Project

Project(F317PRO) Project StephenGummow CandidateReference0703928/1
A case study investigation of the Olympic Aquatic Centre. By selecting a standardised contract suite, have the London 2012 Olympic Delivery Authority fulfilled their pregames objective by delivering
to the agreed budget?
Compiledby StephenGummowMansellConstructionServicesLimitedSouthWest AssistantQuantitySurveyor&CollegeEstateManagementStudent
Contents
Contents
Contents..............................................................................................................................................................2 i. ii. 1. 2. 3. CommonAbbreviationsandTermDefinitions............................................................................................ 4 Abstract.......................................................................................................................................................5 Objectives....................................................................................................................................................6 Structure......................................................................................................................................................6 ResearchMethod........................................................................................................................................7 3.1 3.2 4 Design&Analysis .................................................................................................................................7 Programmeofstudies......................................................................................................................... 8
Materials......................................................................................................................................................9 4.1 4.2 4.3 4.4 4.5 4.6 4.7 LiteratureReview................................................................................................................................9 CaseStudy.........................................................................................................................................10 PrimaryData......................................................................................................................................10 SecondaryData..................................................................................................................................11 AdditionalResearchforDiscussion................................................................................................... 13 Participants........................................................................................................................................13 Procedure..........................................................................................................................................15
LiteratureReview......................................................................................................................................16 5.1 5.2 5.3 5.4 a. Introduction.......................................................................................................................................16 ContractorSelection&BestValueTenderEvaluation.................................................................... 16 NEC3Contract&itsinception........................................................................................................... 17 TheOlympicAquaticsCentre............................................................................................................ 20 Scope.................................................................................................................................................20
b. Procurement......................................................................................................................................20 c. 6 Budget&Costs..................................................................................................................................21
Results.......................................................................................................................................................22 6.1 6.2 6.3 SecondarySourcedBudgetData....................................................................................................... 22 PrimarySourcedAquaticCentreQuestionnaireResults................................................................... 31 PrimarySourcedInterviewResults .................................................................................................... 38
Discussion..................................................................................................................................................47 7.1 7.2 7.3 Introduction.......................................................................................................................................47 WastheAquaticCentreprojectdeliveredonbudget?..................................................................... 47 WeretheOverallOlympicVenuesdeliveredonbudget?................................................................48
Project(F317PRO)StephenGummowC/N0703928/1
Contents 7.4 HowdidthecommercialresultofAquaticsCentrecompareagainsttheoverallOlympicVenues budget?..........................................................................................................................................................48 7.5 7.6 Howrealisticwerethebiddingbudgetssetin2005?....................................................................... 49 ThekeyreasonsforanybudgetvariancesandcostmovementsintheAquaticsCentreProject....50
7.7 ThereasonsforselectingNEC3contractasthepreferredcontractsuitefortheOlympicVenues construction ...................................................................................................................................................51 7.8 8 9 10 11 12 12.1 12.2 12.3 12.4 12.5 12.6 12.7 12.8 12.9 12.10 12.11 12.12 12.13 WastheuseofNEC3OptionCContractawisedecisionindeliveringtheAquaticCentre?............52
Conclusion.................................................................................................................................................53 Limitations.................................................................................................................................................53 FurtherReading.....................................................................................................................................54 References.............................................................................................................................................55 Appendices............................................................................................................................................58 Programmeofstudies....................................................................................................................... 58 SecondarySourcedDataassource ................................................................................................. 63 TabulatedBudgetForecastData....................................................................................................... 72 ComparisonGraphs........................................................................................................................... 73 OverallVenuesGroupedBudgetandCostData ............................................................................ 74 AquaticsCentreGroupedBudgetandCostData........................................................................... 75 QuestionnaireResponses.................................................................................................................. 76 Interviews..........................................................................................................................................95 LiteratureReviewSourceAuthority................................................................................................ 114 Assignment1............................................................................................................................... 118 Assignment2............................................................................................................................... 132 QuestionnaireDesign.................................................................................................................. 157 WordCount.................................................................................................................................161
Project(F317PRO)CandidateReference0703928/1
CommonAbbreviationsandTermDefinitions
i.
CommonAbbreviationsandTermDefinitions
CENCompensationEventNoticeasdescribedinNEC3contract. DCMSDepartmentforCulture,MediaandSport. EoTExtensionofTime EWNEarlyWarningNoticeasdescribedinNEC3contract. IDAPIndependentDisputeAdvisoryPanel NAONationalAuditOffice. NECNewEngineeringContract,standardbuildingcontract.Thirdrevision2005. ODAOlympicDeliveryAuthority. PQQPreQualificationQuestionnaire TargetcostComparabletoacontractsumasreferredtoinNEC3OptionCcontract. VEValueEngineering,aprocesstoreducecostandmaximisevalue.
Abstract
ii.
Abstract
Soherewearethen,its2012 andtheOlympicGamesare comingtoLondon.Theresa swellofnationalprideandthe OlympicParkinStratfordis readytohostthegreatestshow onearth.Sohowmuchdiditall cost?WasDennisHone(2012) rightindeclaringBuildingthe OlympicParkontimeandwithinbudgethasprovedagainthatBritaincanstandcomparisonwiththevery bestwhenitcomestodeliveringmajorconstructionprojects.andmoreimportantlydidTheOlympic DeliveryAuthoritydelivertheirkeyobjectivetodelivertotheagreedbudget? ThisisperhapsthemostsignificantbuiltassetprogrammeintheUKofalltime.Thisdissertationwillcentre onthebudgetaryresultsanddrawconclusionsfromtheOlympicAquaticCentre,aprojectwhich demonstratesthestandardisedprocurementmodeltheUKGovernmentpromotesasindustrybestpractice. Thisresearchwillattempttomeasurethecommercialresultoftheaquaticcentreincomparisonwiththe overallOlympicVenuesbudgets.Inordertounderstandtheresultsofthedataanalysis,subjectiveopinion fromtheprofessionalsatthecoalfacewillbesoughtinordertodecide,whethertheODAactuallydelivered theirpregamesobjectives.
Objectives
1.
Objectives
Thehypothesisisultimatelytoprovewhetherthe finalcostsoftheAquaticCentremetthebudget.In ordertoanswerthisquestioneffectively,theauthor haslistedsevenobjectives,whichwillbereviewedin thediscussionsectionofthisresearch: 1. ToconcludewhetherornottheAquatic Centreprojectwasdeliveredonbudget 2. ToconcludewhetherornottheOverall OlympicVenuesweredeliveredonbudget 3. Tocomparethecommercialresultofthe AquaticsCentreagainsttheoverallOlympicVenues budget 4. Howrealisticwerethebiddingbudgetsset in2005? 5. Analysethekeyreasonsforanybudget variancesandcostmovementswiththeAquaticCentre 6. SubjectivelyreviewthereasonsforselectingNEC3contractasthepreferredcontractsuiteforthe OlympicParkconstructionprogramme 7. UltimatelyrecommendorcondemntheuseofNEC3indeliveringtheOlympicParkVenues.
2.
1. 2. 3. 4.
Structure
Objectivessetsoutquestionstoansweralongsidethehypothesis Structuredetailsthestructureofresearch ResearchMethoddescribesthedesignofresearchandtaskstobecompleted Materialsdetailsthemethodsofdatacollectionandmethodsofdatapresentation.Alsoindicates participantsandproceduretobefollowed. LiteratureReviewcontextualanalysisinordertounderstandthedissertationssubjectareas Resultsdetailstheresultsofprimaryandsecondaryresearch Discussionanswersthequestionsdetailedinobjectivessection Conclusionconcludesthediscussiontoanswerthehypothesis Limitationsdescribesanybiasofresultsandareasofimprovementforthestudy FurtherReadingdescribesmethodsofimprovingtheanalysisandrecommendationsforfuture studies
5 6 7 8 9 10
ResearchMethod
3.
3.1
ResearchMethod
Design&Analysis
OxfordDictionaries(2012)defines researchasThesystematic investigationintoandstudyof materialsandsourcesinorderto establishfactsandreachnew conclusions. Theresearchmethoddeveloped duringthedissertationprocessas thewritersoriginalthesishadbeenbaseduponthepotentialpostOlympicGamestenancyofTheOlympic StadiumbyWestHamUnitedFootballClub.Thisideawassubsequentlydismissedonthegroundsofdata availability.UponreviewingtheOlympicDeliveryAuthoritiesmissionstatements,thereaderhasdiscovered thatDavidHigginsODA(2008)statedOurkeyobjectiveisclearlytodeliverontimeandtotheagreed budgetWehaveadutytoachievegoodvalueandhighqualityfromthecompaniescontractedtohelp delivertheLondon2012Games.InordertofindifHigginsstatementwasfulfilled,thewriterhadintended tousetwocasestudies;theAquaticCentreandOlympicStadiumprojects.Howeveritbecameapparentthat havingissuednumerousrequests;theauthorwasunabletoobtainanyprimarysourceddatafortheOlympic Stadium.Thenatureofsubjectmattermeantinterviewswithprojectpersonswereanecessity,inorderto analysethetopicefficiently.TheauthorthereforedecidedtoreviewtheAquaticCentreingreaterdetail. Anotherfocuschangeduringtheresearchprocessoccurredindecidingtorelatethebudgetanalysistothe useoftheNEC3contractsuite.Itbecameapparentthatthereweretoomanysubdivisionstodiscusswithin procurementpolicies.
ResearchMethod
Inbiddingforthegamesin2005budgetsweresetinordertogainfundingapprovalforthegamesbid.The costwasestimatedat2.4bnBBC(2007),thereforeinlinewiththedissertationobjectives,thewriterwill analysetheoriginalbudgetsagainsttherevisedforecastsissuedbytheODAin2007. Thestrategytoanswerthehypothesisinitiallycentresonobtainingthebudgetsatinceptionandcompletion oftheAquaticCentre.TheseresultswillbecomparedagainsttheoverallOlympicParkbudgetresult.Bythis approach,bothnumericquantitativedataandsubjectivequalitativedatawillbereviewed.Thisapproach willtriangulatediscussionbyconcludingsubjectiveopinionontheNEC3contractandprojectspecifics,in ordertorecommendorcondemntheuseoftheNEC3contractinafterassessingthefinalcosts. Hypothesis NEC3Contract CaseStudyAquaticCentre Budgetanalysis
3.2
Programmeofstudies
Aprogrammeofworktobecompletedispresentedin12.1.
Materials
4 Materials
4.1 LiteratureReview
Theliteraturereviewwillbe thestartingpointofthe writersresearch.Itisa continuouswrittenprose designedtocontextualisethe dissertationsubjectareas.It doesthisbydivulgingkey findingsandacademictheory. Giventhesubjectareaschosen,thiswillbecompletedentirelythroughsecondarysourcedinformation.Two subjectareashavebeenchosen.BuildingcontractsusedindeliveringtheprojectsandtheAquaticCentre. Theliteraturereviewisintendedtofocusonthekeytheorywithregardtocontractswithinpublic procurementpolicy,thewriteralsowishestoconfirmtheinitialbudgetsandpartiesinvolvedwiththe OlympicAquaticCentre. Bycompletingthistasktheunderstandingofhypothesissubjectareawillbroaden.Itisplannedthatby completingresearchfirst,thewriterwillbetterfocusthequestionsmoreacutelytothehypothesis.As Silverman(2010)states,itallowstheauthortoshowcommandinthesubjectareaandunderstandthe problem. ThepreferredsourceofprimaryinformationisconsideredtobeacademicpeerreviewedjournalsNAOUM (2007).Giventheveryspecificnatureofjournals,thewriterwasunabletopinpointgoodauthoritywith regardtothesubjectareas.Theconstructionindustryhasmanypublishedauthors;thiswillthereforebe usedasthemostauthoritativesourcealbeitofsecondarynature.Thewriterhasbeenabletoobtain newspaperreports,occasionalpapersandmagazinesdevotedtothespecificareas.Theinitialliterature reviewwascompletedinMarch2012(asappendix12.11)andwillbereviewedinordertofurtherrefineits findings.Insummarythekeyheadingsthattheliteraturereviewneedstoclarifyare:
10
Materials
1. 2. 3. 4.
Introduction ContractorSelection&BestValueTenderEvaluation NEC3Contract&itsinception TheOlympicAquaticsCentre a. Scope b. Procurement c. Budget&Costs
4.2
CaseStudy
TheAquaticCentreprojectisthefocusofthecasestudy.Thisprojectisoneofthecentrepiecesofthe OlympicParkandadherestotheconsiderationsofthehypothesisbyadoptinganNEC3contractform.The dissertationhypothesisandmethodrequiresinputfromprojectmembersoftheAquaticCentre.Duetothe inabilityinobtainingprimarysourcedinformationfortheOlympicStadium,acombinedmediumapproach wastakeninordertoobtainsubjectiveopinion. Inordertogainenoughresponsesfromappropriatepersonsassociatedwiththeproject;botha questionnaireandinterviewshavebeenchosen.Certainindividualsmayhaveapreferenceinrelationtothe contactmedium.Thewriterwasconsciousthatonlyasmallpoolofpersonswouldbeabletoanswerthe requiredquestions,duetothespecificnatureoftheAquaticCentre.Thequestionnairewillbecompleted andsentinthefirstinstance.Iftheparticipantisunabletocompletethequestionnaire,thentheresultswill bereviewedwithafollowuprequestofaninterview.Iftheparticipantpreferredtobecontactedas opposedtocompletingthequestionnaire,thequestionnaireisintendedtoformthebasisoftheinterview.
4.3
PrimaryData
Questionnaires Aquestionnairewasdeveloped(asappendix12.12)inlinewithNAOUM(2007)Chapter6,inordertocanvas bothopenendedandclosedquestions.Thismediumwillalsoactasapromptinconductingsemistructured interviews.Primaryresearchisonlyrequiredtoanswerthesubjectiveelementsofthedissertation.Naoum (2007)describesqualitativedataassubjectiveinnaturecontinuingtostateitemphasisesmeanings, experiencesdescriptionandsoon.Thisdataisthereforenotintendedtobestatisticallyinterpreted.
Materials SemistructuredInterviews ThismethodwaschosenasNAOUM(2007)describessemistructuredinterviewsas(1)Ittakesplacewith respondentsknowntohavebeeninvolvedinaparticularexperience(2)Itreferstosituationsthathavebeen analysedpriortotheinterview(3)Itproceedsonthebasisofaninterviewguidespecifyingtopicsrelatedto theresearchhypothesis(4)Itisfocusedontherespondentsexperiencesregardingsituationsunderstudy. Thewriterhasplannedtoconducthisliteraturereviewbythetimeofinterviews.Theauthorproposesto contractintervieweesbytelephoneasgeographicalconstraintsmeanfacetofaceinterviewsmaynotbe possible.
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4.4
SecondaryData
TheDepartmentforCulture,MediaandSportproducedquarterlyreports,withforecastbudgetsforthe OlympicParkdevelopments.Itisplannedthatthetimeofeachrecordandforecastfinalcostbecollated.In ordertoanswerthehypothesisandevaluatebystatisticalsensitivityanalysis,atleasttenrecordswillneed toberecorded.AlongsidetheAquaticsCentredata,areviewoftheOverallOlympicVenuesbudgetis planned.ThisistotakeasimilarformtothatoftheAquaticCentreanalysis.Thiswillallowacomparisonof thestatisticaldataasthedatawillbepresentedinthesameform.AswiththeAquaticCentreforecastcosts, tenrecordswillberequiredinordertoprovideasoundbasisforstatisticalanalysis. Theauthorintendstocompletestatisticalanalysisofthe samplesinordertounderstandanytrendsorpatternsin thedatasets.Theauthorwillcalculatethearithmetic mean,medianandrangeasastartingpoint.Theanalysis willthenmoveintomoreauthorativedataanalysisby calculatingtheinterquartilerangeandstandarddeviations ofthedatasets.Theinterquartilerangeofadatasetisbest describedinthegraphtotheright.Thisstatisticwilltellthe writerthespreadofvaluesinthemiddle50%ofthesample.Thisstatisticwillbecrucialindataanalysisasit willreviewthecoredatabydiscardingupperandlowerdataanomalies.
12
Materials
Inordertobestanalyseaveragedatamovementsinrelationtothearithmeticmean,theauthorwill calculatethestandarddeviationofeachdataset.Thisvaluerepresentstheaveragemovementawayfrom themeanaverage.Thearithmeticformulaisshownbelow;itshowsthatthemeanissubtractedfromeach datavalue;allofthesevaluesaretotalled,squaredandthendividedbythesamplesizeless1.Thisvalueis thensquarerooted.Thevaluesaresquaredandsquarerootedinordertoprovideapositiveinteger.The formulaisrepresentedalgebraicallybelow.
TheAquaticCentrehasrelationshiptotheOverallVenuesBudgetsakintothatofasamplewithina population.ThereforetheauthorproposestheuseofaZtestinordertoanalysetheAquaticCentresdata againstthatoftheoverallbudgets.Thistestisdesignedtoshowtheprobabilityofasamplesmeanaverage differingfromthatofthepopulation.InthiscaseitwilltestthelikelihoodoftheAquaticsCentressample meanaverage,differingfromthatoftheoverallbudgets.Thiswouldusuallybetestedbetweendiffering samplesizes,howevertheauthorstillbelievesittobeavaluablecomparisontool. Thisformulasubtractsthepopulationaverage(i.e.thearithmeticmeanoftheoverallVenuesbudget sample)awayfromthemeanofthesample.Itthendividesthisvaluebythesumofthepopulationstandard deviation(i.e.theoverallVenuesbudgetstandarddeviation)dividedbythesquarerootofthesamplesize. Theformulaisrepresentedalgebraicallybelow.
Materials InordertocomparetheAquaticsCentrealongsidetheOverallVenuesbudget(onalikeforlikebasis) percentagecostandbudgetsmovementswillneedtobecalculated.Thewriterwillalsogroupthisdatainto percentagebandsinordertocomparefrequencyandcorrelationsofcostbudgetandcostmovements.
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4.5
AdditionalResearchforDiscussion
PrimarySourced Inordertocompletetheoutcomesstatedindesign&analysisthewriterwillneedtoconductinterviews withpersonsunderstandingtheethosandmechanismsoftheNEC3contractsuite.TheNEC3contractsuite waschosentodelivertheOlympicParkbuildingprogrammeNAO4.32(2006). Inordertojustifyorcondemnthecontractsuse,subjectiveopinionaboutthecontractsuseisrequired. Someofthisresearchwillbeconductedinthecasestudyprimaryresearch;howeverthewriterbelievesthat speakingtopartiesoutsideoftheAquaticCentreprojectwillprovideabetterinsightandislikelytodivulge additionalconsiderations. SecondarySourced TheNEC3ContractSuiteishighlypopularandthereforethereexistsmanywrittenresourcesregardingits use.Thewriterwillincludethesewithintheliteraturereviewbutintendsalsotoincludethisopinionwithin hisdiscussionsection.
4.6
Participants
Itisintendedthatforanaccuratedebatetobeconducted,threeinterviewsorquestionnaireresponsesbe receivedforthecasestudyoftheAquaticCentre.Thewriterwishestoachieveresponsesfrompersons actingwithincostconsultant,client,professionaladvisorandcontractingroles.Namelythewriterwillsend enquiriestothefollowingpersons: 1. AquaticCentre a) KevinPluckrose,ConstructionDirector,BalfourBeatty b) StuartFraser,ProjectDirector,BalfourBeatty c) JohnNicholsonProjectSponsor,ODA
14
Materials
d) MalcolmNelsonProjectManager,CLM e) AlanWillby,HeadofCostManagement,ODA TheliteraturereviewshouldprovideenoughunderstandingoftheNECcontractinordertocompleteasemi structuredinterview.Oneinterviewisdeemedapplicablebythewriterasthequantumofsecondarydata willprovidesufficientdiscussiontosupplementtheinterview.Belowisthetargetedlistofindustry recognisedprofessionals,withexperienceofNEC3contractsuite: 2. NEC3ContractSuite a) SirMichaelLatham,AuthorofConstructingtheTeam,1994 b) SirJohnEgan,AuthorofRethinkingConstruction,1998 c) AndrewWolstenholmeOBE,AuthorofNeverWasteaGoodCrisis,2009 d) NickRaynsfordMP,ConstructionMinisteruntil2001 e) PeterUnitt,MansellConstruction,RegionalCommercialManager f) HumphreyLloydQC,FormereminentjudgeintheUKTechnologyandConstructionCourt.
g) RekhaThawrani,GeneralManagerforNewEngineeringContracts h) RudiKlien,NECUsersGroupChairman
Materials
15
4.7
Procedure
Asdescribedintheresearchmethod,quantitativesecondarysourceddatawillbereviewedandtriangulated byanalysingitalongsidetheprimarysourcedsubjectivedata.Theprocedureislistedbelowinitsrelevant headings:
SecondaryData Collection
LiteratureReview AquaticCentreBudgetData OverallVenuesBudgetData
PrimaryData Collection
Questionniares Interviews
Conclusion
Discussion Limitations AdditionalResearch
16
LiteratureReview
5
5.1
LiteratureReview
Introduction
Thisliteratureseekstoexaminethe reasoningfortheprocurementprocedures andcontractsselectedforthe2012Olympic Parkprojects.Theshifthastakenplacein thelasttwodecades.Thewriterwillalso seektoexplaintherationaleincost planningbehindtheprocurementofthe 2012OlympicVenues.
5.2 ContractorSelection&Best ValueTenderEvaluation

LathamsConstructingtheTeamof1994 reviewedandbenchmarkedProcurementandContractualArrangementsintheUnitedKingdomConstruction Industry.Itfoundfailingsinprocurementanddeliveryofconstructionprojects. UpuntilLatham,mostpublicprocuredprojectswerewonpurelyonlowestprice.Latham(1994)foundmuch inefficiencyinthistraditionalmethodofprocurement,statingitwastherootofadversarialattitudes.His maincriticismsincludedthecostofcomplyingwithtenderprocessesandtheexistenceofDutch auctioningandbidpeddling.LathamsrecommendationswerethecatalystinformingTheConstruction Industryboardin1995.CIB(1997)CodeofpracticefortheselectionofMainContractorsrecommended tenderlistsaretobevaluedonqualityaswellasprice. Theconstructionindustrywasslowtoheadthewarningsandrecommendationsoffered.SubsequentlyEgan (1998)wastaskedtoheadataskforcebytheDeputyPrimeMinisteragainstabackgroundofdeep concernintheindustryandamongitsclients.
LiteratureReview Egan(1998)concludedcutthroatpricecompetitionandinadequateprofitabilitybenefittednoone.The resultofthereportsfindingsleadtoshiftforchange;includinginitiativessuchasBestPracticeProgramme &MovementforInnovation(m4i).EgansrecommendationswereconsolidatedunderlawintheLocal GovernmentAct(1999).Thisabolishedcompulsorycompetitivebiddingechoingpreviousconclusionsby Latham(1994)inrecommendation6.32&CIB(1997). SPONResearch(2006)studiedtheeffectofmodernprocurementmethodsandthecostsinvolvedintheir delivery.Thisresearchfoundthattraditionallyprocuredprojectsencounteredlittlecosttocontractors,as thedegreeofpricinginformationwashigh.Thisisconversetoclientcosts,whicharehighduetothelevelof designinformationneededintraditionalprocurement.Italsofoundthatdesignandbuild&PFIprojects encounteredhighercosts,withPFIprojectsrequiringhightoveryhighmarketingandsuccessfulbidding costs.Thesestudiesrecommendationsincludedthatoftellingbidderswhotheyarecompetingwith,using bondstoreimbursesuppliersforpreconstructionwork,standardisingprequalificationpracticesand dismissingtransactioncosteconomicscorrelationstotheconstructionindustry.
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5.3
NEC3Contract&itsinception
TheODAconfirmedthatNewEngineeringContract(NEC3)wouldbeusedforthemajorityoftheOlympic ParkprogrammeNAO4.32(2006).TheNECisacontractformthathasbeeninexistencesincethe1990s.It grewpraisefromLatham(1994)andisinitsthirdformafterrevisionin1995&2005NEC(2012).Themain ethosofthecontractisacollaborativeapproachtoprojectdelivery.Thistermencompassesthedispute resolutionprocessesthatitcontains. TheintroductionoftheEarlyWarningandCompensationEventnoticesaidupfrontagreementtothetime andcostchange.Ifthecontractordoesnotnotifywithincontractedperiods,heriskslosinghisentitlement. Theadventoftheriskregistersystemfurtheraidsupfrontconfrontationofprojectissues.Thisisalsoaimed atavoidingendofcontactdisputes,suchasWembleyStadium.
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LiteratureReview
Theneedforthismechanismisbornoutoftheextremelyadversarialclientandcontractorrelationshipsof the1990sLatham(1994).Lathamadvisesusingcontractdocumentationadoptedwithemphasison teamworktosolveproblems,Latham9.3(1994). TheOfficeofGovernmentCommercecitestheNEC3astheUKgovernmentspreferredconstructioncontract NAO4.32(2006).Latham(1994)summarisesgooddesignandbuildtenderingpracticesinhis Recommendation5.18: 1. Aspecificdutyforallpartiestodealfairlywitheachother,andwiththeirsubcontractors,specialists andsuppliers,inanatmosphereofmutualcooperation. 2. Firmdutiesofteamwork,withsharedfinancialmotivationtopursuethoseobjectives.Theseshould involveageneralpresumptiontoachieve"winwin"solutionstoproblemswhichmayariseduringthe courseoftheproject. 3. Awhollyinterrelatedpackageofdocumentswhichclearlydefinestherolesanddutiesofallinvolved, andwhichissuitableforalltypesofprojectandforanyprocurementroute. TheNECsuiteinitsearlyformislatercitedasabeaconforthesecriteria.Itadheres5.18(1)byexpressly callingforaspiritofmutualtrustandcooperationincontractclause10.1.Byintroducingapain&gain incentivesinitsOptionCtargetCostform.(2)Byincentivisingcontractorsanddesignerswithfinancial reward.(3)ByencompassingsixdifferentprocurementroutesrangingfromOptionALumpsumwith activityscheduletoOptionFManagementContract.Itallowsfamiliaritytobeformedbetweenparties, givenitswidespreaduse.Eachpartydevelopsacommonunderstandingofdutiesbetweendifferent procurementpaths.
LiteratureReview TheODAsdecisiontouseNECcontractsuiteasthesolemaincontractsuite,hasreceivedlittlecriticism. WhenNEC(2006)confirmed2012OlympicParksweretobesolelyprocuredusingtheNEC3suite,Sir MichaelLathamstatedIcanthinkofnoothercontractformbettersuited. ThereislittleinthewayofcriticismofthewaytheNEC3contractsuiteoperates.Thisissaidaslongasthe partiesunderstandtheirobligationsunderthecontractNEC(2006).HoweverLloyd(2008)raisesconcerns overcertainclauseswordings.Hestatesclause16sdefinitionofEarlyWarningproceduresdoesnot expresslydealwithnoticesforwhichnoriskreductionmeetingwascalled.Hesinglesoutconcernsoverthe lackofProjectManagersunderstandingoftheirrole.Statingthewordingofclause61.3(EarlyWarning)in howitdescribesawarenessasonlybeingconsideredatthepointofnotificationinwriting.Disputescould arisesincetheprojectmanagershouldbereasonablyawarethatanunnotifiedeventwillariseina CompensationEvent.Furtherconfirmingcommonignorancetoclause65.2inthattheNECprovidesno mechanismwherebytheprojectmanagercanreviseadecisionoveraCompensationEvent. HeconcludesthatthefacttheNEChasencounteredfewreallegaldifficultiesduetothemutualtrustaims.It wouldthereforeappearthatthecriticismisobservationonly,andthatitisstillthebestsuitedcontractsuite indeliveringhighvalueoneoffbuilds. Brown(2012)describes,theOlympicprojectshavebeennoticeablebytheirabsenceofdispute.When consideringmaincontractortosubcontractorrelationships,heraisesconcernsoverdisclosureofmain contractfinalaccountagreements.GiventheuseofNEC3OptionC,iffavourablemaincontractagreementis notfound,themaincontractorsmaybemoreeagertodisclosesuchanagreementsothatthe subcontractorssharesomeofthepain.Costscouldbepusheddownwardtosubcontractors;ifcontractors acceptreducedsettlementswithTheODA.
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20
LiteratureReview
5.4
a.
TheOlympicAquaticsCentre
Scope
ICE(2011)describestheOlympicAquaticCentreasaniconicvenuedesignedbyacclaimedarchitectZaha Hadid.Itisdominatedbyaspectacular11000m2waveformroofIngamestime,temporarywings augmentthecapacityto17500,includingapermanentcapacityof2500seatsinlegacyuse.Thefacilitywill beusedasthevenueforallOlympicDiving&Swimmingdisciplinesduringthegames.BuilderandEngineer (2009)confirmstheroofframeissupportedbyjustthreeconcretepiers. b. Procurement
NAO4.26(2008)confirmsduringprocurementoftheAquaticsCentretheODAacceptedBalfourBeattys proposal,atahighervaluethanbudgetcostplanfigures.Theprincipalareasofdifferenceincludedchanges tothedesignandscope.TheODAexpressedlearningeventstobetakenfromthefailingsofbudgetary controlforthe2004AthensOlympics,thelargedisputeandoverspendinbuildingWembleyStadiumandthe successesachievedindeliveringtheEmiratesStadium.RICS(2012)statedthatthekeyfactorwastime.The deadlinecouldntbemissed,andarushtocompletewillseespendingspiraloutofcontrol. InkeepingwithbothLatham,CIB&EgantheOlympicParkVenueswereprocuredusingatwostageprocess. Stageonebeingaprequalificationquestionnairebalancedscorecardsystem.TheOlympicDelivery AuthoritydevelopedprojectspecificPQQcriteria.FortheAquaticCentre,thePQQcriteriaweresplitinto twolevels.ODA(2010)placeda60/40splitofCostoverTechnicalsubmittals.Thisbenchmarkingallowedthe qualityelementofthesubmissiontocarryagreaterweightingthanseenintheperiodofLathamscriticisms. ICE(2011)confirmsthatAquaticCentreprocurementselectionprocesswascarriedoutusingthe competitivedialogueroute,whichresultedinanNEC3EngineeringandConstructionContractoptionCbeing placedwithBalfourBeattyinMarch2008.NAO4.25(2008)inselectingBalfourBeattytocompletethe AquaticCentrebuild.TheODAestimatedthatrerunningtheprocurementprocesswouldhaveresultedin uptosixmonthsdelay.ICE(2011)WorkstartedinJune2008andwascompletedonprogrammeinJuly 2011.NAO(2008)stateprocurementoftheAquaticsCentrestartedbeforetheestablishmentofthe
LiteratureReview OlympicDeliveryAuthorityandinvolvedtheseparateprocurementsofthedesignerandthecontractor.The designerfortheAquaticsCentrewasappointedinJanuary2005bytheLondonDevelopmentAgency.The designer(ZahaHadid)wasnovatedwithinthedesignandbuildcontractformtoBalfourBeatty. TheprocurementmethodshavereceivedcriticismfromNEF(2009)inthatcontractsfortheGamesareso largethattheyareimpossibleforlocalsmallandmediumsizedenterprisestocompetefor.Thisanalysis doesnottakeintoaccountriskmanagementissues.ItcanbearguedtheODAhavetransferredrisksof programmeandqualitytolargercontractors,whoarebestequippedtoachievetheclientsrequirements.It wouldappearbyhavingsucharigorousPQQprocess,theODAadheredtoLatham,Egan&SPONs recommendations.ForTheAquaticCentresthepricewasnegotiatedintwostageevaluations.Reducing tendercostwastagebyreviewingqualityatstageone. c. Budget&Costs
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Guardian(2008)statesthebudgetfortheAquaticCentrewasoriginallyestimatedat75mwhenLondonbid fortheGamesin2005.Althoughpriortotherevisedbudgetforecastsin2007,projectarchitectZahaHadid toldGuardian(2005)thetotalprojectcostswillbesignificantlymore".Guardian(2008)quotesOlympics ministerTessaJowellinstatingthisfigure[75m]alwaysreferredtothebaseconstructioncostsonly. DMCS(2010)confirmsrevisedbudgetspublishedin2007publishedabaselineforecastfinalcostof214m. ICE(2011)suggestthattheoutturncostoftheprojectwas269m.Guardian(2008)understandsthata lastminuteattempttohikethepricebythecontractorBalfourBeattycontributedtotheincreaseinthecost ofthetroubledproject,althoughthisstatementistantamounttoconjectureasthecontractwasletonan actualcostbasis. NAO(2008)believedbudgetswillbeexceededbystatingInbroadterms,thecostsforthehighprofile VenuessuchastheMainStadiumandtheAquaticsCentreareforecasttobehigherthananticipated furtherdescribingTheOlympicDeliveryAuthoritycontinuestolookforcostsavingopportunitiestooffset theMarch2008forecastsofpotentialcostincreasesandkeepwithinexistingbudgets,andhasdrawnthe attentionoffunderstothepotentialneedforafuturecalloncontingencyifitisunabletodoso.
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Results
6
6.1
Results
SecondarySourcedBudgetData
ThewritercollateddatapresentedpublishedbyDCMS quarterlyreportswhichwerepublishedfromFebruary 2010toJune2012.Thisdatashowsforecastcostsof eachOlympicvenueandbaselinebudgetfigures associatedwitheachprojectasprojectedbytheODAin 2007.Thecollateddatatablesareshowninappendix 12.3andthedatasourcesareshowninappendix12.2. Incollatingtheforecastcosts,thewritermadeaconsciousdecisiontoanalyseonlytheDCMSforecastsas dataisthenguaranteedtobecomparedonalikeforlikebasis.Analysingdatafromothersourcesshowed, taxcontingencyandthebasisofbaselinewereofteninconflict.Intheinterestsofafairanalysis,thewriter waspreparedtoacceptthesmallerpoolofdatainordertobringunbiasedconclusions.Thewriterhashad toamendsomeofthedatavaluesforthefinalyearquartersastheODAreallocatedcostselsewherefor externalworksassociatedwiththeprojects.Thisdecisionwasmadeinordertoaccuratelycomparethe costsinlinewiththescopeofworksincludedwithinthe2007baselinecosts. WhichbudgetarewetobaselinethetotalAquaticCentrecostagainst? SkyNews(2012)statesWhenLondonbidfortheGamessevenyearsagothepredictedcostofstagingthe OlympicsandParalympicswasputat2.37bn.Theseforecastswererevisedin2007byTheODA.NAO (2007)revealedthe(onalikeforlikebasis)therevisedfigurestotalled9.325bn.Thisisclearlyaquantum leapinbudgetaryterms.Howeverasthedissertationshypothesiscentresaroundastatementmadein2007, thewriterbelievesthatbaseliningthebudgetsasthe2005bidwouldnotrepresentafairandreasonable debate.ThescopeofworksislikelytohaveincreaseddramaticallyasNicholson(2012)confirmsbackIn 2004agamewasbeingplayedtosecurethegames,ImeanobviouslyyoucantdeliveranOlympicgamesfor 2bn,theathletesvillageThatwas1.5bnjustonitsown.Thedecisionisthereforetobaselinethe budgetsuccessorfailureonthe2007budgets.
Results CostMovementSummary Statistic m %

Mean Median Range Standard Deviation Variance 1st Quartile 3rd Quartile IQR 5.61 1.50 36.00 10.80 116.63 6.50 6.50
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AquaticsCentre%Cost Movements
20.00% 15.00% 10.00% 5.00% 0.00% Feb10 Feb11 Nov10 May10 5.00% May11 Nov11 Aug10 Aug11 Feb12 AquaticsCentre% CostMovements
2.46 0.59 16.62 4.98 0.25 0.00 2.57 2.57
BudgetIncreaseSummary
AquaticsCentre%Budget Increase
30.00% 20.00% 10.00% 0.00% Feb11 Aug10 Aug11 Feb10 Nov10 May10 May11 Nov11 Feb12 AquaticsCentre% BudgetIncrease
Statistic
Overspend
m
56.05 50.22 54.50 24.05 9.08 82.45 45.51 55.79 10.28
%
26.19 23.47 25.47 11.24 4.24 0.18 21.27 26.07 4.80
Mean Median Range Standard Deviation Variance 1st Quartile 3rd Quartile IQR
WastheAquaticCentrebudgetexceeded? Thisdatasetindicatesthattherewasanoverspend.Thetotalfinalcostisshownas270.05mwhich indicatesanoveralloverspendof26.19%or56.05m.ThisincludesanadjustmentmadefortheDecember 2011ODAbudgetadjustments.Thedatafortheexactmovementofbudgetsisnotavailable,andtherefore thedatahadtobeamendedinlinewiththeheadlinefigurespresented.DCMS(2011)statedTheODAhas returned333mtotheDepartmentforCulture,MediaandSports(DCMS)GovernmentOlympicExecutive fortransformationworkstotheParkwhicharenowtobedeliveredbytheOlympicParkLegacyCompany (OPLC).Thetransferofthisscopehasresultedinasavingof31m;theOPLConlyrequire302minorderto deliverequivalentscope.Thebudgetswerethereforeadjustedonaproratabasis.Giventhelackofspecific data,thewriterbelievedthistobethefairestwaytoreflectthechanges.
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Results
Thefactthatthebudgetwasexceededbyover25%doesnotnecessarilyreflectpoorbudgetmanagement. FirstlythefirstquarterlyreportreleasedinFebruary2010indicatesa15%increaseincost.Theheadline figureispulledupwardsbythisinitialpercentageleap,thereforeinrealityafigurecloserto10%isamore accuratepercentageincrease.Thefiguresreleasedin2007werepublishedbeforethecontractswerelet.As weknowfromtheliteraturereview,theAquaticCentrewasalreadyexceedingthebudgetwhenthe contractwassigned.Thetargetcostwasagreedatahighercostthantheoriginalbudget. Thecostmovementdatasetindicatesthemovementsincostateachquarter.Themeanaverageofcost changewas5.61mperquarter.Thisfigureisagainskewedbythe34manomalyshowninFebruary2010 quarter.Thestandarddeviationofthedatasetindicatesthatonaveragethedatadeviatestowards11m fromthemean.Asapercentageofthebudgetsapercentageofthebudgetthisconfirmsthatonaveragethe datadeviates4.98%eithersideofthemean.Thecompactdistributionindicatesthatthemeanaverageis fairlyaccurate. Themedianis1.50mwhichserveslittlepurposebuttoconfirmthatthedatadoesnotcentreaboutzero. Therangeofdataimpliesthatthereisa36mdifferencebetweentheupperandlowervalues.Thisdoesnot trulyrepresentthespreadofdataasitincludesupperandloweranomalies.Theinterquartilerangeshowsa moreaccuratedistributionbetweenthelowerandupperquartilesof6.50m.Thisimpliesthatthespreadof middle50%ofdatavaluesisfairlysmallincomparisontotheoverallrange.Thisconfirmsthatexcluding anomalies,thedatasetisquitecompact.6.50masapercentageofthebudgetindicatesarangeofabout 2.57%betweenthecentralcostmovementdata. Thesamplealsoindicatestheoverallbudgetincreasewhencompareddirectlytotheoriginal2007budget. ThestatisticsrevealthatthemeanaverageoverspendoftheAquaticCentreis50.22mor23.47%.The standarddeviationofthebudgetoverspenddataislowerthanthecostmovementfigure.Thisshowsadata distributionthatonaveragedeviatesfromthemeanat9.08m.Thisindicatesthatthebudgetincreasewas moreconsistentaboutthemeanthanthecostmovementdata.Thisstatementisconfirmedbythefactthat thestandarddeviationdistributioncomparedtotheoriginalbudgetisunder5%.
Results Thebudgetincreasedatarangeisagainlowerthanthecostmovementdataat24.05m.Thisisprobably expectedastheanomalycostmovementsindicatedintheearlyquartersarecompoundedintothe subsequentquarters.Themedianat54.50misinterestingasitlieswithin2moftheoverallbudget increase.Thisshowsthecorrelationofdataisconsistenttowardstheoutturnoverspend,andthatinterms oftheoverallbudget,thecostmovementsarenotlarge. Theinterquartilerangedatadiffersfromthecostmovementanalysisinthatitshowsahigherrangeofdata valuesinthemiddle50%ofresults.Thisindicatesthatthebudgetcomparisondataisbroaderthanthatof thecostmovementdata.Thisshowstheeffectthatthetwobigcostmovementshaveontheoverallbudget. The11mcostmovementofNovember2010skewstheoverallbudgetincreasedataintoahighermiddle datarangespread.Italsoaffectstheinterquartilerangeasthemovementoccursinthemiddleofthe dataset.Thisactuallyreflectsthefactthatthecostscontinuetoriseataconsistentrateinthemiddlesample ofdata.However,atareducedrate,asthemiddlesampleneglectstheFebruary2010costmovement anomaly.Thisisreflectedinthedifferencebetweentherangeandtheinterquartilerange.Thedatashows thatafterNovember2010,thedataremainswithina2%increaseincomparisontothe2007forecastfigures. Fromthecostmovementdatathebudgethasconsistentlygrownthroughouttheproject.Thefinal overspendhasbeencompoundedconsistentlyduetotherelativelysmalldistributionincostmovements anditsconfinedinterquartilerange.Thebudgetincreasedataconcurswiththis,asitshowsaconsistent overspendinlinewiththeoutturncost.Thespreadofdatabetweenthetwosetsofdataisfairly comparableandthisindicatesthatthecostmovementsarefairlyconsistentafterNovember2010withinthe datasample.Thebudgetincreaseinterquartilerangevariesfromthecostmovementsastheeffectofthe 11manomalyiscompoundedwithinthemiddledataset.Thekeyimplicationofthedataresultsisthatit provesthatboththeinitialbudgetandthesubsequenttargetcostdidnotaccuratelyreflectthefinalcostof works.Itisthereforelikelythatthescopeincreasedthroughoutthelifeoftheproject.Italsoconfirmsthat thescopeconsistentlygrewthroughouttheearlyquarters.
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Results
OverallVenue%Cost Movements
20.00% 15.00% 10.00% 5.00% 0.00% Nov10 May11 Nov11 Aug11 May10 Aug10 5.00% Feb10 Feb11 Feb12 OverallVenue% CostMovements
CostMovementSummary Statistic m %
Mean Median Range Standard Deviation Variance 1st Quartile 3rd Quartile IQR 7.31 11.50 208.00 58.43
3,414.62
0.80 0.95 19.38 5.47 0.30 1.33 0.21 1.11
15.75 2.48 13.27
OverallVenue%Budget Increase
20.00% 15.00% 10.00% 5.00% 0.00% Aug11 Aug10 Feb10 Feb11 Nov10 May10 May11 Nov11 Feb12 OverallVenue% BudgetIncrease
Statistic
Overspend
m
73.09 114.63 117 106.91 35.46
1,257.57
%
6.93 10.87 11.09 10.13 3.36 0.11 8.44 13.25 4.80
Mean Median Range Standard Deviation Variance 1st Quartile 3rd Quartile IQR
89.09 139.75 50.66
WasthetotalOlympicVenuesbudgetexceeded? Thedatasetindicatesthattheoverallbudgethasbeenexceededby73.09m,relatingtoanoverspendof 6.93%.AgainthedatahashadtobeadjustedtoaccountfortheDecember2011reallocationofbudget monies. Thecostmovementdatarevealsthatthemeanquarterlyincreasewas7.31m,thisrelatestoamean averagepercentageof0.80%.ThisstatisticreflectsthefactthatinFebruary2010alargeincreaseoccurred thatwassubsequentlymitigated.The167mincreaseisaclearanomalyinthedataset.Thestandard deviationreflectstheFebruaryanomalybyskewingtheaveragemeandifferentialdistributionto58.43m. Therangeofdatais208mbuttheinterquartilerangeshowsasignificantlyreducedspreadof13.37m.This againconfirmsthattheFebruary2010forecastcostmovementisnotrepresentativeoftherestofthedata. Project(F317PRO)StephenGummowC/N0703928/1
Results Theupperandlowerquartilesarealsonegativeresultsandthereforethemiddlerangeofdataisprovenas beingcomprisedofnegativebudgetmovements. Thebudgetincreasedatasetshowsameanaveragebudgetincreaseof114.63m.Thisreflectsamean averagebudgetincreaseof10.87%.Thecostmovementspaintadifferentpicturethanthis,sothisisan interestingstatistic.Thestandarddeviationat58.43mor3.36%revealsthesameconclusionsofthecost movementsthattheFebruary2010anomalyskewstheoutlookofthedata.Infactthebudgetcontinuesto fallthroughouttheremainderofthequarters.Thisprovesaconsistentcompoundeddownwardfallof budgetforecastsfromthesecondthroughtothefinalquarter.Theinterquartilerangeprovesthegradual reductionindatabyshowingamiddlesectorrangeofdataat13.47mor1.11%.Thenegativemedianagain illustratesthisconclusion.Thelasttwoquartersshowabnormalmovementscomparedwiththerestofthe data,thisperhapsreflectsfinalaccountsbeingagreedwiththeODAssupplychain. ThetwodatasetsconfirmthataftertheinitialhikeinFebruary2010,thebudgetswerethenmaintained andinfactareductionof9%wasrealisedbythelastquarter.Thedatashowsthatthebudgetscontinuedto fallfromthesecondquarter.Italsoindicatesafairlycongruentpatternofnegativecostmovementsoccur untilthefinalquarter.Thebudgetshavebeenexceededbutthefinaloutturncosthasbeenreducedfrom thepositionthatwasforecastedinFebruary2010.Itmaybethatthescopeofworkswasreducedafter February2010.Itcouldalsobeconcludedthattheactualcostoftheprocuredtargetcostswererealisedat aloweroutturncostthanpreviouslythought.EventhoughthedatareflectsanimprovementfromFebruary 2010,thefactdoesstillremainthatthe2007budgetswereexceededbyover6.50%.
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Results
CostMovement%Comparison
20.00% 15.00% 10.00% 5.00% 0.00% Feb10 Feb11 Nov10 May10 May11 Nov11 Aug10 Aug11 Feb12 5.00% OlympicPark Venues AquaticCentre
CostMovementSummary
Statistic Aquatic (%) Overall(%)
Mean Median Range Standard Deviation Variance 1st Quartile 3rd Quartile IQR ZTest
2.46 0.59 16.62 4.98 0.25 0.00 2.57 2.57 16.86
0.80 0.95 19.38 5.47 0.30 1.33 0.21 1.11 N/A
BudgetIncrease%Comparison
30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Feb10 Feb11 Nov10 May11 May10 Nov11 Aug10 Aug11 Feb12 OlympicPark Venues AquaticCentre
Statistic Aquatic (%) Overall (%)
Overspend Mean Median Range Standard Deviation Variance 1st Quartile 3rd Quartile IQR ZTest
26.19 23.47 25.47 11.24 4.24 0.18 21.27 26.07 4.80 0.00
6.93 10.87 11.09 10.13 3.36 0.11 8.44 13.25 4.80 N/A
HowdidthecostforecastmodeloftheaquaticcentrecomparetotheoverallVenuesbudget? ThetrendsoftheAquaticCentredonotappeartobecongruentwiththeoverallvenuebudgettrends.The costmovementdatashowsintermsofarithmeticaveragethatthetwodatasetshowsimilarcost movements.Thedatarangesaresimilarwhichalsoindicatesthatoverallthetwodatasetsshowsimilarcost forecastingmodels.Thisisagainconfirmedbyadifferenceinstandarddeviationfromthemeanof0.50%. Exceptforthehighermeanaverage,themaindifferenceindatasetsistheinterquartilerange.Thisshows thattheaquaticcentredataisspreadmoreoverthemiddle50%ofdatavaluesandindicatesthatthe aquaticcentredatacostmovementsaremoreerraticwhencomparedwiththeoverallvenuemodel.
Results Analysisofthecostmovementgraphtrend,showsthattheaquaticcentreisamoreunpredictablecost forecastingdataset.Thisindicatesthatthescopeofworkswasnotfullyrecognisedattenderstage,orlessso whencomparedtotheoverallvenuebudget.Bizarrelybothprojectsshowasimilarcostmovementin February2010.Theybothshowacostleapofcirca15%.Thisindicatesthattheoverallbudgetsuffered similarissuesinmeetingthe2007budgetswhenprocuringthemaincontractpackages.Thedatasetsshow inconsistentcostforecasting,withnorealtrendsbeingdemonstrated.Thereductionincostmovements fromMay2010toAugust2011isreversedbythelatepercentagecostmovementsinthelasttwoquarters. AZtestwascalculatedinordertoanalysetheprobabilityoftheaquaticcentrecostmovementsinlinewith theoverallbudgetsdataset.Theresultsshowedthatoverpercentagecostmovementstherewasa16.87% chancethattheprobabilityoftheaquaticcentreaveragecostmovementsdiffersfromtheoverallbudget. Thisisahigherpercentagedifferencethanonewouldexpectforadatasetthatiscongruentwitha populationsample. Thebudgetincreasestatisticsshowintermsofbudgetincrease,theaquaticcentredatashowsanarithmetic meanoverthedoubletheaverageincreaseoftheoverallvenuebudget.Therangeofdataisfairlyequal, whichisagainconfirmedbythe1%differencebetweenthestandarddeviationsofthedatasets.This indicatesthatalthoughthebudgetincreasesfortheaquaticcentrearehigher,thedataspreadsarevery similar.Thisisconfirmedagainbythefactthattheinterquartilerangesareidentical.Thisappearsaco incidence.Overallallthestatisticsshowthattheaquaticcentredoesnotfollowastightabudgetcontrol modelastheoverallVenuesbudget.Howeverthedataspreadsofbudgetincreasesaresimilar.The AquaticsCentredataislikelytohavesufferedfromtheMay2010February2011anomalybudget increases. Whencontemplatingthebudgetpercentageincreasegraph,itbecomesobviousthatthetwocostmodels arepolaropposites.Theinitial15%budgetincreaseisreducedsteadilyinthecaseoftheoverallvenue budget,butthisisnotthecasewiththeaquaticcentre.TheZtestbetweenthedatasetsprovesthisby
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Results
suggestinga0%probability(to8decimalplaces)thatasampleofaquaticcentredatawillnearthemeanof theoverallvenuebudgetincreasedata.
OlympicParkVenues% CostMovementby Group

5%upwards 3%to4% 1%to2% 1%to0% 2%3% 4%to5% 0.00 2.00 4.00 OlympicPark Venues%Cost Movementby Group
AquaticsCentre%Cost MovementbyGroup
5%upwards 3%to4% 1%to2% 1%to0% 2%3% 4%to5% 0.00 2.00 4.00 AquaticsCentre %Cost Movementby Group
ThegroupedcostmovementdataprovesthattheOlympicparkhasahigheraverageoflowercostincreases orreducedcostforecasts.Thedatarangeoftheoverallbudgetdataishowevershownasbeingfarmore diversethantheAquaticsCentredata.Thisindicatesthattheoverallvenuebudgetmanagementmaybethe forecastingcouldbeseenasabettermodel,thedataismoreerratic.
OlympicParkVenues% ChangetoBudgetby Group

25%to27.5% 17.5%to20% 10%to12.5% 0%to2.5% 0.00 1.00 2.00 3.00 OlympicPark Venues% Changeto Budgetby Group
AquaticCentre% ChangetoBudgetby Group

25%to27.5% 17.5%to20% 10%to12.5% 0%to2.5% 0.002.004.006.00 AquaticCentre %Changeto Budgetby Group
TheAquaticcentrecostincreasesareshownasbeingfarhigherinthisgroupeddatacomparison.Thebudget increasepercentagesareshownasbeingfarmorefrequentinthe2527%rangeandtheoverallbudget showsafrequencyskewfarclosertozero.Thisisthemostvividindicationoftheaquaticcentrebeinga weakerexampleofbudgetmaintenanceincomparisontotheoverallvenuebudgetprofile.
Results
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6.2
PrimarySourcedAquaticCentreQuestionnaireResults
Ofthethreeinterviewsorquestionnairestargeted,thereaderreceivedtwothirdsofthetargetedresponses intheformofquestionnaires.Theresultswerefromtwopersonnelwithdifferentrolesontheprojectsothe responseswillbeabletobecomparedwiththatoftheinterviewsalsocompleted.MalcolmNelsona ProfessionalAdvisorforCLM(projectmanager)andStuartFraseraProjectManagerforBalfourBeatty(main contractor)repliedtothequestionnaire.Inadditiontothisthequestionnairequestionswerealsoaskedto JohnNicholsonProjectSponsorofTheODA(intheformofaninterview)whichgivesa3tieredresponse.Full questionnaireresponsesaredetailedinappendix12.7. NationalAuditOfficestatisticssuggestthatinitialbudgetswereexceeded.Canyoubrieflyexplainany overspends? Nelson(2012)wasboundbyaconfidentialityagreementandwasthereforeunabletoanswer.Fraser(2012) suggeststhebudgetswerenotexpresslystressedtothecontractorbystatingImneversurewhatthebase linefigurewas!beforeconfirmingThefigurefortheAquaticsbackin2005wasaround75m.Thenitrose to303min2008.InterestinglyFrasersuggeststhattheoriginalcontractsumfortheprojectexcludedANY contingencysincetheprojectwascostreimbursableandtheODAdidNOTseekpricesfromcontractorsthat includedriskandthatthebudgetsetin2007includedthefeesofCLMandalltheremediationand associatedcosts.ThisperhapsexplainsthecostmovementsexperiencedinthebudgetdataastheODA holdingalloftheriskwouldmeananyrealisedriskswouldbeaddedtothefinalcostandnotabsorbed withinthecontractsum.Fraser(2012)statesthatTheoutturncostofSection1oftheworksgrewfrom 177mto248m.Thisincluded42mofinstructedvariations.Sotheactualcostcreepwasintheorderof 13%.Giventhecomplexityofthedesignitisthoughtthatthisfigureisnotunreasonable.Thisstatement indicatesthatthescopeoftheprojectgrewandthatthedesignandbuildcontractmeantthatasthedesign developedthecostsoftheprojectincreased. Nicholson(2012)providesagreatinsightbystatingIwasinvolvedinthebid,forthegames.Somyfirst involvementwaslate2003believeitornot.Iwasaskedtodoafeasibilitystudyforaswimmingpool50m Olympicsizepoolofabudgetaround70m.Soonthatbasisthatanybodywouldsayits3to4timesover
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Results
budgetbecauseitsnowjustunder300m.Thebriefbackin2003/2004hadmoreexclusionsthan inclusionssoitsquiteacheapandeasyheadlinetosaythatthingsareoutofcontrolbutwereallyneed tounderstandwhatisincludedinthebudgetinthefirstplace.Thisstatementismorereflectiveofthe biddingbudgets.Theinterestingpointtonoteisthattherevisedbudgetswereexceeded,soitwouldappear thatthescopewasstillnotfullyunderstoodin2007. Inyouropinion,didtheobligations&mechanismsofNEC3contractincreasecosttotheproject? Thisquestionwasdesignedinordertoillicitareactiveresponse.Nelson(2012)slightlydisagreewiththe statementandstatedCostsfortheprojectwereopenbook,inspectedbythePMteamandauditedbythe GovernmentAuditOfficeand2independentsurveyingpracticessotheNECcontractdidnotincreasethe costoftheproject.InterestinglyFraser(2012)continuestodescribeHowever,ifthequestioniscouldthe clienthaveboughttheprojectcheaperwithanotherformofcontractthentheanswerwouldbeyes, particularlyinthecurrentclimatewherecontractorsarebiddingworkwithunrealisticmarginsandrisk allowances.Thatsaid,thefinaloutturncostwouldhavebeenatgreaterriskandtheequallyimportant factorsofachievingthespecifiedquality,meetingtheprogrammeandcompletingsafelycouldhavebeen severelycompromised.Thisanswerisveryinteresting,consideringthebeliefthatanothercontractform wouldhavereducedcost.HoweverNelson(2012)isstillofthebeliefatthetimethatthebestdecisionwas madeOnsuchacomplexprojectandconsideringtheoverheatedmarketwhenitwasprocured(2007)the riskwouldalsohavebeenthatnocontractortendered(orsubmittedahighlyqualifiedbid).Asitwas,with thecompetitivedialogueprocessandtheNECoptionCcontract,twotenderersdroppedoutduringthebid period,leavingonlyonebonafidetender.Thisclarifiestheearlierstatementbyconfirmingthecontracting marketin2007wasriskadverseandthethoughtofcompletinganOlympicprojectwasseenastoohighrisk. Fraser(2012)approachestheanswerdifferentlybystatinganeutralresponseandcontinuingTheNEC3 FormbyitselfrequiressignificantadditionaladministrationasdoestheOptionCform.Thisprobablyadded twosurveyorsfortheperiod.ButOptionC,beingcostreimbursable,andourabilitytotailorsubcontract conditionstosuitthecircumstancesdidreducethepotentialfordisputes.Also,thefactthattheNECForm providesforaninbuiltriskreductionmechanismdoesencouragecollaborationandanopennesstoaddress Project(F317PRO)StephenGummowC/N0703928/1
Results issuessuchascostescalationandprogrammerisk.Butitdoesnteliminatethoserisks.Asnotedabove,the costescalationwasnotunrealisticallyhighand,allinall,IwouldbereticenttosaythattheNECFormadded cost.Thisresponserasiesaninterestingdebateinthatthebeliefisthatthecontractcausedadditional resourcetotheproject.Thereisnowayofanalysingthecontractsimpactintermsofthedisputeresolution impact;howeverthesmallnumberofdisputesonsuchalargeprojectwillhavehadapositivecommercial influenceonthefinalaccount.Theneutralresponseimplieshebelievestheadditionalresourcewascost neutral. Nicholson(2012)agreeswithFraserbutfordifferingreasonsprobablyanotherbodyortwofromthe contractadministrationpointofview,butagainyouhavetoputintoperspectivetheOlympicshasalevelof scrutinywhichwasunprecedentedinmyexperience.Soweobviouslyhadtosatisfythecontractand operateunderthetermsofthecontract,butwewereforeverbeingauditedeitherinternallyexternallyby governmentgoingthroughvariousgatewayreviewsthatwereimplementedthroughoutthelifeofthe development.TheextraworkthatwasdoneontheadministrationsideofmanagingtheNECcameinhandy whenitcametobeingauditedbytheworldandhiswifeIfwedbeenusinganotherformofcontract,wed probablyhavehadthesameamountofpeoplealloverItanyway.Potentially,soIdontthinkthatyoucould sayinthisparticularcasethattheNECaddedaparticularworkloadintermsofnumbersofresources.It wouldappearthereforethattheadditionalresourcesneededwouldvebeenrequiredwhatevertheformof contractused. Inyouropinion,couldanybudgetincreaseshavebeenavoided? Nelson(2012)hasaNeutralviewofthestatement,andconfirmsArobustandrigorouschangeprocess wasimplementedthroughouttheprojectdurationandbudgetswereconstantlymonitoredagainstbase scope.Changeswereonlyintroducedwhenabsolutelynecessaryandanappropriatebudgetwasidentified. Thisstatementimpliesameticulouschangemanagementprocesswasimplemented.Fraser(2012)alsohasa Neutralviewpoint.HestatesItsalwayseasytoacknowledgethatcostincreasescouldhavebeen avoided.Butthisisanexceptionallycomplexprojectthathadtobecompletedwithin4weeksofthe contractprogrammeANDsome42mofadditionalworkwasinstructedalongtheway.Sotherewasgreat Project(F317PRO)CandidateReference0703928/1
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Results
pressureontheprogrammefortheroofstructure.Thiswascompleted12weekslaterthanplanneddueto thesuppliernotbeingabletokeeptoprogramme.Onreflectiontheirprogrammewastootightaswas ours!Thisconfirmsthattherewasadisputewiththeroofingcontractor.Thisstatementalsoindicatesthat althougha4weekdelaywasrealised,with42mofadditionalextras,itwouldappearthattheoriginal contractprogrammewasbetteredforthetargetcostscopeofworks. Nicholson(2012)providesamorepragmaticresponsebystatinghavealookatasimilaraquaticcentres elsewhereintheworldandbelievemeyouwontfindone.Becausetheydontexistsoitsauniquedesign, itsauniqueconcept.Whenyoureputtingacostplantogetherandplanningthebudgetsyouvegotno referencepointonabuildinglikethat.Becauseithasntbeendonebefore,becauseeverythingwasbespoke, soIthinkthatwhenyouredealingwithasignaturearchitect,onaflagshipbuildingyouhavetomaintainthe spiritofthedesignandwhyyouvechosenthatparticulararchitectinthefirstplaceordontbother.It wouldappearthereforethatcostincreaseswerealmostinevitableasthebuildingisnotcommoninits designandthereforetoforecastcostsatconceptionisalmostimpossible. Consideringthecompletedprojectandanyscopechanges,doyoubelieverealisticbudgetsweresetduring agreementoftheTargetCost? Nelson(2012)StronglyAgreedwiththestatement,butdidnotelaborate.Fraser(2012)StronglyAgreed alsoandcontinuedThereisNOdoubtthatthetargetpriceandprogrammewerecorrectlysetandthey drovetheprojectandthebehavioursoftheparties.Weallknewtheimportanceoftimelycompletionand weandtheClientworkedwelltogethertomanagetherisks.TheemphasisofNOclearlyindicatesa strongbeliefthatthetargetcostwasrealistic.Thedataanalysisimpliesthatthebudgetswereheavily exceeded,soitsapparentthatthedesignwasnotsufficientlydetailedatcontractstageinorderto accuratelysetthetargetcost. Nicholson(2012)Becausetheaquaticcentrewasverymuchinthepubliceye(perhapsmoresothanthe otherprojects)therewaspressuretofallinlinewithpreviouslyreportedbudgetsItwouldvebeenawhole lotbettertojustaccepttherealityearlieraspeoplewerelivinginhopethatwecouldachievethebudgets thatwereoriginallyset.AndIthinktherewerealotofpeopleconcernedabouttheoutturncostbeing
Results greaterthanthatbecausetheguysontheground,likeMalcolmmyselfandStuartcouldalwaysseethatit wouldbenotimpossiblebutdifficulttodelivertooriginalexpectations.Thisresponseindicatesthatthe clientbelievedthetargetcostwasunrealistic,butnotforthescopeofworksitwasbasedupon.Nicholsonis clearlyofthemindsetthatthetargetcostwasunachievableduetothereasonsdiscussedintheprevious question. DoyouagreewiththedecisiontoselecttheNEC3contractsuite? Nelson(2012)stronglyagreeswiththestatement.HecontinuesTheNECcontractwasofassistance duringtheprojectbecauseitwasadministeredfairlyandhelpedthewholeteamtofocusontheobjectiveof gettingtheprojectcompleteontimeTheissueofinstructionsandthevaluation(timeandcost)of compensationeventswasamatterofrobustdiscussionbetweentheclientprojectmanagementteamand thetier1contractorbutnodifferenceswererequiredtogotoarbitrationandtherewasaminimalnumber ofpricesthatweresubjecttoaProjectManagersassessment.TheEarlyWarningsissuedbythecontractor andtheclientwereofgreathelpinfocussingtheteamontheimportantissuesandhelpedtopreventthem escalatingintodisputesanddelays.AllthecontractorsaccountswereopenbookandtheProject Managementteamwerefromacontractingbackgroundwhichenabledthemtorelatetothetier1wayof working.Thefactthatthefinalaccountontheprojectwassettledwithin6monthsofcompletionis testamenttotheteamsworkingwiththecontractinthespirititwasdrawn.Consideringthatthedesignwas atstageCwhentenderswereprocuredamoreadversarialtypeofcontractwouldhavebeen counterproductiveandputtheaspirationsoftheclientatgreaterrisk.Thisstatementcontainsmanykey statements.FirstlyNelsonisofastrongagreementthatthiswasthebestcontractselection,secondlyhe confirmsthatprojectmanagersassessmentwasnotrequiredinmostcases.Thisimpliesthatthecontractor wasobtainingpromptagreementtoCENs.Thefactthatthefinalaccountwasagreedwithin6monthsofPC isalsoanindicatorofgoodcostreportingtotheclientastheschemecontained13%additiontothetarget cost. Fraser(2012)agreeswithNelsonsstatementsbyagainstronglyagreeingandstatingItdrovetheright behaviours.Itencouragedopennessandcollaborationacrossalltheprincipalpartiesandthesuppliersand Project(F317PRO)CandidateReference0703928/1
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designers.Moreover,byadoptingOptionCwecouldgetonwiththeincorporationofchangesinthe knowledgethatthefinancialimplicationswouldbeacknowledged. Nicholson(2012)statesthattheadvantagesfortheclientwerehavingtheflexibility,becausethenatureof theproject,designandfasttracknaturethemultiplestakeholdersallofthepotentialexternalinfluences thatyouhavethatarealmostbeyondyourcontrol.Youdoneedtohavetheflexibilitytoadapttochanging circumstancesnothingwasashowstopper.Itmightvebeenaninconvenience,butthecontractwouldve allowedforthingstoflex.Ithinkthatstheoverallclientadvantage.Theabilitytomanagevariationsat actualcostwasthereforeabigadvantagetotheclientintermsoftryingtobestachievethebudget. WhereanyZclausesusedinthemaincontract? Nelson(2012)statesNo,howeverFraser(2012)StatesYes,therewere.Theydealtwithissuessuchas IncreasedCosts,SectionalCompletionandDamages.Thesearestandardcontractamendmentsandare usedtoincentivisethecontractorfortimelycompletionandgivetheemployertheabilitytooccupycertain areasearly.Itsinterestingthattheprojectmanagerdidnotrealisetheirinclusion. Wasthemaincontractmodifiedwithanynonstandardcontractclauses? Nelson(2012)statesYes,ModifiedtocomplywithgeneralODArequirementssuchassustainability objectives,parkwidesupplyofmaterials&services,timingsforresponsestoCEs,openbooktenders, novationofdesign,ambushmarketing..Fraser(2012)statesNo.Nelsonsresponseindicatesthatthe healthandsafety,andprocurementpolicieswereheavilyscrutinised.Ifadditionalsystemsandmanagement wererequired,thiswouldaddadditionalcoststotheproject. Wereanybuildingelementsreducedinspecificationinordertomeetthebudget? Nelson(2012)respondsNobutclarifiesConsiderablevalueengineeringwascarriedoutthroughoutthe project.Alternativespecificationswereusedsuchaswetnicheunderwaterlightingratherthandryniche whichsaved80%ofthecapitalcostforthepoollighting.ThetemporarystandswereVEdtoutilisenatural stackventilationratherthanthe38axialfansthatwereoriginallyspecified.Thisresponseisclearlyan indicatorthatthecontractallowedchangestobeimplementedmorefluidly.ThiswillhavemadetheVE
Results processeasierandenablednegativeCENstoberaisedinthecasesstated.Fraser(2012)simplyresponds no,whichisprobablyanindicationthathebelievesthequalityoftheprojectwasnotcompromisedin ordertomeetthebudget. Nicholson(2012)providesaveryinterestingopinionintermsofvalueengineeringbystatingyoucantgo andtakesomethinglikeaZahabuildingoraFostersbuildingandthentryandvalueengineerittowithinan inchofitslifeYoumightaswellgotoJoeBoggsarchitectaroundthecorner.SoIthinkthathastobetaken intoconsiderationaswellCLMwouldlooktovalueengineeringandefficiencies.Butsomeofthose efficienciescouldhavedeterredfromthefinishedproduct.SoIwasveryconscious,thatwedidntwantto dothat.Thisimpliesthattheclientwantedtodeliveraqualityfinalproductandwasnotpreparedto compromisequalityinordertomeetthebudgetset. Arethereanyfurtherrecommendationsyouwouldpromote,inordertobetterdeliveraprojectofthis natureinthefuture? Nelson(2012)didhavefurtherrecommendationstomakebystatingYes,Fastrackingdesignwith constructiononaverycomplexprojectcanleadtodisputesoverthebasescopeandpricing.Trytogetsign offandcloseoutateachstage.Thecaseoftheaquaticcentreisthatthedesignhadtobedevelopedasthe constructionwascompletedinordertocompletetheprojectbyJuly2011.Nelsonclearlybelievesthatin ordertodelivertoabudgetbetter,andavoiddisputes,thedesignshouldbebetterdevelopedatthepoint ofagreeingthetargetcost.StuartFraserdidnotmakeanyfurtherrecommendationsbyansweringno. Whatprojectspecificchallengesmadethebiggestimpactonbudget? Nelson(2012)statestheprojectbudgetwasdifficulttomaintainbecauseTheuniqueandiconicnatureof theprojectandspecialcircumstancesitwasconstructedunder(contaminatedsite,poorground,highwater table,adjacentrailwayandriver,oversailedroad,mainstructureovertunnels,Olympicpricetagperceived inthemarket).Thissummarisespreviouspointsmadebutdoesexplaintheerraticcostmovementsthat havebeenexperiencedinthebudgetdata.Fraser(2012)isbluntindescribingThecomplexitiesoftheroof structureandtheincorporationofsome25%additionalworks!!Thedisputewiththeroofingcontractor clearlyhadanimpactoncostandagainthedesignandbuildnatureoftheprojectmeantthatthetargetcost
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didnotincludeanycostsfordesigndevelopment.Italsoappearsthatpureextraswereinstructedbythe clientwhichwerenotenvisagedinanyformattargetcoststage.
6.3
PrimarySourcedInterviewResults
Aftersendingnumerousrequestsforquestionnaireresponses,thewriterwasabletoconductinterviews with3persons.StuartFraserofBalfourBeatty,ContractorProjectManagerfortheaquaticcentre,John NicholsonProjectSponsoroftheODAandPeterUnitt,commercialmanagerofMansellConstruction.A summaryofquestionsandnotableanswersislistedbelow. HowdoestheTargetCostsystemwork&whywasitusedfortheAquaticsCentre? Unitt(2012)confirmsthatatcontractstageatargetcostisagreedandthatAttheoutsetofthecontract theninthecontractdata,youagreeandidentifythesharerangeintermsofpainandgainyousignupwith thecontractorattheoutsettoanagreedrangeofpercentageofthebenefitorthepain.Nowwhatwe commonlyseeisaclientthatskewsthatcalculation...Whichisntreallyinthespiritofmutualtrustandco operationHeadvisesthatWewouldalwaystryandsuggestyouhaveabalancedviewaroundthatpain andgaintoenablethecontractortoreallyfeelincentivisedtoreducecost.Andofcoursebyreducingtime ontheprojectindeliveringitthatwouldalsoreducecostaswell.Weveseenitworkveryverywellonsome ofourliveprojects.Intermsoftherisktothecontractor,itisseenasbeingless.Themarketforlettingthe AquaticCentrewasseenasoverheatedanditwasmostlikelyselectedasitisseenasthegobetweencost reimbursableandalumpsumcontract.Unitt(2012)concurs,suggestingyoucanargueonoptionCthe contractortakeslessriskbecauseofthepaingainmechanism.WithoptionAthecontractortakeson possiblymorerisk.Myviewonitis,thatcertainlywhenyougodownfromoptionAtooptionE,therisk profileforthecontractordecreases.BecauseAIwouldsayisthehighestrisk(innormalcontracting conditionsanyway)andasyougetdowntooptionCyouwouldarguethecontractortakeslessriskbecause itscompletelycostreimbursable Whatisinterestingisthatthemaincontractconditionswerenotpassedontothesupplychain.Fraser(2012) confirmsthatthesubcontractswerenotbacktoback,theywerebespokedependinguponthetypeof subcontractitwas,whetherithadadesignportionsupplement,youknowwetookaviewonriskastowho
Results wasbesttailoredtomanagethatrisk,andessentiallywetailoredtheterms,thatwasobviouslybased aroundtheNEC,therewasno2subcontractsthesame,regardlessofthefactthatthepackageswere different,thetermswerebespokereallytosuitthenatureofthejob.Fraser(2012)alsostatesIvenever agreedwithbacktoback,thecircumstancesuponwhichweareincontractwithourclientdifferanddont thenforceyoutogobacktobackwithoursuppliersifthatsnotappropriateWewereselectiveinhowwe transferredrisktooursuppliersbaseduponagain,[togain]valueformoneyreally.Therisktransferis clearlythereasontonotgobacktoback.Ifusingalumpsumsubcontractthemaincontractorcanobtain costcertaintyandalsotailortheconditionstosuitdesignresponsibilities.Thisapproachismoreriskheavy tothesupplychain,howeverthisdoesaddtothecostcertaintyofthetargetcost. Thediagramtotherightwasproducedby Unitt(2012)itshowshowatypicalTarget Costoperatesinagraphicalform.Unitt usesittoshowhowthepain&gain mechanismoperates.Inparticularclients shouldbewarnedthatifthecontractor overspendsthetarget,thathewillbeara percentage(inthediagram50%)ofthe pain.Howeverbysplittingthepain,it doesstillincentivisethecontractortomeetthetargetcost. WhataretheNECspecificContractMechanisms,andwhatistheirpurposewithregardtocostforecasting theAquaticsCentreproject? TotwomaincontractmechanismsthatdifferfromotherformsofstandardbuildingcontractareEarly WarningsandCompensationEvents.Unitt(2012)OKwelldealwithearlywarningsfirst...Theideaisthat anymemberoftheteam,theclient,contractororstakeholderteamcanessentiallyputtheirhandupand whistleblowandsaylookjusttoletyouknowguystheresaproblemcomingandIthinkthecontract mechanismsaysthatanythingthataffectsthetime,theprice,orthesortofuseinlifeofthebuilding
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shouldberaisedinanearlywarning.[Afteryouveraisedanearlywarning]youthenagreethenecessary actiontotaketomitigatetheeffectoftheissuethathasbeenraisedintheearlywarning,andtheideais thatyoucantakeearlymanagementaction.Itsunlikethetraditionalcontractsinthattheytendtodealwith thingsaftertheyvehappened.Thismechanismisaimedatraisingissuessothattheycanberesolved withinthedurationofthecontract.Itisdesignedtostopcostlyandlengthylegaldisputeresolution processes.Unitt(2012)continuesYoureavoidingdisputeresolution[say]aclientsconsideringchanging something,youseeadraftdrawingcomeout,thecontractorcansayjusttoletyouknowifyouimplement thischangeitwilldelaytheprojectby5weeksanditwilladd100ktothetargetcost.Theemployercan makeadecision.Traditionallywhatwouldhappenisadrawingwouldcomeout,thecontractorwouldcrack on,dothework,thenfireinthenoticeofdelay.Whichjustcreatesconfrontation,whereasthiswaypeople aremakingdecisionsbeforethingshappen.Unitt(2012)describesacompensationeventoccurswhenthe contractorfeelsheneedscompensatinghencetheterm,hepricesthatelementorissueandalso establishestheeffectonprogrammeThebeautywiththisisthattherearetimescalesinthecontractby whichyouhavetoadhereto,tomakedecisionsinrelationtothecompensationevent.Sotheclientknows fromabudgetarypointofview,wherehisendtargetisgoing.Theprojectmanageralwayshastheability tovaluethathimself;itsnotjustanopenchequebookforthecontractortheemployercanmakethe valuation.Soifthecontractordoesnotmeetthetimescalesheloseshisentitlement.Thisthereforemeans thatcostsofchangesareagreedasthecontractprogressesandlitigationisavoided. IntermsoftheAquaticCentreFraser(2012)confirmsWeagreedthevalueofacompensationevent,in advanceoftheinstructionbeingissuedtoproceedinalmostallcases.Butagaintherewasnorisk contingencyaddedtothatprice,soinessencewhatweendedupdoingwas[becausecostsalwaystendto goupnotdown]iseverysinglecompensationeventthatwepricedweprobablyunderpitcheditintermsof itseventualcosts.Allthatdoesiseffecttherelationshipbetweenthereferencepriceandthetargetcost.If thepricegoesupandthecostsdontfollowitthenyougetadilutionofmarginessentially.Youdontlose anymoney,butyouveobviouslygotahighercostandyourmarginisassessedasasumratherthanasa percentage.Thisstatementmeantthatbecauseofthecontractualpainandgainmechanism,thecontractor
Results washappytocompetetheextrasatcostonly.FurtherdescribingFraser(2012)statesYouweremoving boththereferencepriceandthetargetcost,sotheendcostforecastandthereferencepriceandmoving bothbythesameamount.Ifavariationwas10m,yourepushingthereferenceandtheforecastupby 10m,ifitactuallycost11,thereferencepricestayedat10mbutthecostwentupsoyougotadilutionof margin. FromaclientperspectiveNicholson(2012)stateswegotthecontractorearlywarningsfromthecoalface. WehadCLM[withan]earlywarningsystemaswelltotheODA.Sowehada2tiersystemwhichwasuseful becauseobviouslyBelfoursfocuswasataparticularlevel,CLMswasmaybeastepupfromthatwhichwas maybemorestrategic.Sothatdoubletiersystemworkedverywell.ByadoptingatwotiersystemTheODA wasabletoforeseeissuesbeforetheybecameacontractorissue.Bearinginmindadditionalresources wouldbeaddedtothetargetifissueswererealised,thisisasensiblesystem.Theclientcanniptheriskin thebudinordertoreduceanycostimpactitmayhavehad.Nicholson(2012)furtherconfirmsWehad regularearlywarningmeetings.Fortnightly...Yestherewasadatabaseyouneedthedisciplineofsitting downandkickingthesethingsaround.Thatwassomethingthatwerigorouslyadheredto,duetothe importanceofit.TheeffectthattheNECcontracthasisthattheforecastfinalcostsareconstantly monitored.Thiswouldgosomewaytoexplaintheerraticcostmovementsthatareshowninthedata analysis.Clearlywithotherformsofcontract(thatinduceretrospectiveclaims)projectscouldreportbeing onbudgetallthewaythoughthecontract.Theycouldthenexperiencealargecosthikeafterpractical completion.Thismayalsobelikelytoresultinlitigation,againanexpensiveprocess.Thechange managementprocesswastransparentandrigorousasNicholsonconfirmsWehadamonthlychange boardsoanypotentialchanges,tryingtoputadesignfreezeonthescope,thosesessionswerealmostlikea unitednationsmeetingtherecouldvebeen5060peopleinaroom.Andyouhadtoattendalltypesofpre meetingsbeforeachangewouldgobeforethechangeboard,anditwasquitebrutal.Soyoudidntwantto beembarrassedinfrontofallofyourpiersorsuperiorsinthatkindofforum.Soyouhadtomakesurethatif youwereproposingachangeyouknewitwaswatertightandthatithadbeensignpostedandthatithad
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beenlobbied.Thisclearlyinducedaspiritthanonlyintroducedchangewhereitwasabsolutelynecessary. Againinanattempttomaintainthebudgets. TheODAdecidedtoholdalmostalloftheriskfortheVenuesbuildingprogramme,whydidtheychooseto dothis? Fraser(2012)confirmsthattheclientdecidedtoholdthemajorityofriskbystatingThenotionthatthey [TheODA]adoptedfromtheonsetwasthattheywouldnotaskthecontractorstopricerisk.Onanything. Whetheritwasfluctuations,increasedcosts,delay,dayworks,nonproductiveovertime,callitwhatyouwill, designdevelopmentnoneofthat.Sothatthebasecontractsum,whichIthinkwas189m,fortheboth phases,wasdevoidofanycontingencyatall.Theytooktheviewthatifthecontractorwastofirmupaprice theywouldaddabout1520%becausethejobwassocomplicated.Thewritersummarisesthereasonfor this,wastheneedtobeseentotrytomatchthebudgets.Clearlybyholdingalloftherisks,theODAcould letthetargetcostsatlowerlevelsandthereforebeclosertothebudgetssetin2007.Thisviewisechoedby Nicholson(2012)Ialsothinkthatthebudgetmightvehadsomethingtodowithit.Andtheperceptionof budget,againpoliticallyaverysensitivesubject.Andifyouleavetherisktothecontractortheyareonly goingtopriceit,andthepricewouldbethenshownintheirbudgets.Fraser(2012)statesthattheODA holdingriskmeantthatthecostsactuallywentupbyabout13%.Whichwouldvereflectedinthefinal account,wecouldvehad20%[i.e.7%addedtothetargetcost]anddoneadealandtheywouldvespenta loadmoremoneyTheODAwereextremelypragmaticaboutallthatanditwasexactlytherightdecisionto take. Unitt(2012)describedhisviewonclientriskbystatingmyviewonrisk,andparticularlywiththeNEC,isthe riskshouldbeownedbythemostappropriatepartyinthecontract.Soitseemsfoolhardyforanemployer topassriskontoacontractor,thathesnotbestplacedtotake.Soifyoupassarisktothecontractoron OptionCandhehastomakedueallowanceforthat,itmaybethetargetinordertomanagethatriskis completelyinappropriate.SoontheOlympicprojects,iftheODAwantedtocompletelyholdthatriskthenat leastiftheriskmanifestsitself,heknowshesonlypayingactualcostforthatrisk.Andhesnotpayingasum inthetargetthatwouldbedisproportionatetothelikelihoodofthatriskoccurring.Unitt(2012)Thebig
Results issuewithcompensationeventsisactuallyallocatingriskmoney,iftheresstillitemsinthatcompensation eventthatthecontractorcannotprice,hecanmakeadueallowanceforrisk.Frommyexperiencethisis alwayswhereyoutendtohaveslightdisagreementswiththeemployerwithregardstowhatthevalueof thatriskshouldbethereforebyholdingthelionshareofrisktheclientisguaranteedtoreduceconflictand payactualcostonly. IndeliveringtheAquaticsCentre,diditbecomemoreacaseofValueManagementthanBudget Management? ThewriterdirectlyaskedthisquestiontoJohnNicholson(2012)whoconfirmedYeah,becauseyourealso dealingwithmultiplestakeholders.Youhaveawholehostofpeoplewhohaveaninterestinthatbuilding andofcourseyouredesigningforthegameswhichareaoneoffevent.Youneedtodesignsuchaunique buildingforsuchauniquepurpose,butyourealsotryingtodesignitforthelongtermlegacyandforittobe usedforanelitetrainingbaseforBritishswimmersandthelocalpublicaswell.Sotherewasalotof conflictingdrawsontheintent.Thenotionthattheprojectwasmanagedbyvaluemanagementasopposed tobudgethasbeenathemethroughoutthisresearch.Thewriterbelievesthistobetheonlypragmatic approachalsoduetotheuniquenatureofthebuilding. WhatisalsointerestingtoaddtothisdebateishowthefinalaccountwassettledwithBalfourBeatty. ClearlytheODAweredesperatetoprovethattheyweredeliveringtheirpregamesobjectiveofbeingon timeandtotheagreedbudget.Fraser(2012)stateswithregardtoa4weekextensionoftimeentitlement Wedidntgetanextensionoftime,butwehadagentlemansagreementthatwewouldvebeenentitledto one.Becausewewerethelastvenuetofinish,andourcompletiondatewas30thJune,EoTwouldveputus beyond27thJuly2011,andtheywantedalltheVenuesfinishedayearbeforethestartofthegames.Ifthat hadbeenacommercialbuildingwithatenant,weprobablywouldvebeenwaitingforpracticalcompletion now,butbecausetherewasadrivetogettheannouncementoutthatalltheVenuesweredoneayear beforethestartofthegames,despitethefactwehadafewlittlebitsandpiecestofinishoff,wegot completionon19thJuly2011.Thismaygosomewaytodevelopinganunderstandingoftheinformation releasedtothegeneralpublic.ItmayalsoexplainthereasonsfortherestatedcommercialfiguresinJuly
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2011.ClearlytheODAwantedtomakeitappearthatthegameshadbeendeliveredonbudget.Inessenceto dothistheyreallocatedDMCS(2011)333mofbudgetcostselsewhere.Thesecostswerenotshowninthe quarterlyreportsandthebudgetsremainedatthesamelevels.Thereforecostwasmovedbutnotthevalue allocatedtothecosts. WhatwerethebiggestfactorsinanybudgetincreasesduringtheAquaticCentreproject? ThebiggestfactorsinfluencingtheAquaticsCentrecostarethedisputewiththeroofingcontractor,scope creepandthecontaminationoftheexistingland.Fraser(2012)confirmsthatBalfourBeattyuseda mechanismcalledIDAP,whichistheIndependentDisputeAdvisoryPanel,theODAsetthatupuponthe outset,toavoiddisputesbetweenthemselvesandtheircontractors,theyhadIDAPasasortofinformal mechanismofarbitrationdiscussionthatwouldpreventadisputeescalating.Intermsofthedisputewith theroofingcontractor(Rowecord)FraserstatedWhenwegottothepointwithRowecord,wherethey wereverylateanditwashavinganeffectonthejobintermsofcostandprogramme,wedecidedwiththe ODAthatperhapsitwouldbesensibletoinvolveIDAP,whichwedidsowegotIDAPinvolvedquitequickly andwithin6weekstheyhadmadeadecisioninourfavourinrelationtomostissuesRowecorddidnt acceptthat,andcontinuedtopursueentitlementbeyondwhattheywerelegallydue,soitdidgoonfor somemonths,buteventuallywereachedacommercialsettlementIthinkRowecordrealisediftheywere togotoformaldispute,andtherehadalreadybeenanindependentdecisiongiven,thattheywouldlosethe argument,fortunatelyrelationshipsremainedfairlycordialandproductivewithRowecordsowenever allowedthecommercialissues,behindcostprogrammeanddelaytosourrelationshipsandtheydidareally goodjobbuttheyjusttook12weekslongerthantheyshouldvedone!.Thecomplexitiesaresummarised wellbyNicholson(2012)whostatesOurchairmanSirJohnArmittcalledtheroofconstructionthemost significantengineeringchallengeontheOlympicpark. Fraser(2012)continuestodescribetheimpactoftheroofingcontractordelayAtthatpointwewere towardthebackendof2009andwere18monthsawayfromcompletion,soitdidcauseafewconcerns.The situationwiththeroofstructureintheAquaticsCentreisthatbeforewecouldbuildthecorehallandthe pooltanks,wehadtodotheroofstructure,sountiltheroofstructurewasfinishedandinitsfinalresting
Results place,wejustcouldntstartanyofthepooltanks,wehadtoworkformthemiddleoutsountilthepool tankswerefinishedwecouldntbuildthepermanentstructure,anduntilthenwecouldntbuildthe temporarystandsThiseventthereforecausedasignificantdelayandadditionalcostsintimeandsupply chainstandingtime.FraseralsoconfirmsThewholethingjusthadaknockoneffectreally.Andtherefore wehadtointroduce247workingfromthebeginningof2009,andthatprevailedforabout18monthsand wecompletedtheprojectwithin3weeksoftheoriginalcompletiondate.Soweovercamethe12week delay.ThisgoessomewaytoconfirmwhyinFebruary2010acostmovementof34mwasreported. Intermsofscopecreeptheclientviewisveryinteresting.Nicholson(2012)discusesyouredealingwith multiplestakeholders.Youhaveawholehostofpeoplewhohaveaninterestinthatbuildingandofcourse youredesigningforthegameswhichareaoneoffevent.Itwillneverneed17.5kseatsagain,sothatswhy wevebuiltthetemporarystandsyouneedtodesignsuchauniquebuildingforsuchauniquepurpose,but yourealsotryingtodesignitforthelongtermlegacyandforittobeusedforanelitetrainingbasefor Britishswimmersandthelocalpublicaswell.Sotherewasalotofconflictingdrawsontheintent,because itsnotaonesizefitsall,youcantmakeitthatwaydecisionsweremadewhereweweregoingtomake significantchangestothebudgettotrytoandreducethepotentialoutturncost,andtheinterestingthingis thestakeholderinfluencewasreallypowerfulprettymuchifwesaywemade10significantchangesatthat point,Icouldtellyounowthat9ofthemcamebackinduringstageDorEdesign.Duetostakeholder influence.Thisclearlyindicatesadditionalpressuresnotpreviouslyconsideredintermsoftryingto maintainthebudget.Italsoprovesthetargetcostwasprobablynotaccurateinassessingalloftheend usersneedsasnineofthetenVEchangeswerereintroducedafterthemaincontractwaslet.Nicholson (2012)alsostatesthescopeobviouslychangesduringthelifeoftheprojectaswell,sowherewehada standaloneAquaticsCentrewethenhadtointegrateasignificantpieceofcivilengineeringwhichwasthe bridge.ThisistheentrancetotheOlympicparkandalsoformstherooftothetrainingpool.Thatmadea hugedifference.Fraser(2012)confirmsthatBalfourBeattyactedwithbestendeavourstocompleteon programmebyconfirmingweovercamethe12weekdelayandbythewaywealsodid50mofadditional
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work!Althoughthisvalueiscloserto42mitstillillustratesthatBalfourBeattyhadapositiveimpacton theoutturnbudget. IntermsoftheAquaticsCentresite,Nicholson(2012)describesitasbeingOneofthemostcontaminated sitesyoucouldvechoseninLondon,andtheactualsiteoftheaquaticcentrewasEuropesbiggestfridge mountain.[this]tookuphalfoftheaquaticcentresiteandtheotherhalfwasaconcretebatchingplant.This againillustratesadditionalcoststhatwereverydifficulttoaccuratelyforecastwithinthemaincontract targetcost.
Discussion
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7 Discussion
7.1 Introduction
Thepurposeofthedissertation wastoascertainwhetherthe OlympicAquaticsCentrewas deliveredonbudgetandto considerthisfinancialresultin linewiththeotherOlympic Venues.Theauthorintroduced thecontractelementintothe debateinordertotriangulate thediscussionaroundtheUKconstructionindustrysstrongpromotionoftheNEC3contractsuite.Itwas hopedthatbyanalysingonthisbasis,areasonedconclusioncouldbemadeuponwhytherewereoverof underspendsandhowtheformofcontractinfluencedthefinalcostoftheVenues. Asthisresearchhasdevelopedtheauthorbecameacutelyawarethatdeliveringbespokemultipurpose buildingswasachallengefargreaterthanthehypothesissummarised.Uponrealisingthecomplexitiesofthe buildingprogrammeitbecameapparentthatonlyoverinflatedbudgetswouldhavebeenabletobe maintained.Withafixedpracticalcompletiondate,thecostconsultantsbudgetingforthebuiltasset programmedidnothavetheluxuryofacompleteddesignorhistoricaldatainordertoaccuratelyforecast theoutturncosts.
7.2
WastheAquaticCentreprojectdeliveredonbudget?
Thesimpleanswerisno;therewasanoverspend(incomparisontotheNovember2007budgets)of 56.05m.However,ifthisquestionwasrephrasedtoWerethefinancialcostsoftheAquaticCentrepoorly managed?thentheanswerwouldbearesoundingno.Thestatisticalanalysisshowsthatateachquarter fromFebruary2010theforecastswerebeingconsistentlyalteredastheprojectwasbeingbothdesigned
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andconstructed.Whilstitwouldbeeasytoconcludethatthebudgetswereconsistentlymoving,thiswould notreflectthemeticulousfinancialmanagementprocessesbeingemployed. Thecostmovementanalysisshowedthatthestandarddeviationandinterquartilerangeofcostmovements werefairlycontained.Itisclearthatthecostmovementsmeanaverageof5.61misskewedupwardsby February2010andNovember2010dataanomalies.AfterNovember2010itcanbearguedthatthecost movementswererelativelyverylow.Thebudgetincreaseanalysisagreeswiththesestatementsasafter November2010thepercentageincreasestayedwithin2%oftheoriginalfigures.Overallthereforethe budgetswereexceeded,butitappearsthatthebudgetswereexceededbecauseoftwolargecostevents whichwerereportedinFebruary2010andNovember2010.
7.3
WeretheOverallOlympicVenuesdeliveredonbudget?
AswiththeAquaticCentre,theoverallVenuesbudgetswereexceeded;inthisinstanceby73.09m.This differsfromtheannouncementmadebyRobertson(2012)thatalloftheVenueswerecompletedontime andjustunderbudget.ThedataanalysisrevealedthatafteralargefinalcostmovementinFebruary2010, theoverallbudgetcontinuedtofall.Thismaymeanthatworkswereomittedwhenitwasrealisedthata largeoverspendmayoccur.Thedataobtainedshowedameancostmovementsaverageof0.95%.The interquartilerangeandstandarddeviationpercentagevaluesbothindicatedafairlyconsistentdataset thereforethecostmovementswereveryconsistentbartheFebruary2010anomaly.Thebudgetanalysis confirmsthisbyshowingagraduallydecreasingforecastafterMay2010.The15%costincreasewas reducedby9%byMarch2012.Toconcludethisquestioninanydetailwillinvolvefarmoreresearchthan thisdissertationintended.HoweverthesummaryisthattheVenuesbudgetswereexceeded,butthefinal outturncostwasreducedsignificantlyfromtheFebruary2010forecasts.
7.4 HowdidthecommercialresultofAquaticsCentrecompareagainsttheoverall OlympicVenuesbudget?

Intermsofthepercentageoverspends,theAquaticCentreproducedanoverspendof26.19%comparedto theoverallVenuesoverspendof6.93%.TheAquaticsCentreshowedapolaroppositecostforecastmodel whencomparedwiththeoverallbudgets.FromapracticallyevenFebruary2010overspendof15%,the
Discussion AquaticsCentrecostscontinuedtogrowwhereastheoverallbudgetreduced.Thisisconfirmedbythefact thatbothdatasetshadidenticalinterquartilerangevalues,whichindicatesthatduringthemiddle50%of datavalues,theAquaticsCentrecostsroseatthesameratethattheoverallcostsfell.Thestatisticalanalysis revealsthatinmostofthemajorityofcasestheAquaticsCentredatadifferedfromtheoverallbudget. ParticularlytheresultoftheZpopulationtestwasunanimousinprovingthedataaspolaropposites.The budgetZtestgavea0%likelihoodofaquaticcentrepercentageincreasesamplebeingreturnedonaverage thesameastheoverallbudgetsample.Thegroupedcomparisondatashowedthattheoverallbudgethada farmoreconcentratedstatisticalrangetowards0%costmovements.Italsoprovedthatintermsofbudget increases,thefrequencyof20%andhighervalueswerefarhigherintheAquaticsCentredataset. TheonlyreasonforhighAquaticsCentreoverspends(otherthanforsitespecificissues)thattheauthorcan conclude,ishowtheODAreportedthecontingencyfiguresfortheprojectspecificandoverallbudgets.Ithas beenfoundthattheODAincludednoriskmoniesagainstthebudgetssetin2007.Itcouldthereforebethe casethattheoverallbudgetsincludealargecontingencypotthatgraduallyreducedthroughoutthecost reportingprocess.Ifthisisthecasethenthegradualreductioninoverallbudget,butgradualincreasein projectbudgetsmaybeexplained.Althoughtheconclusionstodrawfromthedataobtainedarethatthe aquaticcentrebudgetsforecastsdidnotfollowthetrendsoftheoverallbudget.TheAquaticsCentre exceededthebudgetstoamoreextremeextentthantheoveralloverspends.
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7.5
Howrealisticwerethebiddingbudgetssetin2005?
Thebudgetssetin2005wereveryunrealistic.AsprovenbyNicholson(2012)whoconfirmedthattherewere moreexclusionsthaninclusionswithinthecirca2bnoverallgamesbudget.Clearlythepurposeofthe 2005budgetsweretowinthegamesandthereforetheforecastcostswereprovidedinordertogain governmentsupportforthebid.Thebudgetswererevisedin2007,inordertofairlymeasurebudget success,thedecisionwasmadetobaselineagainstthe2007estimates.
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Discussion
7.6 ThekeyreasonsforanybudgetvariancesandcostmovementsintheAquatics CentreProject

ItisclearthattheAquaticsCentreisabuilding,thetypeofwhichhasnotbeenbuiltbeforeorislikelytobe builtagain;asNicholsons(2012)comments.Itisauniquebuildandhadtobedesignedformorethanone purposeandwasdesignedandbuiltinparallelinordertomeetanimmoveablepracticalcompletiondate. EmployingtheflagshiparchitectZahawasaclearstatementofintentbytheODAtodeliverahighquality scheme.Itmeantthatthevalueengineeringscopewaslimitedasthefinalqualityoftheschemewasof paramountimportance.Totakeasimpleexample,theroofingstructurewassupportedononlythree structuralmembers. Theclientthemselveswereactingonbehalfofnumerousendusersandstakeholders.Effortsweremadeto valueengineertenpackageelements,whichNicholson(2012)confirmedthatninewouldbereintroduced totheschemeatalaterdate.Clearlytheoriginalbudgetfigurescouldnotcopewithsuchalargescope addition. Themainprojectspecificcostissuesconcernedtheexistingsiteandtheroofstructure.Nicholson(2012) describedthesiteoftheAquaticsCentreasEuropesbiggestfridgemountain.Nelson(2012)alsolists contaminatedsite,highwatertable,adjacentrailwayandriver,oversailingroadsandthefactthatthe projectsmainstructurewastobebuiltovertunnelsasotherprojectcomplications.Itisclearthatnoamount offorecastingwouldbeaccurateintryingtopredictoutturncosts. TheroofstructurewasdescribedbyJohnArmittasoneofthegreatestchallengesintheOlympicPark.The maindisputeontheprojectwaswithRowecordwhoinstalledtheroof.Thelatedeliveryoftheroofcauseda 12weekdelay.Fraser(2012)confirmedthat247workingwasimplementedinordertomitigatethedelay. Fraser(2012)alsoconfirmedhisbeliefthatRowecordhadtoworktoatightprogrammeandthatthiswasa criticalpathitemthatdelayedalmostalloftheremainingstructuralworks. Fromconceptionitwasabattletogetacontractorbuildtheproject.Unlikethecurrentmarketplacethe overheatedmarketin2007meantcontractorswereinastrongpositiontoturnawaythehighriskOlympic
Discussion projects.Althoughinactuality,thisisunlikelytohaveaffectedthefinalcosts.Supplychainbuyinggainshave increasedsignificantlyduringtherecessionsothedecisiontouseanactualcostcontractvariantwillhave encompassedthisbenefit.Althoughperhapsifletinthecurrentmarket,alowerpercentageoverheadand profitcouldbeagreed. Therearemanyreasonswhythebudgetswereexceeded,buttheODAsdecisiontomanagethelionsshare ofriskisperhapsthemostsignificant.Thisisperhapsareflectionofthemarketplacein2007(aspreviously statedoverheated)andtheneedtobringacontractoronboard.Thiseffectivelymeantthatalladditional coststotheschemewouldbebornebytheclient.AlthoughinusingaTargetCostcontractform,theODA onlypaidactualcostwhentheywererealised. Thecontractitself(theauthorbelieves)isthereasonfortheconsistentcostmovementsinthequarterly reports.Thisisnotacriticismhowever.Thenatureofthecontractistobringaboutupfrontagreementof variationcostsasUnitt(2012).Fraser(2012)confirmedthatthecostswereagreedpriortoinstruction,soin thisknowledgetheforecastfinalcostswereinevitablymovingupanddown.Itappearsthatthebalanceof compensationeventswaslargelypositiveincost.TheNEC3costmodelisfarmoreclientfriendlythanthe traditionalJCTmodelthatUnitt(2012)described.Ifthisformofcontracthadbeenemployed,itmayhave shownfarlesscostmovementsuntilthelaterquarterswhenthecostswouldhavecomedrippingthrough. Itisalsolikelythatthiswouldhavecreatedlegalconflict,whichdidntoccur.Nelson(2012)confirmedthat thefinalaccountwasagreed6monthsafterpracticalcompletion.Fraser(2012)believesthatthecostof additionalresourcesrequiredtooperateanNECcontractwasbalancedbythelackoflegalconflict.Thisview wassharedbyNicholson(2012)buthewasoftheviewthattheauditprocedureswillhaverequiredthe sameamountofprojectresources,regardlessofthecontractform.
51
7.7 ThereasonsforselectingNEC3contractasthepreferredcontractsuiteforthe OlympicVenuesconstruction

FirstlyUnitt(2012)confirmsthatthecontractsuitehassixmainoptions,creatingaonestopshopfor clients.Theoptionsgivetheclientfreedomintermsofcontractstyle,whichenablesthemtoallocatea certainlevelofrisktothecontractor.Unitt(2012)alsobelievesthatasyoumovefromAtoFtheoptions Project(F317PRO)CandidateReference0703928/1
52
Discussion
reducetheriskprofiletothecontractor.TheNEC3alsonativelycontemplatesclientandcontractordesigned contracts.Thereforetheclientcandecidewhethertoownthedesignandtailorittotheirneedsor incentivisetimegainsbydesigntothecontractor.Theycanalsodecidetowhatextenttheywishto incentivisethecontractor.Thecontractalsoincludesalargelistofstandardclauseamendmentswhichmake iteasiertotailoreachoptiononaprojectbyprojectbasis.TheseclauseswereutilisedintheAquaticsCentre asconfirmedbyFraser(2012). TheuseofearlywarningsandcompensationeventsweredescribedbyFraser(2012)ascreatingtheright behavioursandthisengagescollaborativeworkinginordertoovercomeprojectissues.Thisultimately reducesthelikelihoodoflegalconflictandalsoensuresthattheprojecthasabetterchanceofbeing deliveredinaccordancewiththecontractdataagreed.Theliteraturesummarisedthekeyreasonsforthe promotionoftheNEC,withparticularsupportfromtheacclaimedLathamreportof1994.
7.8 WastheuseofNEC3OptionCContractawisedecisionindeliveringtheAquatic Centre?

ItistheauthorsbeliefthatthiscontractformwasthecorrectoptionwithwhichtodelivertheAquatic Centrescheme.Thecontractwasletinanoverheatedmarketsothelikelihoodofobtainingalumpsum(as optionA)priceonadesignandbuildbasiswasunlikelyifnotimpossible.Ifthishadbeenachievedtheclient wouldhavepaidapremiuminordertotransfermorerisktothecontractor. Nicholson(2012)believesthatthekeyadvantageintheAquaticCentrewastheflexibilitytointroduce variationsbystatingnothingwasashowstopper.Thisisakeythemeinthefindings.Theclientwasaware thatthescopeofworkswaslikelytoinflateandthecontractformgaveabalanceinincentivisingthe contractortosavemoney(soasnottobareanypain)andtheflexibilitytoimplementwidescalechanges. Nicholson(2012)likenedthechangemanagementmeetingstounitednationsmeetingsandtherefore payingactualcostplusfeeforvariationssatisfiedthenumerousstakeholders. Thegeneralconsensusamongsttheclient,professionaladvisorsandcontractorswasthatthetargetcost optionwasthecorrectchoiceofcontract.Nelson(2012)wastheonlymemberinterviewedthat
Conclusion recommendedanychangestothewaythecontractwasprocured.Hisrecommendationswereinrelationto signingoffdesignatvariousstagesduringthetargetcostagreementprocess. Intermsoftheresultsfoundinthedataanalysis,thecostmodelsproducedwerenotasdisappointingasthe resultswouldappearatfirstglance.Thecontractactuallypromotestheerraticcostmovementsbyitsup frontcostethos,butthisdoesgivetheclientfullwarningoftheneedtosecureadditionalfunding.This meantthatthefinalaccountwasagreedwithin6monthsofpracticalcompletionasstatedbyNelson(2012). ThelackofprolongedlegaldisputewhencomparedtootherbespokeVenues(suchasWembleystadium)is clearlyasaresultofawellconsideredprocurementpolicy.
53
8 Conclusion
Inconclusiontothehypothesis,theODAhavenotdeliveredtothebudgetinbuildingtheOlympicVenues. Despitenumerousstatementstothecontrary.TheimplementationoftheNEC3contractformhashowever beenasuccess.AlloftheOlympicVenuesweredeliveredontime,andtherewasanotablelackoflegal disputeindeliveringalloftheprojects.Althoughitcouldbearguedthatpublicallocatedfundshavebeen exceeded,itisclearthatthefinancialmanagementproceduresemployedwiththeAquaticCentrewere industryleading.Nicholsons(2012)confirmationthatdeliveringtheVenuesbecameacaseofmanagement asopposedtobudgetmanagementisperhapsthemostvividsummaryofthisdissertationsfindings.
9 Limitations
ThelimitationsofthisstudyconcernDMCSsselectivemanipulationofdata.ItisclearthattheODA&DCMS weredesperatetopubliclybeseentobemeetingbudgets.ThisisparticularlyprevalentintheJuly2011 restatedforecastcosts,inordertomakeitappearthatthebudgetshadnotbeenexceeded.Fraser(2012) confirmingthatthecompletiondatewasactuallylaterthanpubliclypublishedisanotherexampleofthese motives.Therestatedcostsmeantthattheauthorhadtoadjustthelaterquarterlyreportsonaprorata basis.ThiscouldhavesubjectedthedatatobiasasthecostsoftheAquaticCentreworkselementswerenot abletobespecificallyidentified.
54
FurtherReading
Thedatawasreviewedintermsofheadlinedata.Thismeantthattherewasnounderstandingofthe componentsthatbuiltupthefiguresreviewed.Thewriterwasunabletodeterminewhethercontingency existedwithintheoverallVenuesbudgets.Thismayhaveexplainedcostmovementsheadingupwardsona projectbyprojectbasisandthedownwardtrendsshownintheoverallvenuebudgetdata. Intermsofsamplesize,theprimaryresearchcompletedwasverylimited.Thiswasaresultofpinpointing suchaspecificthesis,butdoesmeanthatcertainaspectsoftheprojectdeliverywereunabletobe discussed.Forinstancetheauthorwasunabletoobtainprimaryfeedbackfromcostconsultantsinvolved withthescheme.Thepublicnatureoftheprojectsmeantthatcertainindividualswereunabletodivulge informationduetonondisclosureagreements.Thewriterhadoriginallysoughtfeedbackfrompersons associatedwiththeOlympicStadium,whichhewasunabletoobtain.Thedissertationwouldhavebeenable tohavedrawnamorereasonedconclusionhadtwocasestudiesbeendiscussed. ThehypothesiscentresonDavidHigginsODA(2008)statementthatOurkeyobjectiveisclearlytodeliver ontimeandtotheagreedbudget.Thisstatementwastakenbytheauthorinthecontextofconstruction; howeverthisrepresented1.05bnofthe2007forecastedbudgetof7.09bn.Itcouldthereforebeunfairto decidetheoutcomesofthisdissertationwhentheoverallbudgetmayhavebeenmaintained.
10 FurtherReading
Asdiscussedinthelimitationssection,theauthorwouldseektoreviewandanalysethetrendsofthe Olympicstadiumprojectinordertofurtherdevelopthisresearchsfindings.Thelevelofdataobtainedin ordertoanswerthisthesiswasverymuchheadlinematerial.Thereforethewriterwouldseektoanalyse datanotpubliclyavailable.Perhapsthiscouldbeobtainedthroughcostconsultants.Theanalysesconcerned theclient,projectmanagerandcontractor.Itcouldprovemoreinsightful(especiallyconsideringthebudget elementofthethesis)ifinterviewswerecompletedwithcostconsultantsthatworkedontheprojects. Thinkingfurtherintothefuture,acomparisonstudybetweenthedeliveriesoftheLondonVenuesin comparisontothe2016RioOlympicsinBrazilwouldprovideaveryinterestingdebate.Especiallywith regardtoworldwidecommercialworkingpractices.
References
55
11 References
BBCNews"Olympicsbudgetrisesto9.3bn"Published15thMarch2007availableforviewingat http://news.bbc.co.uk/1/hi/uk_politics/6453575.stm BuilderandEngineer"2012AquaticsCentreroofreacheshalfwaypoint"published26thJune2009available forviewingathttp://www.builderandengineer.co.uk/news/london2012/2012aquaticscentreroof reacheshalfwaypoint4014.html ConstructionIndustryBoard(CIB)CodeofpracticefortheselectionofMainContractorsPublished1997. DennisHoneofOlympicDeliveryAuthorityBEYOND2012TheLondon2012LegacyStoryaspublished 27thMarch2012availableforviewingat www.culture.gov.uk%2Fimages%2Fpublications%2FDCMS_Beyond_2012_Legacy_Story.rtf DepartmentofMediaCultureandSportLONDON2012OLYMPICANDPARALYMPICGAMESQUARTERLY REPORTDECEMBER2011aspublishedinDecember2011availableforviewingat http://www.culture.gov.uk/images/publications/DCMS_GOE_QR_July_2011.pdf DMCS(2011)QuarterlyEconomicReportJuly2011publishedJuly2011,availableforviewingat http://www.culture.gov.uk/images/publications/DCMS_GOE_QR_July_2011.pdf DrSGNaoumDissertationResearch&WritingforConstructionStudentsSecondEditionpublished2007. HughRobertson"OlympicGamestobedeliveredunderbudget"articlepublished05March2012available forviewingathttp://eastlondonolympics.co.uk/olympicnews/organisation/2012/03/olympicgamestobe deliveredunderbudget/ HumphreyLloydInternationalConstructionLawReview"SomethoughtsonNEC3"PublishedOctober2008 availableforviewingat http://www.neccontract.com/documents/key%20reports/Humphrey%20Lloyd%20final.pdf InstitutionofCivilEngineersCIVILENGINEERING,"DeliveringLondon2012:theAquaticsCentre"published November2011availableforviewingathttp://www.icevirtuallibrary.com/docserver/fulltext/cien1646 044.pdf?expires=1335645653&id=id&accname=guest&checksum=03DC1651CF0A9D9AF875C78AD6005217 JeffreyBrownwritingforBuilding.co.uk"Legaldisputes:TheOlympicsandWembley"10February2012 availableforviewingathttp://www.building.co.uk/legal/legaldisputestheolympicsand wembley/5031710.article JohnNicholson(2012)Personalinterviewcompletedwiththeauthoron6thJuly2012. Locke,L.F.,Silverman,S.J.,&Spirduso,W.W.Readingandunderstandingresearch(3rded.).first published2010. MalcolmNelson(2012)Personalquestionnaireresponsewiththeauthor3rdJuly2012. NationalAuditOffice(NAO)"PreparationsfortheLondon2012OlympicandParalympicGames:Progress reportJune2008"PublishedJune2008availableforviewingat http://www.nao.org.uk//idoc.ashx?docId=d338b55bc90f403b9e8e5ca98e691ddf&version=1
56
References
NationalAuditOffice(NAO)TheBudgetfortheLondon2012OlympicandParalympicGamesaspublished 20thJuly2012ISBN#9780102947335. NewEngineeringcontract(NEC)"ChoosingtherightNECContract"published2006availableforviewingat http://www.thomastelford.com/books/SampleChapters/Choosing%20the%20right%20NEC%20contract.pdf Newengineeringcontract(NEC)"WhatistheNEC"viewedApril2012availableat http://www.neccontract.com/about/index.asp NewEngineeringContract(NEC)NEC3chosenforLondon2012OlympicsJuly2006availableforviewingat http://www.neccontract.com/news/article.asp?NEWS_ID=576 NickPearceTheDailyTelegraph"London2012Olympics:OlympicStadiumcompleted'ontimeandunder budget"firstpublished29thMarch2011availableforviewingat http://www.telegraph.co.uk/sport/olympics/8413367/London2012OlympicsOlympicStadiumcompleted ontimeandunderbudget.html OlympicDeliveryAuthority(ODA)PART4of4PROJECTDETAILSProjectname:WaterPoloPublished November2010availableforviewingathttp://assets.businesslink.gov.uk/transparency/ODA/6302_SPWUT South_ProjectDetails.pdf OlympicDeliveryAuthorityorODA(June2008)OlympicDeliveryAuthoritySupplierguideavailableat http://www.london2012.com/documents/odapublications/odasupplierguideengweb.pdf OxfordDictionaries"researchdefinition"viewedMay2012availableforviewingat http://oxforddictionaries.com/definition/english/research?q=research PeterUnitt(2012)Personalinterviewcompletedwiththeauthoron9thMay2012. RoyalInstituteofCharteredSurveyors(RICS)MODUSTheOlympicsIssuepublishedMarch2012. SirJohnEgan(Egan)RethinkingConstructionpublished1998availableforviewingat http://www.constructingexcellence.org.uk/pdf/rethinking%20construction/rethinking_construction_report. pdf SirMichaelLatham(Latham)ConstructingtheTeam1994availableforviewingathttp://nec discussion.web.officelive.com/Documents/constructing%20the%20team.pdf SkyNewsSkyInvestigation:OlympicsBillTops12bnaspublished26thJanuary2012availableforviewing athttp://news.sky.com/story/920409/skyinvestigationolympicsbilltops12bn StuartFraser(2012)Personalinterviewcompletedwiththeauthoron5thJuly2012. StuartFraser(2012)Personalquestionnaireresponsewiththeauthor2ndJuly2012. TheGuardian"Aquaticcentrebudgetisunrealistic,warnsarchitect"aspublishedFriday9thDecember2005 availableforviewingat http://www.guardian.co.uk/sport/2005/dec/09/Olympics2012.politics1?INTCMP=ILCNETTXT3487
References TheGuardian"BudgetforOlympicaquaticcentretriples"aspublished9thApril2008availableforviewingat http://www.guardian.co.uk/sport/2008/apr/09/athletics.olympics2012 TheNewEconomicsFoundation(NEF)FoolsGoldHowthe2012OlympicsissellingEastLondonshort,and a10pointplanforamorepositivelocallegacyPublished2009availableforviewingat http://www.bl.uk/sportandsociety/exploresocsci/businesseconomics/economics/articles/fools_gold08.pdf WHughes,PHillebrandt,DGreenwood,WKwawu,SPONResearchProcurementintheConstruction IndustryTheimpactandcostofalternativemarketandsupplyprocessesPublished2006.
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58
Appendices
12 Appendices
12.1 Programmeofstudies

Appendix 1A - Dissertation Gantt Chart Task Name / W/C & Day M Duration Face-to-face teaching Mid Term Revision Holidays / Events Coldplay Wembley with West Ham (hopeful) Isle of Wight Festival Complete At T 27 February 2012 W T F Sa 05 March 2012 W T F Sa 12 March 2012 W T F
Su
Su
2 days 4 days
29/03/2012 20/07/2012
1 day 1 day 5 days
29/05/2012 19/05/2012 25/05/2012
Assignment Deadlines BUILDING QS PRACTICE 1 06-Mar-12 CONSTRUCTION LAW 1 20-Mar-12 PROJECT REPORT 2 24-Apr-12 PROJECT DEVELOPMENT AND STRATEGY 2 22-May-12 BUILDING QS PRACTICE 2 05-Jun-12 CONSTRUCTION LAW 2 19-Jun-12 Secondary data collection Searching for secondary source information Compile literaure source list Complete first literature review Review source list for statistical data to answer required quantitative questions Review source list for descriptive data to answer required qualitative questions Summarise key findings in relation to desired questions identified in research methodology Analyse secondary data and test hypothesis (inc float) Primary data collection Populate list of potential candidates to interview Send enquiries Review responses and arrange interviews Plan semi structured interview topics and review desired outcomes Complete interviews Write up transcripts and highlight key opinion and facts Summarise findings for review in line with required questions Analyse interviews and test hypothesis Write Dissertation Complete second literature review Review and analyse secondary data Review and analyse primary data Write methodology section of dissertation Write analysis section of dissertation Write discussion section of dissertation Write conclusion section of dissertation Complete appendices Review overall dissertation Make ammendments and hand to third party for reivew Make final ammendments Submit dissertation in first draft form Review comments from tutor and make final ammendments
9 days 12 days 9 days 15 days 10 days 12 days
06/03/2012 20/03/2012 24/04/2012 22/05/2012 05/06/2012 19/06/2012
12 days 7 Days 8 days 12 days 12 days 3 days 14 days
08/04/2012 15/04/2012 23/04/2012 07/05/2012 19/05/2012 22/05/2012 05/06/2012
1 day 1 day 1 day 5 days 3 days duration 5 days duration 5 days 7 days
07/05/2012 07/05/2012 11/05/2012 18/05/2012 23/05/2012 26/05/2012 31/05/2012 05/06/2012
3 days 3 days 7 days 3 days 5 days 5 days 7 days 2 days 1 day 2 days 3 days 1 day 8 days
12/06/2012 15/06/2012 22/06/2012 29/06/2012 04/07/2012 09/07/2012 14/07/2012 21/07/2012 23/07/2012 24/07/2012 26/07/2012 29/07/2012 06/08/2012
Dissertation hand in date
1 day
07/08/2012
Sa
Su
19 March 2012 W T F Sa
Su
26 March 2012 W T F Sa
Su
02 April 2012 W T F Sa
Su
Su
Su
Su
30 April 2012 W T F
Sa
Su
07 May 2012 W T F
Sa
Su
14 May 2012 W T F
Sa
Su
21 May 2012 W T F
Sa
Su
28 May 2012 W T F
Sa
Su
04 June 2012 W T F Sa
Su
Su
18 June 2012 W T F
Sa
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02 July 2012 W T F
Sa
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09 July 2012 W T F
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16 July 2012 W T F
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23 July 2012 W T F
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30 July 2012 W T F
Sa
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06 August 2012 W T F
Appendices
63
12.2 SecondarySourcedDataassource
72
Appendices
12.3 TabulatedBudgetForecastData
OlympicParkVenuesBudgetData
Date Forecastfinal(m)incVAT Nov07 1,055.00 Feb10 1,222.00 May10 1,210.00 Jul 10 1,199.00 Nov10 1,182.00 Feb11 1,181.00 May11 1,163.00 Jul 11 1,156.09 Dec11 1,115.09 Feb12 1,140.09 Mar12 1,128.09 OlympicParkVenues CostMovements(m) Budgetincrease 167.00 12.00 11.00 17.00 1.00 18.00 6.91 41.00 25.00 12.00 167.00 155.00 144.00 127.00 126.00 108.00 101.09 60.09 85.09 73.09 0.80% 0.95% 19.38% 5.47% 0.30% 1.33% 0.21% 1.11% %costmovement 15.83% 0.98% 0.91% 1.42% 0.08% 1.52% 0.59% 3.55% 2.24% 1.05% 10.87% 11.09% 10.13% 3.36% 0.11% 8.44% 13.25% 4.80% %changeinbudget 15.83% 14.69% 13.65% 12.04% 11.94% 10.24% 9.58% 5.70% 8.07% 6.93%
Mean 1,169.63 7.31 114.63 Mode Median 1,172.00 11.50 117.00 Range 167.00 208.00 106.91 StandardDeviation 35.46 Variance 1,257.57 58.43 3,414.62 35.46 1,257.57
1stQuartile 1,134.09 15.75 89.09 3rdQuartile 1,194.75 2.48 139.75 IQR 60.66 13.27 50.66
AquaticCentreBudgetData
AquaticsCentre CostMovements(m) Budgetincrease (m) 34.00 2.00 7.00 11.00 1.00 1.95 5.00 2.00 5.61 1.50 36.00 34.00 36.00 43.00 54.00 55.00 55.00 53.05 58.05 58.05 56.05 50.22 54.50 24.05 9.08 82.45 45.51 55.79 10.28 2.46% 0.59% 16.62% 4.98% 0.25% 0.00% 2.57% 2.57%
Date
Forecastfinal(m)incVAT Nov07 214.00 Feb10 248.00 May10 250.00 Jul 10 257.00 Nov10 268.00 Feb11 269.00 May11 269.00 Jul 11 267.05 Dec11 272.05 Feb12 272.05 Mar12 270.05 Mean 264.22 Mode Median 268.00 Range 58.05
%costmovementbymonth%change inbudget 15.89% 0.81% 2.80% 4.28% 0.37% 0.00% 0.72% 1.87% 0.00% 0.74% 23.47% 25.47% 11.24% 4.24% 0.18% 21.27% 26.07% 4.80% 15.89% 16.82% 20.09% 25.23% 25.70% 25.70% 24.79% 27.13% 27.13% 26.19%
StandardDeviation 9.08 10.80 Variance 82.45 116.63 1stQuartile 253.50 3rdQuartile 269.79 IQR 16.29 ZtestAquaticvpopulationcostmovements ZtestAquaticvpopulationbudgetchange ZtestAquaticvpopulation%costmovements ZtestAquaticvpopulation%budgetchange 6.50 6.50 53.6729839% 99.9999995% 16.8681073% 0.0000000%
Appendices
73
12.4 ComparisonGraphs
Comparisonof%CostMovementsbetweenOlympicParkVenues&AquaticCentre
20.00%
15.00%
10.00% OlympicParkVenues AquaticCentre 5.00%
0.00%
5.00%
Comparisonof%ChangesinBudgetbetweenOlympicParkVenues&AquaticCentre
30.00%
25.00%
20.00%
15.00%
OlympicParkVenues AquaticCentre
10.00%
5.00%
0.00%
74
Appendices
12.5 OverallVenuesGroupedBudgetandCostData
OverallVenuesBudgetCostMovementbyGroup Range Frequency 4%to5% 0.00 3%to4% 1.00 2%3% 0.00 2%to1% 0.00 1%to0% 3.00 0%to1% 4.00 1%to2% 0.00 2%to3% 1.00 3%to4% 0.00 4%to5% 0.00 5%upwards 1.00 OverallVenuesChange toBudgetbyGroup Range Frequency 0%to2.5% 5%to7.5% 7.5%to10% 10%to12.5% 12.5%to15% 15%to17.5% 17.5%to20% 20%to22.5% 22.5%to25% 25%to27.5% 27.5%to30% 0.00 2.00 2.00 3.00 2.00 1.00 0.00 0.00 0.00 0.00 0.00
OlympicParkVenues%CostMovementbyGroup
5%upwards 3%to4% 1%to2% 1%to0% 2%3% 4%to5% 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 OlympicParkVenues%Cost MovementbyGroup
OlympicParkVenues%ChangetoBudgetbyGroup
27.5%to30% 25%to27.5% 22.5%to25% 20%to22.5% 17.5%to20% 15%to17.5% 12.5%to15% 10%to12.5% 7.5%to10% 5%to7.5% 0%to2.5% 0.00 0.50 1.00 1.50 2.00 2.50 3.00 OlympicParkVenues%Changeto BudgetbyGroup
Appendices
75
12.6 AquaticsCentreGroupedBudgetandCostData
AquaticCentre %CostMovementsbyGroup Range Frequency 4%to5% 3%to4% 2%3% 2%to1% 1%to0% 0%to1% 1%to2% 2%to3% 3%to4% 4%to5% 5%upwards 0.00 0.00 0.00 0.00 4.00 2.00 1.00 1.00 0.00 1.00 1.00 AquaticCentre %Change toBudgetbyGroup Range Frequency 0%to2.5% 5%to7.5% 7.5%to10% 10%to12.5% 12.5%to15% 15%to17.5% 17.5%to20% 20%to22.5% 22.5%to25% 25%to27.5% 27.5%to30% 0.00 0.00 0.00 0.00 0.00 2.00 0.00 1.00 1.00 6.00 0.00
AquaticsCentre%CostMovementbyGroup
5%upwards 3%to4% 1%to2% 1%to0% 2%3% 4%to5% 0.00 1.00 2.00 3.00 4.00 AquaticsCentre%CostMovementby Group
AquaticCentre%ChangetoBudgetbyGroup
27.5%to30% 25%to27.5% 22.5%to25% 20%to22.5% 17.5%to20% 15%to17.5% 12.5%to15% 10%to12.5% 7.5%to10% 5%to7.5% 0%to2.5% 0.00 1.00 2.00 3.00 4.00 5.00 6.00
AquaticCentre%ChangetoBudget byGroup
76
Appendices
12.7 QuestionnaireResponses

Appendices
95
12.8 Interviews
FacetoFaceinterviewbetweenPeterUnitt(RegionalCommercialManagerforMansellConstruction partofBalfourBeatty)andStephenGummow(DissertationAuthor). Interviewcompleted9thMay201209:00am SG:ThisisWednesday7thMay2012[actually9thMayinterviewererror],presentintheroomareStephen GummowofMansellConstructionandPeterUnittofMansellConstruction.GoodmorningPeter PU:MorningStephen,howareyou? SG:Yeahimgoodthankyou,thanksforyourtimethismorning PU:Noproblem SG:JustwantedtochatthroughafewitemsontheNECcontract,obviouslyitstheUKgovernments preferredconstructionprocurementvehicleformostpublicfundedcontracts;Ijustwantedtorunthrough effectivelywhythatis.TheNEChas6differentmaincontractoptions PU:Yes SG:Ofwhich,shouldgivethegovernmentcontractbycontractprojectspecificoptions. PU:Uhmm SG:Intermsofthecontractsyouseethen,whatarethemostcommonoptions,bearinginmindyouhave lumpsum,remeasuredandtargetcostetc? PU:OkwellmostcommonisAandC,Amostcommon(lumpsum),contractortakesthelionsshareofthe riskonthat,butwelltalkrisklater.SecondlyweseeoptionCtargetcostwithactivityschedule.Tobefrank wevenotexecutedalotofprojectsonthatoption,weseealotofjobswheretheclientstartsprocuringas anoptionC(wantsthecontractortoestablishatargetcost)andthenthroughposttendernegotiationthe clienthasthenchosentochangethistoanoptionA.soanexampleofthatIllgiveyouistheExeterrugby clubstadiumwheretheclientstartedonanoptionctender,soyourpricingthinkingyourepricingatarget, subjecttopain&gainobviously,andthroughnegotiationstheclientwantedtochangethistoanA.the interestingthingthereis,wehadtoaddonariskpottoconvertittoanA.becauseyoucanargueonoption Cthecontractortakeslessriskbecauseofthepaingainmechanism.WithoptionAthecontractortakeson possiblymorerisk.Myviewonitis,thatcertainlywhenyougodownfromoptionAtooptionE,therisk profileforthecontractordecreases.BecauseAIwouldsayisthehighestrisk(innormalcontracting conditionsanyway)andasyougetdowntooptioncyouwouldarguethecontractortakeslessriskbecause itscompletelycostreembersbile.SoinsummaryA&CStephenarethemostpopularweseefromour clients. SG:Rightok SG:IntheOlympicProjects,theyve(ODA)procuredmainlyontheoptionCbasis.Itsinterestingyouspeak aboutriskbecausetheODAactuallyheldtheentirerisk(oravastproportionof)formostoftheOlympic projects.Soinyouropinionthentheoptionc,givesthemtheabilitytodothatiftheybelievetheycan managetheriskmoreeffectivelythemselves.
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PU:Ithinkmyviewonrisk,andparticularlywiththeNEC,istheriskshouldbeownedbythemost appropriatepartyinthecontract.Soitseemsfoolhardyforanemployertopassriskontoacontractor,that hesnotbestplacedtotake.SoifyoupassarisktothecontractoronoptionCandhehastomakedue allowanceforthat,itmaybethetargetinordertomanagethatriskiscompletelyinappropriate.Soonthe Olympicprojects,iftheODAwantedtocompletelyholdthatriskthanatleastiftheriskmanifestsitself,he knowshesonlypayingactualcostforthatrisk.Andhesnotpayingasuminthetargetthatwouldbe disproportionatetothelikelihoodofthatriskoccurring. SG:Isupposejustlookingatthesenow(interviewquestions)optionD,targetcostwithabillofquantities. Whyisthatlesscommon? PU:IllbeperfectlyhonestStephen,IvenotdonealotofoptionD,infactIveneverseenanoptionDever comeouttotender.IdsayitsatoddswiththetraditionalapproachofabillofquantsonaJCTcontract,we allknowhowthatoperates.AndIthinktomostpeopleitseemsthattherecouldbeabitoftensionbetween atargetcostandtryingtooperateabillofquants.Ivenotdoneany,soifIwastoinferanything.Idsayits becauseoftheconflictofinterest.Wejustdontseethem,neverseenone. SG:Wellifthatstheanswerthen,thatissimplytheanswerthen! PU:InfairnessStephenIvenotseenanyoptionBseither!Inthe8yearsinMansellweve SG:IttendstobeprocuredonaJCTbasisifremeasured PU:Yesabsolutely.AndthisexperiencebythewayisnotjustMansellexperience,thisisalsoDean&Dyball civilengineeringexperience,andasyouknowcivils,peoplelikesouthwestwateruseNECandalotofcivils clientsuseNECbutIveneverseenaBandneverseenaD. SG:Sointermsofhowthecontractitselfoperatesthen,youhaveessentially2elementsthatarealmost unique(intitleanyway)totheNECcontract,whichareearlywarningsandcompensationevents.Canyou justbrieflyexplainhowbothofthosemechanismsworkandthenhowthatrelatestomanagementofa clientsbudgetanddeliveringaproject. PU:OKwelldealwithearlywarningsfirst,soanearlywarning.Theideaisthatanymemberoftheteam,the client,contractororstakeholderteamcanessentiallyputtheirhandupandwhistleblowandsaylookjustto letyouknowguystheresaproblemcomingandIthinkthecontractmechanismsaysthatanythingthat affectsthetime,theprice,orthesortofuseinlifeofthebuildingshouldberaisedinanearlywarning.So ifsgonnaeffectthecost,itsgonnaeffectthetimeofthedeliveryoftheprojectandanythingthatcould affectitgoingforwardtheideabeingthereisyouraiseanearlywarning(anymemberoftheteamcan raiseit)andthenjointlyasaproject,youthenagreethenecessaryactiontotaketomitigatetheeffectof theissuethathasbeenraisedintheearlywarning,andtheideaisthatyoucantakeearlymanagement action.Itsunlikethetraditionalcontractsinthattheytendtodealwiththingsaftertheyvehappened.Thisis tryingtomitigateoravoidoreliminatetheeffectofanissueonaproject. SG:Soeffectivelyanupfrontdisputeresolutionprocess? PU:Wellyouravoidingdisputeresolutionbecauseyoursayingtotheclient,ifyouproceedwiththis changewellletstakeanexample.Aclientsconsideringchangingsomething,youseeadraftdrawingcome out,thecontractorcansayjusttoletyouknowifyouimplementthischangeitwilldelaytheprojectby5
Appendices weeksanditwilladd100ktothetargetcost.Theemployercanmakeadecision.Traditionallywhatwould happenisadrawingwouldcomeout,thecontractorwouldcrackon,dothework,thenfireinthenoticeof delay.Whichjustcreatesconfrontation,whereasthiswaypeoplearemakingdecisionsbeforethings happen. SG:Compensationeventsthen,obviouslyintermsofatargetcostasoptionc,presumablywhenyou implementacompensationevent,yourthenmovingthetargetcostthresholdupwards.Thisshouldgivethe clientmoreofanindicationoftheirbudgetspendattheearliestpossibleopportunity? PU:AsyousaythisisuniquetotheNEC,soassoonasanissuearisesthatthecontractorfeelsheneeds compensatingforhensetheterm,hepricesthatelementorissueandalsoestablishestheaffaceton programme.Sotheemployermakesachange,orariskeventoccurs,thecontractorwilladvisehowmuch thatsgoingtocost.Andtheaffectonprogramme.Andthebeautywiththisisthattherearetimescalesin thecontractbywhichyouhavetoadhereto,tomakedecisionsinrelationtothecompensationevent.So theclientknowsfromabudgetarypointofview,wherehisendtargetisgoing.Becausehehasapriced compensationevent,heknowswhatthecosteffectis,heknowswhattheprogrammeeffectis.Ofcourse theprojectmanageralwayshastheabilitytovaluethathimself,itsnotjustanopenchequebookforthe contractortheemployercanmakethevaluation.Thebigissuewithcompensationeventsisactually allocatingriskmoney,iftheresstillitemsinthatcompensationeventthatthecontractorcannotprice,he canmakeadueallowanceforrisk.Frommyexperiencethisisalwayswhereyoutendtohaveslight disagreementswiththeemployerwithregardstowhatthevalueofthatriskshouldbe,butinsummaryboth thosemechanismsareanexcellentwaytoimprovethecontractadministrationofthescheme. SG:Doyoueverseecontractreamendediontermsofthetimescalesforearlywarningsandcompensation events?I.e.shorteningtheagreementprocedures PU:Yeahabsolutely,Imeantraditionallyimnottryingtosoundlikeacontractorgettingbashedallthe time,butwhatyouseeistheclientwillchangetheamountoftimethatthecontractorhastoraisethe notifications.Shortensthetimethatthecontractorhastopricethecompensationevent,butincreasingthe timebywhichtheprojectmanagerhastomanageit.OnethingIwouldalwaysrecommendatthestartofa projectisonanNECbecause,letsbefrankyoudontseemanyconsultantsthatreallyunderstandhowto administeranNEC.IwouldalwayspromoteanNECworkshopatthestartoftheschemewherebyyouagree withtheemployerhowyouregoingtoadministerthecontract,howyouregoingtodealwiththesethings, agreethetimescalesandjustgetaunilateralbuyinatdayonebeforeyoustarthittingtheproblems.But yes,youdoseeamendmentsStephen. SG:AnothermechanismintheNECistheriskregister,wespokeearlierthattheODAessentiallyheldthe wholerisks,onthemainpartfortheOlympicdevelopments.Theriskregisteritself,isthisactuallydrafted intothecontractinitsstandardform? PU:Yeah,itsacontractdocumentnow.UndertheNEC3,itchangedfrom2to3.Under3itbecamea contractdocument.Sotheideaisatthestartoftheprojectinthecontractdata,youidentifywhichrisksare beingheldbyeachparty.Theresasectioninthecontractdatathatlistsadditionalemployerrisks,sothere arestandardrisksintheNECthattheemployertakes,thereareadditionalrisksthatyoucanputontohe employer,buttheriskregisterreallyshouldstartattheveryearlystagesoftheschemeattheprecontract stageandthenitmovesthroughthelifeoftheprojectandessentiallywhathappensiswithearlywarningsis thattheythengoontheriskregister.Becausethatisarisk.Essentiallythenariskreductionmeetingiscalled
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(thecontractdictatesallofthesethings)atthatmeetingiswhenyouretalkingabouttheearlywarningsand howyouregoingtodealwiththemandwhotakesownership.Butitisacontractdocumentitisalive documentthatrunsthroughtheschemeandifoperatedcorrectlybeaveryvaluablemanagementtool. SG:Ok,thatsessentiallytheNECmechanisms,Iknowthatprogrammeshavetobesubmitteduponevery compensationevent,whichintheoryshouldaidmanagementofthetimedelivery.Itskeepingtheclient informedofeverychangeanditseffectontheenddateoftheprojectandIpresumethatwithinthatyou couldpricecertaincompensationeventstobringtimeback,soanaccelerationcompensationevenif required. PU:Theprogrammeitselfsitsinthecontractdatasoyouhavethefirstacceptedprogramme,ifyousubmita programmewithyourtenderthatbecomesthefirstacceptedprogramme.AsyourightlysayStephen,with everycompensationeventquotationyougive,youhavetosubmitanupdatedprogramme.Thecontract generallysaysthatat4weekintervalsoranyotherweekintervalsyoulike,yousubmitanupdated programmeanyway.Soifyouvehadnocompensationeventsintheperiodyourestillobligedunderthe contracttoissueanupdatedprogramme.Theideathereforeisthateverymonththeclientknowswherethe enddateisgoing,whattheeffectofallofthecompensationeventshavehadontheprogrammeand thereforetheygetsomerealcertaintyintermsofthecontractorsplantoachievetheenddate.Andasyou rightlysay,iftheemployerwishestoimplementmeasurestobringheenddatebackthenagainthrougha compensationeventthecontractorcanpricethatanmakedueallowanceintheprogramme.Butagainvery valuabletool,butwhatIwouldsayisthatmostcontractorsunderestimatethetimethattheprogrammeora plannerontheprojectneedstoactuallyadministertheprogrammecorrectlyundertheNEC. SG:Whichintheoryismitigatesifyouareusingatargetcost(aslongasnotclarifiedincontractconditions toprovideit)ifadditionalprogrammerstimewasrequireditwouldmovethetargetcostupwards. PU:Yeahifyouwereabletobuilditintothecompensationevents.Ithinkinrealitymostcontractors wouldntbuildenoughmoneyintheirtargettoprovideaplanneranyway,thatstherealityofthesituation. Butyeahyoureright,Iftherewasabigprogrammeexerciseonacompensationeventthemoneywouldbe builtinandmovethetarget,butveryvaluabletool. SG:So,intermsofaclientsperspective,whatincentivesaretherewithinallofthecontractoptionsreally, toincentivisethecontractortomanagethebudgetandmanagethedeliveryintermsoftime.Timewouldbe coveredunderLADclauses,whicharepartofthestandardZclausesyoucaninsertintothecontract,Iknow thetargetcostoptionccontainsapain&gainshareincentive,howdoesthatoperate? PU:Well,letstalkoptioncbecausethatsprobablythemostcommonwayofincentivisingthecontractor.At theoutsetofthecontracttheninthecontractdata,youagreeandidentifythesharerangeintermsofpain andgain.Soessentiallywhatthatmeansisyousignupwiththecontractorattheoutsettoanagreedrange of,ifthejobunderspendsonthetargetoroverspends,youagreewhichpercentageofthebenefitorthe pain.Nowwhatwecommonlyseeisaclientthatskewsthatcalculationbymakingthecontractortakethe majorityofthepainfortheoverspendandtheemployertakesthemajorityofthegainforanyunderspend. Whichreallyinthespiritofmuturaltrustandcooperationthatsnotreallyhowitshouldwork.Wewould alwaystryandsuggestyouhaveabalancedviewaroundthatpainandgaintoenablethecontractortoreally feelincentivisedtoreducecost.Andofcoursebyreducingtimeontheprojectindeliveringitthatwould alsoreducecostaswell.Weveseenitworkveryverywellonsomeofourliveprojects,whereallparties benefitbyunderspendingonthetarget.
Appendices SG:Soitsinherentintheotheroptions,ifyoulookatthelumpsum,byfixingthemeasuredworksandmain elementsthenthecontractorisincentivisedanywayastheirfeefortheworkisfixed.SoIsupposethe optionCis(asopposedtoapurecostreimbersible)isthegobetweenthetwo PU:Yeahitis,wevedoneacostreimbersiblecontract.Wedidabig15m+schemeonoptionEandthis wasearly2004.Ratherniavelywethoughtitwasanopenchequebook,becausewejustthoughtwellcost plus(mistakenlyasopposedtoreimbersable)thetrapthecontractorfallsintoisthatnotallcostincurred aredeemedanallowablecostunderthecontract.Soarguablyitstheleastriskoption,butintermsof incentivisingthecontractoronthatapproach,thereisntreallymuchincentiveonoptionEtoreducecosts. Anexampleobviouslyinthecurrentclimate,subcontractorbettermentsonorderplacementonanoptionC youwouldobviouslygetagainifyoubuydownwellandnegotiatehardwithyoursupplychain(hardbut fair)onoptionEthecontractorwouldntseeabenefitfromthat.Theemployerwouldbutthecontractor wouldnt.Ithinkonbalanceoptioncisthewaytogoforincentives. SG:Wetouchedbrieflyuponthespiritofmuturaltrustandcooperation,whichisoneoftheearlierclauses inthecontract.WhatbehavioursdoestheNECpromote?Presumablywiththeearlywarningcompensation eventmechanismsitstopromoteanupfrontcollaborativeworkingapproach,iveactuallyjustansweredmy ownquestionthen PU:YouvedonewellthereStephen,Idgiveyouagoodmarkforthat,wellyeahitsmeanttoengendera teamethic,ateamapproach.Whichunderotherformsofcontract(partneringdoesanyway)butthisis meanttohaveeverybodylookingoutfortheinterestsoftheproject.Sotheearlywarning,anybodycan raisewhichisverydifferenttoatraditionaltypeofcontractaJCTwhereitsthecontractortoissuenotices. TheNEC,anypartycanissuethenotices,soitsmeanttoingenderaspiritwherenobodyisafraidtoputtheir handupandsaylooktheeffectofdoingthisisacostorprogrammeeffectofy.sothebehavioursyouwould liketothinkaremuchmoreopenandasyousaycollaborativeapproachtotheproject.Butunfortunately weveseenprojectswhereweveissuedearlywarnings,wheretheemployersteam(whoarevery traditionallyminded)haveseenthisasaclaimcoming.Quoteoneprojectwherewesaidweregoingtosend anearlywarningin;andtheemployersaidifyousendusone,wellsendyoutwobackwellthatclearlyis anemployerthatdoesntunderstandtheethosandhisbehavioursarecompletelywrong.Itshouldcreatea moreopenspirittothecontract. SG:Andintermsofoutcomesthenthatinturnreduceslegalconflict,becausetheissuesaresupposedtobe resolvedwithinthecontract. PU:Absolutely,itslegalconflictanditsalso,whatwecantaffordinthesecurrentclimatesistohavestaff tiedupforsixmonthsinafinalaccountbattle.TheideaoftheNECistechnicallyitshouldgettotheendof theschemeandbarthelastfewcompensationeventsinthelastperiod,youshouldhaveafinalaccount agreed.Thisisgoodforus,itimprovescashflow,improvestreatmentofsubcontractorsanditmeansyou getyourkeystafffreeforthenextscheme. SG:Didyouwanttotalkthroughthediagramwewentthroughearlier?(optionCtheory) PU:Justtonote,wewerechattingbeforetheinterviewthatwhilstthetargetcostunderoptionCisgoodfor anemployer.Heknowswhatthetargetis,heknowshowmanycompensationeventshavebeenraised.In termsofforecastingtheoutturnposition,theemployerstillreliesonthecontractortoforecastthecost accurately.Thecontractorstillneedstoengagerobustcostreportingproceduresbecauseobviouslyifthe
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forecastcostortheendcostrisespasttheadjustedtarget,theniftheemployerhastotakesomeofthe pain,theheneedstobudgetthatasearlyashecan.Sowhilstitsoptionc,whilstitsatargetandalltherest ofit,ifIwastheemployerIwouldstillbeensuringthecontractorprovidedrobustforecastcostprocedures becausethatdoeseffectmyoutturnposition. Interviewends
Appendices TelephoneinterviewbetweenStuartFraser(AquaticCentreContractorProjectManagerforBalfour Beatty)andStephenGummow(DissertationAuthor). Interviewcompleted05/07/201211:30am SF:Hello,StuartFraser SG:HiStuartitsStephenGummow SF:HelloStephenhowareyou? SG:Nottoobackthankyouhowareyouthismorning SF:YoudidsayyouweregoingtophonemethismorningbutIdforgotten,soyoucarryon SG:BasicallyIvejustafewmorequestions;Idontknowhowlongyouvegotcurrently SF:Nottoolongbutyoujustfireaway SG:Yourefertosectionalhandoverarrangements,whatwerethey SF:Welltherewasonecontractforboththedeliveryofthevenueofthegamesandthenthesubsequent deconstructionandconversionintolegacyuse,sothefirstsectionalcompletiondatewasforthegames venue SG:Andthenthesecondwasforthelegacymode? SF:Isquarter12014orsomething SG:Didyouhaveaninvolvementinthetenderprocessinthisone? SF:Iwasnotinvolvedinthetenderprocessofthisone,IwasatT5 SG:Intermsofhowyoutailoredyoursubcontractconditionsthen,didyoudooptionAsubcontractsordid yougobacktobackwiththemaincontract? SF:Theywerenotbacktoback,theywerebespokedependinguponthetypeofsubcontractitwas,whether ithadadesignportionsupplement,youknowwetookaviewonriskastowhowasbesttaileredtomanage thatrisk,andessentiallywetailoredtheterms,thatwasobviouslybasedaroundtheNEC,therewasno2 subcontractsthesame,regardlessofthefactthatthepackagesweredifferent,thetermswerebespoke reallytosuitthenatureofthejob SG:Youmentionedanissuewiththeroof?Todowiththesteelwasit? SF:Thestructure,theroofstructureyes SG:Howwasthatdealtwithcontractuallythen?DidyouinvokeLADsorwasitmoreofadesign developmentissue?
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SF:WeactuallyusedamechanismcallediDap,whichaistheindependentdisputeadvisorypanel,theODA setthatupupontheoutset,toavoiddisputesbetweenthemselvesandtheircontractors,theyhadidapasa sortofinformalmechanismofarbitrationdiscussionthatwouldpreventadisputeescalating,sowhenwe gottothepointwithRowecord,wheretheywereverylateanditwashavinganeffectonthejobintermsof costandprogramme,wedecidedwiththeODAthatperhapsitwouldbesensibletoinvolveidap,whichwe didsowegotidapinvolvedquitequicklyandwithin6weekstheyhadmadeadecisioninourfavourin relationtomostissues,butRowecorddidntacceptthat,andcontinuedtopursueentitlementbeyondwhat theywerelegallydue,soitdidgoonforsomemonths,buteventuallywereachedacommercialsettlement becauseIthinkRowecordrealisediftheyweretogotoformaldispute,andtherehadalreadybeenan independentdecisiongiven,thattheywouldlosetheargument,fortunatelyrelationshipsremainedfairly cordialandproductivewithRowecordsoweneverallowedthecommercialissuedbehindcostprogramme anddelaytosourrelationshipsandtheydidareallygoodjobbuttheyjusttook12weekslongerthanthey shouldvedone!Atthatpointweweretowardthebackendof2009andwere18monthsawayfrom completion,soitdidcauseafewconcerns.ThesituationwiththeroofstructureintheAquaticsCentreis thatbeforewecouldbuildthecorehallandthepooltanks,wehadtodotheroofstructure,sountiltheroof structurewasfinishedandinitsfinalrestingplace,wejustcouldntstartanyofthepooltanks,wehadto workformthemiddleoutsountilthepooltankswerefinishedwecouldntbuildthepermanentstructure, anduntilthenwecouldntbuildthetemporarystands SG:Soacriticalpathitem? SF:Yes,sothewholethingjusthadaknockoneffectreally.Andthereforewehadtointroduce247working fromthebeginningof2009,andthatprevailedforabout18monthsandwecompletedtheprojectwithin3 weeksoftheoriginalcompletiondate.Soweovercamethe12weekdelayandbythewaywealsodid50m ofadditionalwork! SG:YesInoticedthatinyourquestionnaireresponse,42mofadditionalworks! SG:TheNAOseemtocontradictthemselvesquitealot,inthattheyweresayingtheaquaticcentrewas targetedforanApril2011completion SG:Wasthat4weeksanextensiontoyourprogrammeordidyounotreceiveanyadditionalentitlement? SF:Wedidntgetanextensionoftime,butwehadagentlemansagreementthatwewouldvebeenentitled toone.Becausewewerethelastvenuetofinish,andourcompletiondatewas30thJune,andEoTwouldve putusbeyond27thJuly2011,andtheywantedalltheVenuesfinishedayearbeforethestartofthegames. Ifthathadbeenacommercialbuildingwithatenant,weprobablywouldvebeenwaitingforpractical completionnow,butbecausetherewasadrivetogettheannouncementoutthatalltheVenuesweredone ayearbeforethestartofthegames,despitethefactwehadafewlittlebitsandpiecestofinishoff,wegot completionon19thJuly2011. SG:Ivenotedanothercoupleofitemsintermsofriskandchangemanagement,intermsofhowtheprice wasbuiltup,didthey(ODA)actuallyaskyoutopriceanyriskintherewhatsoever?Ordidtheyholdallof therisksontheriskregister? SF:Umno,thenotionthattheyadoptedfromtheonsetwasthattheywouldnotaskthecontractorstoprice risk.Onanything.Whetheritwasfluctuations,increasedcosts,delay,dayworks,nonproductiveovertime, callitwhatyouwill,designdevelopmentnoneofthatsothatthebasecontractsum,whichIthinkwas
Appendices 189m,forthebothphases,wasdevoidofanycontingencyatall.Theytooktheviewthatifthecontractor wastofirmupapricetheywouldaddabout1520%becauseethejobwassocomplicated. SG:Whichisrefelectedinthefinalaccountincreaseof13% SF:Yes.WhichIadmittedtoyouthecostsactuallywentupbyabout13%.Whichwouldvereflectedinthe finalaccount,wecouldvehad20%anddoneadealandtheywouldvespentaloadmoremoney.Weve actuallyhadasimilarconversationtoday,dowewanttouseasubcontractorthatsbasedinAustriatofixhis exchangerate,wellImeanyoucouldaskhimtobutyoucouldchuckaloadofmoneyatitso,Icouldnt secondguesswhattheexchangerateisgoingtolooklikein3monthstimesotheODAwereextremely pragmaticaboutallthatanditwasexactlytherightdecisiontotake. SG:Ithinkyourerightthere,itsobviousthattheriskmanagementethoswasadoptedcorrectlyalltheway throughtheproject,havingreadtheODAreportsandeverythingthattheriskelementoftheprojectwas highlyscrutinisedandmanagedwasntit SF:Absolutely,butthenthatdoesntexactlymeanwthenprocuredallofoursuppliersonthatbasis.We wereselectiveinhowwetransferredrisktooursuppliersbaseduponagain,valueforomeyreally. SG:Howdidyoufindyoursupplychainintermsofadoptingnecprocedures? SF:Yestheywereactually,wehadtosupportthemaneducatethem,butthewholeprocessofearly warningsandcompensationeventswasbroadlyfollowedandactionedbyallofthesuppliers SG:Sopresumablyyoupassedyourmaincontractriskdownthroughthesupplychain,andjoinedupthebits inbetween? SF:Yes,wellasIsaidearlierintermsoftherisktransfertosupplierswediditonabespokebasisuponthe risksthatexisted.Wedidnotgobacktoback.Iveneveragreedwithbacktoback,thecircumstancesupon whichweareincontractwithourclientdifferanddontthenforceyoutogobacktobackwithoursuppliers ifthatsnotappropriate. SG:Justonemorequestionthen,intermsofhowyouagreedcostchanges,throughtheproject,wasitonan upfrontbasisi.e.lumpsumandmanagetheriskofthatchangeorwasitapostchangevaluationwhereby itsalmostremeasuredinessence? SF:Nonotreally,weagreedthevalueofacompensationevent,inadvanceoftheinstructionbeingissuedto proceedinalmostallcases.Butagaintherewasnoriskcontingencyaddedtothatprice,soinessencewhat weendedupdoingwas[becausecostsalwaystendtogoupnotdown]iseverysinglecompensationevent thatwepricedweprobablyunderpitcheditintermsofitseventualcosts.Allthatdoesiseffectthe relationshipbetweenthereferencepriceandthetargetcost.Ifthepricegoesupandthecostsdontfollow itthenyougetadilutionofmarginessentially.Youdontloseanymoney,butyouveobviouslygotahigher costandyourmarginisassetasasumratherthanasapercentage. SG:Sofrommyperspectivethen,whenyouwereagreeingchanges,youmovethepainandgainthreshold upwards? SF:Youweremovingboththereferencepriceandthetargetcost,sotheendcostforecastandthereference price.Andmovingbothbythesameamount.Ifavariationwas10m,yourepushingthereferenceandthe
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forecastupby10m,ifitactuallycost11,thereferencepricestayedat10mbutthecostwentupsoyougot adilutionofmargin. SG:Soyoutakethepain(orpercentageof)ofthat1m SF:Sure,thatsright.Wellyougetitback,butyouwouldntgetanymarginonit. SG:ThatsprettymuchitStuart,thanksforyourtime Discussionmovesontonondissertationrelatedconversation
Appendices TelephoneinterviewbetweenJohnNicholson(AquaticCentreProjectSponsorODA)andStephen Gummow(DissertationAuthor). InterviewCompleted7thJuly201210:00am SG:GoodmorningMansell JN:HiisthatStephen? SG:Itisyes JN:StephenitsjohnNicholson SG:Hijohnhowareyoudoing? JN:Imgoodthanks,howareyou? SG:YeahImgoodthankyou JN:Isitrainingdownthere? SG:Yeahitsnotverygooddownhere JN:NotbestupinLondonImustadmit,Idontquiteknowwhattheweekendhasinstorebutitslookinglike yetanotherwashoutfromhere SG:Yeahmoreofthesameisntithighlyfrustrating JN:Thethingis,atleasttheOlympicparklooksfantasticbecauseeverythinghascomeoutintofullbloom anditlookslikeitsbeenestablishedforabout20yearsratherthan,sotherainsdonesomegood somewherebutitdoesntfeellikeitjustnowdoesit SG:WhenyoulookatWimbledon,itsjustbeenonandoff JN:Yeahthatsit,butmaybethatsagoodsignbecauseIthinkifitwaseverpermanentlysunnywedhave nothingtomoanaboutwouldwe SG:HahawewouldntbeBritishwouldwe JN:NobodywouldtalktoeachotherinLondonifitwasntfortheweathersoIdontknowwhatelsewed thinkof! SG:Haha,fairplayJohn.BasicallyIwaswonderingifwecouldtalkthroughsomeofthequestionnaireitemsI had? JN:Yeah,ivegotitinfrontofmehere. SG:Ideal JN:Youredoingyourdissertation,is,justremindmeagainwhattheactualfocusisoverallandwhoyouve spokentoandwhatyourplanisifyoudontmind
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SG:Yeahfine,basicallythedissertationhypothesiscentresaroundastatementthattheODAmadeatthe beginningofprocurementforthegamesthattheydbedeliveredontimeandonbudget.Anditsliterallyjust focusingonthatbudgetstatementreallyandhowtheuseofthegovernmentspreferredprocurement vehiclei.e.usingNECcontractsforpublicprocuredjobsandhowthatshelpeddelivertheprojectsbasically. JN:OK SG:Soitsacombinedcontractandbudgethypothesisreally JN:Okandwhohaveyouspokentosofar SG:IvemanagedtospeaktoStuartFraseratBalfourBeattyhadaninterviewwithhimyesterdayandIve hadaquestionnaireresponsefromMalcolmNelson JN:Ohyeah SG:SothatsbasicallywhereIamattheminute,Imtryingtokeepthemajorityofmyresearchtoa secondarybasis,becauseobviouslyitsfiguresandthingsthatImcomparing,sotheinterviewillbe conductingwithyouwillbeprimarilyfocusedonopenendedquestionsandabitofopinionreally JN:OKbecauseIthinkStuart,obviouslyIknowbothStuartandMalcolmverywellandStuartbeingthe contractorwillobviouslyhaveaverydetailedcloseupviewoftheworld.Malcolmisagreatguy,worked verycloselywithhimforanumberofyearactuallyandasadeliverypartner,hewastheclientproject managersohewasmygobetween,betweentheclientandthecontractorifyoulike,hewastheclient representativeandbeingtheclientthathemaygiveadifferentperspectiveonthings SG:Yeahhopefullyso,soyouhavethequestionnaireinfrontofyou.Obviouslythefirsttwoquestions youvejustanswered.Yourclientsideandinvolvedintheaquaticcentreproject.Intermsofthebudgets then,backin2008(2007)Ithinktherewasaballparkincreaseincostofabout13%, JN:13didyousay? SG:Yes JN:Yeah,seethisiswhereyoullgettheclientview.Fromabudgetperspective,itsallverywelltalkingabout suitesofcontractsandhowthingsaremanagedandarethingsdeliveredunderbudgetornot.Butthe budgethastoberealisticinthefirstplace.Andthebudgetwaybackinthestart,Iwasinvolvedinthebid, forthegames.Somyfirstinvolvementwaslate2003believeitornot.Iwasaskedtodoafeasibilitystudy foraswimmingpool50mOlympicsizepoolofabudgetaround70m.soonthebasisthatanybodywould saywellhangonaminute,itssortof3x4timesoverbudgetbecauseitsnowjustunder300m.butyoure notcomparinglikewithlike. SG:Agreedyes,scopewise JN:Thebriefbackin2003/2004,hadmoreexclusionsthaninclusions.Soobviouslyinformationlikethat nevergoesouttothepublic,andthepublicwouldneverunderstandanywaysoitsquiteacheapandeasy headlinetosaythatthingsareoutofcontrolandwhyareweoverbudget,butwereallyneedtounderstand whatisincludedinthebudgetinthefirstplace SG:YesImfullyawareofthatyes
Appendices JN:AndbackIn2004agamewasbeingplayedtosecurethegames,Imeanobviouslyyoucantdeliverand Olympicgamesfor2bn,theathletesvillagethatIwentontoandfinisheduponacoupleofmonthsago. Thatwas1.5bnjustonitsown. SG:OKIunderstandthatobviouslywithregardtobudgets,atconceptionstageitwasallverynewandyour probablytalkingaboutperfectgreenfieldsiteswhereyoucouldjustplonkbuildingsonwhichobviouslythe sitesyouinheritedineastLondonwerenotthatwerethey JN:Yeahwelltheywereprobablyoneofthemostcontaminatessitesyoucouldvechosen.InLondonand theactualsiteoftheaquaticcentrewaswhenIfirstwentdowntherewasin2004,wasEuropesbiggest fridgemountain.Whichtookuphalfoftheaquaticcentresiteandtheotherhalfwasaconcretebatching plantsothosekindofcostswhenthebidwasfirstputtogether,whichisexactlyasyousaywasmaking assumptionsthattheremediationcostswouldbecoveredelsewhere.Thatdidnthappen,allthecostscame intotheaquaticsproject.Thescopeobviouslychangesduringthelifeoftheprojectaswell,sowherewehad astandaloneAquaticsCentrewethenhadtointegrateasignificantpieceofcivilengineeringwhichwasthe bridgewhichistheentrancetotheOlympicparkandalsoformstherooftothetrainingpool.Thatmadea hugedifference,sotheresawholeloadofexcusesforthebudgetsbeingexceeded SG:Itsnotsomuchthat,in2008(2007)yousetinitialbudgets,presumablythenyouwereworkingthe designthroughwithBalfourBeatty[asitsadesignandbuildproject]andthenyourobviouslyfinalisingyour specificationandeverything,Iwasjustwonderingiftherewasanyparticular;Iknowtheroofstructureat onepointwasanissue, JN:Yep SG:Andthereweretherejustsimplethingsthatyoucouldntforecastthataffectedthefinalspend? JN:YeahIthinkthatagain,youhavetolookatthetypeofbuildingthattheaquaticcentreis.Yougoand havealookatasimilaraquaticcentreselsewhereintheworldandbelievemeyouwontfindone.Because theydontexist.Wewenttoseesomeofthebestswimmingpoolsintheworldandtheresnothinglikethe oneinLondon.Itsnotcomparablewithanything,soitsauniquedesign,itsauniqueconcept.Whenyour puttingacostplantogetherandplanningthebudgetsyouvegotnoreferencepointonabuildinglikethat. Becauseithasntbeendonebefore,whenwedidthesteelworkforthemediacentre,whichwas4.5ktonsof steelallsectional,itwasdoneinabout8or9weeks.Wedid3ktonsofsteelintheroofoftheAquatics Centreandittookabout10months.Youknow,becauseeverythingwasbespoke,soIthinkthatwhenyoure dealingwithasignaturearchitect,onaflagshipbuildingyouhavetomaintainthespiritofthedesignand whyyouvechosenthatparticulararchitectinthefirstplaceordontbother SG:Orjustascheapaspossibleandyoudontgetthefinalproduct. JN:Yeah,youcantgoandtakesomethinglikeaZahabuildingorafostersbuildingandthentryandvalue engineerittowithinaninchofitslife.Anddumbthethingdown.YoumightaswellgotoJoeBoggsarchitect aroundthecorner.SoIthinkthathastobetakenintoconsiderationaswell,Ibecametheguardianofthe design.Sotheoriginaldesign,CLMwouldlooktovalueengineeringandcutcorners,andImnotsayingthat inaderogatoryway,thatstheirjob,andperhapsnotcutcornersletscallthemefficiencies.Butsomeof thoseefficienciescouldhavedeterredfromthefinishedproduct.SoIwasveryconscious,thatwedidnt wanttodothat.
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SG:Fine,sowouldyousayitwasmoreacaseofmanagingvalueformoney,asopposedtomanagingafixed budget? JN:Yeah,becauseyourealsodealingwithmultiplestakeholders.Youhaveawholehostofpeoplewhohave aninterestinthatbuildingandofcourseyouredesigningforthegameswhichisaoneofevent.Itwillnever need17.5kseatsagain,sothatswhywevebuiltthetemporarystands,whichisnotwhattheydidinBeijing forexample.Soyouneedtodesignsuchauniquebuildingforsuchauniquepurpose,butyourealsotrying todesignitforthelongtermlegacyandforittobeusedforanelitetrainingbaseforBritishswimmersand thelocalpublicaswell.Sotherewasalotofconflictingdrawsontheintent,becauseitsnotaonesizefits all,youcantmakeitthatway,sowedidlookatvalueengineering,Ithinkthatatacertainpointintime, decisionsweremadewhereweweregoingtomakesignificantchangestothebudgettotrytoandreduce thepotentialoutturncost,andtheinterestingthingisthestakeholderinfluencewasreallypowerful. BecausedecisionsweremadealmostinisolationbytheODAandCLMaboutwhatwethinkwecanchange totheprojectandthatwasagreedthatwasthewayweweregoingtogoatstagecdesign.prettymuchif wesaywemade10significantchangesatthatpoint,Icouldtellyounowthat9ofthemcamebackinduring stagedoredesign.Duetostakeholderinfluence. SG:Right,thepurposesandthefactyouhaveaverydemandingenduser. JN:Correctwellyeah,verydemandingseriesofendusers. SG:Ok,wellthatcoverstheethosofthebudgetandhowtheprojectwascompetedfromconceptionwhich isuseful.IntermsofhowtheNECworkedwithinthecontract,doyouthinkthatinanywaytheobligations, andthemechanismsthattheNEChaswouldveaddedanyincreasedcoststotheclient?Asanexample Stuartalludedtothefacttheyhadtoemployanothercoupleofsurveyorsinordertomanagethecontract, albeitheclarifiedthiswasprobablycostneutralasthedisputeresolutionprocessesobviouslyimbedded withintheNECmeanttheydidnothavemuchconflictwithcontractorsexcepttheroofingcontractorof whichtheymanagedtosettle,fromaclientperspectivethen,wasthereanyadditionalresourcethatyou hadtoinclude,toeasethemechanismofthecontract? JN:Possibly,butintheschemeofthings,probablyanotherbodyortwofromthecontractadministration pointofview,butagainyouhavetoputintoperspectivetheOlympicshasalevelofscrutinywhichwas unprecedentedinmyexperience.Soweobviouslyhadtosatisfythecontractandoperateundertheterms ofthecontract,butwewereforeverbeingauditedeitherinternallyexternallybygovernmentgoingthrough variousgatewayreviews,processedthatwereimplementedthroughoutthelifeofthedevelopment.The extraworkthatwasdoneontheadministrationsideofmanagingtheNECcameinhandywhenitcameto beingauditedbytheworldandhiswife. SG:Soyouresayingeffectivelythattheextraproceduresyouhadtoincludeforwouldvebeenrequired anywaysimplybecauseitsaflagshipprojectanditwasbeingscrutinisedanyway. JN:Ifwedbeenusinganotherformofcontract,wedprobablyhadthesameamountofpeoplealloverIt anyway.Potentially,soIdontthinkthatyoucouldsayinthisparticularcasethattheNECaddedaparticular workloadintermsofnumbersofresources,Ithinkthatlookingback,Idontthinkitwouldbeinteresting toseewhatStuartandMalcolmsaidbutIdontthinktherewasabetterwayofdoingit. SG:YesthatscertainlythatsapointthatStuarthasagreedwith.Thefinalquestioninthequestionnairehes saidhewouldntprovideanyfurtherrecommendationsinordertodeliveraprojectlikethisinthefuture.So
Appendices hesanadvocateforusingtheNEConlargescalepublicjobs.AsamItobehonestwithyou,Idontthink thereisabettersuitedcontractform JN:Ithinkitsmaybe;saylikeyoulookatthemediacentrewhichwasbasicallyaverybigshed.Andyoucould bequitespecificintermsoftherequirements;maybethefixedpriceisanoptionbecausethedesignisfairly straightforward.ButyoucouldneverfixapriceonaZahabuilding,itsnotpossible. SG:Youwereobviouslydevelopingthedesignasyouwentthroughanywaybecauseofthetimescales involved.SoIthinkthattheoptionAwasneverreallyanoption. JN:Yes,notreallyjustbecausethedesignwasdeveloping,butthelevelofcomplexity.OurchairmanSirJohn ArmittcalledtheroofconstructionthemostsignificantengineeringchallengeontheOlympicpark.That goessomewaytounderstandingwhatitwasweweredealingwiththere.Youhavetohavethatflexibilityto rollwiththepunches,onauniqueprojectlikethat. SG:Thetargetcost,whenthatwasagreed,didyoufeelitwasrealisticordidyoubelieveitwouldbesubject tochange? JN:Becausetheaquaticcentrewasverymuchinthepubliceye(perhapsmoresothantheotherprojects) therewaspressuretofallinlinewithpreviouslyreportedbudgets.anditwouldvebeenawholelotbetter tojustaccepttherealityearlieraspeoplewerelivinginhopethatwecouldachievethebudgetsthatwere originallyset.AndIthinktherewerealotofpeopleconcernedabouttheoutturncostbeinggreaterthan thatbecausetheguysontheground,likeMalcolmmyselfandStuartcouldalwaysseethatitwouldbenot impossiblebutdifficulttodelivertooriginalexpectations. SG:AndobviouslychoosinganoptionCgaveyoutheabilitytomanageatactualcostasthescopegrew.In termsofmanagingthevalueintermsofthat.Ifyouusedalumpsumthatwouldnthaveworkedthesame JN:Exactly.Thatsit. SG:YoureanadvocateoftheNECthenforthissortofscheme JN:Yes SG:Isthereanyparticularclientadvantagesthatyouidentify? JN:Iguessperhapsjusttyingallthattogetherinrelationtohavingtheflexibility,becausethenatureofthe project,designandfasttracknaturethemultiplestakeholdersallofthepotentialexternalinfluencesthat youhavethatarealmostbeyondyourcontrol.Youdoneedtohavetheflexibilitytoadapttochanging circumstances,andIthinkthatfrommyperspective,ofallthethingsthathappened,andallthethingsthat camebackinthatwehadtoreintroducethathadpreviouslybeenVEdout,nothingwasashowstopper.It mightvebeenaninconvenience,butthecontractwouldveallowedforthingstoflex.Ithinkthatsthe overallclientadvantage,soIwouldntliketosaythatitmeansthatwecanberelaxedaboutscope,because youwanttofixthingsasbestyoucan.Butyouhavetoberealisticoncertainprojectsandthiswascertainly oneofthem. SG:Intermsoftheearlywarningcompensationeventprocedurethen,Iassumethatthecontractorwasvery forthcomingintermsofpresentingcostsandthatyouwereabletothenreviewyourbudgetsmoving forwardwheneverachangewasinstructedandthatyouknewthecostsbeforetheevent?
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JN:Yesthatsright,wegotthecontractorearlywarningsfromthecoalface.WehadCLMalsogavetheODA, theyhadanearlywarningsystemaswelltotheODA.Sowehada2tiersystemwhichwasusefulbecause obviouslyBalfoursfocuswasataparticularlevel,CLMswasmaybeastepupfromthatwhichmaybemore strategic.Sothatdoubletiersystemworkedverywell. SG:IvenotseenthatinmyexperiencehavingaseparatesystemforthePMtoraisenotifications,thats good.Itgenerallyfallsonthecontractor,thatscertainlygoodfromastrategicpointofview.Intermsofhow thatwasadministeredthen,wasthatelectronicorpaperbased? JN:Wehadregularearlywarningmeetings.Fortnightly.Itwasntweeklyormonthlyeither.Yestherewasa database,yesyougetalltheprintouts,andyesyougetalltheinformationslottedintotheappendices,ofa thousandpagemonthlyreport.Butyouneedthedisciplineofsittingdownandkickingthesethingsaround. Thatwassomethingthatwerigorouslyadheredto,duetotheimportanceofit. SG:Wellthatleadsmeontomynextquestionreallywhichwas,theODAdecidingtomanagetheriskonthis one.Prettymuchacrosstheboard,howdidthatworkfromacostreportingperspective?Ipresumeyou couldvepassedtheriskontothecontractor,butatsomepointyoudecidedthatitwasamorecosteffective optiontomanageityourselves? JN:YesIthink.Ialsothinkthatthebudgetmightvehadsomethingtodowithit.Andtheperceptionof budget,againpoliticallyaverysensitivesubject.Andifyouleavetherisktothecontractortheyareonly goingtopriceit,andthepricewouldbethenshownintheirbudgets. SG:Sothebudgetswouldvebeenexceededhigheratdayone,andpotentiallyyouwouldvebeenpayinga higherprice,albeititmayhavetranspiredtobealowerone,forthecontractortoholdthatrisk. JN:Ithinkexactlythat,andIthinkthatthefactthatwehadthetwotierearlywarningsystemmeansyou couldrespondtopotentialrisksearlyandthewholepointistoniptheminthebudbeforetheybecome majorissues,anditthewholethingwasmanagedexceptionallywell.Wehadamonthlychangeboardso anypotentialchanges,tryingtoputadesignfreezeonthescope,thosesessionswerealmostlikeaunited nationsmeetingtherecouldvebeen5060peopleinaroom.Andyouhadtoattendalltypesofpre meetingsbeforeachangewouldgobeforethechangeboard,anditwasquitebrutal.Soyoudidntwantto beembarrassedinfrontofallofyourpiersorsuperiorsinthatkindofforum.Soyouhadtomakesurethatif youwereproposingachangeyouknewitwaswatertightandthatithadbeensignpostedandthatithad beenlobbied. Phonecutsout SG:OKsojusttoconfirmyouwereexplainingthattheriskmanagementprocesswaswellmanagedandthat itwasbetterthananyotherprojectyouveworkedonorseen.Therewasaveryrigorousputinplaceand thatholdingtheriskmeantyoucouldmanageitbetterthanhandingittothecontractorandpayinga premium? JN:Yes,exactly. SG:Intermsofhowthemaincontractwasdrafted,Imnotsureifthatsanareawhereyouwouldvebeen particularlyinvolved? JN:NotparticularlyImustadmit.
Appendices SG:IthinkthatStuartalludedtoacoupleofZclausesthatwereputinforLADSandthelike. JN:Whichwasprettymuchinkeepingwithprogrammewidephilosophyratherthanspecifictotheaquatic centre. SG:IntermsofLADsthen,thatmustvebeenaninterestingonetomeasureasnobodywouldwanttoeven contemplatethenotionofmissingthekeydates?TheactualLADriskinvolvedinthatcouldbecatastrophic.I knowyouhadeffectivelyayearsfloatthere,ifdelayshadextendedbeyondthatyearIwoulddreadtothink whattheLADscouldvebeen JN:Yeswell,againsomethinglikethat,youvegotBalfourBeatty,whichthisisthebeautyofhavingalmosta strategyearlyonofspreadtheriskaroundthepark.SoifyoulookaroundyouvegotBalfourBeattydoing theAquaticsCentre,CarilliondoingtheMediaCentre,McAlpinesdoingthestadium,ISGdidtheVelodrome. Youhaventgotone,maincontractordoingmorethanonemajorvenue.Soyourespreadingtheriskthat everyoneinvolved,wantstobeapartofUKconstructionbiggestsuccessinageneration.Nobodywould wanttoletthesidedown.Sothoseguyswerenevernotgoingtodeliver.Itwassomethingthat,wouldbe catastrophicfortheirbusiness,nomatterwhosefaultitwas,youdlovethecontracttobackituponthat. Butthiswasanoverarchingprincipleofallofthosecontractors,theownersevenwerebroughtinona regularbasisinordertoberemindedoftheirobligations.Sointhatsensetherewasneveradangerthatit wasntgoingtobeready.SointhatsensewhilsttheODAwasabletosayayearoutfromthegameswillall thepublicity,TomDaileydivingoffthetopboardandallovertheTVonJuly7thlastyear,thelinesfor practicalcompletionwerecompletelyblurredbecauseoftheamountofoverlayingworksLOCOGneededto do.Sothejobwontbefinisheduntilthefirstathletedivesintothatpoolforthefirstrace.Becausetheres somuchworkstilltodoafterBalfourBeattyhavedonetheirbasebuild.BalfourBeattyofcoursebeingthe incumbentwillalwaysbeinstructedbyLOCOGtodocertainworks.Sotheedgesallbecomeblurred.We manageitbutyouknowthebuildingwasntfinishedonthe27thJulylastyear.Theyllsayitwas,noneofthe Venueswerefinishedonthedaytheysayitwas,Imeandontquotethis[nondisclosure]butthisisthe smokeandmirrorsthatareused.WhichispartlydeliberatebutpartlyafactoflifethattheODAhascertain obligationstofulfilandLOCOGhavesimilarobligationsandyoucantjustdrawalinebetweenthetwo.The edgesareveryblurred.SoIdontthinktherewasanydangerofLADsonBalfourBeatty.TheLADscamein onthingsliketheroofbeinglate,moretodowiththesubcontractthanthemaincontract. SG:Theriskallocationthenyoureferto,intermsofdistributingthepackagesbetweenvariouscontractors, wasthatbornoutofthemarketthatthecontractswereletin,i.e.abuoyantmarketsomedescribedas overheatedinLondonatthetime.Isthatthereason? JN:Yes,wellpartlythat.AndImeanagain,therealitywasatthetimeoflettingtheaquaticcentrecontract, wecouldntactuallygetanybodyinterestedtobuildit.Becausetherewassomuchworkoutthere,the Olympicswashighrisk,WembleyhadjustbeenandgoneandthatwasbadpublicityintermsofMultiplex beinglateonWembley.WehadtodragBalfourBeattytothetabletotake Phonecutsout SG:Hijohnapologies,myphonejustcutoutthen. JN:Yeahthatsok,IjustrangyourvoicemailbackandIwaswitteringonforafewminutesbeforeIrealised Idontknowifyougotthegistofthat
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SG:ItwasliterallyjustatthepointwhereyousaidBalfourBeattyweretheonlycontractorreallythatyou couldget,thatwantedtodothejob. JN:Yes,andeventhentheydidntwanttodoit.Sothatsagoodpointyoumakeaboutthestateofthe marketatthatpoint.Againthatssomethingtobearinmind,Iguessifwedlookedatafixedpriceatthat pointintime,theywouldveputinamegaprice.Theperceptionofriskatthattimewassogreat. SG:Yousaidyoudidalotofvalueengineering,ormanagement,totrytoreducecostwherepossible.But likeyousayitsalandmarkthatyourbuildingeffectivelyandsoIdimagineitsverydifficulttocompromise onspecification. JN:Itisyes.Anditjustgoestoshowthatyoucanttakethosedecisionsinisolation.Ithinkpeoplethought, yeahweretheclientwereincharge.butultimatelythereisalotofstakeholderandpoliticalinfluenceona projectsuchasthis.Youcanttakethosedecisionsinisolation,ifyoudontbringpeoplealongwithyouand discusspotentialchangesthenitwonthappen.Soifyoujustmakethemarbitrarily,andthentryandthen tryandimposethemthenthatcancauseyoualotofgriefexternally.Andthenultimatelywhatwillhappen isthattheyallralliedthemselvesandputupafightandcertainthingscamebackin. SG:Doyouknowtheoutturncostsoftheaquaticcentre? JN:No,Idontactually.OnlybecauseIlefttheprojectinlate2009andthenIlefttogoanddeliverthe athletesvillage.SohowitturnedoutintheendIdontknow.Malcolmwillknow! SG:Intermsofanyfutureprojectsyougoonto,isthereanyotherproceduresyoudbringinoristhere anythingthatwasimplementedwithinthatOlympucbuildthatyouwouldpromote? JN:Yes,wevenoteventalkedabouthealthandsafety.Whichhasbeenanevenbiggersuccesswhenyou thinkthatontheathletesvillagealonethistimelastyearIhad6kpeopleadaycominginthegate.Wewere doingamillionmanhoursevery4weeks,whichittook2yearstodoamillionmanhoursontheaquatic centreandweweredoingiteverymonthsonthemediacentre.Sowhenyouvegotprojectsofthat unprecedentedlevelofintensity,youdohavetostepupmassivelyintermsofprocesses.Anditsnotjust aboutticksheetsandsafetycourses,itsaboutgettingoutthere,inamongsteveryone.Asaclientleading fromthefront.FunnilyenoughIsawsomescaffolds,ImbasedinHoldenattheminuteandIwasinVictoria yesterday,andIsaw4scaffoldersofftheproject.Whoworkedononeoftheplotsoftheathletesvillage. AndwehadarightlaughandagoodcrackbecauseImthinking,thereisnootherjob1.5bnjob,whereI wouldveknown4scaffolders.Notachance.Becausewedidalotofworkforceengagement,andtheyknew whoIwasandItookthetimetogetoutthereandtalktoalotofpeople.Itsamazingwhatdifferencethat makessoyouknowthosearethekindsofthingsthatIlllooktotaketothenextprojectandIcantwaitto dothatbecausethelessonslearntontheOlmypics,intermsofprojectandprogrammedeliverybutthe true,agoodlineforyourdissertationisthatsthetruelegacyofthegames.NottheVenues,thesportand allofthePRthatgoeswithit,wevecompletelyraisedthebarintermsofprogrammedelivery,contract administrationease.Butparticularlyhealthandsafetyandenvironmentalconcerns,thatsthelegacyand youwanteveryonethatsbeeninvolvedintheOlympicstotakeapieceofthatawayandapplyittothenext project.Thatwillimprovethewholeindustry. SG:Didthat,goingbacktomycontracthead.Didthataffectthewaythecontractsweredraftedinanyway, didyouhavetoputanyclausesinthataffectedworkingprocedures?
Appendices JN:Maybealittleatthestart,butitdeveloped.Thecontracthadalreadybeenletbefore,sayifIweredoing itagain.Whenthecontractswerelet,wewouldneverhaveenvisagedhowmuchwewouldveneededto do.Soalotofithascomeoutofgoodwillfromthecontractors,ratherthanbeingspecificallyaddressed withinthecontract.Ithinkthatdoingitagain,wewouldprobablymakethemmoreawareofthe requirementsupfront.Itsevolved,justbecausetheresacertainamountofmakingitupasyougoalongon projectsorprogrammeslikethis,youhavenoreferencepoint.Itsneverbeendonebefore. SG:TheoptionCelementofitthen,ifyouneededadditionalresourcetomanagehealthandsafetyelements ofit,thenitwascoveredasacompensationeventandthecostswerecoveredandthetargetmoved accordingly. JN:Yes,exactlythat. Conversationmovesontonondissertationrelatedmatters.
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12.9 LiteratureReviewSourceAuthority
# SourceTitle Purposeofinclusion inliteraturereview Usedtoconsiderthe movementintheUK frompredominant costbasedPQQ approachestohigher moderndayquality weightings.Also describes characteristicsof contractssuited towardsdelivering highcostprojectson budget. Authoritywithregard Authority tosubjectarea score(%) TheLathamReport identifiedsystemic failingsintheUK constructionindustry andgainedindustry andgovernment support.Widely consideredtheoriginal catalystforpublic construction procurementreforms. Leadtoformationof CIBConstruction IndustryBoard).
SirMichaelLatham (Latham) 1 Constructingthe Team
95.00%
RoyalInstituteof CharteredSurveyors 2 (RICS)MODUSThe OlympicsIssue
Describedclient considerationsin decidingappropriate procurementpath.
RICSisaworld renownedprofessional body.Inthissourceit isrepresentingthe viewsofits professionally accreditedmembers. Thispieceisamonthly magazinewhich describesseveral aspectsofthe2012 Olympicdelivery decisionmaking processes. UKgovernment directiveaimedat providingbestpractice adviceforconstruction clients.
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ConstructionIndustry Board(CIB)Codeof 3 practiceforthe selectionofMain Contractors
Usedtoconfirm governmentadvicein procuringpublic fundedprojects
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SirJohnEgan(Egan) 4 Rethinking Construction
Considerstheeffects oftheLathamreport (1)recommends furtheractions.Report Usedtoreaffirm producedatDeputy recommendationsand Primeministers governmentactions requestandresulted arisingfromLatham inLocalGovernment report(1) Act1999,abolishing 'lowestprice'tender criteriafor'bestvalue' ethos. Foundedin1986by theleadersofThe OtherEconomic Summit(TOES), providesalternative debatetomainstream procedures. Part4ofPQQsentto contractorsfor expressionofinterest inAquaticsCentre. ICEisawellreceived professionalbodythat 'strivestopromote andprogresscivil engineering'.Inthis sourceitsrepresenting theviewsofits professionally accreditedmembers
95.00%
TheNewEconomics Foundation(NEF) FoolsGoldHowthe 2012Olympicsis 5 sellingEastLondon short,anda10point planforamore positivelocallegacy
Usedascritical oppositiontothePQQ practicesemployedin procuringtheOlympic ParkVenues
40.00%
OlympicDelivery Authority(ODA)PART Datauseonly,to proveweightingof 6 4of4PROJECT PQQscorecard DETAILSProject name:WaterPolo
100.00%
InstitutionofCivil EngineersCIVIL ENGINEERING, 7 "DeliveringLondon 2012:theAquatics Centre"
Confirmationof contractusedfor AquaticCentre
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WHughes,P Hillebrandt,D Greenwood,W Kwawu,SPON Research 8 Procurementinthe ConstructionIndustry Theimpactandcostof alternativemarketand supplyprocesses
Examinescosteffects ofchosen procurementpaths, usedtocompare recommendations againstthe procurementpolicies usedforOlympicPark.
SPONScarriesgood reputationinindustry forcostplanningand advice.Opinions thereforeconsidered authorities
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NationalAuditOffice (NAO)"Preparations fortheLondon2012 9 Olympicand ParalympicGames: ProgressreportJune 2008" NewEngineering Contract(NEC)NEC3 10 chosenforLondon 2012Olympics
UsedtoconfirmODA decisionmaking reasoninginrelation tocontractand contractorselection. Alsousedtoconfirm datasuchaschoiceof contractoption. Useofquotefrom Lathamwithregard appropriatenessof usingNEC3contract suite Usedtoprovidebrief narrativeof developmentofthe NEC3contractform
Thirdpartyusedto auditODAprocedures toensurepublic moneyisspentwisely. Opiniontherefore consideredimpartial andauthorities. Lathamconsidereda prominentvoiceIn constructiondelivery rationale. Inthiscontext, describingits conceptionand developmentto presentdayvalued source. HisHonourHumphrey LloydQC,aformer eminentjudgeinthe UKTechnologyand ConstructionCourt. RenownedUK ConstructionLegal voice.
85.00%
95.00%
Newengineering 11 contract(NEC)"What istheNEC"
95.00%
HumphreyLloyd International 12 ConstructionLaw Review"Some thoughtsonNEC3"
Usedtocritically examinetheuseof NEC3inpractice,with regardtolegal interpretationof specificclauses
95.00%
NewEngineering contract(NEC) 13 "Choosingtheright NECContract" JeffreyBrownwriting forBuilding.co.uk 14 "Legaldisputes:The Olympicsand Wembley"
Inthiscontext, Usedtodemonstrate describingcommon commonpitfallsinuse clienterrorsgood ofNEC3 source. Usedtoconsider supplychaineffectsof pain/gainshare incentivisedcontracts. Regularvoiceon building.co.uk, consideredasafactual sourceingeneral constructionmatters
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NickPearceTheDaily Telegraph"London 2012Olympics: 15 OlympicStadium completed'ontime andunderbudget"
Datauseonly, confirmingoutturn costandbudget advisedatOlympic Gamesbiddingstage; oftheOlympic Stadium
DailyTelegraph consideredasreliable broadsheet newspaper.Datais usuallyethically sourcedand consideredimpartial. Howevernota commonvoicein constructionmatters, usedasdatasource only.
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12.10 Assignment1
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12.11 Assignment2
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12.12 QuestionnaireDesign
ResearchFirstThoughtQuestions SourceofCollection Measure (Primaryor MethodofCollection (Quantitativeor Secondary) Qualitative) Quantitative Quantitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Quantitative Qualitative Qualitative Qualitative Qualitative Qualitative Quantitative Qualitative Secondary Secondary Primary Primary Primary Primary Primary Primary Primary Primary Primary Primary Primary Primary Primary Primary Primary Primary Primary Primary Secondary Primary Primary Primary Primary Primary Secondary Primary Governmentstatistics Governmentstatistics Questionnaire Questionnaire Questionnaire Interview Interview Interview Questionnaire Interview Questionnaire Questionnaire Interview Questionnaire Interview Questionnaire Questionnaire Questionnaire Questionnaire Questionnaire Governmentstatistics Questionnaire Questionnaire Questionnaire Questionnaire Questionnaire Governmentstatistics Interview
Question # 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 WhatwastheinitialbudgetfortheAquaticCentre&OlympicStadium? WerethebudgetsforAquaticCentreorOlympicStadiumexceeded? CouldtheAquaticCentre&OlympicStadiumbeenbuiltfaster? WhatXclauseswereused? Weretheretoomanystakeholdersinvolvedindeliveringtheprojects? Wouldanothercontractformdealwithissuesdifferently? Wouldanothercontractformdealwithissuesmorecosteffectively? Wastheprocurementmethodusedthebestvalueoption? Ifbudgetswereexceeded,whyweretheyexceeded? HowdoesNEC3helpreduceconstructioncosts? WerethepitfallsofpastfailingssuchasWembleyStadiumproject,overcome? Werethebudgetsseteverachievable CommoncharacteristicsofNEC3projectsthatexceedbudgets Werethecontractsheavilymodified? Whatarethedisadvantagesofstandardisedprocurementmodels? Couldthebudgetincreaseshavebeenavoided? Whatbuildingcharacteristicsorvariablesareuniquetothetwoprojects? Whatcostsavingmeasureswereimplemented? Didthecontractobligations/mechanismscauseadditionalcosttotheproject? Arethereany'learningevents'tobetakenfromtheproject? WeretheAquaticCentre&OlympicStadiumbuiltontime? IstheclientsatisfiedwiththequalityoftheAquaticCentre&OlympicStadium? WilltheOlympicStadium&Aquaticcentre'scontinuetogernerateincomepostgames? WastheNEC3awisecontractselection? Wherethereanycostincreasingeventsencounteredtothemaincontractworks? WeretherightcontractorsselectedtodelivertheOlympicStadium&AquaticCentres? Doesthedesignofthestadiumleadtolongtermlifecyclecostsavings? Wasthe'best'NEC3optionselected(i.e.A,B,C,D,E)
Relevance(110) 10 10 5 7 2 6 9 8 10 9 2 10 7 7 8 9 7 7 9 9 3 4 2 8 9 4 2 7
ResearchQuestionstoDevelop/Research Question # 12 9 2 1 25 20 19 16 10 7 24 15 8 28 18 17 14 13 4 6 3 26 22 21 27 23 11 5 Werethebudgetsseteverachievable Ifbudgetswereexceeded,whyweretheyexceeded? WerethebudgetsforAquaticCentreorOlympicStadiumexceeded? WhatwastheinitialbudgetfortheAquaticCentre&OlympicStadium? Wherethereanycostincreasingeventsencounteredtothemaincontractworks? Arethereany'learningevents'tobetakenfromtheproject? Didthecontractobligations/mechanismscauseadditionalcosttotheproject? Couldthebudgetincreaseshavebeenavoided? HowdoesNEC3helpreduceconstructioncosts? Wouldanothercontractformdealwithissuesmorecosteffectively? WastheNEC3awisecontractselection? Whatarethedisadvantagesofstandardisedprocurementmodels? Wastheprocurementmethodusedthebestvalueoption? Wasthe'best'NEC3optionselected(i.e.A,B,C,D,E) Whatcostsavingmeasureswereimplemented? Whatbuildingcharacteristicsorvariablesareuniquetothetwoprojects? Werethecontractsheavilymodified? CommoncharacteristicsofNEC3projectsthatexceedbudgets WhatXclauseswereused? Wouldanothercontractformdealwithissuesdifferently? CouldtheAquaticCentre&OlympicStadiumbeenbuiltfaster? WeretherightcontractorsselectedtodelivertheOlympicStadium&AquaticCentres? IstheclientsatisfiedwiththequalityoftheAquaticCentre&OlympicStadium? WeretheAquaticCentre&OlympicStadiumbuiltontime? Doesthedesignofthestadiumleadtolongtermlifecyclecostsavings? WilltheOlympicStadium&Aquaticcentre'scontinuetogernerateincomepostgames? WerethepitfallsofpastfailingssuchasWembleyStadiumproject,overcome? Weretheretoomanystakeholdersinvolvedindeliveringtheprojects? SourceofCollection Measure (Primaryor MethodofCollection (Quantitativeor Secondary) Qualitative) Qualitative Qualitative Quantitative Quantitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Quantitative Quantitative Qualitative Qualitative Qualitative Primary Primary Secondary Secondary Primary Primary Primary Primary Primary Primary Primary Primary Primary Primary Primary Primary Primary Primary Primary Primary Primary Primary Primary Secondary Secondary Primary Primary Primary Questionnaire Questionnaire Governmentstatistics Governmentstatistics Questionnaire Questionnaire Questionnaire Questionnaire Interview Interview Questionnaire Interview Interview Interview Questionnaire Questionnaire Questionnaire Interview Questionnaire Interview Questionnaire Questionnaire Questionnaire Governmentstatistics Governmentstatistics Questionnaire Questionnaire Questionnaire Relevance(110) 10 10 10 10 9 9 9 9 9 9 8 8 8 7 7 7 7 7 7 6 5 4 4 3 2 2 2 2
ResearchQuestionnaireForm 2 1 10 7 8 15 28 13 6 12 9 25 20 19 16 24 18 17 14 4 WerethebudgetsforAquaticCentreorOlympicStadiumexceeded? WhatwastheinitialbudgetfortheAquaticCentre&OlympicStadium? HowdoesNEC3helpreduceconstructioncosts? Wouldanothercontractformdealwithissuesmorecosteffectively? Wastheprocurementmethodusedthebestvalueoption? Whatarethedisadvantagesofstandardisedprocurementmodels? Wasthe'best'NEC3optionselected(i.e.A,B,C,D,E) CommoncharacteristicsofNEC3projectsthatexceedbudgets Wouldanothercontractformdealwithissuesdifferently? Werethebudgetsseteverachievable Ifbudgetswereexceeded,whyweretheyexceeded? Wherethereanycostincreasingeventsencounteredtothemaincontractworks? Arethereany'learningevents'tobetakenfromtheproject? Didthecontractobligations/mechanismscauseadditionalcosttotheproject? Couldthebudgetincreaseshavebeenavoided? WastheNEC3awisecontractselection? Whatcostsavingmeasureswereimplemented? Whatbuildingcharacteristicsorvariablesareuniquetothetwoprojects? Werethecontractsheavilymodified? WhatXclauseswereused? Quantitative Quantitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Qualitative Secondary Secondary Primary Primary Primary Primary Primary Primary Primary Primary Primary Primary Primary Primary Primary Primary Primary Primary Primary Primary Governmentstatistics Governmentstatistics Interview Interview Interview Interview Interview Interview Interview Questionnaire Questionnaire Questionnaire Questionnaire Questionnaire Questionnaire Questionnaire Questionnaire Questionnaire Questionnaire Questionnaire 10 10 9 9 8 8 7 7 6 10 10 9 9 9 9 8 7 7 7 7
ResearchQuestionnaireHeadingswithFirstThoughtQuestions Heading 1 OlympicProjectAssociatedWith a OlympicStadium b AquaticCentre RolewithinProject a Client b ProfessionalAdvisor c Contractor Budget Werethebudgetsseteverachievable Ifbudgetswereexceeded,whyweretheyexceeded? Wherethereanycostincreasingeventsencounteredtothemaincontractworks? Didthecontractobligations/mechanismscauseadditionalcosttotheproject? Couldthebudgetincreaseshavebeenavoided? OpenorClosed? TypeofQuestion
Closed Closed
Factual Factual
Closed Closed Closed
Factual Factual Factual
3 a b c d e 4
Open Open Open Open Open
Likert Written Written Likert Likert
Contract a WastheNEC3awisecontractselection? b Werethecontractsmodified? c WhatXclauseswereused? Projectissues a Arethereany'learningevents'tobetakenfromtheproject? b Whatcostsavingmeasureswereimplemented? c Whatbuildingcharacteristicsorvariablesareuniquetothetwoprojects?
Open Closed Open
Likert Written Written
Open Open Open
Written Written Written
ResearchQuestionnaireHeadingswithRedraftedQuestions Heading 1 WhichOlympicProjectareyouassociatedwith? a OlympicStadium b AquaticCentre WhichofthebelowbestdescribesyourProfessionalrolewithintheProject? a Client b ProfessionalAdvisor c Contractor Budget NationalAuditOfficestatisticssuggestthatinitialbugetswereexceeded.Canyoubrieflyexplain a anyoverspends? b Inyouropinion,didtheobligations&mechanismsofNEC3contractincreasecosttotheproject? Pleasebrieflyexplainwithreferencetoanyadditionalresourcesemployed c Couldanybudgetincreaseshavebeenavoided? Pleaseexplainwithreferencetoalloftheabove d Inyouropinion,wererealisticbudgetssetduringagreementoftheTargetCost? 4 Contract a DoyouagreewiththedecisiontoselecttheNEC3contractsuite? Pleaseexplainprinciplereasonforyouranswer c WhereanyXclausesused? Ifsowhichclauseswereused? b Werethecontractsmodifiedwithnonstandardcontractclauses? Ifsowhichammendmentswereused? Projectissues a Wereanybuildingelementsreducedinspecificationinordertomeetthebudget? Ifso,pleasedescribedthelargestpackagetobereducedinspecification Arethereanyreccomendationsyouwouldpromote,inordertobetterdevlieraprojectofthis b natureinthefuture? Ifso,pleasedescribeyourmainreccomendation c Whatprojectspecificchallengesmadethebiggestimpactonbudget? OpenorClosed? TypeofQuestion
Closed Closed
Factual Factual
Closed Closed Closed
Factual Factual Factual
Open Open Open Open Open Open
Written Likert Written Likert Written Likert
Open Open Closed Open Closed Open
Likert Written Factual Written Factual Written
Closed Open Closed Open Open
Factual Written Factual Written Written
Appendices
161
12.13 WordCount
(Excludingreferences,bibliographies,appendices&thelike)9722words.

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Project(F317PRO) Project StephenGummow CandidateReference0703928/1

to the agreed budget?

Compiledby StephenGummowMansellConstructionServicesLimitedSouthWest AssistantQuantitySurveyor&CollegeEstateManagementStudent

Introduction ContractorSelection&BestValueTenderEvaluation NEC3Contract&itsinception TheOlympicAquaticsCentre a. Scope b. Procurement c. Budget&Costs

Materials InordertocomparetheAquaticsCentrealongsidetheOverallVenuesbudget(onalikeforlikebasis) percentagecostandbudgetsmovementswillneedtobecalculated.Thewriterwillalsogroupthisdatainto percentagebandsinordertocomparefrequencyandcorrelationsofcostbudgetandcostmovements.

Asdescribedintheresearchmethod,quantitativesecondarysourceddatawillbereviewedandtriangulated byanalysingitalongsidetheprimarysourcedsubjectivedata.Theprocedureislistedbelowinitsrelevant headings:

LiteratureReview AquaticCentreBudgetData OverallVenuesBudgetData

Discussion Limitations AdditionalResearch

Thisliteratureseekstoexaminethe reasoningfortheprocurementprocedures andcontractsselectedforthe2012Olympic Parkprojects.Theshifthastakenplacein thelasttwodecades.Thewriterwillalso seektoexplaintherationaleincost planningbehindtheprocurementofthe 2012OlympicVenues.

5.2 ContractorSelection&Best ValueTenderEvaluation

Results CostMovementSummary Statistic m %

2.46 0.59 16.62 4.98 0.25 0.00 2.57 2.57

0.80 0.95 19.38 5.47 0.30 1.33 0.21 1.11

15.75 2.48 13.27

89.09 139.75 50.66

2.46 0.59 16.62 4.98 0.25 0.00 2.57 2.57 16.86

0.80 0.95 19.38 5.47 0.30 1.33 0.21 1.11 N/A

OlympicParkVenues% CostMovementby Group

OlympicParkVenues% ChangetoBudgetby Group

AquaticCentre% ChangetoBudgetby Group

7.4 HowdidthecommercialresultofAquaticsCentrecompareagainsttheoverall OlympicVenuesbudget?

7.6 ThekeyreasonsforanybudgetvariancesandcostmovementsintheAquatics CentreProject

7.7 ThereasonsforselectingNEC3contractasthepreferredcontractsuiteforthe OlympicVenuesconstruction

7.8 WastheuseofNEC3OptionCContractawisedecisionindeliveringtheAquatic Centre?

1 day 1 day 5 days

29/05/2012 19/05/2012 25/05/2012

9 days 12 days 9 days 15 days 10 days 12 days

06/03/2012 20/03/2012 24/04/2012 22/05/2012 05/06/2012 19/06/2012

12 days 7 Days 8 days 12 days 12 days 3 days 14 days

08/04/2012 15/04/2012 23/04/2012 07/05/2012 19/05/2012 22/05/2012 05/06/2012

07/05/2012 07/05/2012 11/05/2012 18/05/2012 23/05/2012 26/05/2012 31/05/2012 05/06/2012

Dissertation hand in date

10.00% OlympicParkVenues AquaticCentre 5.00%

SirMichaelLatham (Latham) 1 Constructingthe Team

RoyalInstituteof CharteredSurveyors 2 (RICS)MODUSThe OlympicsIssue

Describedclient considerationsin decidingappropriate procurementpath.

ConstructionIndustry Board(CIB)Codeof 3 practiceforthe selectionofMain Contractors

Usedtoconfirm governmentadvicein procuringpublic fundedprojects

SirJohnEgan(Egan) 4 Rethinking Construction

TheNewEconomics Foundation(NEF) FoolsGoldHowthe 2012Olympicsis 5 sellingEastLondon short,anda10point planforamore positivelocallegacy

Usedascritical oppositiontothePQQ practicesemployedin procuringtheOlympic ParkVenues

OlympicDelivery Authority(ODA)PART Datauseonly,to proveweightingof 6 4of4PROJECT PQQscorecard DETAILSProject name:WaterPolo

InstitutionofCivil EngineersCIVIL ENGINEERING, 7 "DeliveringLondon 2012:theAquatics Centre"

Confirmationof contractusedfor AquaticCentre

Examinescosteffects ofchosen procurementpaths, usedtocompare recommendations againstthe procurementpolicies usedforOlympicPark.

SPONScarriesgood reputationinindustry forcostplanningand advice.Opinions thereforeconsidered authorities

Newengineering 11 contract(NEC)"What istheNEC"

HumphreyLloyd International 12 ConstructionLaw Review"Some thoughtsonNEC3"

Usedtocritically examinetheuseof NEC3inpractice,with regardtolegal interpretationof specificclauses

NewEngineering contract(NEC) 13 "Choosingtheright NECContract" JeffreyBrownwriting forBuilding.co.uk 14 "Legaldisputes:The Olympicsand Wembley"

NickPearceTheDaily Telegraph"London 2012Olympics: 15 OlympicStadium completed'ontime andunderbudget"

Datauseonly, confirmingoutturn costandbudget advisedatOlympic Gamesbiddingstage; oftheOlympic Stadium

Closed Closed Closed

Factual Factual Factual

Open Open Open Open Open

Likert Written Written Likert Likert

Contract a WastheNEC3awisecontractselection? b Werethecontractsmodified? c WhatXclauseswereused? Projectissues a Arethereany'learningevents'tobetakenfromtheproject? b Whatcostsavingmeasureswereimplemented? c Whatbuildingcharacteristicsorvariablesareuniquetothetwoprojects?

Open Closed Open

Likert Written Written

Open Open Open

Written Written Written

Closed Closed Closed

Factual Factual Factual