FIDIC 2005 Beijing Workshop 13 Design - Build

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FIDIC 2005 BeijingWorkshop 13 Design - Build

• Opportunities and Challenges in Australasia

Tony Barry, President Association of Consulting
Engineers Australia Director Connell Wagner Pty
Ltd
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Project Delivery

• Traditional Construct Only
• Design Construct (DC)
• Design, Construct Maintain (DCM)
• Build Own Operate (BOO)
• Build Own Operate Transfer (BOOT)
• Public Private Partnerships (PPP)
• Alliances

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Design Construct

• Design-Build Design Construct
• There is a DC Contract embedded in every PPP,
  BOOT, BOT, DCM contract
• DC is the most common form of project delivery
  in the Building, Urban Infrastructure and Power
  Generation Markets in Australia
• Construct Only Contracts most common in NZ, DC
  increasing

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Roles for the Consulting Engineer in DC

• Owners Planner and Engineer
• Bankers Engineer
• Contractors Designer
• Contractors Verifier
• Proof Engineer (Principal Contractor)
• Construction Verifier (Principal Contractor)
• Independent Reviewer (Principal Contractor)

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Why Design Construct ?

• Initially
• Reduce claims by contractors against Principals
• Innovation without risk
• Larger projects contractors perceived with
  greater capacity to manage than government
• Speed of Delivery
• Cost and program, both risks to politicians

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Why Design Construct ?

• Now
• Total risk transfer from Principal to Contractor
  very few claims
• Innovative Solutions
• Successful delivery, great projects
• Even larger projects
• Speed of Delivery
• Projects delivered in one political term

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The Risk Environment for Consultants

• Legal framework Common Law, Contract Law, Trade
  Practices Act, Occupational Health Safety Acts
• Onerous Agreements
• Contractors capacity
• Contractors plan to deal with commercial loss

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The Risks

• Client risk dumping
• Risks inherent in Design Construct
• Tender process suppresses risk
• Client Information risk
• The risks are commercial risks
• Losses crystalise in the DC team
• Contractor has no avenue to claim against client
• Claim against consultant
• PI cannot support commercial risks

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Onerous Terms

• High standards of care
• Responsibility for client supplied information
• Absolute Fitness for Purpose warranties
• Strict compliance
• Open ended Indemnities
• Duty of Care to multiple parties
• Liability for delays outside control
• Disclosing terms of PI Policy

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The Solution

• Dont accept unreasonable terms walk away
• Negotiate a good contract to maintain a good
  relationship and a good business
• Use Limits of Liability above which Clients carry
  the risk
• Adopt commercially sustainable PI Insurance
  levels and guidelines
• Negotiate scope carefully and exclude others
  responsibilities

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The Future

• More Design Construct
• Bigger projects
• Fewer contractors
• Higher cost to Principals
• More work and more opportunity for Consulting
  Engineers
• More claims and litigation
• Better risk management by all parties

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Better Risk Management

• Open identification and pricing in tenders
• Risk sharing with agreed specified outcomes
• Limitation of liability for contractors and
  consultants
• Risk management record and tender evaluation
  criteria

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Design Construct Business Model
Principal
Total Risk Transfer
D C Contractor
Risk Transfer
Risk Transferred or Managed
Consultant
Subcontractors
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ContractorConsultant Liability Transfer Model

• Master servant relationship
• Head contract conditions passed down
• Risk transfer through onerous terms
• Impossible and impractical notice requirements
• Representations designed to create TPA breaches
• Certify compliance or breach contract
• Excessive and protective administration
• Aggressive and manipulative behaviours
• Designers site role suppressed / limited
• Post-contract claims and disputes
• Careers destroyed

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ContractorConsultant Liability Managed Model

• Co-operative integrated relationship
• Methods of managing Head contract conditions
  agreed without transfer to consultant
• Consultant carries negligence risk
• Consultant assists Contractor to identify and
  manage risks
• Contractor to certify compliance or
  non-conformance
• Consultant to retain independent judgement
• Consultant uses Contractor administrative systems
• Co-operative behaviours and excellent performance
• Designers site role expanded and integrated
• Post-contract awards
• Careers enhanced

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Tony Barry Connell Wagner Pty Ltd on behalf
of Level 12, 75 Miller Street North
Sydney NSW 2059 (02) 99224711 www.acea.com.au
acea_at_acea.com.au