25 February 2021
In his two-part blog, Guy McCoig-Lees continues the theme of risk and explains why both client and contractor should work together to avoid having a lot to lose.
Guy McCoig-Lees, Commercial Director
When I look at a wall I sometimes squint. I think if I strain my eyes hard enough, I’ll see through its surface finish and work out what’s behind it and what surprises there are inside. I’ve not yet mastered the skill, but I’m practicing.
In truth, both my client and I know that my eyes are never going to improve and without knocking a hole through the wall and looking inside we won’t know whether there’s a vacant space, a complex structure or how it’s actually been constructed – all of which are going to impact on what we need to do next.
As Bill outlined in his blog, complex buildability, it’s worth the risk, Collins has a reputation for delivering challenging refurbishment projects that many contractors see as too risky to take on.
But we only say yes when given the opportunity to expose the risk of uncertainty so we can inform and protect our client and inform and protect ourselves. We want our clients to have a building they are proud of at the end of a smooth journey we have all enjoyed and made money on. We can only achieve this by getting the risks on the table at the very beginning so we can present managed solutions, transferred at the appropriate time.
Our experience tells us that there will be unforeseen site conditions, such as issues beneath the sub-surface, existing poor workmanship, and an inadequate structure often unable to take the proposed works in most complex, structural refurb projects. There is no avoiding the challenges posed by 200 years of original and modified structures buried deep within a building. The key to a successful project is to accept unforeseen risks as a potential element of a structural refurb; to invest in people with the skills and expertise to identify these risks; then be on the front foot to manage them through within an acceptable programme by investing contingency time and money in carrying out the intrusive investigations needed to identify these risks.
For the client, the value of this experience combined with due diligence is a transparent cost and time programme that delivers a building that is exactly to their ambitions and is resilient for the future.
Over the past 65 years, there have been a few projects that we have walked away from due to the lack of opportunity for due diligence or not being able to have the correct contingency in place. Then the project completes 10 months later and it is proven to be problem free. On these occasions we have been overly-cautious and made the decision to highlight potential risks rather than say nothing, so the project goes elsewhere to a less cautious bid.
But this situation is rare and more often overshadowed by the all-too common ‘over time and over budget’ projects that leave both client and project team feeling bruised and out of pocket. This unhappy situation occurs because everyone crossed their fingers at the start and hoped there were no giant oil tanks under the slab of a previously disused Coachworks.
When the oil tanks do appear, there is no plan, no mitigation and time and cost resources need to be quickly amassed in the hope the original programme can still be achieved. It is the contractor that must accept the financial risk but the client’s ambitions are rarely met under these conditions as projects overrun and the quality originally promised is compromised.
Upon receipt of a tender enquiry, Collins will go through its due diligence to establish the project’s risks and identify the project team member that can best foresee the risk and the one best placed to control and manage it.
By identifying the right people at the right time, we are establishing the most equitable distribution of the risk allocation. We not only develop a contingency plan for the risk’s successful closure but develop a fairer risk allocation. This approach provides transparency for all parties and allows the client to understand the project risks further leading to a reasonable price, a qualitative performance and ultimately minimising the risk of future disputes. There is a great truth in the phrase, ‘a good job always makes money, and the route of a bad job is a dispute.’
We have a strong relationship with all our clients and we appreciate the pressure they are under to generate value from the best price. We take this into consideration as part of our assessments during the pre-construction stages.
We also recognise market dynamics have demanded the transfer of risk to the main contractor through a series of contract amendments, at the earliest opportunity and in many cases pre-contract. These risks include those unforeseen site conditions but also errors in employers-provided information, performance of statutory undertakers, changes in law and more recently, force majeure and pandemic events.
This flow-down of strict contract terms then forces us to ask the question, “Does the risk far outweigh the potential reward?” And yes, this means our profit. Balancing profit with best-value fee and outcome for our client is our focus during the tender period. By identifying the key risks and developing proposals on how to overcome them we can provide timely and efficient design, including planning and innovation. This ensures that our client achieves – and we achieve – a successful, value-generating refurbishment and a project we can all be proud of.