Management of the Holyrood building project (PDF ... - Audit Scotland

4.27 The architects had accepted
responsibility for completing all
aspects of the design. But from 2000
project management, on the
construction manager’s
recommendation, increasingly
adopted trade contractor design for
some key works packages. Under
this approach the architects remained
responsible for most of the concept
design, but trade contractors took
greater responsibility for developing
the detailed design information
necessary for construction.
4.28 This provided the opportunity to
enhance the ‘buildability’ of the
detailed design and speed up
completion of the work. Trade
contractors brought their own
designers in to supplement the
architect’s resources. They could
provide design solutions to often
complex requirements that they
were more confident they could
build. But this approach carried a
hidden extra cost. The mixture of the
commercial approach adopted – such
as the use of two stage tenders and
provisional sum allowances – and
uncertainty about the scope of the
work had the result that for a great
part of the work the final price was
set by negotiation with a single
contractor not by a competition
(although the contractor had usually
been selected by competition at an
earlier stage).
4.29 To meet the programme the
construction manager developed a
tender event schedule to drive along
the process of trade contractor
selection and award. The schedule
set out key milestones in the overall
procurement process of each trade
package, from pre-qualification stage
to agreement of bid lists, preparation
of tender enquiry documents,
obtaining tenders, tender
recommendations, contract awards
and start on site.
Part 4. The reasons for increased costs 59
4.30 To meet the required
programme packages went out to
tender generally at the dates required
in the tender event schedule, even if
the amount of design information
was less than would normally be
expected. The further advanced the
design is prior to tendering, the
greater level of cost certainty that
can be achieved. But as shown in
Part 3 late and incomplete supply of
design information was a significant
factor in many Holyrood contracts.
4.31 Based on data in the
construction manager’s tender event
schedule there was a long period
between the initial tender and the
subsequent start on site in 11
contracts examined (Exhibit 35
overleaf). The time between approval
of the tender recommendation and
the subsequent start on site strongly
suggests that the design was not
sufficiently detailed at tender stage
and that design input was required
from the trade contractor. It was
almost as if, once a package had
been awarded, it then had to wait for
the design to catch up.
4.32 Tendering work with an
uncertain scope adds to overall cost
because it reduces the level of
competitiveness in achieving
eventual price certainty. The cost risk
lies with the client and not the trade
contractor. The trade contractor is in
a very strong position to set the final
cost of the provisional, undefined
items. Costs are subject to review
and approval by the construction
manager, the cost consultant and
project management. But the scope
for controlling costs for these
elements of the work is inevitably
compromised in the absence of a
competition. If there was
disagreement with a supplier about
costs, the client could in theory
terminate the negotiation and seek
another supplier. But programme
pressures meant this was not an
attractive option.
4.33 The trade contractor can also,
through pricing levels, ensure that
any risks on costs taken to win the
contract can be absorbed or
eliminated in the subsequent design
development. The trade contractor
does not need to go out to a range of
material suppliers or sub-contractors
to achieve favourable prices within its
cost allowances, as there is no
competition.
4.34 The inevitable consequence of
letting packages before the design
had been fully developed was
therefore a loss of true
competitiveness. Instead of securing
as large a proportion of the overall
costs as possible on a fixed price
basis, design uncertainty led to large
provisional items, which led to a
much greater degree of negotiation
than was desirable. In the
consultant’s opinion seven of the 20
trade contracts reviewed were
tendered when design was not as far
advanced as they would normally
expect. Whilst the rationale for
awarding these packages in this way
was driven by programme, it had an
inevitable impact on cost (Exhibit 36
overleaf).
4.35 On 18 of the 20 packages
reviewed trade contractors had some
design responsibility. On four of
these packages the trade contractors
were required to finalise the
development of the concept in
addition to the detailed design,
subject to final design team approval.
While specialist trade contractor
design input was necessary to
develop certain elements of the
design this input ideally should have
been separated from the
construction works, which should
have been separately competitively
tendered once the design reached
the required stage. This did not
happen at all in the Holyrood project.