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Legal Corner

Failing to Plan - Planning to Fail

I

Market Analysis

n these uncertain times a construction project requires a focused strategy, tightly drawn tactics and careful execution to ensure that the project is completed on time, on budget and to the required quality and risk profile. Some requirements of a major project are essential to success and require special attention.

Stakeholder Management

The necessity is now acknowledged to map and monitor the interests of all the major participants/stakeholders in order to ensure all are mobilised in support of the project. A project’s political, social and environmental context must be monitored so resources are available to respond to any difficulty that arises during project execution.

Program and Cost Management

There is now a heightened understanding that time is money and that the programming of the project by way of a logic and resource driven/constrained programme is essential. This ensures that the programme is matched with the available resources and the expectations of its stakeholders. The costing of the project must be properly modelled with the best available data to demonstrate robustness in the face of the likely and unlikely scenarios that may be encountered during execution. The scenario analysis coupled with a keen understanding of the economic and technical relationships underpinning the project often leads to re-design. This often significantly improves the cost-benefit ratios and is one aspect where a multidisciplinary approach can repair the results of tunnel vision by one or another discipline. An overly cautious design often introduces marginality into otherwise sound projects. The contingency planning shaped by the scenario analysis is necessary to ensure that plans are in place to respond to cost or time over runs or exogenous shocks to the project environment.

Design

The design responsibility division between principal and contractor is often a major source of friction and mismanagement. Design

10 | Award Magazine

By Jim Doyle

to some degree is a responsibility that the principal cannot fully transfer. The precision of the definition of the responsibility borne by each party is of vital importance. Value engineering the design at crucial stages can deliver significantly enhanced outcomes for all stakeholders. This is particularly the case where the contractual arrangements ensure that a re-design delivers a win-win solution with benefits to both parties. An important benefit of a contract is the clear definition of the risks and the clear allocation of the responsibility. The mechanics of monitoring and managing a project are increasingly being database driven; thus ensuring knowledge is not the first casualty of a torrent of uncoordinated information. The current understanding that the principal can transfer little of the ultimate project risk has led principals to a more informed, involved and proactive management role on most major projects. In this model a principal takes the responsibility for key project decisions and initiatives in the interests of driving the project towards the key objectives, rather than relying on traditional legal remedies if the objectives are not met.

Planning the Procurement Process

The procurement process must be well-managed in order to achieve a proper sequence and duration of the key steps: 1. Market analysis 2. Market engagement 3. Competitive tendering 4. Contract Negotiation , and 5. Contract Establishment Expert advice on the structure and content of each of the steps is required before the project reaches concept design and basic feasibility.

With constraints operating in most Australian resource supply markets, it is important to survey the market’s capacity prior to the commencement of the execution of any major project. Contract packaging can often assist in avoiding market restraints for critical components. The progressive briefing of tenderers and adoption of expressions of interest or early contractor participation models are now well recognised as the optimal route for many projects.

Resource Planning

Where the proposed project is thought to tax the resources available in any particular market or segment of the market, it is necessary to ensure that the execution of the project is supported by excellent resource planning, including: Contract management resources to service the overloads that are inevitably encountered if the contract is disturbed by external factors such as authority approvals or sub-contractor unavailability, or internal factors such as poor performance, management changes and IT difficulties. If the contract administrators are over-challenged, the delivery of the project can be imperilled. Management resources for both contractor and principal must be available at critical times, particularly during contract establishment, early planning of the contract execution and during any recovery programs to ensure the planning and performance are optimal. Handover or practical completion should also be tightly managed to avoid a sluggish completion with unresolved issues degrading effective performance during the main construction activities.

Leadership

The many responsibilities of those who lead the execution of major projects include proper strategic planning and monitoring during times when risk is not apparent, and the leadership to ensure any risks are managed competently by a team prepared and equipped to respond to challenges. Jim Doyle Doyles Construction Lawyers

Award Magazine - Legal Corner  

From Award Magazine Volume 1 Number 3 - 2008

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