It is crucial that the right procurement methods are put in place to deal with the apportionment of risk in the event of delay and disruption in the run-up to 2012
Time will be a key factor in preparations for the Olympics. Procurement strategies will need to be adopted that ensure that the right requirements are made in terms of planning, programming and progress reporting. How contracts deal with delay will be important, but equally important will be how they deal with disruption.
Liquidated damages were mentioned briefly in a recent article by Helen Garthwaite (15 July, page 53). The question posed was whether they could ever be truly calculated for the Olympic stadium, and if so, whether the contractor should bear the risk. But would it be impossible to attempt to calculate liquidated damages, not “truly”, but as a genuine pre-estimate? I suspect not, and I guess some number-cruncher in an ivory tower somewhere is already trying to do just that.
Different considerations will apply to different parts of the procurement overall. Liquidated damages may be of little comfort in the event of the apocalyptical scenario of 100,000 spectators (not to mention the television crews) turning up at the Stratford stadium for the opening ceremony only to be told to come back next week. But if that happens, I’ll eat my hat.
On the other hand, with the primary infrastructure works, like those in progress on the power cabling, delay could well be an issue and liquidated damages therefore important. If the developer cannot protect its position with liquidated damages in the event that there is delay, who will bear the cost of having to procure subsequent works within a tighter timescale? If contractors do not, it may be the taxpayer.
Dealing with disruption will require good practical systems. Producing an adequate master programme will be step one. Do we have sufficient people with sufficient skill to do that? We may not be able to train planners and programmers in time to plan and programme the whole Olympic development, but they will be vital to running the project management and dealing with unforeseen problems.
Having established the programme’s fundamental importance, will it cover design stages as well as construction? Here, we might ask whether consultants will be tied into time deadlines. Why shouldn’t they? Timing of the design will be just as important as timing of the construction. And what about float? Will the programme show float or not, and will the contract, given the debate about who owns the float, be negotiated to include an express provision giving ownership to one party or another? There isn’t space here to consider provisions for concurrent delay by the contractor and employer, but that will need to be considered.
Now is the time to introduce proper resource-based programmes. They will improve the ability to monitor and assess the effect and cost of disruption. Resource-based programmes will enable project managers to manage the application of resources more effectively as and when problems occur.
The next step is properly monitoring and recording progress. Who will be employed to do this? How will it be done? Will the programme be updated so that sense can be made of what should have happened and what actually did when a comparison is made? It probably should. Whichever contract is used, it will need to be amended to ensure that an adequate progress monitoring regime is in place.
Employers and contractors alike will need to look closely at such requirements in the contracts they use. If disruption occurs, or delay looks likely, what obligations does the contract impose in terms of reporting them? Standard forms, such as the NEC Third Edition and the JCT Major Project Form, do not have adequate requirements in terms of programming and progress monitoring. Even when expensively amended, contracts often fail to address these issues properly. For the Olympics, they must.
London 2012 is a fantastic opportunity for the construction industry to demonstrate its undoubted skill in planning, programming and managing large projects. If the practicalities are well thought out in advance, those putting the contracts together can draft the most suitable contracts to get the job done with the right risk apportionment.
Nick Lane is a lawyer specialising in construction at Travers Smith, firstname.lastname@example.org