OBAWEMIMO AINA 28/11/16
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SIGNIFICANT RISKS OF THE PROJECT 1.0 Contract Conditions Based on the procurement strategy selected to execute this project (Traditional) and the desire and having considered the risk appetite of the employer (risk averse), the selected contract type will be Standard Building Contract with quantities (SBC11) and the following conditions will be considered in the contract framework for the execution of the project in accordance with JCT SBC11. The framework will be under 9 major headings: 1. 2. 3. 4. 5. 6. 7. 8. 9.
Intentions Time Control Money Statutory obligations Insurance Termination Miscellaneous Disputes
1.1 Intentions The contractor’s performance conditions aligned to the dictates of the contract documents (materials, goods, workmanship, and design portion requirements) with cognisance to Health and Safety Plan and other Statutory Requirements must be stated.
1.2 Time Time related clauses that reflect completion and possession dates must clearly stated in the contract, with provision for partial possession (beneficial entry) of a completed part in the building due to lack of funds to complete the project or for storage, this shall be subject to adequate insurance arrangements. Certificate of completion must be duly released upon completion of agreed works. Contractor will incur charges for delay in completion. The contractor must provide a notice of delay in writing with documented evidence including estimates of the impact on the project completion.
1.3 Control Provision of collateral warranty to safe guard the interests of third parties. Sub-contracting any part of the project work will require the written consent of the architect, and the contractor is liable for the performance of all sub-contractors.
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1.4 Money The contract sum shall be exclusive of VAT, and inclusive of milestone payments. Variation of contractor design portion by the architect will be valued as an employer’s requirement. Interim payment will be made to the contractor, upon the issuance of interim certificate by the architect, subject to a confirmation by the quantity surveyor.
1.5 Statutory Obligations The contractor shall be made obligated to comply with the dictates of the CDM regulations in particular – Construction Phase Plan and Health and Safety file.
1.6 Insurance The contractor must indemnify the employer with respect to personal injury or death. The contractor must purchase a professional indemnity insurance to cover its liability for design.
1.7 Termination Provision to terminate the employment of the contractor by reason of specified defaults. Allowance for the contractor to terminate its own employment for specified defaults by the employer. Termination of contract on the basis of, neutral causes by both parties.
1.8 Miscellaneous The provision of power to the architect to restrict persons from the works.
1.9 Disputes Adjudication procedure must be clearly set out in the scheme for construction contracts. The adjudication decision shall be binding on all parties at least until the dispute is finally determined at arbitration or by legal proceedings.
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2.0 Key Tender Documents Tender documents are documents created to communicate the design intentions/requirements of the employer to the tendering contractors. Its precision should be capable of providing the contractors with clarity of thoughts with regards to contractual obligations, project scope, costs and specifications (Cunningham, 2013). Tender documents should be sufficiently detailed to provide for its breakdown into smaller packages (each with its own design drawing and specifications) for ease of pricing for the tendering contractors (Designing Building Wiki, 2016). The key objective of engaging in the tender process is to achieve value for money in terms of cost, quality and innovation in a fair and equitable way. The tender process can follow the stages identified in figure 1 below to achieve its objectives.
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4 OBAWEMIMO AINA 1610606 For effective communication of project requirements, the following key documents are important for tender process • • • • • • • • •
A letter of invitation to tender Specifications The Form of Tender Bill of Quantities Site Waste Management plan Requirements for BIM Pre construction services agreement Construction drawings Health and Safety plan
2.1 The Invitation to Tender The ITT is a formal request document issued to the tendering contractors to submit bids for the project (Cunningham, 2013). It contains instructions to the tendering contractor i.e., the arrangement of site visits, tender return deadline and method of submission (Brook, 2008). It also informs the tendering contractor on the nature of other attached documents and the purpose and scope of the ITT (See appendix A).
2.2 Construction Drawings Drawings are the most precise means by which designers communicate their vision and intention to the building team, which ultimately presents a clear and concise interpretation for the tendering contractors (Hackett et al, 2006). All works to be built should be as complete as possible as this provides a basis for accurate pricing and less possibility for variations. A clear and concise drawing is essential to running a project and also inspires confidence, a poorly presented drawing reveals the designers deficiencies (Hackett et al, 2006). This project will require less tender drawings because of the existence of BOQ, it will however require a location drawing (drawn to scale 1:2500/1:1250/1:500), site plan (1:500/1:200), general arrangement drawings (1:100/1:50) i.e., floor plans, elevations and sectional drawings that show the various elements in the building and any other detailed drawing referred to in the BOQ (Hackett & Robinson, 2003; Cunningham, 2013).
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The table 1 below describes various types of drawings. TYPE OF DRAWING
DESCRIPTION
General arrangement drawings
These are presented as plans and elevations. It is produced after the employers consent and forwarded to all consultants for the production of their draft schemes (Cunningham, 2013). This will be issued if there is a reference to specification clauses in the BOQ and not covered by the BOQ’s preliminaries i.e., the provision of site accommodation (Cunningham, 2013; Chappell, 2014).
Services Drawings (Drainage and Plumbing)
To be produced simultaneously with general arrangement drawings (Hackett and Robinson, 2003).
Construction details by the architect and specialist subcontractors
The process of selecting materials and finishes conducted during general arrangement drawing leads to the detailed architects drawing used for obtaining tenders for the specialist works. The importance of this stage borders on the consequence of its precision or lack of on the consultants (Designing Buildings Wiki, 2016).
Assembly details
Once the consultant drawings are accepted, the assembly detail drawing in draft outline, should be completed (Hackett & Statham, 2016).
Final co-ordination of drawings
When all detailed drawings have been collated and coordinated, the final drawing can now be produced with elements of accuracy (Hackett and Robinson, 2003).
Layout and Site Plans
These are completed at the incorporation of all external services and setting out of the buildings (Sinclair, 2013).
Table 1. The various types of construction drawings.
2.3 The Specification The specification defines the acceptance criteria and product description for the quality of materials and expertise required in this project; it augments the details of items of works provided in the BOQ (Hore et al, 2009). ‘It identifies the scope of work, level of quality, tolerances, testing and inspection requirements’ (PMI, 2016) The specification is an important part of tender document in this project, and it will serve a complementary document that provides additional information that supplements the BOQ (Hackett & Robinson, 2003).
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2.4 Bill of Quantities The BOQ (see appendix II) describes the quality and quantities of units of items of work for a project. Its key function is to provide a uniform basis for competitive lump sum tenders and subsequently become schedules of rates for pricing variations (Hackett & Robinson, 2003). Before ITT, it is important practice for the architect to prepare a detailed drawing to avail the quantity surveyor the opportunity to measure from it, the actual executable amount (Chappell, 2014).
2.5 The Form of Tender This is the form where the tendering organization will fill their details as related to their offer for the project, including their lump sum figure they are offering for the contract works.
3.0 Project Team and Structure The following built industry professionals will form the core of the project team; • • • • • • •
Client Contract administrator Project Manager Quantity Surveyor Architect Main Contractor Subcontractors and Suppliers
3.1 Roles and Responsibilities 3.1.1 Contract Administrator The contract administrator is appointed by the employer, the role involves managing the contractual obligations between the employer and the contractor. A role historically held by the architect but now held by other building professionals i.e., building surveyor, quantity surveyor and engineers. Sometimes the CA may be required to execute pre-contract services under formal or informal arrangements with the employer. Other functions include- advising contractors on changes to project works i.e., variations to building layout, recommending substitute materials as the performance will affect the works.
3.1.2 Client According to CIOB, 2014 the following are the key roles of the client in construction, to make suitable arrangements for managing and successfully accomplishing a project. Ensuring that the build meets set quality criteria, and creating an enabling environment that will allow the project proceed in a reasonable sequence.
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The risk aversive nature of the client implies that he requires clear understanding of potential risks to the construction phase due to employer changes and endeavor to make prompt decision to avoid delay on project works through management of internal stakeholders. Site security and the adoption of health and safety practices is paramount to the client to maintain his high rating, while also ensuring contractors and consultants are payed promptly.
3.1.3 Construction Project Manager The role of the construction manager is that of oversight; having clear overview of all operational and technical matters as it relates with the construction project including the health and safety standards of the construction site. Similarly, he oversees the preparation and issuance of contract documents to the contractors; to prevent undue project delay (CIOB, 2014). Ensures contract documents are endorsed by the appropriate personnel; thus confirming the validity of contract papers, and reviews the contractors working schedule and method statement; this is important as it shows that significant health and safety risks have been identified and communicated while also confirming that safe, coordinated systems of work have been put in place (CIOB, 2014). Making sure procedures are set up and enforced; this will provide significant overview for construction activities and ensure no step is missed (CIOB, 2014). Monitoring construction financial status; to ensure the continuity of a project and monitor its cash flow through practical procedures that identifies the presence of deviation and their magnitude is important as cost problems usually stem from a chain of linked activities (CIOB, 2014). Coordination of site inspection; inspection is important as it ensures that project activity progresses as planned in terms of quality requirements and compliance to standards and regulations (CIOB, 2014).
3.1.4 Design Team Provision of production information; this task enables the project to be constructed, while providing guidelines on the best practice approach on the fabrication of production information (CIOB, 2014). Instructions on standards of work and working methods; necessary for managing and assessing risks, handy for feedback process i.e., collecting workers view and briefing them (CIOB, 2014). Engaging in design inputs; this is a collaboration exercise between the owner, design team, architect or engineer during the design phase with the purpose of reducing construction cost and time, and improving constructability (CIOB, 2014). Conducting quality inspection; conducted to ensure compliance with quality and contract requirements, it also provides an independent assessment for reporting to the contract administrator (CIOB, 2014). Baseline works against drawings and specifications; the augmentation of specific details of ongoing works against approved drawings and specifications, helps early correction of errors (CIOB, 2014).
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4.0 Organisational Structure
Figure 2. Organisational structure and relationship.
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5.0 Risk Management Risk occurs when a threat and vulnerability overlap, and can affect project objectives positively or negatively. It is essential to pay attention to risk, to ensure the successful outcome of this project. The risk management process will attempt to identify and assess the potential impact of risks and their likelihood of occurrence during this project, this will ensure that a conscious plan to mitigate the risk has been put in place. The risk planning for this project has taken into consideration that the client is non tolerant to risk, therefore the deployed strategy would be to eliminate, transfer or share the risks inherent in this project as much as possible. The following are likely potential categories of risks capable of affecting this project:
5.1 Benefits risks Due to the high capital investment of this project, significant effort must be made to ensure that it realises its set objectives. While attempting to deliver value for money and design, factoring environmental considerations in the buildings location is important, as it should aim to deliver a wider range of social and economic benefits, capable of accommodating future requirements. It is then imperative for the client to conduct sensitivity analysis, to estimate future revenue loss of incorporating the cost of these factors (social and economic benefits) in the lifetime cost of the building (CABE, 2004).
5.2 Consequential risks Be aware that not all risks are insurable. Consequential risks are risks that may occur as a result of other risks. Contractors are used to accommodating risk, it is second nature to them as failure to accommodate risks translates to loss of business. This overbearing need to accommodate various risks creates avenues for construction delays that invariably lead to potential loss of revenue. It is therefore necessary for the project team to measure and assess accurately each potential loss to prevent over insurance or underinsurance (Kerzner, 2009).
5.3 Political and business risks The effect of Brexit could have far-reaching consequences on this project and on the construction industry at large. The project team should investigate the uncertainty surrounding the UK economy with regards to taxation, loss of expertise, access to funding, and legality which could remove confidence from the construction industry (McLeod and Milne, 2016). Other potential risks within the group, is the possibility of contractors to practice conservatism and be unwilling to embrace risks in an unfamiliar economic terrain. It is however advised that the client’s management team seek appropriate means to calm the nerves of the contractors by removing unnecessary risk burden through encouraging collaboration amongst contractors to spread the risk.
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5.4 Programme risks The risks that may affect the organisations interrelated projects. Majorly a risk associated with decisions on project funding, quality, business continuity and cultural issues (NRM1, 2012). The integration of the above is aimed at realizing the strategic set objectives of the client e.g., constructing the athlete’s village for the London Olympics. To manage this risk category adequately requires: • • • •
Strong leadership and direction Collaboration between organisations Engagement of multiple stakeholders Ensuring visibility of risks at project checkpoints to enable prompt management decisions.
5.5 Design development risks The identification of design development risks is important for the elimination of the inherent risks available in this project phase (NRM1, 2012). For example if the project brief is clear and detailed, the potential for other design related risks i.e., appropriateness of design would be eliminated or at the least reduced. A checklist of the design development risk shown in Appendix B, should be prepared and closely monitored by the project team for compliance. If the risk of constructability however occurs, appropriate technological solutions or expertise can be deployed.
5.6 Construction risks The relevance of identifying construction risks cannot be over emphasised in the management of risk. It can be used as an accurate and emphatic technique for conducting site suitability and ensuring smooth construction progress without the delay that may ensue from i.e., the discovery of archaeological remains or invasive plant growth (NRM1, 2012). See Appendix C, for a list of construction risks.
5.7 Employer change risks A list of identified employer change risks is shown in Appendix D for ease of reference. These risks are consequent upon the client’s desires to change the scope of works, time or amen quality criteria. These variations may have a time and cost implication on the project and may require adjustments to project budget, timelines and may also increase the risk for claims against the client if considerable time is not given to the contractors to adjust to the changes. To avoid this set of risks, it is vital for the client to deliberate/ discuss with project consultants before arriving at project specifics such as quality requirements, construction duration and scope of work (NRM1, 2012). Engaging the project in short definitive phases may also be considered.
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5.8 Employer other risks Considerations should be given to this category of risk (see Appendix E for list), as it relates to this project these risk are also consequent upon the decisions of the client and or factors that affect him that directly impacts the project i.e., funding. In the event that the client cannot proceed with construction commitments, partial entry/possession should be included in the plan to accommodate for the impact of lack of funds, these would allow the client to continue operations or rent out a completed part of the building to enhance his possibility to continue to generate revenue for the completion of the project.
5.9 Response Strategies It is important for the risk management strategy to be established early on in the project and to continually address risk throughout the project lifecycle (NRM1, 2012). The following risk management strategies can be used in the management of risk. Plan risk management
Risk identification
Risk assessment/analysis Risk response planning
Monitor and control risk
This process can be used to document and develop an organized strategic method for identifying and analysing risks, developing an action plan to monitor and control risks (Kerzner, 2013). The identification of risks that may negatively or positively impact the delivery of the project through critically examining each project phase to identify and document the risks and uncertainties associated with them i.e., scope, cost, schedule, works. These risks will be identified by methodologically querying the hypothesis, logic, reasoning of the project scope and analysing the identified uncertainties associated with each project phase (Kerzner, 2013). This can be achieved through quantitative and qualitative assessments of the impact as well as the probability of occurrence (Kerzner, 2013). This process identifies, evaluates, selects and implements one or more strategic options within the risk response group. The response options are risk avoidance, reduction, transfer, sharing and retention (Kerzner, 2013). The systematic tracking and evaluation of risk response performance baselined against established parameters, throughout the implementation process, it allows for the selected risk response strategy to be updated accordingly (Kerzner, 2013). Table 2. Risk management strategies.
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5.10 Risk Management as a Continuous Process Upon identifying all potential risks that can negate the outcome of a project outcome, the project team must assess the risks most likely to occur. The risk selection process is chiefly influenced by experiences gained from past projects, historical data and lessons learned (Aina, 2015). Threats and opportunities are high during project planning, but due to the low level of investment at that stage, the cost of risk is low, it is however necessary to begin risk management planning early on in the project and continually monitor and control risks throughout the project life cycle. The figure below highlights some project controls and monitoring groups to track risks and provide an extra layer of security (Aina, 2015).
Figure 3. Project controls and monitoring group.
5.11 Risk Qualification The RICS, 2015 duly notes the importance of quantifying inherent risks in a project with regards to cost and time and identifies the following risk quantification techniques • • • • • • • • •
Sensitivity analysis Monte Carlo Probability trees Central limit theorem Fault tree analysis Event tree analysis Simple method assessment Probabilistic method Percentage addition
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5.12 Risk identification 5.12.1 Risk breakdown structure RICS, 2015 agrees that the project team will identify risks, by using the risk breakdown structure (RBS) and identifies potential risk generators in the following areas: • • • • • • •
Natural Economic Government Societal Client Construction Project
5.13 Risk categories Each of the potential risk events in this project will come under one of the following risk categories (RICS, 2015). See figure below for the influence diagram of cause-risk-effect with response: • • • • •
External – uncontrollable External – influenceable Internal – client operations (controllable) Internal – user requirements (controllable) Internal – project processes (controllable)
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Risk Category External Uncontrollable
Risk Source Inflation, Interest rate
External – Influenceable
Brexit
Internal –Client operations
Change in quality requirements
The control of this risk category lies with the client. The project team has no control over impact or occurrence probability.
Internal – User requirements
Ineffective reporting and maintenance review procedures Unclear roles and responsibilities
Both the client and project team have joint control over the probability of the event occurring. The project team has control over probability of occurrence and impact.
Internal – Project processes
Source Characteristics Dependent on existing financial landscape external to the project team and client with no control over its impact. Existence of partial influence.
Table 3. Risk categories and response.
Response Characteristics Spread risk Increase insurance
Encourage project collaboration/partnering between contractors. Prepare a robust business case, options consideration. Define quality assurance policies and procedures. Define quality control policies and procedures. Assign QA and QC personnel Test for compliance with established QA and QC policies and procedures Standard reporting packages. Utilisation of communication plans. Review of project reporting packages, KPI’s etc. Utilisation of a RACI matrix. Identification of roles and responsibilities within project management processes. Test the project roles and responsibilities for potential segregation of duties and conflicts.
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5.14 Risk assessment and management CATEGORIES
DESIGN RISKS
LIKELIHOOD
IMPACT
1(RARE) – 5 (VERY FREQUENT
1 (VERY LOW) – 5 (VERY HIGH)
D1
INEFFECTIVE DESIGN COORDINATION
4
5
D2
INEFFECTIVE QUALITY CONTROL PROCEDURES
3
4
D3
APPROPRIATENESS OF DESIGN (CONSTRUCTABILITY)
4
5
CONSTRUCTION RISKS C1
ARCHAEOLOGICAL REMAINS
1
4
C2
ADJACENT STRUCTURES
2
2
C3
ASBESTOS AND OTHER HAZARDUOUS MATERIALS
2
3
C4
TREE PRESERVATION
2
2
C5
RESTRICTED WORKING HOURS/ROUTINES
3
4
EMPLOYER OTHER RISKS EO1
INADEQUATE OR UNCLEAR PROJECT BRIEF
4
5
EO2
CONTRACTUAL CLAIMS
4
5
EO3
UNSUITABLE CONTRACT STRATEGY
4
5
EO4
CHANGING INFLATION
2
4
EMPLOYER CHANGE RISKS EC1
INADEQUATE OR UNCLEAR PROJECT BRIEF
4
5
EC2
CONTRACTUAL CLAIMS
3
4
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VERY HIGH D1, D3, EO1, EO2, EO3, EC1, EC3, EC4
HIGH
IMPACT
D2, C5, EC2 MODERATE
C2, C4
LOW
C3
EO4
VERY LOW
RARE
OCCASSIONAL
SOMEWHAT FREQUENT
FREQUENT
VERY FREQUENT
LIKELIHOOD Figure 4. Risk Matrix.
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