Initial Considerations Inception & Feasibility Design - - PowerPoint PPT Presentation
Initial Considerations Inception & Feasibility Design (traditional) / Concept (package deal) Authority Approvals Determining Procurement & Pricing Structure Determining Other Risk Allocations Conditions &
Pricing Structure Norm
Pricing
Pricing
– Sub-Structure = Re-measured BQ – Super Structure = Lump Sum – Preliminaries = Lump Sum – Specialist Design & Construct NSCs = Lump Sum – Underground Complex & Innovative Work = Cost Reimbursable with Target Cost Incentives and Dis- Incentives
Developer’s Risk – Lowest Price
– On time or Delayed – EOT or LAD – Quality Performances (QLASSIC/CONQUAS etc.) – Safety Record (DOSH) – Green Building Certification History
– Currency – Materials (Fixed Sums)
– Budget explosion↑ Delay Tender? – Fast Track: Contingency Pricing in Rates – Provisional Sum Works/ Provisional PC Sum Works (PAM 2006 removed Provisional PC Sum Works?) – BQ as Schedule of Rates? 1st Stage Tendering based on Competitive BQ? – Is the Schedule of Rates thorough?
– Provide all Information in Possession but without Assurance on Veracity or Accuracy – Site Visit – Sufficient Time to Study Conditions within Site and Access to and within Site – Geo technical information but with Exclusion as to Accuracy – Deemed Knowledge protects Legal Exposure but Not Contingency Pricing
– Danger of Contingency Pricing if no Information or Qualified Information – Allow Contractor to carry out own soil Investigations : Not many do
geo-technical conditions (possible 2 stage)
geo-technical studies if they are later not appointed
Tender if Compulsory Investigation drastically different
– Contract Sum Analysis – Rationalisation of LS Possible
Fluctuate
from as-builts
(need rationalization)
increase/decrease
– soil / substructure piling
– Budget explosion↑ Delay Tender? – Fast Track: Contingency Pricing in Rates – Provisional Sum Works/ Provisional PC Sum Works (PAM 2006 removed Provisional PC Sum Works?) – Allow Rate Fluctuation based on % ↑↓
ignore contingency pricing for provisional quantities
– Increased Quantities affects Quantity based Preliminaries : Supervision/QAQC etc. – Critical path quantities – within same time
– Under-Quantified Items: Profit Loading – Chance of budget burst ↑ – Independent Checker Pre-Tender? Cost ↑
– Proper Rationalisation is Required – Rationalisation Provision in the Contract or BQ (PAM 2006 : Errors to be Rationalised) – Not Errors but Unreasonably Weighted Rates – To ensure Equal Profit Margin Spread – SO’s view of rationalisation deemed final unless proven to be unfairly end loaded
– Is the Preamble to BQ thorough & clear? – Is the Malaysian SMMs made applicable? – What about other SMMs that are wider? – SMMs do not cover every area of Work! – Is there industry practice? (PAM 2006: SMM sanctioned by ISM & currently in force?) – Have “extra overs” been allowed in the BQ?
Specifications
– ↑ Descriptions = ↑ Ambiguity/ Discrepancy (Pam 2006 = quality of work set out in BQ?) (PAM 2006 = error in description to be corrected by SO = variation) – Priority Provision? No Contra Proferentum – Duty to Identify & Raise : Tender & Before Commencement : Bound by Clarification – Duty to Rectify at Costs if not Sought Clarification
– Preliminaries Contingency Pricing for Works Not Listed but Shown in Drawings – Deemed Priced into other Items Listed – Inclusive Price Principle
Forms
deemed part of obligation considered sufficient
– Inclusive Price Principle
but a reasonable experienced contractor would realise is Indispensably and Contingently Necessary: Deemed Priced in Rates and Items in BQ
to comply with Contractual Requirements
Final Works
AE Farr Ltd v Ministry of Transport (excavation of temporary work space not covered under BQ: variation)
–design, cost control, supervision, contract administration?
project funding?
specifications clearly defined?
technology?
Controlled?
designs differ?
– 2 Stage Tendering
– Design Checkers? Increases Cost & Defeats Purpose – Avoid Competition in Under-Designing
Construction
– 1st Stage: Feasibility, Concept, Development Opportunities, Sanctioned Budget + Schedule & Design – Specialist Contractor who Develops for Owner – Value Engineering at its Highest & Cost Efficient Development Methodology Inclusive – Best Cost & Time from Contractor’s Perspective – 2nd Stage: FEED Contractor Project Manage - Execution
– Design Transfer + 2 Stage Hybrid Tender
Pricing covert to Lump Sum + Design Contingency Price
– Design Value Engineering + 2 Stage Hybrid Tender
Sum Pricing
– Transfer Design Consultants to Contractor
– rationalisations – schedule of rates – reduced pricing – value engineering – horse trading
– Based on Limited Concept/Design – Benchmark Maximum Price
Agreement : Design/Cost/Time Consultancy
Sum Contract
– Design Process Evaluation – Value Engineering – Programming Issues – Mitigation / Prevention Processes – Cost Control Processes
Pro
Pro
Requirements
Con
Contractor
Con
Contractor / Project Teams
Recommended:-
– Cost-Efficiency & Value Engineering = Target Cost – Guaranteed Maximum Price – Sharing cost savings from Target Cost – Pricing mechanism is premised on Target Cost with Incentives/Dis-incentive + Open Book – Senior management & site management Partnering Charter” & Incentive formula – Progress & Quality KPIs – Incentives within TC
(KPIs)
(www.beonline.co.uk)