Southern Water

Contract Set Up and Mobilisation

Overview

Southern Water’s capital construction programme, known as AMP 4, ran between 2005 and 2010. Worth approximately £650m, it was awarded under a target cost contract arrangement to a newly formed joint venture 4Delivery (a joint venture between Costain, United Utilities, MWH).

The Orange Partnership was requested to review the contract and work with both Client and Contractor to drive understanding, transparency and definitions of contract cost during the initial mobilisation period.

Our actions assisted the smooth running of the partnership and avoidance of several millions of pounds of potential disputes.

Actions:

Working through a series of workshops we were quickly able to identify several areas of immediate concern.

By running various ‘what if’ scenarios we were able to roll up likely contractual conflicts that were likely to emerge as the project neared completion. These events were jointly assessed and the team quickly concluded that several million might be disputed and potentially taken off at final account (in turn diminishing the JV’s forecast fee).

We then addressed each item to formalise where it needed to sit with respect to the contract definitions of actual cost or fee. Our wider experience of other contract suites, such as NEC 3 assisted in this.

Results:

Within a few months of appointment we had built a bespoke schedule of cost components agreeable to all four working parties, potentially saving our client millions in unnecessary costs.
This was in the face of initial high resistance to our commission. This was mainly due to over simplistic views that the cost was simply the cost i.e. no further definition was required. We quickly identified that all four parties had varying degrees of experience of actual cost based contracting.

In addition, the relative experience and knowledge of such contracts was further exposed when we widened our challenge to the specific finance and commercial resources due to be deployed on the project.

As a result of our success on this initial contract mobilisation, we continued to give contract and cost audit advice to both Southern Water and 4D for the remainder of the AMP 4 period.

For more information call +44 (0)20 8898 6447
or send your enquiry.