submission rather than first principles), full version for defined cost AND CE’s
Contract Practice
Cherry Tree Lane
Why did you advise on an NEC contract?
Summary 2:
-Programme management - public
-Transfer risk (client took ground risk)
-Collaboration
-ECI
-Target cost
-Risk register
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Summary:
-Programme management important, time bars make sure CE’s constantly updated to keep a up-to-date record, good audit for partially public funded project
-Ability to transfer risk eg unforeseen ground conditions usually Contractor risk but client took this risk as done extensive surveys (JCT more adversarial employer v contractor)
-Allows target cost for phase 2
-JCT doesn’t have ECI clause, only a PCSA which is separate contract (at TW the early and main works are often integrated) which is better for collaboration
-Option C provides good audit trail of change/open book - helpful for auditing as project partially publicly funded
-Client wanted provisional sums in Phase 2 but NEC should be used with proper consideration of pre-contract risk register instead with pre-set cost/PROGRAMME impact
-Hence made sense splitting into 2 phases with a target cost for uncertain Phase 2 - which relied on information/progress from at Phase 1 to determine when it started/how risks developed
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NEC:
-Good programme management to speed up project after delay between frameworks: facilitated through NEC always having up to date programme so client always informed, which happens due to strict time bars of EWN/CE process making sure everything updated as it happens
-Approach to risk is collaborative and allows it to be allocated to best meet project objectives (whoever is best to control risk) through a risk register. …. Unforeseen ground conditions usually Contractor risk but TW took this risk as had done extensive surveys in previous framework and happy to take on risk/not pay contractor premium
-More flexible in terms of payment arrangements, allowing target cost for Phase 2. JCT only fixed price and only in 2024 introduced target cost contract
-High level of collaboration needed for ECI which NEC facilitates
-Often used on complex/infrastructure projects with potential for change, NEC deals with change and so it happens AND can use target cost for Phase 2 to reduce cost risk of going over budget
-NEC option C provides good audit trail of change and rolling final account giving client constant update of completion date and final cost. Also an open book procedure, important for auditing as project is NRSWA, partially publicly funded
-For Phase 2, the client asked about provisional sums for cost certainty of unknown excavation. I advised that they should use NEC (which doesn’t use provisional sums) but instead dealt with through a proper consideration in the pre-contract risk register instead of provisional sums ‘plugging gaps’. The risk register will have pre-set cost and PROGRAMME impact (PS’s vague on this) if it occurs, and if risk occurs then PM issues instruction and whoever ‘owns’ the risk pays for it.
I advised ideally their requirements should be complete and work required in the Works Information, ideally slowing tender until they know. So THIS IS WHY SPLIT INTO 2 PHASES
Change in scope will be a compensation event
Also much better for setting initial ECI budget and public funded auditing purposes
Note: Phases 1 and 2 are SEPARATE CONTRACTS, cannot be in same one as messes with defined cost/activity schedule etc
*Different to JCT which doesn’t have risk register/allow transfer of risk (apart from
Constructing Excellence) so Contractor would still take ground conditions risk and price for it