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 | acea@acea.com.au