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Don O’Sullivan argues the government’s response to rising costs is analogous to a Leaving Certificate student answering the wrong question
The new GCCC form of contract was introduced by the government to
enable public procurers to avoid a repeat of the cost overruns perceived to have happened with the first National Development Plan.
Since Charlie McCreevy’s 2004 budget speech where he announced the introduction of fixed-price lump sum contracts, the authenticity or otherwise of these project cost overruns has become clear. The reality is that projects were delivered at competitive market prices and the fact that these were well in excess of the government’s original estimates is inconsequential.
We now know that the real drivers of project cost increase were planning delays, property costs, and project scope creep. These along with other considerations, when taken together with seriously deficient estimates, presented a recipe for disaster.
The government’s response was analogous to a Leaving Certificate student answering the wrong question. The traditional tried and tested forms of contract provided that a basic price could be tendered and adjusted for what actually happened on site. The government is now looking for a price that will cover all eventualities. It seems that it is
willing to pay for what might happen rather than what actually happens.
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Barry B LePatner argues fixed-price contracts can work if detailed design documents are laid out in full before the construction contract is awarded
Owners often assume, incorrectly, that bid drawings are the same as
100% complete construction documents. But often awards are made and
construction starts before the construction documents are fully complete.
Information added to complete the construction documents after the contractor is awarded the job often leads to non-competitively-bid change order work and possible delays.
To the extent that those traditional post-award changes can be made pre-award, everyone will be better off. To accomplish this, the agreement with the architect - who will likely enter into separate agreements with each of the engineers - must contain language reflecting the responsibility to provide 100% complete construction documents that have been fully coordinated with each of the engineers and other designers on the project.
The owner may find it well worth the additional few extra weeks and compensation the architect requires to finalize 100% complete documents, especially when compared to the potential 20-30% hidden premium contractors included in most change orders.
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