Wednesday, 20 September 2017


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 1/10th 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.”

No comments:

Post a Comment