Contractor Prebid and Schedule Risk

Transcription

1 Contractor Prebid and Schedule Risk Ray Post Vice President Huxted Tunneling

2 Presentation Outline This is all taken from my perspective as a Contractor Define Risk and Management. Discussion of Bidding and Schedule Risk. Summary. Questions. Things to remember: A Contractor is a gambler who never gets to cut, shuffle or deal. A bid is nothing more than a guess carried out to two decimal places. The bid opening is nothing more than all the gamblers placing their cards on the table in which the losing hand wins. The losing hand winner, or low bidder, spends the next week wondering what was left out of the bid which is likely all the risk the company owner said don t worry about it, get the job and we will figure it out. The Engineers Estimate is the price of construction in Heaven. A lawyer is a person who claims to fight for one side in a war, but, after the battle, kills the wounded and strips everyone (including those who already are dead) of their valuables.

3 Google Search for Construction Risk

4 Definition of Risk: The possibility that something bad or unpleasant will happen. Possibility of loss or injury. A situation involving exposure to danger. Definition of Management: The process of dealing with or controlling things or people. The conducting or supervising of something. The act or process of deciding how to use something.

5 (Some) Bidding Risk Factors: Owner. Competitors. Construction Managers/Inspectors. Design Engineers. Current work load (busy or slow). Subcontractors. Contract Documents - Plans, Specifications, Geotechnical Reports, etc. Environmental Hazards. Labor (Open and Closed shop). Equipment. Economy. Politics. Geotechnical. Federal/State/local Laws. Contract Terms and Conditions. Small, Minority and/or local hiring requirements. Weather. Taxation, foreign currency fluctuation, duties and fees, payment (AR/AP) Bonding. Schedule. Geotechnical. OCIP programs. Safety. Escalation. Insurance requirements Location. Multiple occupancy. Contracts/Legal issues. Probably 1249 more items could be on this list. Did I mention Geotechnical?

6 When you break it down, there are 6 major risk items to consider in the bid phase: Contract Documents - Plans, Specifications, Geotech, etc. The legal documents to which you are bound! The Competition. Your Existing and Future work/backlog. Labor and Equipment. Schedule. Other. This does not take the actual work into consideration.

7 Contract Document Risk. Contract language. Impossible to change for public contracting Standard design/bid/build. Understand the General Conditions, Special Conditions and Hierarchy/Precedence. Claim and differing site conditions clauses. Is there a DSC clause? What are the notification requirements? Time frame. Prudent to understand the State statues on notification requirements. Written. Cost(s). ADR/Legal solutions to claims. What is the road to resolving rejected claims? Straight to legal filing? Arbitration (binding/nonbinding)? Mediation? Disputes Review Board? Informal ruling? Formal ruling? Are rulings allowed in court? What geotechnical information is provided. Geotechnical Base Line Reports? Geotechnical Data Reports? Is the Geotechnical information included or excluded from the Contract Documents? Properly Prepared Drawings and Specifications Can the job be built as designed? Are the specifications written for the job or a copy and past from previous work? Are the specifications over burdensome? How does the contract address errors in the drawings and specifications?

8 Competition Risk. Local vs out of town Small vs large. Risk Management in Underground Construction Perceived reputations. Subcontractor access and relationships. Previous experience/knowledge. Open Shop vs Closed Shop.

9 Existing and Future/Backlog Risk. Assume risk due to lack of backlog. Small vs large.

10 Labor and Equipment Risk. Do/will you have the equipment? Do/will you have the labor? Do/will you have the CORRECT people (not just bodies) and Equipment. What is the availability of the CORRECT or TRAINED labor in the project area. What is the availability of equipment.

11 Schedule Risk. Risk Management in Underground Construction Can the job be built in the contract time frame? If not, how do you handle the risk? Bid the LD s. Who owns float? Is float ownership is defined? Is contractor overhead and other cost defined or is it ambiguous? Rarely does a contractor receive true OH cost in return for an extension of time.

12 Other Risk. Cost of money/escalation? Type of Owner/Engineer/CM? Payment issues? OCIP programs/insurance. Potential environmental issues. Currency fluctuation, Taxes, Duties. MBE/WBE/LBE goals and requirements. Simply the production used to bid the work. How much risk is there in performing the work.

13 Examples of Contract Document Risk.

14 Examples of Escalation Risk. Project advertised to bid December 15, Simple project, one launch and retrieval shaft. 144 inch outside diameter two pass rib and board tunnel 6000 feet long. Installation of a carrier pipe on the inside of the tunnel with a tie-in at each shaft. No power drop available, you must generate power with a generator. Figure 3 months from bid date to NTP. Figure 5 months from NTP to TBM arrival date. Tunnel work to last 6 months. Carrier pipe installation, grout and tie-in work to last 5 months. Did you escalate your fuel correctly?

15 Examples of Schedule Risk.

16 Summary: Risk is actual and perceived. Different contractors and people view risk differently. What I may view as risky, someone else may not. In the underground tunnel industry, it seems that owners/engineers know they will always get a low bid no matter how much risk they pass on to contractors. There are limited contractors with limited work and the chance of someone bidding low and accepting the risk is high Advantage Owners. Alternate forms of procurement (rather conventional design, bid, build) have and can reduce risk to both the owner and contractor. The Portland Contract Model. Competent contractors do evaluate risk, not just the actual risk of building the project, but all risk.

17 We all love underground work. Unless born into it, a lot of us fell into it. BUT Let s remember what is important! Any Questions! Risk Management in Underground Construction