PM Handbook6

Mott
MacDonald
Infrastructure
Buildings
and
Project Managers Commercial Handbook

The 10 Steps to Commercial Success
CONFIDENTIAL
ISSUE 6
August 2003
/var/www/apps/conversion/tmp/scratch_2/310517653.doc
THETENSTEPSTOCOMMERCIALSUCCESS
INTRODUCTION
Step 1
Shall we bid?
Step 2
Establish our costs?
Step 3
Assess fees and finalise bid
Step 4
Matters to consider in the financial proposal
Step 5
Now we have won
Step 6
Install and run Project Control System
Step 7
Monitor progress and costs and identify "extras"
Step 8
Negotiate financial opportunities and agree "extras"
Step 9
Establish credit control procedure
Step 10
At an early stage undertake "financial review of project"
APPENDIX 1
BID PROCESS
1-1
Simplified Flow Chart
APPENDIX 2
LISTS AND FORMS
2-1
2-2
2-3
2-4
Project Director/Manager Responsibilities

Project Control Form
B & I Bid Proposal Summary Form
Risk Assessment Form
APPENDIX 3
CUSTOMER RELATIONSHIP
3-1
3-2
3-3
3-4
Mott MacDonald strengths - A customer's viewpoint

Customer Characteristics
Typical Proposal Letter
Negotiation - Guidelines on tactics
APPENDIX 4
COMMERCIAL ISSUES
4-1
4-2
4-3
4-4
4-5
4-6
4-7
4-8
Fee proposals - Typical wording to use and items to avoid

Financial reports - Explanation of terms
Minimise costs - Measures to consider
Maximise fees - Measures to consider
Changes outside our control - How to ask for more fees
Credit control procedures
Corerequirementstobeincludedinconsultancyagreements
Mott MacDonald internal reference documents
TENSTEPSTOCOMMERCIALSUCCESS
INTRODUCTION
This document is primarily applicable to projects located in the UK. However many of the
issues are also applicable to projects overseas.
The purpose of the manual is to address the key issues aimed at achieving a commercially
successful project in a sequential step by step approach in the project cycle (10 steps). There
are four sets of appendices providing additional reference data including typical clauses for
direct use in correspondence.
Each step is vital if the profitability of the project is to be maximised.
It is intended that the manual is used as a reference document to act as both a guide and a
checklist for each step. It is primarily aimed at Project Managers who should seek advice and
direction from their Project Director as appropriate by means of regular consultation to
establish clear responsibilities for each action. Appendix 2-1 identifies the responsibilities of
the Project Director and Manager.
Regular monthly project control meetings between the Project Manager and the Project
Director are key ingredients to commercial success. These should be based around a standard
agenda (see Appendix 2-2) and provide a record for future reference.
Lateral thinking and the cross-fertilisation of ideas are seen as essential ingredients in
establishing the proper commercial framework, both at the proposal stage and in managing the
project. It is therefore recommended that appropriate brain-storming routines are established to
facilitate this approach.
It should be noted that the manual does not cover all aspects in detail and, where appropriate,
Group Directives and Procedures should be referred to (see the Project Management Navigator
on the Intranet, access through Projects). Similarly, the manual does not cover technical
aspects of project management and therefore does not include reference to QES procedures,
CDM regulations and similar matters.
It is important always to recognise that a key factor for commercial success is that we deliver a
technically and financially successful project to the customer on time. It is without doubt that
the best form of business development is by facilitating repeat business.
Reference should be made to the Unit Commercial page on MiMi (Units/Buildings and
Infrastructure/Unit Homepage/Commercial) where there are example spreadsheets for costs
and risk, feedback reports and post project reviews giving feedback on experience to watch for
and avoid.
Step 1: Shall We Bid?
In deciding whether or not to bid for a job a large number of factors need to be taken into
consideration. Many of these are included in the B&I Proposal Summary Form (see Appendix 2-3),
the top section of which should be completed and approved before any major costs are incurred in
working up a bid. Whenever possible the decision to bid should be taken at prequalification stage as
withdrawal after prequalifying can sometimes be annoying to Customers. The fundamental
questions to be considered prior to spending money on preparing a bid are:
is it work we can do profitably, or accepted as a strategic investment?
is it compatible with the Unit/Divisional Business Plan?
do we have a realistic chance of winning?
are the commercial terms acceptable?
Where the customer is a contractor
are they on the Unit approved list? If not the Divisional Manager must be consulted before any
work starts on the bid.
If a decision is taken not to bid let the customer know.
Step 2: Establish our Costs

Our costs include staff costs (with the appropriate overhead rate applied) and direct costs (including
expenses, sub-consultants and IDT costs where appropriate)
Itemise the scope of work into tasks and/or deliverables (mantime by grade by task).
Establish times and cost rates for tasks/deliverables by consultation with providers; calculate
staff costs
Itemise associated direct costs (inc. IDT input by others).
Calculate total costs using PMD, spreadsheet or similar.
Where appropriate/sensible check against estimates derived by:

i) Cost per drawing
ii) Average team cost for project duration
iii) Factored ACE scale (say 75% as a benchmark)
Undertake a Risk Assessment (See Appendix 2-4) and assess any contingency that may be
needed (Risk Assessment form available on Intranet Units, B&I Unit Homepage,
Commercial, Risk Management, Project Commercial Risk Register.xls).
Ensure that others who will be involved in doing the work have sufficient information to enable
them to own their part of the bid.
Establish if Project team is available, if necessary cost the risk of having to use substitutes .
Talk to the Customer to check our approach and try to establish Customer budget.
Visit site when feasible
Step 3: Assess Fees and Finalise Bid
Evaluate likely winning fee level and set up formal bid reviews.
Consult with others and correlate to percentage fees prevailing in market and previous bid
information.
Can we qualify or re-structure the bid to limit risk?
Are there practical measures to reduce costs?
Can we tactically restructure the fee presentation?
Evaluate level of profit and ROCE decline to bid if unacceptable.
Ensure agreed fee bid is approved and authorised before submission. (Directive 4.01)
For all bids, complete the BNI Proposal Summary Form. (see Appendix 2-3)
Make final decision on whether to submit bid. If decision is not to bid let the customer know.
Be aware of any customer changes introduced late in the bidding process.
Include management time from lead office to visit remote offices to manage/review all work
regardless of location.
Step 4: Matters to consider in the financial proposal
Conditions of engagement (preferably ACE or MM Short Form- see Appendix 3-3 & 4-7).
Use Mott MacDonald short form agreement as basis until Agreement Negotiations complete.
Rigorously check the proposed Agreement and obtain advice from Contracts Department if not
ACE. Look out for implied fitness-for-purpose or liabilities for issues outside our control; for
examples see Appendix 4.1.
Scope of work (limit by defining what is included).
Does additional work need written approval before starting?
Value of fee and exclusions (VAT and/or expenses).
Payment schedule (by named calendar month based on our programme).
Payment terms; 30 days then interest payable on outstanding balance or "right of termination".
Time charge rates for extras (include computer where appropriate).
Period of validity for fee and rates.
Copyright (with MM - covered under ACE).
Set liability limit; should not exceed PI limit (See Directive 4).
Warranties, performance bonds, guarantees.
Novation, can we influence award?
Work carried out by others (Is it direct with customer, sub-consultants or a JV?). Note 7.5%
overhead.
Programme assumptions.
Information supplied by others with dates.
Contract procurement strategy.
Construction cost and its relationship to fee value.
Do not underestimate the cost of any site surveys or site investigations.
Supervision arrangements.
Confirm staffing arrangements (PD, PM, team leaders etc).
Confirm budgets for lifetime costs and lifetime fees.
Currency and taxation issues if project is overseas.
Can we get redesign fees as additional duty?
Have we included a contingency for D&B? (See Projects Intranet page D&B policy.doc)
Success fee on D&B pre-tender designs
Negotiate down cost quotes from others (internal and external).
Step 5: Now we have won
Confirm the project team and ensure responsibilities are clearly allocated, particularly between
the Project Director, Project Manager and Divisional Accountant (see Appendix 2-1)
Set up the framework for the monthly project control meetings
Ensure all team members agree to and therefore 'own' their allocated cost budgets
Identify strategy to minimise costs, noting areas at risk of cost over-run (see Appendix 4-3)
Identify strategy to maximise fees, including areas which could involve extras and tactics for
their negotiation (see Appendices 3-4 and 4-4)
Confirm project budget or amend if necessary
Record critical decisions or actions and their timings concerning high risk technical or budget
activities
Record key facts relating to bid as part of an office database to assist in future bids (winning
formula, cost data, scope of work).
Step 6: Install and run a Project Control System
Select an appropriate project control system to suit size and complexity of project
e.g.
- PMD
- project management software - Microsoft Project/Primavera
- specially adapted spreadsheet
Use FiFi and PMD to establish costs to date
Calculate future costs - staff & direct (include any contingency)
Derive total lifetime costs
Assess total lifetime fees - i.e. contracted fees only and ensuring they are on the same basis as
costs
Derive lifetime profit or loss
Staff costs
Check rates for staff to be used (PMD)
Compare to average cost rate incurred YTD?
Allow for inflation if appropriate
Itemise tasks to assist assessment
Utilise a spreadsheet/PMD
Direct Costs
Check cost YTD
Itemise using a spreadsheet
Include possible claims by the customer where appropriate
Include 7.5% procurement/sub-consultant overhead
Fees
% scale fee: ensure correct construction value (not too optimistic)
Lump sum
Time charge - relate to any budget/limit and ensure costs correlate
Separate out fees not contracted
Do not include fee claims less than 75% secure and only 50% if over 75% secure
Use a practical Change Order approval process
Step 7: Monitor progress and costs and identify "extras" or savings
establish and follow project control routines:

-weekly monitoring of time and cost inputs
-monthly monitoring of costs and progress
-update PMD (hence budget): monthly unless otherwise agreed
regularly consult others on their progress against agreed budgets
hold Project Director and Project Manager meeting on a monthly basis using standard proforma
agenda and carry out agreed actions. (See Appendix 2-2)
regularly review scope of work required against scope of work in our contract and thereby
identify 'extras' or savings; be vigilant in avoiding scope creep
ensure everyone involved is keeping detailed records and diaries to substantiate additional fees
this step is ongoing to the end of the project
Step 8: Negotiate financial opportunities and agree "extras"
it is of paramount importance when seeking additional fees to recognise the customer 's
point of view:-he needs funds available in his budget and therefore he needs to know about any additional
expenditure at the earliest opportunity
-he needs reasons to pay more
-he needs to satisfy others in his own organisation
-he may need to satisfy auditors
establish and maintain regular contact with customer on fee-based issues; prepare and issue to
the customer standard notification of basic and additional fees on a regular basis to avoid
surprises.
recognise and be familiar with the negotiation process
(see Appendix 3-4 )
ensure verbal request for more fees is immediately confirmed in writing
this step is ongoing to the end of the project
Step 9: Establish credit control procedure
establish and maintain a billings diary (see note on billings good practice)
monitor value of unbilled work through review of WIP, using monthly project returns
monitor debtors and payments received; review at least monthly and liaise with the Credit
Management Team on project specific roles in chasing debts.
in case of late payment, agree escalation procedure with Credit Management Team (see
Appendix 4-6)
Step 10: At an early stage undertake "financial review of project"
at an early stage, say at 10% to 20% progress, it is essential to undertake a radical formal
review of lifetime costs and fees
reassess the contracted scope of work in light of fuller knowledge and identify any cost
implications
identify scope for additional fees
reassess appropriate measures to reduce costs (see Appendix 4-3)
reassess appropriate measures to maximise fees (see Appendix 4-4)
Establish action plan for financial success
Review action plan at monthly project control meetings
If a major problem arises:

-
act promptly in consultation with Project Director to protect our interests
notify Divisional Manager and B & I MD
notify as potential PI claim if appropriate
seek advice on contractual options from Contracts Department
identify and follow a clear action plan
APPENDICES
APPENDIX 1
BID PROCESS
APPENDIX 2
LISTS AND FORMS
APPENDIX 3
CUSTOMER RELATIONSHIP
APPENDIX 4
COMMERCIAL ISSUES
APPENDIX 1-1
SIMPLIFIEDFLOWCHART
Bid/Prequalification
Received
DecisiontoBid
YE
S
NO
DMtoappointPD&BM
AdviseClientandreturndocuments
BM
PD
BM
SeekAdvicefromContracts/
LegalTaxation(INT)
GroupTreasurer(INT)
Estimates
Resources
ImplementDirective4
BM
PreparelistofAssumptions
BidReviewPanelMeets
TocompleteBid/NoBidForm
<50kDMapproves
>50kDM/UMapproves
Legend
PM=ProjectDirector
BM=BidManager(orProject
Manager)
DM=DivisionalManager
INT=InternationalProjects
UM=UnitManager
BM
CompleteBid
ReviewForm
PM/102/01
PDBidApproval/
Authoritytosign
SubmitProposal
BM
ReviewContract
BM
SignContract
SubmitProposal
BidReviewPanelMeets
BM
BMComplete
Agreement
Review
PM/102/01
APPENDIX21
Project Managers Responsibilities

reportingtoProjectDirector
Bid Stage
1
Organisepreparationoftechnicalandfinancialproposal,forapproval.
Demonstratehowtheprojectcanbedelivered(WBSandprogramme)
Project Stage
3
Establishprojectbudget,ProjectPlanofWorkandprojectcontrolsystem.
Completetheprojecttotime,tobudgetandtorequiredquality:
Establishtheprojectteamanddevelopitthroughleadership
Managecostsandresources:staff,otherDivisions,externalinput
Maximisesustainableprofit(minimisecosts,maximisefees)
Minimisecapitalemployed(earlybilling,earlypayment)
Ensuretechnicalqualityofwork
Organisecompletionofdeliverables,ontime
Maintainprojectrecords
ReviewstateofprojectwithProjectDirectoratmonthlyprojectcontrolmeetings.
DevelopastrongCustomerCarerelationship.
ComplywithQESrequirements.
PromotefurtherworkopportunitieswithCustomer.
APPENDIX21
Continued
ProjectDirectorsResponsibilities
reportingtotheDivisionalManager
These headings summarise responsibilities for a single project; Project Directors will also have
wider responsibilities (e.g. in development of the business and of the staff).
NB. A Project Director does not require to be a Divisional Director.
Bid Stage
1
Decide whether to bid and set proposal budget.
Appoint Project Manager for the bid and direct the proposal preparation.
Approve bid price and terms, obtaining authority as necessary.
Approve final terms of appointment, obtaining authority as necessary.
Confirm the project risks have been assessed
Project Stage
6
Appoint Project Manager (preferably bid manager) and Project Review Engineer.
Agree working arrangements with Project Manager (responsibilities, authority, etc).
Approve Project Plan of Work and project control system.
Approve opening project budget, and all changes.
10 Monitor state of project, using monthly control meetings; agree actions with PM.
11 Ensure correct resources are available.
12 Approve project deliverables (can be delegated if appropriate).
13 Monitor and develop the Customer relationship, in co-ordination with PM.
14 Ensure staff development and technical expertise are maximised, within project constraints.
15 Support, guide and coach the Project Manager.
Office:
B & I Project Control Form
Project:
KPIs
Date of project control meeting
KPI
Latest project
budget:
Staff costs
Fees
Direct costs
Profit
Project No:
APPENDIX 2-2
Project Manager:
Project Director:
KPI
Reasons for budget changes:

Claims, by us/against us:
(status, changes, reasons)
Billings/WIP (status, reasons )
KPI
Debtors (status, reasons )

Progress:
financial (% costs) technical(%complete)
Programme (on time?, note deliverables,..)
KPI
Staff Issues:
QA:
Bid/Agreement Review; then Audit
(Dates, status,
PPW
etc)
Project Review
Complaints/CARs
CDM:
Other Issues:
Customer advised
Risk assessment
H&S Plan
H&S File
Technical problems
Future work opportunities
Customer care status
KPI
Actions
Signed: PM/PD
KPI Total
KPI Total
KPI Total
KEY PERFORMANCE INDICATORS (KPI)
Core Skill
APPENDIX 2-2 (continued)
KPI
Measure
Project
Control
A simple record of the

number
of
project
control meetings held
between PD and PM
against a KPI of one per
month.
5 Meeting monthly
4 75% of possible meetings
3 50% of possible meetings
2 25% of possible meeting
1 less than 25% of possible meeting
0 No project control meeting
Current Profit
Maximisation
Profit
maximisation
measures not only the
recovery of the original
budgeted
profit
but
records any changes
and ensures maximum
recovery.
5 Exceeding target profit by > 10%

4 Exceeding target profit by 10%
3 Achieving target profit
2 100%-50% of target profit
1 50%-0% of target profit
0 Loss
Billing
Compare actual billing

(to
include
agreed
extras) to the project
costs to ensure positive
cash flow.
5 Billing
4 Billing
3 Billing
2 Billing
1 Billing
0 Billing
Timescale
Compare actual delivery

date to programmed
delivery
date.
(to
include
agreed
changes)
5 Improved on agreed programme

delivery
4 Achieved programme delivery
3 late but no consequence
2 late, moderate consequence
1 late, major consequence
0 Legal damages pending
Customer
Satisfaction
This will be a measure

provided by the project
managers
customers
and therefore will not be
undertaken
quarterly
but once for selected
projects only. It will give
a measure of the
professionalism of the
PM.
5 full customer satisfaction and repeat

work
4 full customer satisfaction without any
repeat work.
3 partial customer satisfaction
2 little customer satisfaction
1 customer dissatisfaction
0 Legal damages pending
12
10% ahead of costs

in line with costs
lower than costs by 10%
lower than costs by >30%
APPENDIX 2-3
B&I Proposal Summary Form
Revision
E
(to be used for all bids)
Date
Project
Proposal Code
Client
Project No
04/07/03
Location
B
idP
lan
n
in
g
Scope of Work
Competition
Lead Firm/Unit/Div
Assoc. Firms/Subcontractors
Start Date
Project Period
Estimated Fee
Bid Submission Date and time
Chances of Success
Good, Fair,Poor,Unlikely
Marking criteria
Involve other Divisions

Tender Bond? How Much?:
Proposal budget:
(reviewed) Project Director
Bid Manager
Decision to proceed
(approved) Div Manager
Date
MM in Dispute?
Plus (Unit Mgr. >50k)
For significant bids the Bid Manager and Project Director should refer to 'Bid Page 2' worksheet which gives questions for decisions on BID/NO BID.
Special permissions/reviews required (Group Directive 4.02)? Y/N. (+ve answer - approval required and Obtained .)
Reqd.
Approved
a) Fees >250,000 (or equivalent)

b) Liabilities >10 x Fee or 5m (or equivalent)
c) Contracting
d) Fitness for purpose
e) Liquidated damages
f) Group "C" Country
f1) D&B Contractor NOT on approved list
g) Joint Venture
h) Uninsured Liability
i) Parent Company Guarantee
j) Bank/Performance Bonds
k) Environmental Pollution
l) Use of Special Group Company
m) credit check Not done/Not acceptable?
f2) Novation
n) Warranties
Reqd.
Items c-i require Group MD approval

Copy to Bid Manager, Project Director, QES File, Div Mgr., MD B&I and (if fees > 1m) B&I Business Div Manager
Basis of Financial Bid
P
rop
osedF
in
al B
idT
e
rm
s
Total Income:
IDTs:
Net Revenue:
Profit:
Division
Amount
Terms
Details agreed:
Inflation provision in contract
in costs:
Terms of payment:
Average capital employed (months of turnover)
or ROCE
Staff inputs (man-months):
Other Divisions
Division
Staff available & suitable:

Terms of reference satisfied or modified:
Form of consultancy agreement:
Special Commitments
Limit of Liability:
Environmental Liability:
Bonds/Warranties/Novation:
Design and Build risk:
Other Risks/Opportunities
Copy to Divisional Manager (and MD of B&I if >50k or D&B ) prior to finalisation of bid and for approval
Reviewed by Project Director, Divisional Manager and MD B&I; agreed to submit on terms noted above
Signed:
Date
(Proj Dir)
Signed:
Date
(Div Mgr)
Signed:
Date
(MD B&I)
Copy to:
Legal & Secretarial if special commitments apply/Relevant Company Secretary, or equivalent, when contract is signed.
To be retained on Project File and by MD B&I
13
Approved
APPENDIX 2-3 continued
Contract Conditions
Contract
ConditionsChecklist
Checklist
Client:
Client:
Attach to
to the
the Bid
BidForm
Form
Put
if statement
is true,
"N" if"N"
not if
Put "Y"
"Y"ininbox
box
if statement
is true,
not
Comments
Comments
NotDone Linked
Linked
NotDone
Credit
andand
satisfactory
Creditcheck
checkmade
made
satisfactory
Cannot
MM's
obligations
without
agreement
Cannotassign
assign
MM's
obligations
without
agreement
Job:
Job:
No
obligations
No contracting
contracting
MM
tasks
defined
obligations
MM
tasksclearly
clearly
Proposal
allall
requirements
of theofenquiry
Proposalmeets
defined
meets
requirements
the
enquiry
Nominated
andand
resources
are suitable,
available
and sufficient
Nominatedstaff
staff
resources
are suitable,
available
and
sufficient
Liability
Liability
NotDone Linked
Linked
NotDone
Only
plus
at most
one one
other
Onlytotoclient
client
plus
at most
Cannot exceed
10m
in aggregate
for job
Cannot
other
exceed
10m
in aggregate
for
Cannot exceed
fees
x 10x (or
if higher)
Cannot
job
exceed
fees
10 250,000
(or 250,000
if
Claims cannot
bebe
made
more
than than
six years
finished
higher)
Claims
cannot
made
more
six after
yearsjob
after
job
No indirect/economic
finished
lossloss
can be
No
indirect/economic
canclaimed
be
claimed
Fees
Fees
Clear
forfor
payment
Cleartimetable
timetable
Payment
conditional
on matters
beyond
MM control
pay (e.g.
when pay
paid)when
Paymentisisnotnot
payment
conditional
on matters
beyond
MM (e.g.
control
Have
additional
workwork
beenbeen
included
paid)rates
Have
ratesforfor
additional
MM
to to
stop
work
if invoices
not getting
paid
MMhas
included
hasright
right
stop
work
if invoices
not getting
paid
Payment
(If International
use Checklist
for Costs/Taxes
etc on Hidden
QES
Form) QES
PaymentininSterling
Sterling
(If International
use Checklist
for Costs/Taxes
etc on
Hidden
Form)
Copyright
Copyright
Retained
RetainedbybyGroup
Group
Any
client
is restricted
to thistoproject
Anylicence
licencetoto
client
is restricted
this
project
Insurance
Insurance
Obligation
is conditional
on market
conditions
permitting
at reasonable
cost
Obligationtotoinsure
insure
is conditional
on market
conditions
permitting
at reasonable
limit
does
not not
imply
any limit
Limit
does
not not
exceed
contract
liabilityliability
or 5m. orNB
Limit
insurance
does
exceed
contract
NB insurance
insurance
limit
does
imply
any on
limit
cost ofofinsurance
actual
on
5m. liability
actual
liability
Special
SpecialCommitment
Commitment
Contract
"special
commitments"
Contracthas
hasnono
"special
Advice
& Secretarial
Department
(and where
Taxation
has been obtained
Advicefrom
fromLegal
Legal
& Secretarial
Department
(andrelevant
where the
relevant
theDepartment)
Taxation Department)
has been
commitments"
and
obtained
andcarefully
carefullyconsidered.
considered.
General
General
(or ififproject
in Scotland,
Scots) law
English
projectsituate
situate
in Scotland,
English(or
lawapplies
applies
No conditions
project
manager
considers
to be unusually
onerous
Scots)which
No
conditions
which
project
manager
considers
to be unusually
MM
is
not
acting
in
a
joint
venture/consortium
MM is not acting in a joint
onerous
venture/consortium
Confirms that
thethe
Agreement
complies
with Group
policy
Confirms
that
Agreement
complies
with Group
NotDone
NotDone Linked
Linked
policy
Save
in attached
papers,
the Project
Director:
Saveasasmentioned
mentioned
in attached
papers,
the Project
Director:
Has
thethe
terms
of the
document
Hasreviewed
reviewed
terms
of attached
the attached
Confirms
thethe
Agreement
complies
with Group
policy
Confirmsthat
document
that
Agreement
complies
with Group
policy
Recommends
that
thethe
Agreement
be signed/executed
Recommends
that
Agreement
be
signed/executed
Name
Proj Dir
Name
Proj
Dir
Date
Date
14
APPENDIX 2-4
See Intranet Units, B&I Unit Homepage, Commercial, Risk Management,

Project Commercial Risk Register.xls
Buildings & Infrastructure Risk Register
Rev B 17-11-02
For use in preparing bids and monitoring Project

At Bid Stage, Mitigation Measures to be increased until Risk is Tolerable (or if agreed with DM, Significant) Summary Worksheet to be copied to Bid
Approval Form
During Project, Spreadsheet to be kept live to add/delete Threat/Opportunity and review effectiveness of Mitigation and hence Likelihood of
occurrence.
INPUT DEFINITIONS
LIKELIHOOD
IMPACT
Likelihood that a threat occurs/opportunity is lost
Impact of the Threat/Opportunity should it occur
IMPACT
Qualitative
COST
PROGRAMME
LIKELIHOOD
Qualitative
Definition
As Input
PROBABILITY
Definition
As Input
VL
very low
negligible
negligible effect
on programme
VL
negligible/
improbable
<1%
low
> 1% budget
> 5% effect on
programme
unlikely/
remote
>1%
medium
> 10%budget
> 12% effect on

programme
likely/
possible
>10%
high
> 20% budget
> 25% effect on

programme
probable
>50%
VH
very high
> 50% budget
> 50% effect on

programme
VH
very likely /
almost certain
>90%
OUTPUT DEFINITIONS
ACCEPTABLILTY OF RISK TO PROJECT AT BID
intolerable
15 to 25
significant
10 to 12
tolerable
4 to 9
negligible
up tp 4
LIKELIHOOD
IMPACT
Qualitative As
Input
Mott MacDonald strengths - A customers viewpoint
APPENDIX 3-1
Items to consider in any initial discussion and phrases to use in technical proposal:
Successfully carried out a similar project before (preferably recently).
Keen and enthusiastic about our potential involvement.
Large resource locally based.
Ability to deliver the project within budget and to programme.
Specialist skills in required areas.
Ability to provide innovative solutions, value for money and affordable design excellence.
Project leader and team all available within short mobilisation period.
Third party accredited quality assurance since 1992.
Financially sound with appropriate professional indemnity cover.
Describe key staff and their roles on this project.
Include recent letters of praise from customers.
Demonstrate that we have visited the site.
Follow customer instructions, answer all his questions.
Identify the key problem-solving/technical points and ensure they stay in focus during the proposals
preparations.
Show we manage risks to avoid surprises.
Show how we minimise procurement time.
Show we understand customers business needs.
Show we believe in teamwork.
Show we operate a single point of contact.
Show we measure continuous improvement.
Show we are pro-active and drive the project.
Show we have provided the A team for this job and we can deliver.
Show we are committed to environmental and health and safety issues.
Show we are committed to research and development, including significant investment in R&D,
training and CPD.
Show we are committed to IT and able to interface with the customers own systems where
appropriate.
Identify any other issues that make us stand out from our competitors.
16
APPENDIX 3-1
Continued
Typical technical proposal phrases
Further to our recent telephone discussion in respect of the recent advertisement in the Official Journal
for the above commission we confirm our keen interest in being involved in your team.
Work will be undertaken by staff based in our Office, which presently employs around 160 multidisciplinary staff and which provides comprehensive professional services in civil, structural, highway,
transportation and mechanical/electrical engineering.
Mott MacDonald meets industrys demands for on-time delivery and value for money through a wealth
of design expertise, practical experience and management skills tailored to achieve each customers
programme, budget, performance and quality goals.
We recognise the need to maintain the highest levels of quality control, reliability and safety while
optimising operating, energy and maintenance costs.
Our multi-disciplinary base enables us to cover all components of a project and all stages from concept
to completion, providing a totally integrated and quality-assured one-stop service.
Mott MacDonald is a proven winner in design and build having completed over 100 such projects
covering numerous disciplines.
We understand both the commercial and engineering demands of design and build and are known for
our sound practical engineering and ability to meet the special requirements of the fast track design and
build process.
We are at the forefront of developments in bridge design and apply the latest technology to projects
ranging from some of the longest suspension bridges to short span rural road bridges, and in this
respect we attach for your reference examples of projects that we have undertaken in the recent past.
17
APPENDIX 3-1
Continued
We have the ability to provide innovative solutions, value for money and affordable design excellence.
Mott MacDonald is a world-class multi-disciplinary engineering consultancy.
We are a wholly
independent international company, based in the UK, with over 7,000 staff world-wide, turnover of
400 million and global experience spanning 130 countries. We are renowned not only for our
technical excellence, dependability and quality, but also for developing innovative, value for money and
people-focused solutions.
At Mott MacDonald we offer a rich technical diversity that we believe to be unrivalled among our
competitors.
Our capabilities cover the full spectrum of engineering disciplines including all
structural, civil, mechanical and electrical engineering plus numerous specialist fields ranging from
communications, project management and subsea engineering to landscape architecture, food industry
consultancy and education. We offer our customers the advantage of a totally integrated and qualityassured one-stop service across each of our main business sectors.
building transport energy water industry urban development rural development
communications environmental-management consultancy research and development education and
training construction economies management consultancy
Every commission we undertake is assigned a project director with overall responsibility for it plus
a project manager who is the customers principal contact and oversees the projects day-to-day
management and cost control. Close teamwork and partnership with our customers ensure that all
project activities are fully co-ordinated and targeted towards their objectives and we provide special
training for customers staff if required. We operate a quality system in accordance with British and
ISO standards designed to guarantee a top-class service.
18
Customer Characteristics
APPENDIX 3-2
Contractors (See Working with Contractors/D&B Projects)
Contractors are inherently contractual by nature and are often demanding customers.
Our PI insurance is often seen as fair game. Be prepared for surprises!
Carry out rigorous checks on our contractual liabilities, in particular avoid implied fitness for purpose
or liabilities regarding our performance.
There is a basic problem with all D&B in that we have no real control at any stage as customer design
decisions will be based on profit not on design risks.
Fees have to be competitive as part of contractors own tender.
Payment record on fees is usually poor as cash flow is a problem for contractors.
Use external QS where possible on D&B.
Developers
Developers usually try to limit their own financial risks and expect others to work at risk in the early
stages.
They often use a 100 Company as part of this strategy; therefore a credit check is a problem that
needs to be recognised.
There is a need to have a clearly defined risk management strategy at the outset.
The bid needs to spell out all the issues so there is no ambiguity about our exposure.
Fees can be high margin (to reflect risks) once the project has the Funder in place.
Payment record on fees is usually poor as cash flow is a problem for developers.
Blue-Chip Companies/Utility Companies/Retail-Leisure Companies
Blue-chip companies are financially robust but can be difficult and demanding.
They are used to working with consultants and expect a special level of service.
Often their terms and conditions are weighted in their favour.
Individuals do vary and building a close relationship is a key strategy.
Fees may have to be competitive but repeat business is the reward.
Payment record on fees is usually OK but terms are often more than 30 days.
19
APPENDIX 3-2
Continued
Government Agencies/Local Authorities
Government Agency customers are financially robust but can be bureaucratic and decision-averse.
They are used to working with consultants and expect a full level of service.
When things go wrong they are happy to take the legal route using in-house resources.
Individuals do vary and building a close relationship is a key strategy.
Fees have to be competitive but repeat opportunities are the reward.
Sub-Consultants Role
Working as a sub-consultant is a non-preferred role and is usually high risk.
It is difficult to ensure that our interests are always protected.
Terms and conditions are usually the same as for the Lead Consultant, who hopefully remains solvent!
When things go wrong responsibilities and liabilities can be confused.
Fees usually have to be competitive but repeat business is the reward.
Architects
Difference in project stages can lead to confusion.
Assisting architects can lead to increased liabilities for no increase in fees. Work to Mott MacDonald
scope or use change control notes.
Identify and be clear about interfaces and responsibilities.
Their design development could be our design change. Having our designs signed off means further
work is easier to clarify as a change.
Overall co-ordination is normally the Architects job.
For further information see Projects, working with architects.doc on the Intranet.
20
TYPICALPROPOSALLETTER
SEEMiMiforuptodateversiononB&ICommercialPage
APPENDIX33
Ourref: JDB/ARW/1234
Yourref:
MrANOther
123PrincesStreet
AcityZE10PX
12February2003
DearMrOther
Re: A New Building for A N Other Limited
With reference to our meeting on 3 August 2002, we are very pleased to submit our fee proposal for
your consideration.
1.0
Introduction
From the information currently available to us [in the following documents list], we
understandthatitisyourintentionto constructanewofficebuildinginAStreet,Acitn,
comprising 1,000 m2 of office accommodation over 3 floors. We have estimated [been
advised]thatthetotalconstructioncostis3million[plusVA].
2.0
ScopeofWork
We understand that we are required to provide the design services for the internal
mechanicalandelectricalplantandsystems,abovegrounddrainage,externallightingand
irrigationtothegroundsandgardens.Duringthedesignphasewehaveincludedwithinour
feetoattendeightdesignteammeetingsinAplacn.Duringtheconstructionphaseofthe
project we will provide a full time Resident Engineer based on site in fully fitted out
accommodationprovidedbyothers.Inadditionarepresentativeofourdesignteamwill
attendtwelvemonthlysiteprogressmeetings.
3.0
2.1
Meetings
2.2
Exclusions
2.3
Assumptions
Programme
21
We haveassumedthatthedesignteamwillmeetasaninitialactivitytoagreeadetailed
designprogrammeandanassociated informatiotransferschedulewithproposeddates,for
informationrequiredtopermitustocarryoutthedesignwithfreezedatesforeachphaseof
theproject,suchthatourworkcanbecarriedoutinanefficientoncethroughdesignprocess
Apreliminaryprogrammeiscurrentlybeingdevelopedbutthecurrentknownkeydatesare:
Appointmentofdesignteam
1January2002
Schemedesign(ACEstage4/RIBAstageDcompletedby25February2002
Detaileddesign/Productioninformation(ACEstage6/RIBA
StageF)completeby
30April2002
ContractorstartonSite
1June2002
Completionofconstruction
30November2003
Or
Aspertheattachedprogramme.
4.0 ConditionsofEngagement
OurfeeproposalisbasedonthefactthatwewillbeappointedonTheAssociation of
ConsultingEngineers,ConditionsofEngagement,1995,2ndedition1998,AgreementA(2).
Ourfeeassumesthatouragreementsaresignedunderhand.
Ifanalternative formofagreement istobeutilised, wewillcontinue toworkonACE
conditionsofengagementuntilanalternativeagreementismutuallyagreed.
5.0 Fees
1
Ourlumpsumfeetoundertakethescopeofworkasperitem2.0aboveis54,000
(fiftyfourthousandpounds).
Or
2
Or
3
Ourfeetoundertakethescopeofworkasperitem2.0aboveis 1.8%(onepoint
eightpercent)ofthetotalconstructioncostofthebuildingasmentionedin1.0abov.
[Atthisstageorfromtheinformationcurrentlyavailabletousoronaprojectofthis
nature], we believe that our fee should be based on a time charge basis, at the
followingrates:
DivisionalDirector
AssociateDirector
PrincipalEngineer
SeniorEngineer
Engineer
TechnicianEngineer
Graduate
TechnicalClerk/CADOperator
22
90.00perhour
75.00perhour
65.00perhour
55.00perhour
48.00perhour
45.00perhour
35.00perhour
45.00perhour
Wesuggestthatabudget,whichwillnotbeexceededwithoutyourprioragreement,
of54,000besetasidetocoverourtimechargefees.
Thesetimechargeratesarevaliduntil31December2002atwhichtimetheywillbe
reviewed for inflation, increased costs etc. based on Labour Market Trends
Magazine, Table E2Construction published by the United Kingdom Office of
NationalStatistics,withabasedateof1January2002.
6.0 Duties
OurdutieswillbeNormalDutiesasdefinedbytheAssociationofConsultingEngineers
conditionsofengagement. Additionaldutiese.g.attendingadditionalsitemeetingsand/or
visits,variationstoscopeofservice,variationinsizeofbuilding,designvariations,redesign
etc.willbeundertakenonatimechargebasis.Instructionstoredesigncomponentswhich
werepreviouslydesignedtoanapprovedstageanddesignchangestosuitparticularsystems,
revised construction procedures and associated implications shall also be considered
additionalduties.Ourtimechargesratesforadditionaldutiesare:
DivisionalDirector
AssociateDirector
PrincipalEngineer
SeniorEngineer
Engineer
TechnicianEngineer
Graduate
TechnicalClerk/CADOperator
90.00perhour
75.00perhour
65.00perhour
55.00perhour
48.00perhour
45.00perhour
35.00perhour
45.00perhour
These time charge rates are valid until 31 December 2002 at which time they will be
reviewedforinflation,increasedcostsetc.basedonLabourMarketTrendsMagazine,Table
E2ConstructionpublishedbytheUnitedKingdomOfficeofNationalStatistics,withabase
dateof1January20
7.0 Expenses
1
Or
All reasonably foreseeable expenses e.g. telephone; faxes, internal printing, local
traveletc.areincludedwithinourfeein5.0above.Wehavealsoincludedforthe
provisionof4setsofconstructionissuedrawingsand4copiesofourspecification.
Allotherexpenseswillbechargedatcostplus5%handlingcharge.
Ourfeein5.0aboveincludesallexpenses.
Or
3
Our fee in 5.0 above includes all expenses but excludes international travel,
accommodationandsubsistence.
23
Or
4
Ourfeein5.0excludesallexpenses,whichwillbechargedatcost,plus5%handling
charge.
8.0 Taxes
Allfeesandexpensesareexclusiveofanylocal,national,internationalortaxesofanykind.
Anytaxesduewillbechargedattheappropriaterateatthedateofinvoice
9.0 Currency
Ourfeeproposalisinsterlingpounds(GBP).
10.0
Payment
WepreferforpaymenttobemadedirectlyintoourUKbankaccount(detailsareprintedon
ourinvoices)usingBACSorbywiretransferwithoutdeductions.Alternativelychequescan
besenttotheaddressshownonourinvoices.
Invoicesaretobesettledwithin20daysfromthedateoftheinvoice.
Anyamountoutstandingafter20dayswillbesubjecttoLatePaymentofCommercialDebts
Regulations 2002, made under The Late Payment of Commercial Debts (Interest) Act
1998
11.0
PaymentSchedule
Invoiceswillbesubmittedmonthlyinarrearsagainstprogressofwork.
Or
Invoiceswillbesubmittedasfollows:
Stage
Percentage of Feeamounts
fee
Mobilisation
10%
5400
Outlinedesign
15%
8100
Schemedesign
25%
6750
6750
Detaileddesign
25%
6750
6750
Tenderstage
10%
5400
ConstructionPhase 15%
1620
1620
1620
1620
1620
24
Dateofinvoice
30January2003
28February2003
31March2003
30April2003
31May2003
30June2003
31July2003
31August2003
30September2003
31October2003
30November2003
31December2003
Total
100%
54,000
12.0
LimitofLiability
The maximum amount of compensation payable by Mott MacDonald Limited (whether
arisingundercontract, tort,negligence, bystatute orinanyotherway)is limited to 1
millionforoneclaimorseriesofclaimsarisingfromoneevent,and10millioninaggregate
forallsuchclaimsforaperiodnotexceedingsixyears.
Inthecaseofpollutionandcontaminationourliabilityislimitedto2millioninaggregateof
allclaims
Or
Inthecaseofpollutionandcontaminationourliabilityisexclude.
If Mott MacDonald Limited is considered to be liable jointly with third parties, the
proportionofcompensationpayablebyMottMacDonaldLimitedshallbelimitedtothat
proportionofliabilitywhichisattributabletoitsbreach
13.0
Bonds,WarrantiesandGuarantees.
Ourfeedoesnotincludeforanybonds,warrantiesorguaranteesofanykind.
Or
Ourfeeonlyincludesforabankperformancebondasrequiredbyyourtermsofreferenceto
avalueof50,000
14.0
ContractingEntity
Connell Mott MacDonald is the trading name of the strategic alliance between Mott
MacDonaldLimitedoftheUnitedKingdomandConnellWagner(Pty)LimitedofAustralia.
ThecontractingentityforthiscontractwillbeMottMacDonaldLimited.
15.0
Validity
Thisfeeproposalremainsopenforacceptanceuntil9November2002.
We believe that we have interpreted your requirements accurately and comprehensively but if
you require any further information or clarification of any kind, please do not hesitate to
contact Joe Bloggs or myself.
Yourssincerely
ForConnellMottMacDonald
25
A R Worley
DivisionalDirector
26
Negotiation - Guidelines on tactics
APPENDIX 3-4
Recognise and understand aspiration levels - The person who aims high gets more
Aspiration levels move both before and during the actual negotiation.
Lower the other person's aspiration level. This should preferably be done over a period of
time before the 'actual negotiation'
Establish 'Best Possible Result' (BPR) and 'Minimum Acceptable Result' (MAR) before the
'actual negotiation' to ensure both the target and limit for the negotiation is understood and
authorised internally in MM.
Don't simply concede on fees - Defend the fees consistently
Point out the benefits - the hidden values - prepare a list before the 'actual negotiation'.
Don't give concessions - trade them "What I offer you balanced by what you offer
me".
Giving concessions raises the other person's aspiration level; therefore avoid by proposing "If you agree to ............. then we can do ............."
Lets split the difference - avoid by responding as follows "I would like to but I can't afford to; but what I can do is ............"
Look for items to trade - Avoid seeing our fees as the only issue
Prepare two lists prior to the 'actual negotiation' as follows
1.
Cheap to him - valuable to us
e.g. -
2.
Cheap to us - valuable to him
e.g. -
assurance on further work

opportunities to provide other
disciplines
earlier fee payments
earlier handover date
limited BPF collateral warranty
conditional copyright
Remember the 'Smarties' principle

If I give you one of my blue Smarties how many red ones will you give me?
i.e. do not assume it always has to be a one for one trade.
27
Fee Proposals - Typical wording to use and items to avoid
APPENDIX 4-1
Typical clauses to consider for inclusion in the financial section of the fee proposal
We are pleased to provide our fee proposals for carrying out the structural engineering
design on this project.
The actual disciplines need to be included to limit the service to be provided
Our work to be carried out under the latest edition of the ACE Conditions of Engagement
2002 version A, B, C D, E or F, except where described below:The appropriate ACE Agreement needs to be included wherever the customer has not specified his own
conditions
Note: ACE conditions provide basic protection re.
reasonable skill and care

copyright with MM
provision for cancellation charge
See Appendix 3-7 for further information
Our fees to be based on a fixed fee of 50,000 (exc. VAT) relating to the scope of work
described below.
Alternatives to fixed fee are % of construction cost or time charge fees or a combination
Out-of-pocket expenses including printing, travel and subsistence to be reimbursed

separately at cost plus 5%.
Out-of-pocket expenses provide extra and generally profitable fees
Fees to be payable in five equal monthly instalments. Payments to be received within 30 days
of submission of invoice. Where full payment is not received within 30 days interest is
payable on outstanding balance at 2% above clearing bank base rates.
Ensure payment arrangements are front-loaded to help cash flow and minimise finance charges
Work carried out by others to be arranged for direct payment by yourselves following our
approval of invoices on your behalf. Where this procedure is not appropriate and payment by
ourselves on your behalf is agreed then such payments to be reimbursed at cost plus 15%.
Statutory fees to be by direct payment by yourselves.
Any additional work that may be required beyond the scope of work described to be
reimbursed on a time charge basis as follows:
Director/Associate
Professional Staff
Technical Staff
Computer CAD
90 per hour
55 per hour
45 per hour
30 per hour
Note: rates exclude

VAT and expenses and
relate to 2003 costs
By quoting rates this establishes the background to seeking further fees.

Note: using general description for professional and technical staff covers a wide range of staff and
therefore facilitates maximising fees.
Note: include computer, and qualify rates as shown.
28
TENSTEPSTENTOSTEPSCOMMERCIALTOSUCCESSCOMMERCIAL
SUCCESS
APPENDIX 4-1
Continued
Typical clauses to consider for inclusion in the scope of work section of the fee proposal
We have examined the content of your letter and attached brief describing your requirements and
have assessed the extent of work required to carry out:It is important to confirm the information received on which we are basing our fee proposal.
feasibility study and outline design;

scheme design and preparation of tender documentation;
tender procedure and evaluation;
general site supervision and contract administration;
Generally is advantageous to define the services to be included rather than what is excluded as this approach is less
open ended.
The development of the design is to be confined to the outline design phase and our fee is based
upon carrying out the scheme design and preparing tender documentation without modification
from the outline design.
Design development is potentially an open -ended commitment to keep changing the design and therefore it is vital
to define the stage when in effect the design is frozen.
Our fees are calculated on the basis of a once through design against the agreed scope of work
and programme with no allowance for any additional work in response to changes.
It is often advantageous to be able to refer back to this clause should the customer argue that changes are a normal
part of the process.
We understand there will be a value engineering workshop arranged at the pre-tender stage. In the
event that changes to the design are identified which provide an overall cost benefit to the scheme
then the associated costs of implementing the changes are to be reimbursed on a time charge basis
as additional work at the rates described above.
Value engineering can lead to extensive additional design work and it is important to ensure that our potential costs
are recoverable and that these in turn are included in the overall cost benefit calculation for the scheme.
The cost of this work to be reimbursed as a fixed fee which takes account of the following:-
total construction cost of around 2m

start on site by October 1999 completion December 2000
information detailing your final requirements to be provided by 31.5.99
information on the existing construction and dimensional survey information prepared by
others on your behalf to be provided by 30.6.99
tender documentation to be based on detailed design and construct procurement to minimise
possible claims and thereby establishing the likely out turn cost at the tender stage.
By defining all the assumptions for the basis of the fee, it will provide scope for variations if factors outside our
control result in changes.
29
SUCCESS
APPENDIX 4-1
Continued
In view of the importance attached to monitoring both the quality of construction and the progress
against programme and recognising there are associated risks, we recommend that full-time site
supervision is provided during the construction period and propose that you allow 6,000 per
month (exc. VAT) in your budget to cover an appropriately qualified resident engineer.
By recommending full-time supervision and stressing its importance we are placing the onus on the customer should
he not accept this proposal. If full-time supervision is accepted then this usually assists in reducing our office-based
costs.
Potential difficulties that can arise when working with other consultants
Design changes by other members of the team
customer is unlikely to be willing to pay for costs arising from design team changes
advise other team members that any design development must be confined to the appropriate
stage and that our fee agreement with the customer is on this basis
'Back to back' sub-consultancy arrangements
avoid being the sub-consultant wherever possible
ensure the lead consultant fully represents all our interests in his dealings with the customer
try to avoid fee payments on a paid-when-paid basis as we would be vulnerable financially

(use the Construction Act as the basis of prompt payment)
ensure the agreement conditions are acceptable
In cases where potential customers aim to impose unreasonable conditions these need to be
tactfully 'qualified' into an acceptable form.
any reference to or implication of designing for "fitness for purpose"

response -
this clause relates to a contractors liability and as such is not covered under
our PI insurance.
any reference to achieving the approval of a third party e.g. statutory planning or building
regulation approvals
response -
we will submit applications on your behalf but cannot provide assurances

which depend on the views of the statutory authority.
30
SUCCESS
APPENDIX 4-1
Continued
any reference to achieving the project within a prescribed or tender cost budget.
response -
any reference to collateral warranties which include terms that fall outside the standard
British Property Federation form of warranty.
response -
whilst we will use our best endeavours to design the facility within your cost
budget you will appreciate that the tender value will be dependent on market
forces prevailing at the time; any redesign work required to reduce the cost
will be subject to additional fees.
there are certain items that fall outside the BPF form of warranty and will need
to be reviewed to ensure that they do not conflict with our PI insurance cover.
any reference to ensuring that the Contractor builds to the Specification and to the
construction programme.
response:-
We will administer the contract within its terms and conditions, and monitor
and advise you when these are not being met by the contractor.
31
SUCCESS
Financial reports - Explanation of terms
APPENDIX 4-2
Fee billings
theamountsrequestedfromthecustomerforpayment;these
may be in the form of invoices which add VAT to the fee amount or
applications for payment which do not add VAT.
Staffcosts
salary and payroll cost multiplied by the appropriate overhead factor;

currently:
1.675
officebased
1.30
sitebased
1.50
secondedtocustomersoffice
allcostswhicharenotstaffcostswhichareallocatedtoaproject(note:
notonlyexpenses);directcostsinclude:
Directcosts
allowances (UK site & overseas)

IDT costs (other Divisions staff + direct costs)
subconsultantsexternal(plus7.5%chargefromGroup)
countryoverheads(overseas)
stafftravel
staffsubsistence
staffaccommodation
companycarmileage
companycarallowance
premisescosts
computer
printing&archivingcosts
admin.&generalcosts
financecosts&bankcharges
baddebts
telecoms
interest
unrelievedforeigntax
procurement (plus 7.5% charge from Group)
Lifetime profit
thisequatestolifetimebillingsminuslifetimecosts(staffanddirect)
Workin
progress
thisisdefinedasthevalueofworkcarriedoutbutnotyetbilledtoa
customer. Note:thevalueofworkinprogressisthecostofthework
carriedoutlessamountsbilledpluseitheraproportionoflifetimeprofit
(whereapplicable)orlessthelifetimeloss. Workinprogressmaybe
negative(calledfeeinadvance). NormallyveWIPmeansyouhave
beenpaidforworkyettodoand+veWIPmeansyouhavedoneworkyet
tobebilled.
FeesEarned
YTD
(YearToDate)
This is also referred to as fee income or turnover and comprises: fee

billings + the change in work in progress, from the beginning of the year to
the end of the period being considered.
Note: It is neither billings nor cash received
32
SUCCESS
Profit YTD
profit YTD comprises fee income YTD less costs YTD
33
SUCCESS
APPENDIX 4-2
Continued
Methodof
derivingprofit
Profit is released during the project lifetime on a conservative basis,

according to the cube of the percentage of budgeted staff costs which have
been expended up to that time.
This calculation relates to projects where the lifetime profit is positive;
whenever a lifetime loss is recorded then the YTD profit immediately
equates to the value of lifetime loss less the lifetime loss at the end of the
previous year.
Debtors
thisisthesumofallunpaidinvoicesi.e.debts
Note: as soon as an invoice is issued it effectively transfers work in
progress into a debt until payment is received. All UK debts on the FIS
include VAT (even if they have been submitted as applications for
payment).
Capital
Employed
thiscomprisesvalueofworkinprogressplusvalueofdebtors(including
VAT).
ProjectROCE
thisisannualisedprofitdividedbytheaveragecapitalemployedoverthe
lifetimeoftheproject.
Note:annualisedprofitisthelifetimeprofitdividedbythelifeofthe
projectinyears.SpreadsheetavailableonMiMiB&ICommercial
Homepage
34
SUCCESS
Minimise costs - Measures to consider
APPENDIX 4-3
Measures to consider to reduce costs both at bid stage and managing project stage
make sure you have understood the technical brief requirements
utilise simple-to-design, simple-to-build, concepts
reduce numbers of drawings by use of composite multi-discipline drawings
use standard specifications
use standard contract documents
adapt previous reports and designs
maximise use of computer-generated information
tabulate or use spreadsheets to reduce calculations
use design software programs
increase scope of work for contractor to do detail design (e.g. bar bending schedules)
utilise D & B contract for procurement
omit bills of quantities or remeasure
minimise opportunities for claims and thereby reducing post-contract work
ensure contractor provides fully serviced accommodation for RE staff
ensure site staff have adequate communications, transport, computers, etc.
utilise full-time site staff to check contractors designs and drawings
utilise company or hire cars rather than private, where available
utilise internal printing rather than external, where available
charge set percentage for costs of telephones, word processing, computers, printing, etc.
35
SUCCESS
Maximise fees - Measures to consider
APPENDIX 4-4
Measures to consider to increase fees both at bid stage and managing project stage
claim for all hours that are actually worked (more than 7.5 per day if appropriate)
check staff are not booking to unpaid overtime if timescale job
allocate staff to highest appropriate grade;
professional staff can include graduates
technical staff can include ONC grade
refer to appropriately qualified (not necessarily chartered) in bid proposal
charge for computers on additional work (include a note in bid)
charge for administrative work (include a note in bid)
charge for expenses on additional work (include a note in bid)
include handling charge for administering work by others (include a note in bid)
where percentage fee, ensure MM calculate the construction costs even when external QS
refer to salary review date and validity period (include in bid) as reason for increased rates
charge for collateral warranty (include a note in bid)
where percentage fee, ensure the tender price is not artificially low
advise on the need for full time site staff
advise any extra work items that the customer may wish to action.
36
SUCCESS
Changes outside our control - How to ask for more fees
APPENDIX 4-5
Issues that can be raised in discussion and correspondence to ask more sensitively for
more fees
refer to QES
As part of our QES procedures we wish to advise you of the recent

change control items which have further design cost implications.
reluctance
I am usually reluctant to seek further reimbursement of our design

costs however ......
extra effort
to save cost
This further work will facilitate the opportunity to increase cost

savings on the construction costs
minor changes
As you will recall we have already been involved in taking on board a

number of minor changes however .....
extra effort
to reduce risk
It is beneficial to carry out this further work at this stage to minimise

the possibility of contractors claims later.
unforeseen work
You will appreciate that this work could not have been anticipated
earlier and therefore unfortunately there will inevitably be further
associated design costs to allow for in your budget.
limit if possible
We will of course use all reasonable endeavours to ensure that this

further work is kept to a minimum.
increase resources
for acceleration
In order to incorporate this further work and still achieve the critical
programme dates, we are proposing to increase our design team
resources by reallocating other work to enable more staff to be
mobilised and we will advise you of the cost implications in the next
few days.
initial fee
estimate only
You will appreciate it is not possible to assess the extent of work

required until the initial phase is complete and the design costs can be
more clearly defined.
increase costs
extension
As a result of a number of factors previously discussed at our

meetings you will appreciate that the extended programme will
unfortunately involve a corresponding increase in resources with
associated design costs.
disruption
You will appreciate this delay has resulted in the need for a number of
staff to be reallocated to other work until the present difficulties have
been resolved.
37
SUCCESS
APPENDIX 4-5
Continued
regular review
of our costs
We have recently completed a review of the anticipated design cost

implications associated with the changes now envisaged and wish to
advise that .......
extra effort
to save time
in the future
This further work at this stage will be beneficial reducing the time that
otherwise would have to be spent during the construction period.
lack of
information
There is the likelihood that the absence of key information from others will
result in abortive design work and we trust that it is still your wish that
we continue to progress our work to minimise the associated programme
delays. We will advise you of the fee implications when the extent of
abortive work is more clearly defined.
38
TENSTEPSTENTOSTEPSCOMMERCIALTO
SUCCESSCOMMERCIALSUCCESS
Credit Control Procedures
APPENDIX 4-6
Items to clarify on appointment:
Whoisthecustomer? Ifweareunsureaboutexactlywhichentitywearedealing
with,seekfurtherinformationfromthecustomer(ideallytheirregisterednumber),or
seekadvicefromtheCreditManagementTeam.
Isthecustomercreditworthy?Thisshouldbeconfirmedbyacreditcheckcarried
outwithinthelastsixmonths,unlessthecustomerislistedasexempt(seeAppendix
JofCreditManagementPoliciesandProceduresonIntranet).
Havethepaymenttermsbeenagreedandincludedintheagreementorcontract?
Towhomshouldtheinvoicebesent(e.g.AccountsPayableorProjectManager)?
Shouldacopybesentelsewhere?Doestherehavetobeacoveringlettersentwith
eachinvoice(potentiallydelayingsubmission)ifso,coulditbepreparedpriorto
invoicingtakingplace?
Whohastoauthorisepayment,andwhatisthelimitoftheirauthorisation?
Isthereafeebudgetinanyparticularfinancialyear?
Isthereanordernumberthatshouldbequotedonallinvoices/correspondence?
Isthereaparticulardateinthemonthbywhichinvoicesmustbereceivedbythe
customertoensurethattheyarepaidwithintheagreedterms?
Canwebillfeesonaccountforsubstantiationatalatertime?
Canwebillevenearlier?
Whatisdoneonceaninvoiceissubmitted?
CreditManagementTeamfulfilaproactiveroleincashcollection.ALLcustomers
willbecontactedinrespectofALLoutstandingdebts,unlesstheCreditManagement
Teamisadvisedtothecontrary. Itistherefore importanttonotifytheCredit
ManagementTeamifthereisaknownreasonthataninvoicewillnotbepaid,or
isunlikelytobepaid.
StatementsaresentatthebeginningofeachmonthtoallcustomersbytheCredit
ManagementTeam.Inexceptionalcircumstances(tobeapprovedbytheDivisional
Manager), a Project Manager may elect to send the statement themselves with a
coveringletter.
If payment is still not forthcoming as a result of normal collection methods, an
39
escalationplanshouldbeagreedwiththeCreditManagementTeam.
Note: Always check the contractual position prior to threatening to charge interest,
and/or stopping work and/or legal action. All threats should be on the basis that they
will be carried out if payment is not received.
40
Core requirements to be included in Consultancy Agreements
7
APPENDIX 4-
This list is not exhaustive and is for guidance only. Of necessity it does not contain what must be excluded,
or is preferable to exclude, nor can it cover special cases like design and build assignments. There are
other sources of Group Information for these.
ACE
FIDIC
NEC
MML
Model Agreement Forms
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Free and prompt supply of information

Prompt decisions by Customer
*
*
*
*
*
*
Delay and disruption provisions and associated cost

Suspension by Customer
Late supply of information by Customer
Late decisions by Customer
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Standard of Performance, Liability and PI

Exercise of reasonable skill and care (no stricter standard)
Liability limited in extent and amount to that recovered from PII
Indemnity from customer for any claims excess over PI cover
Liability limited to legal liability and directly foreseeable costs
incurred
Liability of consultant limited to related proportion of default
Exclusion or limitation of pollution or contamination aspects
Payment Terms
Period for payment specified
Interest provision on late payment specified
Obligatory payment of undisputed portions of invoices
Variations, Additional Services
Provision for fee on charge rates/actual inputs
Agreement on fees and costs prior to undertaking work
Customer Obligations
Termination rights of Consultant

Failure of Customer to pay
Continued suspension
Recovery of direct additional costs resulting from termination
Specified fee addition for termination
Changes in Personnel
Approval to changes of (key) personnel not to be unreasonably
withheld
41
APPENDIX 4-7
Continued
FIDIC
NEC
MML
ACE
Model Agreement Forms
Specified Cost of Works and Programme

Specified cost for calculating fee and cost overrun include in
scope of services/payment terms
Specified period (particularly under supervision) with
additional rates/costs for extension include in scope of
services/payment terms
Other
Copyright retained by consultant, with licence to customer for
project only
Customer not entitled to assign obligations without agreement
Model agreement form details:

ACE
- Association of Consulting Engineers 1995, versions A,B,C and D (version C is for

design services to a Contractor) Up to date comments on Agreements available on
MiMi
FIDIC
- Customer/Consultant Model Services Agreement, 2nd Edition 1992

(internationally orientated but simple in format and clarity and usable in UK with
appropriate deletions)
NEC
- New Engineering Contract Professional Services Contract, 2nd Edition 1998
MML
- MML Small Projects Consultancy Agreement
42
AGREEMENT REVIEW CHECK LIST
APPENDIX 4-7 (continued)
(Available on MiMi)
1.0Introduction
ThischecklistassumesthatthereaderisfamiliarwiththeGroupDirectivesandalso
withtheLegalInformationNotesontheLegalandSecretarialandContractsDivision
homepage.Thechecklisthighlightscommonareasofconcerninagreementsbut
isnotasubstituteforobtainingspecificadvicefromtheContractsDivision.
Someofthecommentsmaynotbestrictlyapplicableinoverseascontractifin
doubtcontactContractsDivision
2.0TypeofAgreement
Priortoreviewinganagreementitisessentialtoestablishthenatureofthecontractual
undertakingbeingconsideredinordertodeterminewhattermsareappropriateand
whattermsmaybeimpliedbystatute.
AreMMundertaking:
Traditionalconsultancyservicesforclient/owner
ConsultancyservicesforaclientwithnovationtoaDandBcontractor
ConsultancyservicesforaDandBcontractorpretenderand/orposttender(these
formsofcontractarepotentiallyveryonerousandContractsDivisionshould
alwaysbeconsulted)
ConsultancyservicestoaPFISPVorsimilar
DuediligenceservicestoPFISPVorfundersetc
Consultancy/contractingservicesinrespectofEPCM
Contracting
Etc.
InordertoestablishwhatobligationsarelikelytobeowedbyMMorowedtoMMby
othersitisnecessarytodeterminewhatroleMMareexpected
tofillintheprojectorganisation.
AreMM:
Leadconsultanttoclient/owner
Partofdesignteamwithotherconsultants,notaslead
Subconsultantonbacktobackarrangement
Withthesemattersinmindtheagreementcanbeproperlyreviewed.
43
SUCCESS
3.0Parties
Checkthelegalstatusoftheotherparty(companyname/registerednumber)
DoesthepartyorthecountryofoperationcomplywithDirective4.02
Carryoutcreditcheck
UsecorrectMottMacDonaldcompanyseeDirective4.03
Ifourclientisadeveloper/subsidiarycompany/overseasclientreliantonfunding/etc
wemayneedaguaranteeinrespectofpaymentfromaparentcompany,bankor
fundingagency
4.0StandardofPerformance
Theexerciseofskillandcare(anddiligence)satisfactory
Theexerciseofthelevelofskillandcaretobeexpectedfromacompetentconsultant
experiencedinaprojectofsimilarsizeandcomplexitysatisfactoryiftrue
InDandBcontractswithcontractorsensurethatthepretenderperformancereflects
thepreliminarynatureofthedesign
Avoid"fitnessforpurpose"performanceobligations
Avoidwarrantiesforstrictperformance
Avoidtheuseof"bestendeavours"
Avoid"timeoftheessence"provisions
5.0Liability
Thepreferredpositionisliabilityforbreachoftheexerciseofskillandcareor
negligence
Damagesfollowingabreachshouldalwaysbesubjecttothecommonlawruleon
remotenessofthedamage
Alwaysproposeanetcontributionclause(i.e.MMonlyliablefortheproportionofthe
damageattributabletoMM'sdefault).EssentialhoweverwhereMM'sclientisa
contractorinthebuildingsector.
Alwayslimitanyactionorproceedingsunderthecontractto6or12yearsas
appropriate
AlwaysseektolimitliabilityforbreachinaccordancewiththeDirective4.06and
LegalInfoNote
Liabilityforpollutionandcontaminationisfurtherrestricted,seeDirective4.14
Wheretheprojectisparticularlyriskyitmaybenecessarytorequiretheclientto
indemnifyMMforanyclaims(sayintort)aboveMM'slimitofliability
Avoidindemnityprovisions
Avoidwidelydrafteddamagesprovisions
AvoidliabilitytothirdpartiesbyexpressexclusionoftheContracts(RightsofThird
Parties)Act1999
Avoid"backtoback"provisionsinDandBcontractswithcontractors
6.0Insurance
MMhavewiderangingprofessionalindemnityinsurance,publicliabilityinsurance
andEmployer'sliabilityinsurancebuttheseCANNOTbetailoredtosuitindividual
44
SUCCESS
clients.ReferanyunusualrequirementstoContractsDivision
AnyobligationtomaintaininsuranceMUSTbesubjecttosuchinsurancebeing
availableatreasonablycommercialrates
7.0PaymentTerms
ForcontractsintheUKthepaymenttermswillgenerallybesubjecttotheHGCRAct
1996.Maynotapplytocertaincontractsinthepower/waterandnuclearsectors.
Periodofpaymentshouldbe30days
Includeobligationtopayundisputedelementofanyinvoice
Trytoobtaincalendarormilestonepaymentregime
Thereisnowastatutoryrighttointerestonlatepaymentof8%abovebasefor
contractsinEnglandandWales,seeLegalInfoNote.Obtainatleast2%abovebasefor
othercontracts
IncludeaprovisionforcostandtimearisingoutofdelayanddisruptiontoMM
services
InoverseascontractsconsultFinanceTreasuryforadviceontaxesetc
PaywhenpaidtermsarevoidundertheHGCRActgenerallyalsoavoidincontracts
notsubjecttotheHGCRAct,i.e.overseas
Avoidmeasureandvalueapproachtopayment
Avoidsetoffprovisionsbetweencontracts
Avoidretentionoffees
8.0VariationsandAdditionalWork
Ifthecontractallowstheclienttoinstructvariationsand/oradditionalwork,thenthere
MUSTbeaprovisiontodetermineadditionalfeesand/ortimeresultingtherefrom
Preferablyvariationsandadditionalworkshouldbepricedattimescaleratesoragreed
asalumpsumpriortoexecution
Avoidany"conditionsprecedent"ortimebarringprovisionstoentitlementtopayment
forvariedoradditionalwork
9.0ClientObligations
Theclientmustagreetoprovideallinformationanddatapromptlysoasnottodelay
theservicesallatnocost
Theclientmustagreetoprovidedecisionspromptlyandanyequipment,supplies,visas
etc.allatnocost
AvoidtransferofliabilitytoMMforaccuracyorsufficiencyofinformation,dataetc
providedbyclient
10.0TerminationbyMM
Thepreferredpositionisforanexpressrighttoterminateintheeventofamaterial
breachbytheclient
IftheclientcansuspendtheservicesMMmusthavearighttoterminateiftheservices
arenotresumedwithin6months
11.0TerminationbyClient
45
SUCCESS
Terminationshouldonlybeallowedinrespectofamaterialbreachandthenonlyif
MMfailtorectifythebreachwithin28days
Terminationforconvenienceshouldberesistedandifacceptedlinkedtopaymentto
MMofthelostprofitonthecontract
46
SUCCESS
12.0Suspension
Suspensionoftheservicesshouldnotbeallowedforperiodsexceeding6monthsand
muchlessifpossible
Resumptionofservicesshouldalwaysbesubjecttopaymentofreasonablecosts
arisingfromthedisruptiontoMMservices
13.0ChangesinPersonnel
CheckifthereareanyrestrictionsonMMchangingkeypersonnel
Avoidfinancialpenaltiesforchangingkeypersonnel
14.0CopyrightandIntellectualPropertyrights
CopyrightandIPRshouldberetainedbyMMifpossible
OnlyaccepttransferofIPRifthebusinesscaseisnotprejudicedandMMretainthe
righttousetheIPRinthecourseofourbusiness
EnsurethatMMareexpresslyrelievedofanyliabilityfortheuseofanydeliverablefor
purposesotherthanthatintended
15.0WarrantiesandBonds
Warrantiesandbondscreateseparateundertakingsthesemustbecheckedtoensure
thatoriginalobligationsandliabilitiesarenotextended,CONSULTContractsDivision
Warrantiesshouldbeexpresslylimitedinnumber
ParentCompanyGuaranteescanonlybeagreedbyGroupMD
16.0Confidentiality
Ensurethatsuchprovisionstoprejudicethebusinesscase
Checktoseethatonlymattersrelatingtoconfidentialityareaddressedsuchclauses
areoftenusedtotransferliabilityforthedatadisclosed
Ensurethattheprovisionsaresubjecttoareasonabletimeexpiry
17.0Disputes
MostUKcontractsaresubjecttostatutoryadjudicationundertheHGCRAct1996.
Maynotapplytocertaincontractsinthepower/waterandnuclearsectors.
Includeadjudicationprovisionsinanyevent
ThepreferredpositionistoincludearbitrationundertheCIMARRulesinadditionto
adjudication
OverseescontractsshouldbesubjecttoarbitrationundertheInternationalChamberof
CommerceRulesforArbitrationifpossible
Someforeignjurisdictionshaveacceptablearbitralprocedures
Mediationcanbealowcostwayofresolvingdisputes(butisnonbinding)andshould
beconsideredwhereadjudicationisnotpossibleseewww.cedr.co.uk
Avoidbespokeadjudicationprovisionsasthesegenerallyseektoactinfavourofthe
otherside
18.0Law
47
SUCCESS
ThecontractshouldalwaysbesubjecttoEnglishlaw(orScottish/NIrelandlaw)
wherepossiblethelanguageshouldalwaysbeEnglish.
48
SUCCESS
Mott MacDonald Internal Reference Documents
APPENDIX 4-8
PLEASE ACCESS VIA MIMI TO ENSURE UP TO DATE VERSION

Useful Group Directives and Procedures as at July 2003
Directive4ProjectControl
4.01
4.02
4.03
4.04
4.05
4.06
4.07
4.08
4.09
4.10
4.11
4.12
4.13
4.14
4.15
4.16
4.17
4.18
4.19
4.20
4.21
4.22
4.23
4.24
Required Authority
Approved Country
Appropriate Company
Commitment Procedure
High Value Commitments
High Liabilities
Contracting Obligations
Liability for Fitness for Purpose or Performance
Liability for Liquidated Damages
Joint Venture or Other Arrangement by Which the Group is Liable for the Actions
of Others
Any Significant Uninsured Liability
Bank Bond
Parent Company Guarantee
Environmental Pollution or Contaminated Land
Work at Unprofitable Fee levels
Appointment as Engineer for the Works
Restrictions on other Group Business Units
Investments
Taking over Staff or Debts of Another Entity
Group Quality Environment and Safety Management System
Disclaimers on Drawings and Reports
Disputes and Professional Indemnity Insurance
Project Records
Other Policies
Directive 5 - Project Accounting

5.01
5.02
5.03
5.04
5.05
5.06
5.07
5.08
5.09
5.10
5.11
5.12
5.13
Financial Proposals
Project Reporting
Charge Rates
Time Records
Staff Transfers and Redundancies
Staff Expense Claims
Project/General Expenses
Payment of Expenses over the Internet
Currency Exposure
Country Specific Issues
Project Offices and Country Offices
Bad and Doubtful Debts
Unrelieved Taxes
Directive 6 -Group Accounting

49
SUCCESS
6.01 Manpower Returns
6.02 Key Reporting Dates
6.03 Key Meeting Dates
6.04 Remote Office Visits
6.05 Inter Divisional Trading
6.06 Divisional Partnerships & Partnered IDT
6.07 Inter Group Trading
6.08 Banking Arrangements
6.09 Internal Interest Rates
6.10 Payroll
6.11 Creditor Payments
6.12 Charitable Donations
Directive 7 Business Practice
7.01
7.02
7.03
7.04
7.05
7.06
7.07
7.08
7.09
7.10
7.11
7.12
7.13
7.14
7.15
7.16
Ethics Statement
Code of Business Conduct
Anti-Fraud Policy
Whistle Blowing
Conflict of Interest
Health and Safety
Travel Risk
Corporate Identity
Visual Identity
Correspondence Style
Media Relations
Control of New Company Formation
Control of Corporate Acquisitions
Post Acquisition Evaluation
Data Protection.
Office Disaster Recovery Plans
50
SUCCESS
UsefulLegalDocumentsonMimi
Agents and Agency Agreements
Bonds - Fees Charged to Projects
Bonds - NatWest's advice on risk issues
Bonds - Risks When Giving Bonds Checklist
Certifying Copy Documents
Collateral Warranties
Computer Viruses - Reducing MM liability for
Confidentiality Agreements
Consortium or Joint Venture - MM acting in a
Contracting - Insurance of Risks
Contracting - Risks for MM
Contracts - Rights of non parties
Copyright - Protecting Reports and Drawings
Correspondence - Headings - "Without Prejudice" etc.
Debts - Interest on Late Payments
Design - Increased Risk from Client Requirements
Disputes - Offers to Settle - calculating a monetary offer
Disputes - Offers to Settle - risk issues
Documents - how they are signed and sealed
Fees - avoiding disputes about MM's fees
Fees - Billing - Invoices and Applications for payment
Fees - Invoices - correct addressee
Fees - Payment Terms for MM Appointments
Fees unpaid - whether MM can stop work
Guarantees - Parent Guarantees for MM companies
Housing Grants, Construction and Regeneration Act 1996
Indemnities - Dangers for MM
Intellectual Property - Provisions for MM appointments
Inventions - patenting MM inventions
Investigations By External Agencies
Joint Venture Companies - Advantages and Disadvantages
Liability - Joint, Several and Joint and Several Liability
Liability and how to limit it
Litigation disclosure of documents
Litigation Expert Witness - Business for MM
Litigation Limitation Periods
Litigation - MM as Expert Witness - Legal Aid Clients
Litigation Witnesses
Local exposure - how to minimise exposure to problematic countries
Local laws aspects of the laws of various countries
Notarising Documents - General Issues
Notarising Documents - Specific Country Requirements
Novation of Agreements
Police etc Interviews
Privilege Keeping Documents Out of Court
References Provided by MM
Set-Off
Signing authority - can we rely on the other party's signature?
51
SUCCESS
UsefulLegalDocuments(continued)
Starting work before a contract is signed.
Subcontracting consultancy work
Technical Advice for Banks, etc. - Risks
FeedbackReports
Date
September 00
October 00
November 00
December 00
January 01
February 01
March 01
April 01
May 01
June 01
July 01
August 01
September 01
October 01
November 01
December 01
January 02
Title
Construction Budget Problems
Change of PM affecting project performance
Old +ve WIP proving not to be billable
Doubts surrounding validity of MM contract
After the event valid fee claims
Performance not compatible with draft form of contract
Subconsultants without a back to back agreement
Fees included in the budget not consistent with the contract
Design development that never stops
Fee payment withheld as a result of alleged non-performance
Work not constructed in accordance with the design
Defects in the construction blamed on an inadequate design
Novation and lack of clarity on who our contract is with
Taking instructions from an external Project Manager
Changes to the scope of work increasing our liability
Cost saving measures which increase the risk of problems in the future
Assumptions on costings in the framework bid proving to be over optimistic
Absence of client instructions which lead to audit problems in the future
Clients financial difficulties leading to non-payment of fees
Construction Information Release Date Problems
Problems Arising from unsatisfactory work from sub-consultants
Contractor seeking recompense from MM for costs arising from increased
quantities.
Error in spreadsheet leading to incorrect calculation of future costs
Requests for help turning into someone to blame.
Simple error in reading the Clients brief invalidating design assumptions.
Fully reimbursed bid costs turning into project loss
Client loses our tender documentation
No limit of liability for unforeseen contamination issues
Reliance on the specialist division in establishing the appropriate contractual
arrangements.
Extended programme resulting in increased costs
Contractor reluctant to pay invoices against payment schedule
Interpretation of what is value engineering
Approval by the client increasing work for MM
Contract limits opportunities for additional fees
Assumptions on scope of work at bid stage prove to be misplaced
D&B Contractor blames MM for increase in construction costs
PFI D&B anything unforeseen identified after financial close is alleged to
be a problem for MM.
52
SUCCESS
February 02
D&B contractor alleges that we have operated as the management
contractor
Request for information from archives leading to allegations of design error
March 02
Late billing containing minor errors results in non-payment of fees
April 02
Contractor does not recognise contractual entitlement of MM success
D&B contractor stops paying fees due to problems on another project
May 02
Acting as a sub-consultant problems in getting paid
Acting as a sub-consultant problems in securing fee claims
June 02
Fee Claim absence of quality records limits success
D&B contractor blames MM for late construction information
July 02
Use of Clients equipment by contractor leads to claim against MM.
D&B contractor stops paying fees because of a problem on another project.
August 02
Adjudication to recover fees from D&B Contractor
D&B Contractor issues adjudication notice against MM
April 03
MM loses investment when teamed with winning contractor for PFI D&B
when he decides he is too exposed in this market and withdraws.
Opportunity lost to Clarify/Constrain/Qualify our deliverable for the Client's
Aspirational Brief not taken.
OtherDocumentsonMimi
WorkingwithArchitects
BusinessAdviceNotesforDirectors
D&BPolicy(B&IDocument)
53

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Mott

Project Managers Commercial Handbook

Establish our costs?

Assess fees and finalise bid

Matters to consider in the financial proposal

Now we have won

Install and run Project Control System

Monitor progress and costs and identify "extras"

Negotiate financial opportunities and agree "extras"

Establish credit control procedure

At an early stage undertake "financial review of project"

Simplified Flow Chart

LISTS AND FORMS

Project Director/Manager Responsibilities

Mott MacDonald strengths - A customer's viewpoint

Fee proposals - Typical wording to use and items to avoid

Each step is vital if the profitability of the project is to be maximised.

Step 1: Shall We Bid?

is it work we can do profitably, or accepted as a strategic investment?

is it compatible with the Unit/Divisional Business Plan?

do we have a realistic chance of winning?

are the commercial terms acceptable?

Where the customer is a contractor

If a decision is taken not to bid let the customer know.

Step 2: Establish our Costs

Itemise associated direct costs (inc. IDT input by others).

Calculate total costs using PMD, spreadsheet or similar.

Where appropriate/sensible check against estimates derived by:

Visit site when feasible

Step 3: Assess Fees and Finalise Bid

Can we qualify or re-structure the bid to limit risk?

Are there practical measures to reduce costs?

Can we tactically restructure the fee presentation?

Evaluate level of profit and ROCE decline to bid if unacceptable.

Be aware of any customer changes introduced late in the bidding process.

Step 4: Matters to consider in the financial proposal

Scope of work (limit by defining what is included).

Does additional work need written approval before starting?

Value of fee and exclusions (VAT and/or expenses).

Payment schedule (by named calendar month based on our programme).

Time charge rates for extras (include computer where appropriate).

Period of validity for fee and rates.

Copyright (with MM - covered under ACE).

Warranties, performance bonds, guarantees.

Novation, can we influence award?

Information supplied by others with dates.

Contract procurement strategy.

Construction cost and its relationship to fee value.

Do not underestimate the cost of any site surveys or site investigations.

Confirm staffing arrangements (PD, PM, team leaders etc).

Confirm budgets for lifetime costs and lifetime fees.

Currency and taxation issues if project is overseas.

Can we get redesign fees as additional duty?

Success fee on D&B pre-tender designs

Negotiate down cost quotes from others (internal and external).

Step 5: Now we have won

Set up the framework for the monthly project control meetings

Confirm project budget or amend if necessary

Step 6: Install and run a Project Control System

Use FiFi and PMD to establish costs to date

Calculate future costs - staff & direct (include any contingency)

Derive total lifetime costs

Derive lifetime profit or loss

Check rates for staff to be used (PMD)