By David Lee
David Lee looks at the long-term cost of variations in MEP contracts and searches for alternatives that would be better for the finances of the client.
Have you ever seen working drawings for structural concrete, or for the finishings? No? Why is it then, that under a ‘fully designed’ contract, the MEP subcontractor has to produce a new set of drawings for approval, before he can start installation?
Here is another question. Why does virtually every specification document sent out to tender for the MEP works have a clause in it which says: ‘if there is a discrepancy between any or all of the documents, you are deemed to have allowed for putting it right, at no cost to the client’. Keep in mind that the designer has had two years to design the works and the tenderer has maybe eight weeks to find these discrepancies, notify the client’s team and price them.
MEP is approximately 30% of the cost of the average construction contract. To allow this major, and arguably, most important, package of works to proceed without full design, is a great financial risk.
An analysis of the final accounts on eight construction contracts completed in Abu Dhabi showed that on average the MEP was responsible for over 50% of the total cost increase attributed to variations.
Most MEP contracts have a degree of ‘design completion’ inherent in them. But why? It just seems to be accepted practice in the industry for this to happen.
At tender stage, the extent of the design completion is not defined and so becomes a major area for dispute. When the MEP contractor asks for a variation, the debate begins as to whether it should have been allowed for in the tender. The usual comment is that it is at the contractors’ risk. But why? The one actually taking the risk, and paying for it, is the client.
All manner of arguments can be advanced as to why the design cannot be completed prior to tender, the usual ones include; differing possible choice of equipment suppliers, inability to coordinate with the structure and allowing the contractor freedom to install in the manner he sees best. Surely there should be a complete, workable, functioning, co-ordinated design, that is fit for competitive tender?
That being so, the client team could easily evaluate the documents without the extended period, carry out post-tender discussions and incorporate those suggestions that the tenderer has proposed.
Further sets of drawings are then issued almost as soon as a contract price has been agreed, under the guise of ‘construction issue’. These become yet another fertile ground for dispute, disagreement and variation. Surely the design should have been ‘ready for construction’ before being sent for tender?
The counter argument could be that the client is not prepared to pay for a complete design, and anyway, the fees are insufficient to allow the designer to undertake a full design. The client eventually ends up paying for the contractor to complete the design via an enhanced tender price, so why not pay the consultant?
A further complication arises when the client puts pressure on the design team to distribute the documents by a certain date. Why not take a little longer with the documents and have them at a stage where queries are minimised?
Whatever the answer, the fact remains that going out for prices with an incomplete MEP design will cost the client more in the long run. In order to minimise the risks of time and cost overruns, it is suggested that the following be implemented: undertake an MEP risk assessment at tender stage; check for completeness of design; allow adequate time for tendering; and ensure that documents are current and reflect the design intent.
David Lee is a senior consultant for Hill International in Abu Dhabi. He is has involved himself in the project management and engineering of MEP services. Experienced in most major forms of contract, including all of the Fidic versions, he has worked across all sectors of the industry including airports, railways, infrastructure, and all types of buildings and construction. Currently David is working on a range of projects including a new international airport in Yemen and a power station in Saudi Arabia.
The opinions expressed in this column are of the author and not of the publisher.