Taxpayers to dig for £20M for Liverpool Dock

[Happier diner]

26 minutes ago, Mistercee said:

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!!   

Sisk will have eased any potential 'pain' by the use of compensation events. Remember the pain element is often quite small in a contract and like you say we do not know the limits of it. I have worked on contracts where the contractor has been 'in pain' but has made so much by the mark up in its quote that they still make money on the project. I guess this is how this worked out for them.

I have seen this contract option used for projects less than £20M

[Hairy Poppins]

There must be a ball park range for the final figure? Or did they seriously sign an open ended contract? 

What's the maximum, £250m? More?

[Mercenary]

2 hours ago, Mistercee said:

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

Nothing inherently wrong with this option for this project and I would guess outturn cost if it was Option A would be within 5% anyway 

[Happier diner]

6 minutes ago, Hairy Poppins said:

There must be a ball park range for the final figure? Or did they seriously sign an open ended contract? 

What's the maximum, £250m? More?

There is no such thing as a 'maximum' in NEC contracts.

[Hairy Poppins]

3 minutes ago, Happier diner said:

There is no such thing as a 'maximum' in NEC contracts.

Fair enough.

[Non-Believer]

41 minutes ago, Hairy Poppins said:

There must be a ball park range for the final figure? Or did they seriously sign an open ended contract? 

What's the maximum, £250m? More?

Or maybe they just can't account for everything that's been spent and they'd rather not let that particular cat out of the bag 😉

[Mistercee]

3 hours ago, Happier diner said:

Sisk will have eased any potential 'pain' by the use of compensation events. Remember the pain element is often quite small in a contract and like you say we do not know the limits of it. I have worked on contracts where the contractor has been 'in pain' but has made so much by the mark up in its quote that they still make money on the project. I guess this is how this worked out for them.

I have seen this contract option used for projects less than £20M

But any Compensation Event must be agreed in advance so Sisk cannot use that route to ease any pain. The trouble is we do not know what the pain sharing arrangement is other than the fact that IOMG pain is in the order of £50m. 

[Happier diner]

43 minutes ago, Mistercee said:

But any Compensation Event must be agreed in advance so Sisk cannot use that route to ease any pain. The trouble is we do not know what the pain sharing arrangement is other than the fact that IOMG pain is in the order of £50m. 

You misunderstand what I saying. The contractor makes a mark up on every man hour worked, every subcontractor paid, every material procured. This is included in his tender. This mark up also applies to every compensation event. So, what I am saying is that the accumulation of this mark up can exceed any losses on a pain/gain contract. It happens. Believe me.

PS They are not agreed in advance. The contractor will issue an early warning to the PM so that there are no surprises. The early warning will have an indication of the rough extent of the cost increase and why. The PM will then approve the compensation event and the contractor goes forward. Its not really an agreement, more of an acknowledgement

Example - The contractor makes the PM aware that the designer has not allowed sufficient time or materials to complete an activity. The designer has underestimated the size of the task and the design is in effect wrong. The contractor will raise an early warning to let the PM know this. The PM may go back to the designer and get their view. They might then instruct the contractor to crack on as per the design or provide new information for the contractor. If the PM instructs them to go forward with new information the contractor charges the same rates and does the work and then gets paid the extra. The total cost is increased by the value of the CE. 

 

[The Phantom]

4 minutes ago, Happier diner said:

You misunderstand what I saying. The contractor makes a mark up on every man hour worked, every subcontractor paid, every material procured. This is included in his tender. This mark up also applies to every compensation event. So, what I am saying is that the accumulation of this mark up can exceed any losses on a pain/gain contract. It happens. Believe me.

PS They are not agreed in advance. The contractor will issue an early warning to the PM so that there are no surprises. The early warning will have an indication of the rough extent of the cost increase and why. The PM will then approve the compensation event and the contractor goes forward. Its not really an agreement, more of an acknowledgement

Example - The contractor makes the PM aware that the designer has not allowed sufficient time or materials to complete an activity. The designer has underestimated the size of the task and the design is in effect wrong. The contractor will raise an early warning to let the PM know this. The PM may go back to the designer and get their view. They might then instruct the contractor to crack on as per the design or provide new information for the contractor. If the PM instructs them to go forward with new information the contractor charges the same rates and does the work and then gets paid the extra. The total cost is increased by the value of the CE. 

 

It's basically poor project management. 

However, what's the alternative?  We spend 90% of the amount required to finish it and then stop?  Leaving us with an unfinished, non functional terminal that we have still spent x amount on?

[Happier diner]

15 minutes ago, The Phantom said:

It's basically poor project management. 

However, what's the alternative?  We spend 90% of the amount required to finish it and then stop?  Leaving us with an unfinished, non functional terminal that we have still spent x amount on?

No its not poor project management. It sounds more like perhaps poor design and specification (IMO of course). The PM gets all the crap when the consultant hasn't done a decent job or has been given wrong information.

A more simple example is, you (The PM) get an architect in to design you a new garage. He specifies a base of 1" thick. Then you get a builder to quote you on the drawings and information that the architect has prepared. You accept the quotation but then when the builder arrives he say "Hey, I cant use a 1" base on that ground, it will fall over/sink - what do yo want me to do?" (an early warning)

You go back to your architect and he says "err yes, he has a point - ill give him details of a 4" base with reinforcement"

The builder comes back to you and says I have a new specification and the price has now gone up by £2000. Do you want me to continue? You (The PM) has to decide well do I risk it with the 1" or go with a the 4" and the new price.

Imagine that scenario played over many times with millions of pounds instead of thousands of pounds

[Mercenary]

1 hour ago, Happier diner said:

No its not poor project management. It sounds more like perhaps poor design and specification (IMO of course). The PM gets all the crap when the consultant hasn't done a decent job or has been given wrong information.

A more simple example is, you (The PM) get an architect in to design you a new garage. He specifies a base of 1" thick. Then you get a builder to quote you on the drawings and information that the architect has prepared. You accept the quotation but then when the builder arrives he say "Hey, I cant use a 1" base on that ground, it will fall over/sink - what do yo want me to do?" (an early warning)

You go back to your architect and he says "err yes, he has a point - ill give him details of a 4" base with reinforcement"

The builder comes back to you and says I have a new specification and the price has now gone up by £2000. Do you want me to continue? You (The PM) has to decide well do I risk it with the 1" or go with a the 4" and the new price.

Imagine that scenario played over many times with millions of pounds instead of thousands of pounds

That example would be negligence and you may be able to seek suitable redress from the architect in that instance.

 

It's more nuanced than that as it's likely more around risk management, surveys, asset agreements with Peel, planning consents, COVID/inflation impacts, scope creep/Steam Packet/Liverpool City Council interface etc which presumably sit more with the PM team.

 

[Happier diner]

1 hour ago, Mercenary said:

That example would be negligence and you may be able to seek suitable redress from the architect in that instance.

 

It's more nuanced than that as it's likely more around risk management, surveys, asset agreements with Peel, planning consents, COVID/inflation impacts, scope creep/Steam Packet/Liverpool City Council interface etc which presumably sit more with the PM team.

 

Depends on what you mean by PM. As you know everyone has a PM. Do you mean the DOIs PM? They are now known as Project Sponsors. The clients PM in effect. 

But yes I agree with what you are saying. There are lots of opportunities to bollox it up. Seems we took them all. 

However if we selected a designer who has stuffed up to the point of negligence, should they not be persued? My example was purposefully similar to what might have happened. 

Edited August 27 by Happier diner

[Mercenary]

10 hours ago, Roger Mexico said:

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.  

I quite like this guidance from the author of the contract (from Google)

https://www.neccontract.com/support/faqs/calculating-the-final-account?srsltid=AfmBOorYTcRByOqQNob3q6jG53ccn4BKyK9hic9WhjuQB1YJbKpGmuHc

Quote

Therefore, by the time you get to completion under option C, all of the hard work should be done and the project manager should have a good idea of what the total defined cost is. And until such time as the contractor justifies any other costs, they are not due because they will be a disallowed cost until they are justified.

As to the payment of share (one way or other) the main tranche of that should have been certified by project managers at the assessment immediately following completion, and be based upon their forecasts of the final price for work done to date and the final total of the prices – see clause 53.3. The final payment of the share is made as soon as the final figures for the price for work done to date and total of the prices are known (clause 53.4).

 Compare and contrast to the Tynwald answer ... 

[Andy Onchan]

The answer to Thomas' written question below should make interesting reading:

[Beelzebub3]

33 minutes ago, Andy Onchan said:

The answer to Thomas' written question below should make interesting reading:

CT was DOI minister for part of the build and will have had a peak at the books, so I would assume he will know the answer or where the skeletons are buried. If he did not have his finger on the pulse at the DOI as minister who really is pulling the strings? I suspect that the answer will be as revealing as the CS are prepared to divulge.