Continuing to share her façade remediation Quantity Surveying experience, Dalbergia’s consultant Emily Lippitt provides insight into building a realistic contingency on a façade remediation project. This article explores how contingencies, contractor clarifications and provisional sums can be used to manage uncertainty and why a realistic client contingency is key to protecting overall project budgets.
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All construction projects require a level of contingency, however, each scheme has it’s own nuances and different set of risks which need to be carefully reviewed. On façade remediation projects, the procurement is generally via Design and Build where the contractor takes on the risk. Under this route there are three ways for additional cost to be incurred and use of contingency required.
Client Instruction
The scope of works for façade remediation is generally led by a FRAEW (Fire Risk Appraisal for External Walls) with works being undertaken with the purpose of making a building compliant to current regulations. It is therefore rare that client variations are put forward. If they are, it is normally freeholder/leaseholder driven items rather than remediation works, such as rectification of other building defects. If a project is government funded these works would not be eligible to be taken from contingency and would need to be self-funded by the client.
Contractor Clarifications
Despite opening up works being undertaken during the PCSA period (Pre-Construction Services Agreement) the true build-up of a façade cannot be completely known until the full façade is removed. On some buildings it transpires that construction, and the materials utilised, are inconsistent and that the opening up works therefore don’t cover the full remediation necessary. On a Design and Build project, the contractor is subject to take on any found risk, however, due to the nature of facade works contractors generally state within their clarifications that they have only included for the remediation stated within the FRAEW and build up found within opening up works. On this basis, if further works are found and considered eligible, monies for these would either need to be taken from the contingency or, additional government funding can be applied for.
Provisional Sums
Provisional sums are utilised when there are works or potential risks where not enough information is available to give a fixed price. On façade remediation projects there are a number of items which are perceived as risks which can be covered by provisional sums to give a level of cost certainty, an example being repairs to the substrate.
A key element which holds a degree of uncertainty is the length of time it will take for a project to gain Gateway 2 approval. Due to this being an unknown, and periods surpassing that previously advised, we are seeing instances of contractors clarifying that their submissions aren’t fixed. To mitigate this a defined provisional sum can be included, utilising the tender price index to gain a forecast of potential inflation. Once the programme is realised and any true inflation understood, the provisional sum can then be firmed up. This method ensures that the overall tender is fixed and stops the contractor being able to increase their prices across the board.
Conclusion
As discussed, there are several methods to minimise cost risk and ensure all reasonably foreseeable items are mitigated, however, true unknowns are still always a possibility. To cover this eventuality, and dependant on project value, experience would dictate a 5-10% contingency could be included to give cost security. This figure sits outside of the contract sum as client contingency and would therefore be included in the overall project budget.
