FIDIC 2005 BeijingFIDIC 2005 BeijingWorkshop 13 Design - Build Workshop 13 Design - Build
Opportunities and Challenges in Australasia
Tony Barry, PresidentAssociation of Consulting Engineers Australia
Director Connell Wagner Pty Ltd
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Project DeliveryProject Delivery
• Traditional Construct Only• Design & Construct (D&C)• Design, Construct & Maintain
(DCM)• Build Own Operate (BOO)• Build Own Operate & Transfer
(BOOT)• Public Private Partnerships (PPP)• Alliances
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Design & ConstructDesign & Construct
• Design-Build = Design & Construct• There is a D&C Contract
embedded in every PPP, BOOT, BOT, DCM contract
• D&C 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, D&C increasing
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Roles for the Consulting Engineer in Roles for the Consulting Engineer in D&CD&C
• Owner’s Planner and Engineer• Banker’s Engineer• Contractor’s Designer• Contractor’s Verifier• Proof Engineer (Principal &
Contractor)• Construction Verifier (Principal &
Contractor)• Independent Reviewer (Principal
& Contractor)
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Why Design & Construct ?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 ?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 ConsultantsThe 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 RisksThe 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 D&C team• Contractor has no avenue to claim
against client• Claim against consultant• PI cannot support commercial risks
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Onerous TermsOnerous 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 SolutionThe Solution
• Don’t 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 FutureThe 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 ManagementBetter 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 ModelDesign & Construct Business Model
Principal
D & C Contractor
ConsultantSubcontractors
Total Risk Transfer
Risk Transfer
Risk Transferred or Managed
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Contractor–Consultant Liability Transfer Contractor–Consultant Liability Transfer ModelModel
• 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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Contractor–Consultant Liability Contractor–Consultant Liability Managed ModelManaged 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 BarryConnell Wagner Pty Ltd
on behalf of
Level 12, 75 Miller Street | North Sydney NSW 2059 (02) 99224711 | www.acea.com.au | [email protected]