Taxpayers to dig for £20M for Liverpool Dock

[asitis]

2 hours ago, Gladys said:

Was it identified as a high risk project?  In retrospect, you would think it should have been, but was there sufficient information and advice at the outset? 

I can't recall fully what occurred , but a relevant question might be .. Why did Peel Ports walk away ?

[Happier diner]

1 hour ago, Mercenary said:

As I said it's not an Option B contract

https://tynwald.org.im/index.php/spfile?file=/business/pp/Reports/2023-PP-0123.pdf 

That's interesting. I did say all along I was assuming is was Option B as I did not know.

This changes things a little bit as we can assume that the Contractor is feeling 50% of the pain of the exceedance of the target cost.

However it does not change my comments about preparation. All it means is that 50% oft he risk is with the contractor (although they have probably earned this back by way of compensation events).

 

[Happier diner]

11 hours ago, Mercenary said:

Bill of quantities is not cost reimbursable any more than buying bananas in Tesco is. I believe it's target cost anyway - so there is a mechanism for partial reimbursement  but it's not really a 'cost reimbursable' contract.

Correct. But if your bill of quantities is completely wrong (or under estimated massively) then you effectively become in a position of cost reimbursable because the contractor will claim every extra by way of compensation events and you have lost all of your leverage and control.

[Andy Onchan]

3 hours ago, Happier diner said:

Correct. But if your bill of quantities is completely wrong (or under estimated massively) then you effectively become in a position of cost reimbursable because the contractor will claim every extra by way of compensation events and you have lost all of your leverage and control.

And therein lies the need for an independent audit (of the forensic kind) to test the veracity of these additional costs.

[Happier diner]

1 hour ago, Andy Onchan said:

And therein lies the need for an independent audit (of the forensic kind) to test the veracity of these additional costs.

That won't work. As mentioned many times before, there is a mechanism within the contract. If the contractor believes he is due extra cost because of something outwith his control he submits what is called a compensation event. This is a claim for an increase in payment (basically the contract price goes up). The NEC Project Manager assesses this claim and either rejects it or approves it. The contractor is then paid ( or not paid) . The NEC Project Manager is independent and impartial. They have total discretion. They are employed by the client (us) but remain impartial. 

Here is a useful article which details how this stands in law. 

https://prospectlaw.co.uk/news/article/nec-taking-sides-a-look-at-the-need-for-proect-manager-impartiality/

[Mercenary]

https://www.manxradio.com/news/isle-of-man-news/final-cost-of-liverpool-ferry-terminal-still-unknown/

 

On 8/21/2024 at 4:07 PM, Happier diner said:

That won't work. As mentioned many times before, there is a mechanism within the contract. If the contractor believes he is due extra cost because of something outwith his control he submits what is called a compensation event. This is a claim for an increase in payment (basically the contract price goes up). The NEC Project Manager assesses this claim and either rejects it or approves it. The contractor is then paid ( or not paid) . The NEC Project Manager is independent and impartial. They have total discretion. They are employed by the client (us) but remain impartial. 

Here is a useful article which details how this stands in law. 

https://prospectlaw.co.uk/news/article/nec-taking-sides-a-look-at-the-need-for-proect-manager-impartiality/

https://www.manxradio.com/news/isle-of-man-news/final-cost-of-liverpool-ferry-terminal-still-unknown/

 

[asitis]

Can anybody tell me how it is that our politicos voted to continue with a project that, (if the above is true), no one knew the costs of ? To me this is fiscal madness !

[Hairy Poppins]

On 8/21/2024 at 10:01 AM, asitis said:

I can't recall fully what occurred , but a relevant question might be .. Why did Peel Ports walk away ?

Because DOI told them they knew best and would push ahead on their own.

[Happier diner]

49 minutes ago, asitis said:

Can anybody tell me how it is that our politicos voted to continue with a project that, (if the above is true), no one knew the costs of ? To me this is fiscal madness !

They did know the costs. Its just that the cost was wrong. They are amateurs. How would they know what as going to happen.

[Happier diner]

31 minutes ago, Hairy Poppins said:

Because DOI told them they knew best and would push ahead on their own.

Did they? Can you back this up with.....actual facts?

[Happier diner]

10 hours ago, Mercenary said:

https://www.manxradio.com/news/isle-of-man-news/final-cost-of-liverpool-ferry-terminal-still-unknown/

 

https://www.manxradio.com/news/isle-of-man-news/final-cost-of-liverpool-ferry-terminal-still-unknown/

 

You know as well as I do that this is always the case with large construction projects. There are reasons

1. The supply chain has to run to completion

2. There is snagging (that could be on compensation events)

3. There are retentions to pay

Outgoings on  a major construction can typically continue for over 12 months. Most of it should be in the final cost estimate at this stage (and accrued into the outturn cost) but does add uncertainty. It should drift much further.

[John Wright]

49 minutes ago, Happier diner said:

You know as well as I do that this is always the case with large construction projects. There are reasons

1. The supply chain has to run to completion

2. There is snagging (that could be on compensation events)

3. There are retentions to pay

Outgoings on  a major construction can typically continue for over 12 months. Most of it should be in the final cost estimate at this stage (and accrued into the outturn cost) but does add uncertainty. It should drift much further.

However, in the interest of transparency there is nothing to stop DoI to say “ so far we’ve paid £x and there will be more based on any additional certification, snagging and retention.

its this constant withholding of information that causes concern. Of course, asking the right question helps, but they don’t have to be so bloody minded and legalistically perverse in denying the info. Its as if the get a weird pleasure out of it.

[Mistercee]

Do you not think TNBD is being a tad disingenuous in his response? He is basically saying we don't know the final cost full stop. However they must know how much they have paid to date and how much is still to be paid. 

 

A brief outline of how NEC4 ECC option C contracts should work can be found here:

  NEC Options - What Do They Mean? - Metroun

It would be interesting to find out how much pain Sisk have taken - I wouldn't mind betting we have been royally shafted and are taking all the pain. If we have taken (conservatively) £50m of pain I would have thought that if Sisk were taking that sort of pain they would have walked. 

As every compensation event has to be agreed we should know exactly what the costs will be at any time. There should be minimal surprises. There are many questions that need to be asked about how we got into doing the build on this contract basis, how the pain sharing was agreed and how the compensation events  were and how they were agreed. 

Option C contracts are meant to be used for huge infrastructure projects - not the building of a £20m shed etc in Liverpool!!   

[Roger Mexico]

49 minutes ago, Happier diner said:

You know as well as I do that this is always the case with large construction projects. There are reasons

1. The supply chain has to run to completion

2. There is snagging (that could be on compensation events)

3. There are retentions to pay

Outgoings on  a major construction can typically continue for over 12 months. Most of it should be in the final cost estimate at this stage (and accrued into the outturn cost) but does add uncertainty. It should drift much further.

This is pretty much what the WQ answer to Wannenburgh said (though in much less clear language):

What the final cost of the lease acquisition and build of the Liverpool Ferry Terminal project is; and are there any remaining costs yet to be finalised.

The lease for the land from Peel Land and Properties was £3.5m. In addition to this Stamp duty and professional fees totalled £167,500.00

The final build cost (and therefore final account) of the Isle of Man Ferry Terminal, Liverpool project have not yet been fully determined. This is as expected at this time and is compliant with the terms of the NEC4 ECC Option C Contract.

The NEC4 ECC Option C is a Target Cost Contract with an Activity Schedule where the Contractor estimates the project cost, including overheads and preliminaries, at tender stage. This estimate becomes the "Target" cost. Adjustments to the Target Cost can occur during the contract project through compensation events. Final payment is assessed by the Project Manager post-completion, with mechanisms in place for dispute resolution if the assessment is contested. Under the NEC 4 ECC contract framework, a final account is typically settled 65 weeks after construction completion, and therefore at this point in time we are unable to confirm the final cost, as the final account is still to be determined and settled.

(It has to be pointed out that despite this being boilerplate flam, the DoI still took the full 21 days to reply).

But of course they haven't actually answered the question.  Wannenburgh clearly wanted the current best estimate of the final total with an indication of the limits it might vary to.  The question could have been a bit better worded, but they would probably just ignore it and give the answer they wanted anyway.

Now any, even the most incompetent, project management should have this information (your "final cost estimate at this stage").  And indeed at every stage of the project.  The fact they have been unwilling to release a figure for many months shows just how bad things obviously are.  

[Happier diner]

34 minutes ago, John Wright said:

However, in the interest of transparency there is nothing to stop DoI to say “ so far we’ve paid £x and there will be more based on any additional certification, snagging and retention.

its this constant withholding of information that causes concern. Of course, asking the right question helps, but they don’t have to be so bloody minded and legalistically perverse in denying the info. Its as if the get a weird pleasure out of it.

To be fair to me JW I am not saying they couldn't. The must have an idea of the outturn cost as its constantly updated and forecast (even if some things are not physically paid). I think they are being obtuse. Yes they don't know what the exact final cost will be but they know what its predicted to be.