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  • Andy Bradley

Transfer the project risk.... What could possibly go wrong.....?


So, you've got a project... It's a relatively complex project with a tight site and a tighter budget....

What's new...? What could possibly go wrong?

You picked the best design team. They weren't the cheapest... no, in fact, they were the 2nd cheapest out of 10 who submitted their competition entry.... What could possibly go wrong?

The design team is made up of world class firms, shaping better planets, thinking big about cities, doing lots of great research with thought leaders all over the place, they even had more diversity than the Rio de Janeiro Mardi Gras.... What could possibly go wrong?

The design team did a great job, developed a fantastic looking set of documents - shiny covers and everything! They even delivered a decent looking BIM model which you looked at through your super cool Hololens goggles... What could possibly go wrong?

You then opted to make things super safe for yourself and transferred the risk to the contractor by signing him up on a GMP with final responsibility for design, weather, geo-political events and any liability associated with an alien invasion. What could possibly go wrong?

To further minimise your risk, you then novated the design team to the builder. Ha!! He was now responsible for any errors made by the design team (even though the virtual model's clash detection software gave everything the thumbs up...)

What could go possibly go wrong??

So, you're now sitting 6 months into the project and the Contractor is telling you that there's an issue.... WTF?!?! You transferred all responsibility to him! Why is he telling you there's an issue.....???!?!?

He says that there are "cost / programme / technical" issues that weren't picked up by anyone. You're flummoxed.... How can this be? You transferred all the risk.... The Contractor has had 2 contracts managers working on the job since the start and they are presenting you with a heap of evidence showing that there were gaps in the tender docs and the contract which were either "unforseen" or "non-documented"....

So, you turn to your design design team....yes YOUR design team.....They'll help you. They told you all those fantastic things they do and how they operate etc etc.

errrr, "sorry" they say, "cant help mate. We're novated now. The Contractor wont permit us to talk to you". This gets you really frustrated as you employed them, however you probably should realise that those poor guys havent been paid by the Contractor for 3 months and are now running at a massive loss on the project.

Aaarrghh how has this happened?? You transferred all the risk.....

Well, bad news.... There is no such thing as transferring all the risk....

The Contract you signed the Contractor up to referenced a Brief or a set of design documents....These were produced by your design team (or, Contractually, YOU).

The Contractor has now slapped in a 3 month delay and his first variation of many.... He's also saying there are "Scope Gaps", "Latent / unforseen issues" and "Technical Errors". He's priced all these issues and it's looking like a $10m blowout.

However, all is not lost, his subbies have come back to him with some alternative options.... He says they have the expertise, have spoken to their suppliers and believe that they have a much better solution for the facade / HVAC /Lighting / BMS / Ceilings (choose any one).

He presents the "Value Engineered" solution. It all seems sensible. They're saying it meets the BCA and is $150k cheaper than the "consultants overdesigned scheme".... He leaves that statement hanging there, just for effect..... You make a mental note to publicly execute the consultant in the town square for wasting so much of your time.

At this stage, you dont have any option but accept all of the the Value Engineering options. This gets you back (nealry) on budget.... He can give you a nice schedule of changes. He can even get new Form 15s for the revised design.

All seems well again.... the Sun's shining and the project is back on budget. You ignore that wee voice at the back of your mind telling you to check the original Brief of your subsequent Lease Agreements that you now have with others..... The Contractor has this covered.... He also has lots of great motherhood statements on his website about Building Better Cities and stuff like that....

What could possibly go wrong?

Fast forward 18 months....

You're now nearing completion. Well, to be honest, completion was supposed to happen 3 months ago but you're just about there. You've finished within your project contingency. Well, you're second upgraded contingency. You've got 4 weeks to go. It's been one of the most painful experiences of your life but it's almost over. Home straight... What could possibly go wrong now?? Commissioning has been delayed and delayed and has only just started (can they really pull 3 months of commissioning off in 4 weeks??).

First tenants are winding up to move in. Their agent is chasing you for Base Building info. They need all the Mech and Elec data. You dont have this yet. You send them what you have. They come back, it doesnt meet what the Leasing Agreement states.... WHAT!!??!?! You call you're original engineers, they've cant provide any help as they're now in contractual dispute with the Contractor over non-payment of fees. The Tenant's engineers have written to you now, explaining your building's shortfalls.... Aaarrghh.. What do you do now???!!?

Heeeeellpppp!

....................................................

Unfortunately the above scenario is all too familiar. As the market tightened over the last 5 or 6 years, procurement of projects got more and more convoluted. We've seen design teams novated at 20%, 40%, 60%, 80% and even 83% Design Development stage (yes, one large contract resulted in the design team being novated at 83% DD.....)

This was all done with the intention of transferring risk.... As the above example highlights, there's no such thing in reality.

So, as an industry, what should we do? The answer is pretty simple... We need trust, respect and collaboration.

For starters, the client needs to trust that his design team are delivering a value for money outcome for him. The design team in turn must respect what the contractor supply chain can bring to the project. Finally, all parties; Client, design team, main contractor and key sub-contractors must collaborate from the outset. I don't mean the usual watered down half-baked ECI. I mean true ECI where early means EARLY (e.g at the start, the beginning, the kick off.... got it?)

All parties must start thinking and behaving as an integrated project delivery team. All parties must face all challenges together. There will be mistakes and errors on all sides. The project delivery team must unite, adopt a no blame culture and sort them out. This true collaboration will then allow the respect and trust to flow back up the chain.

It's not going to be easy for an industry like ours to change behaviours and it certainly won't happen overnight.

Sometimes it needs an independent person to come into the project to invoke change. This is where XBÜRO are delivering massive gains for their clients.

XBÜRO are currently helping clients in a range of different ways, such as; getting projects off the ground, contractor procurement, providing technical leadership, resolving cost and programme blow outs, rescuing projects that have gone awry and making sure buildings are performing as they should.

Our experts come in, help solve your problems and then get out.

With that, we'll sign off and leave you with a song (be thankful, rather than a blog, I nearly did a video singing this.....)

🎶🎶. If there's something wrong, with you project plan, who ya gonna call - XBÜRO. 🎶🎶

ps. If I get over 100 likes for this blog, I'll do a video of the song!!!


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