Recurring problems the Contractors are facing in the design and build Lumpsum model

1. Validation of Scope of work –

In general, even though the Employer requirements are fairly clear. it all depends on how one interprets them and uses them to gain an advantage. If the Contractor makes a detailed scope matrix and gets validated upfront there is less chance for different interpretations. Scope matrix to be defined in such a way that the activities can be easily co-related to milestones and payment so that during execution there will not be much ambiguity. It is surprising to notice, that even the PMC and Client do not insist on it right at the start. Ideally from the Contractors’ point of view, it should be presented during the kick-off meeting itself. But looking into the practice being followed it is clear that all are having some of the other hidden agendas to fight for during the execution stage. Each one will use it as a tool for negotiation which is an important lesson for all. (Ethical practice v/s management)

Except for the Contract manager (administrator) no other person looks into it including the designer and execution people. Both these should understand it more than anybody else.

2. Design Delay –

There has been a considerable amount of delay from the Contractors side to submit the Concept and detailed design/documents for approval. Then the employer takes his own time to review. These drawing/document submission delays are mainly concurrent delays and hence not compensable, but the Contractor suffers substantial loss by time-lapse which he understands but more often fails to accelerate, sometimes deliberately delays it. One of the reasons for this delay by the Contractor is that the Contractor’s designer does not study the Contract in detail and understands the Employer’s requirements before getting into an actual design. This leads to the Employer’s review delay getting nullified on paper unless there is a delay by the Employer’s specific instruction for change or hold or so forth.

The contractor suffers in terms of time lapse/disruption and idling charges without getting compensated. The Contractor also suffers due to the short time for design optimization and not identifying and notifying the changes during the design stage as there is a lack of clarity in understanding the Employer’s requirement by the designer.

3. Quantity Validation –

As the design/drawings get delayed there will not be any time left for quantity validation before execution. Even after execution, there is no set mechanism for quantity validation. Whatever the quantity from the sub-Contractor bills/claims/RMC Log sheet/procurement quantity or the quantity from the designer etc. will be the base for actual quantity. There is no exercise done to capture the As-built /actual quantified data. Also, there is no comparison between the tender requirement and the actual executed quantity, and the quantity is supposed to be executed based on the tendered scope. There is more possibility the Contractor executing more than actually required.

The Contractor may not be aware of it even at the completion of the work as there is no quantity validation done based on the tender scope and GFC drawing. The increase in quantity for the tendered scope may not be eligible for payment but the Contractor can use it for an Extension of Time(EOT) without cost by properly analyzing it. This EOT without cost can save penalties for the delay and will be a big saving when there are huge penalties.

In a design and build lumpsum work there is no requirement for quantification from the Employer side unless there is a variation. But for the Contractor’s own interest the quantity validation should be done irrespective of the requirement from the Employer side. Surprisingly almost all the Organisations turned a blind eye to it. As per my experience quantity validation before the start of the execution shall have the potential to save at least 1 to 2% of the Cost. Even then Organisations are not considering setting it up, provides a different dimension to the thinking/strategy. Not doing the quantity validation during the design stage and execution stage leads to a lot of corrupt practices at the execution level.

The Contractor can mitigate/reduce the losses by the following actions.

1. Tender team should transfer all the tender-related data to the execution team/design team explaining the scope and deliverables in detail.

2. The site team should arrange a workshop for the scope demarcation and milestone clarification including the Consultants, Clients, and the tender team to mitigate the losses on account of Scope validation and design delay.