THE BENEFITS OF COLLABORATING WITH KEY SUBCONTRACTORS (BAD STORY)

By Rodney Appleby, New Business Manager

Answer this question honestly…..

Do you regularly take the cheapest tender/subcontract price, and hope that you can manage your way through the risk?

The temptation is always to take the cheapest price – then roll the dice and back yourself. Is this a good idea when dealing with foundations and ground risk? Where there are multiple variables and most of them out of your control? After mobilisation changes become slow and very costly!

This can be an even bigger risk in a tender scenario. Each tenderer is trying to lower their price to win by tagging out of more and more risk items – effectively passing them on to the Client.

So why not involve a trusted and reliable specialist at an Early Contractor Involvement stage? You may find it’s a “hedged bet” – where they can help identify opportunities to save you money and identify actual risks and help put mechanisms in place to prevent costs spiralling out skyward.

Bad Story – The Risk!

A couple of years ago, Piletech were contacted by a prominent design consultant about screw piling for a large building project.  Cobbles were identified in the geotech report, so we highlighted the risk the screw pile may not penetrate into the rock.  We suggested measures to mitigate the risk, but stressed upfront “probing” would quantify and qualify the risk for both subcontractor and Client!

The screw piling solution appeared to be half the price of the bored piling alternative.  But despite highlighting the risks, and for whatever reason unknown to us, the Client choose against site probing, instead pushing the project straight into the tender phase.  

Tendering can push subcontractors into a corner – desperate to win they put in their lowest price riddled with tags through their tender.  Piletech were unwilling to remove the foreseeable ground risk clause we’d identified in our early involvement (let alone the unforeseen ground conditions).

After some deliberation the Client accepted another tender that was nearly 20% cheaper than our ~$400k bid.  What followed was akin to train-wreck, only it unfolded all too slowly:  

• Numerous pile tests that failed the specified performance criteria set by the consulting engineer.
• It later became apparent our competitors had mobilised plant with 1/10^th of the torque we had tendered – so it was no wonder they failed.
• Compromises to design to accommodate an inability to achieve the design.
• The local newspaper splashed headlines of the job being months behind programme and “$1M over-budget” – all before it was even out of the ground.  
• Contractual debates over foreseeable/unforeseeable ground conditions,
• Just think of all the energy that each party will be dedicating to fighting these!
• $15k/day liquidated damages with 10 months delays! This should have been a 2-3 week job.

It was extremely frustrating watching a foreseeable risk materialise before our eyes despite attempts to warn our Client. But it really highlights our point; engaging a trusted specialist partner early will help you identify key risks (and opportunities) and prevent a price blow out!  As one party communicated to me later – “As Benjamin Franklin said – the price is forgotten long after the quality remains.”

[See also THE BENEFITS OF COLLABORATING WITH KEY SUBCONTRACTORS (GOOD STORY)]

THE BENEFITS OF COLLABORATING WITH KEY SUBCONTRACTORS (GOOD STORY)

Answer this question honestly…..

Do you regularly take the cheapest tender/subcontract price, and hope that you can manage your way through the risk?

The temptation is always to take the cheapest price – then roll the dice and back yourself.  Is this a good idea when dealing with foundations and ground risk? Where there are so many variables at play, and most of them out of your control?  Once you’ve mobilised to site change becomes very slow and very very costly!

This is can be an even bigger risk in a tender scenario.  Each tenderer is trying to lower their price to win by tagging out of more and more risk items – effectively passing them on to the Client.

So why not involve a trusted and reliable specialist at an Early Contractor Involvement stage?  You may actually find it’s a “hedged bet” – where they can help you identify opportunities to save you money and identify the actual risks and putting mechanisms in place to prevent costs spiralling out skyward.

Good Story – The Opportunity

Piletech recently helped a prominent NZ Main Contractor who was engaged in an ECI project of their own. This Main Contractor advised their Client – “We want to bring Piletech on board now – to work with your designers”.

The results were huge, and here is a glimpse of the key Value Adds (or Customer Value Propositions) that Piletech have delivered through our early involvement:

• Local Experience: It counts for something when you’ve done jobs next door, and worked with the local designers and councils!
• Efficient Design WITH an Efficient Price:
  • Piletech’s inhouse designers understand the relationship between the geotechnical and the structural components to optimise design, and minimise the risk.
  • Our designers work closely with our estimators to check what gives the best price, and revise if necessary.
  • Knowing when to load test, and when it’s a waste of your clients’ money!
  • Advising what site investigations should be done to ensure the right design is chosen.
• Prompt PS1’s & PS2’s to quickly and easily navigate the consenting phase the first time.
• Stock and Procurement: Piletech can draw upon large pipe stocks, and manufacture off the critical path.  This means less delays, and protection from FOREX and steel fluctuation risks.
• The Right Piling Solution: screw piles were not only cost effective in this scenario, but there were an array of other factors that made us the silver bullet.  Speed of installation, noise and vibration, minimal deliveries, no dust, no spoil (asbestos was identified), amongst others.

The result:  We saved their client over $100k (~20%) on their original piling design, not to mention programme benefits and an array of headaches removed before we’d even set foot onsite.

It really begs the question why you’d go and get 3 prices for “competitive tension” right before the project is about to kick off, when you can engage the right partners in your ECI team and end up with a cheaper price, installed more quickly with less risk.


[See also THE BENEFITS OF COLLABORATING WITH KEY SUBCONTRACTORS (BAD STORY)]