Contracts and Risk. Building blocks for success. Miami, November 14 th, 2016

Transcription

1 Contracts and Risk Building blocks for success Miami, November 14 th, 2016

2 Risk, what risk? Heathrow 100% Cost Overrun 6 month delay Channel Tunnel 80% cost overrun Hallandsas 300% Cost overrun 10+ years delay Jubilee Line 67% cost overrun 1 year delay East Side Access 150% cost increase 8 years delay Storebaelt 54% cost overrun 2 years delay 17/11/2016 Mott MacDonald Presentation 2

3 Publications and guidelines 17/11/2016 Mott MacDonald Presentation 3

4 Risk management toolkit 1. Risk assessment, allocation and risk register. 2. Changed ground conditions clause 3. A payment mechanism for changed ground conditions to minimise claims 4. DRB or other alternative resolution process 5. Insurance 6. Procurement strategy. 7. Collaborative project environment 17/11/2016 Mott MacDonald Presentation 4

5 Add Picture Project Greater Istanbul Water Supply Project Client Devlet Su Isleri Location Istanbul, Turkey 28km drill and blast 4km TBM 2 shafts Design Bid Build Modified FIDIC 17/11/2016 Mott MacDonald Presentation 5

6 Contract Summary Risk Register none prepared and no formal risk assessment Risk Allocation Client owned ground risk Baseline no GBR. GDR and remeasured BoQ DSC included. Payment mechanism Remeasured BoQ Procurement Strategy Design Bid Build Collaboration no partnering or other similar mechanism. No DRB 17/11/2016 Mott MacDonald Presentation 6

7 Baseline conditions Ground conditions defined using estimated Q values Ground mapped by Contractor and agreed to by Engineer Payment made against Q value 17/11/2016 Mott MacDonald Presentation 7

8 Ground Support 6 Support classes identified based on Q values Support details shown on drawings including sequence 17/11/2016 Mott MacDonald Presentation 8

9 Ground Support Additional support elements identified in the Bill of Quantities and paid as used. 17/11/2016 Mott MacDonald Presentation 9

10 Project Outcome Actual ground classification encountered was significantly different than the estimate cost and schedule overruns. No contingency was included in the contract budget for changed ground conditions and the associated cost increase. Risk allocation- clear and changed ground conditions were managed in a straightforward manner. No risk assessment - underestimation of the risks and unrealistic expectations from the client together with low cost certainty. Absence of shared commitments and unrealistic expectations of the client led to strained relationships diverting significant man-hours from the main task of constructing the project. Cultural factors and client experience were not sufficiently appreciated in developing the procurement strategy. 17/11/2016 Mott MacDonald Presentation 10

11 Project Harbour Area Treatment Scheme Stage 1 Client Drainage Services Division, Hong Kong Location Hong Kong 28km hard rock tunnels 10 Shafts Design Bid Build 17/11/2016 Mott MacDonald Presentation 11

12 Contract Summary Risk Register none performed Risk Allocation Client owned ground risk Baseline No GBR, remeasured BoQ DSC specifically excluded by contract language Payment mechanism Not included Procurement Strategy Design Bid Build Collaboration None. DRB No. 17/11/2016 Mott MacDonald Presentation 12

13 Clause 13 The Contractor shall be deemed to have examined and inspected the Site and its surroundings and to have satisfied himself, before submitting his Tender, as regards existing roads or other means of communication with and access to the Site, the nature of the ground and sub-soil, the form and nature of the Site, the risk of injury or damage to property, the nature of materials (whether natural or otherwise) to be excavated, the nature of the work and materials necessary for the execution of the Works, the accommodation he may require and generally to have obtained his own information on all matters affecting his Tender and the execution of the Works. No claim by the Contractor for additional payment shall be allowed on the ground of any misunderstanding in respect of the matters referred to in sub-clause (1) of this Clause or otherwise or on the ground of any allegation or fact that incorrect or insufficient information was given to him by any person whether in the employ of the Employer or not or of the failure of the Contractor to obtain correct and sufficient information, nor shall the Contractor be relieved from any risk or obligation imposed on or undertaken by him under the Contract on any such ground or on the ground that he did not or could not foresee any matter which may in fact affect or have affected the execution of the Works 17/11/2016 Mott MacDonald Presentation 13

14 Baseline conditions No GBR GDR was provided Ground conditions shown on drawings Ground Support shown on Drawings Based on Q values Remeasured BoQ Contractor mapped rock and Engineer confirmed Probe Drilling mandated 17/11/2016 Mott MacDonald Presentation 14

15 Groundwater Control Probe Drilling mandated Grouting required at +20l/min Probing and grouting included as re-measureable bill items High water flows encountered Significant advance grouting required Cost and schedule overruns 17/11/2016 Mott MacDonald Presentation 15

16 Grouting Statistics Length grouted Drill Intensity Grout Intensity Tunnel Length (m) % m m/m Total Tunnel Drill Hole Total kg/m kg/m kg Average 22,718 10, , ,413,046 AB % , ,240 C % , ,300 D % , ,854 E % , ,952 F % , ,796,700 G % , ,000 F % , ,450,032

17 9/20/ /20/ /20/ /20/1998 1/20/1999 2/20/1999 3/20/1999 4/20/1999 5/20/1999 6/20/1999 7/20/1999 8/20/1999 9/20/ /20/ /20/ /20/1999 1/20/2000 Rings built TBM Advance Rates 100 Rings Built Tunnel D week summary Week Ending 17/11/2016 Mott MacDonald Presentation 17

18 Tunnel D Progress Length Days Daily Weekly Max Baseline 3265m m/39ft 71m/232ft 15m/49ft Actual 3265m 569 Shaft repair 10,711ft 151 Excavation 418 8m//26ft 47m/154ft 24m/78ft Grout 131 Mining m/36ft 68m/223ft 24m/78ft

19 TBM Drive Shaft 17/11/2016 Mott MacDonald Presentation 19

20 Project Outcome Ground conditions and groundwater conditions varied from assumed vertical alignment was changed during design despite limited information. Original Contractor was forfeited from the project due to dispute over groundwater Project was rebid Arbitration Occurred (2 years and $$$) generally in favor of Client Significant cost and schedule (years) overruns, for example: 483 day delay on a 775 day contract duration $37m additional cost on $97m base contract. Stage 2 of the project specifically excluded TBM mining due to perceived issues with groundwater management 17/11/2016 Mott MacDonald Presentation 20

21 Project Atlanta West CSO Client City of Atlanta Location Atlanta, USA 42,000ft 27ft diameter hard rock tunnels 4 Shafts Design Bid Build 17/11/2016 Mott MacDonald Presentation 21

22 Contract Summary Risk Register developed and risk assessment performed Risk Allocation Client owned ground risk Baseline GBR used. DSC included. Payment mechanism Not included Procurement Strategy Design Bid Build Collaboration informal partnering. 17/11/2016 Mott MacDonald Presentation 22

23 Baseline conditions GBR used GDR also provided Ground conditions shown on drawings 17/11/2016 Mott MacDonald Presentation 23

24 Ground Support 3 Support classes identified based on Q values Support details shown on drawings No link between mapping and payment in contract 17/11/2016 Mott MacDonald Presentation 24

25 Ground Support installed Ground Support 17/11/2016 Mott MacDonald Presentation 25

26 Project Outcome Ongoing dispute regarding payment Contractor should be paid for installed support Engineer payment should be made on ground condition mapping Ground conditions encountered varied from GBR subhorizontal joints resulted in rock falls Contractor insisted on installing pattern rock bolt as a minimum Claims, dispute, cost and schedule overruns No DRB 17/11/2016 Mott MacDonald Presentation 26

27 Project East Side Access, CQ031 Queens Soft Ground Tunnels Client MTACC Location New York 10,500ft. soft ground tunnels Slurry TBM Segmental Lining Design Bid Build RFP Negotiated Contract 17/11/2016 Mott MacDonald Presentation 27

28 Contract Summary Risk Register developed and risk assessment performed RFP with qualifications, negotiated contract cost Cutterhead Interventions Risk Shared Pressurized Face TBM required type Contractors choice Contractor required to develop risk register after award Risk Allocation Client owned ground risk Baseline GIR used with unit rates for different ground types. DSC included. Payment mechanism Unit Rates Procurement Strategy Design Bid Build Collaboration informal partnering. DRB - Yes 17/11/2016 Mott MacDonald Presentation 28

29 Contract Details GBR was changed to GIR same content but no baseline quantities established Schedule became baseline, TBM advance rates locked in TBM operational cycle assumptions lined to the baseline Changes in TBM operational cycles used to determine changed conditions All operational info shared and available to MTA. Cutterhead Interventions 800 house of interventions bought in base bid together with detailed determination of when intervention started Safe havens free air, jet grouted blocks selected as preferred choice Safe havens compromised by decision to delete shafts 17/11/2016 Mott MacDonald Presentation 29

30 Baseline conditions GIR used GDR also provided Ground conditions shown on drawings Launch shaft was supposed to be dry - $17m change order after NTP to fix defective work from defaulted contract 17/11/2016 Mott MacDonald Presentation 30

31 Launch Shaft Repairs January /11/2016 Mott MacDonald Presentation 31

32 Walls fixed and TBM s readied May /11/2016 Mott MacDonald Presentation 32

33 TBM Breakthrough 17/11/2016 Mott MacDonald Presentation 33

34 Completed Tunnel

35 TBM Mining Strategy 1) TBM Launch Area 2) 4 Tunnels 3) Three Tunnel Emergency Exit & Safe Haven 4) Yard Lead Emergency Exit

36 Three Tunnel Emergency Exit 17/11/2016 Mott MacDonald Presentation 36

37 Freeze layout

38 Freeze Layout 38

39 Freeze Holes Drilled 39

40 Platform creation

41 Freeze Hole Drilling

42 Finished Installation

43 Cutterhead Interventions Planned Tunnel A Tunnel D Tunnel YL Tunnel B/C Overall Free Air CAI Total SH Hours CAI Hours Total hrs/shifts 109/13 125/15 335/42 129/16 699/87 Actuals Free Air CAI Hours CAI Pressures varied from 0.2 bar to 2.2 bar Mott MacDonald

44 TBM Performance TBM Performance Item Tunnel A Tunnel D Tunnel YL Tunnel B/C Overall Length m ,239 Days Rate m/day 6* * 10 8 Best m/day N/A Rings ,134 Interventions Cutters Changed YL and A TBM, durations include stoppages awaiting freeze and jet grout completion Baseline Schedule showed 7 m/day advance rates. Mott MacDonald

45 Project Outcome Cutterhead Interventions quantity exceeded, paid from allowance On schedule and on budget No DSC claims Slurry TBM chosen advance rates marginally higher than forecast No impacts to railroad infrastructure above Experienced client used sophisticated contract mechanism DRB used, but no hearings 17/11/2016 Mott MacDonald Presentation 45

46 ESA and DRB s Contract NOC s Dispute Notices Advisory Opinion Hearings Recommendations CM CM CM CQ CQ Overall /11/2016 Mott MacDonald Presentation 46

47 ESA and DRB s Fosters communication Forces resolution of issues Can be burdensome on CM and Contractor staff Costs shared between MTACC and Contractor Chairperson on each DRB is a lawyer MTACC maintained a pool of DRB members to avoid overload MTACC General Counsel not enamored of DRB process 17/11/2016 Mott MacDonald Presentation 47

48 So what?? Common thread? Too many choices? Clear way forward? 17/11/2016 Mott MacDonald Presentation 48

49 Risk management tools 1. Risk assessment and risk register. 2. Risk needs to allocated. Place the risk with the party best able to deal with the consequences. Allocation of risk must be clearly stated. 3. Ground condition risk can best be allocated through the use of geotechnical base lining. 4. A changed ground conditions clause must be included 5. A payment mechanism for changed ground conditions to minimise claims 6. Insurance should not be considered as a the sole mitigation measure in risk assessment for tunnel works. 7. The procurement strategy can utilise any form of contract provided they allow for the above items to be included. 8. The use of a collaborative project environment strategy such as partnering is encouraged together with DRB but is not considered essential 17/11/2016 Mott MacDonald Presentation 49

50 Summary Risk must be managed not ignored Suite of tools exist Risk and the contract mechanisms should be addressed early in the project Different projects have different solutions Not a one fit for all 17/11/2016 Mott MacDonald Presentation 50

51 Thank You