Risk Sharing and the Application of the Public Works Contract for Contracting Authorities in Housing

Risk Sharing and the Application of the Public Works Contract for Contracting Authorities in Housing

6 Common Construction Programme Risks.

On 3 July 2023, the Irish Government announced significant risk-related amendments to the suite of Irish Public Works contracts. One potential major issue for contracting authorities is the ‘provision whereby the liability of a contractor to the Employer will be limited to a monetary amount (“the Liability Cap”).

In its guidance note to contractors and contracting authorities, it states that ‘When setting the amount of the Liability Cap, a contracting authority should conduct a considered assessment of the potential risks associated with the contract, combined with consideration of factors that may influence value for money in the tender process in relation to the value of the project.’

With the onset of this legislative change for Employers, I outline (from personal experience) some potential time-related construction programme risks that need to be identified in the tender process in relation to the value of the project.

1 – Access / Egress

How does a contractor access and egress the site. ? Will the contractor’s logistic strategy be subject to planning conditions? This needs to be priced into his tender. In a recent risk-related meeting, a client informed me that ‘we can’t use that route or that route’. This is a common risk theme on ‘constrained’ sites. So be wary of this common pitfall, as it will inevitably slow down or disrupt a contractor’s progress to perform under the contract.

2 – Enabling Works / Demolition

In most brownfield projects, demolishing and conserving existing buildings is a major risk for contractors and employers. For example, temporary works such as the retention of facades will pose a site health and safety risk and challenges. Such challenges also impose temporary works design liability issues concerning PII. Also, conservation risks become apparent when an old building is peeled back. Inevitably…a road to a ruin, can be a road to ruin. Also, don’t forget about the bats (they apparently switch home every three weeks) and possibly unforeseen asbestos.

Site possession is a risk item for all projects. For example, a contractor will mobilise operatives, plant, and machinery for a certain programme milestone date – but it can be delayed. Will we see more DSU insurance claims within the industry? From experience, site possession can be impacted due to third-party uncharted utilities such as ESB, Gas, Water, and Broadband that were missed in the employer’s tender design.

In many cases, a power cable traversing a site can lead to delays, especially if it is not highlighted on a drawing, or is within the footprint of a proposed structure. Guaranteed this could be a Clause 10.3 delay event under the PWC schedule K as a delay event!

3 – Excavation

Excavation is also a high-risk area on a construction project. It is almost impossible to cover all the ‘what ifs’, but the key pointers are as follows :

  1. Does the Employers site investigation (trial pits, boreholes) cover the footprint of the proposed building?
  2. What is the underground water level at the deepest excavation point? (Don’t forget left pits !)
  3. How does a contractor excavate the site? – Is an earthworks berm or ramp required?
  4. What time of the year is it being excavated?
  5. How does a contractor access/egress the excavation onto a main road? Will local residents get protest?

4 – Substructure

Ok, now we are coming out of the ground, and it’s time to lay the foundations. What could go wrong?

On an Employer-based design, the structural design needs to be clearly detailed. The last thing an Employer wants is a design with missing or erroneous information that a contractor can claim is delaying the work. Also, the late sign-off of contractors piling calculations may lead to the late procurement of rebar activities. But equally, it would be almost impossible to identify contractor workmanship quality risks, as this lies with the contractor.

Remember, such activities are almost certainly to be critical path activities, and any delay may impact the programme’s substantial completion date, leading to another 10.3 notice, or 10.3.3 if the design is not corrected and prolongs the delay.

It cannot be overstated enough how important a robust employer’s design is at the substructure stage of the project.  On-site, the response time to a contractor-raised RFI is equally important to mitigate any substructure delay.

5 – Superstructure

Invariably, risks still prevail as the superstructure emerges from the ground into the superstructure stage. Most risks include a combination of elements, but some of the main ones are :

Scaffolding – Especially if structural steel walkways and balconies are to be fitted as part of the superstructure.

Type of superstructure – Lightweight Gauge steel – Typical risks are late substructure impacting timely delivery, and material inflation.

Reinforced concrete – Changes to Employer specifications, inclement weather, and quality considerations

Pre-Cast Concrete – Logistics, Lifting, Laying (Three L’s) – Remember that most tower cranes do not have a lifting capacity to lift and place large-span PCC elements.

6 – External Envelope

Ok, we need to get the building weathertight and commence 1st fix activities inside the building. The external envelope basically keeps the water out, or does it? The employer design and construction sequence will influence the project’s risk level. For example, are external walkways connected to the parapet of the envelope? What is the sequence of construction? Level by level or elevation by elevation. The sequence of the external envelope installation will impact the timing and sequence of the installation of windows and the commencement of fit-out activities. When will the roof be constructed on the programme? Will water ingress lead to mould growth? Are there any new building regulations regarding the fire safety of fabric and the fire certificate?

Final thoughts

What is key with this change to the PWC is that employers and their staff must now undertake an extensive (and continuous) risk assessment of each project. The starting point in risk assessment is the risk register and a thorough risk assessment of planning, legislative, design, procurement, and construction activities. Risk is categorised and scored in likelihood, severity and treatments.

While I acknowledge that risk is highlighted early in the PWC procurement process, the NEC 4 contract goes one step further. The early warning register is key to managing and administering the contract under NEC 4. This is because the programme is king under NEC 4, as Time is Money.

The NEC 4 early warning clause works particularly well where programme risk is built into a tenderers and contractors’ programme. Once risk is established, it can then be continuously measured and mitigated. This is definitive risk/reward sharing on a project.

Contractually, most risks would be reduced in likelihood and severity if contractors were legally obligated to demonstrate early warnings of potentially late programme activities under the PWC contract.

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