Topic: Construction Industry

Subject: URGENT QUESTION RE: Risk Management at Closeout of Construction Project
Richard Archer
Member: 2009
Posts:24
Submitted on 04-07-15 10:12 am
Message:
I'm doing a project management & risk management practices assessment for a hospital that had some significant problems in being able to operate the hospital after signing the Taking over Certificate based on the recommendation of the Employer Representative they retained for the project. I have two questions about a situation at ToC/closeout that I haven't encountered before:

1 - If the snag list and list of works to complete after taking over is made up in large part of small, low cost defects, but they are defects in items that are critical to patient care, is it appropriate to consider those items as significant, rather than minor, defects that would allow rejection of the ToC or at least taking a risk management action of requiring the contractor to accept extension of the performance bond or provide some other security?

2 - If the contractor sets a schedule to clear the items on the snag list and list of works to complete after taking over, is it appropriate to consider the contractor's past consistent failures in completing any commitments on schedule and either reject the ToC application or at least taking a risk management action of requiring the contractor to accept extension of the performance bond or provide some other security?

Any suggestions will be appreciated.

Richard Archer
 
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Replies
Brian Rowland
Member: 2012
Posts: 4

Subject: Re:URGENT QUESTION RE: Risk Management at Closeout of Construction Project

Submitted on 04-24-16 11:56 am.
Message:

Richard,


My experience is as the contractor who built over 20 hospitals.  When low dollar defects/work to complete are critical to patient care, they must be considered as major defects that require immediate attention and correction by the contractor.  Review the contract, but you probably have the right to withhold payment in the amount it would cost you to have someone else come  in and complete the work in a timely manner.  In my experience the amount held back is usually 2.5 times the amount the contractor states as value.  Include your (hospital's) time and expense to find a replacement.  It has to be enough to keep the contractor's attention.


As to performance, yes, you must consider their recent late performance and consider adding milestones / priorities of items to complete before releasing more funds.  The amount owed to the contractor must be material to keep their focus on completing the work in your time schedule.


Feel free to contact me to discuss further.  Brian Rowland, 480-612-4781. 

 
Richard Archer
Member: 2009
Posts: 24

Subject: Re:URGENT QUESTION RE: Risk Management at Closeout of Construction Project

Submitted on 04-24-16 12:55 pm.
Message:

Thanks, Brian. My assessment report was issued in January, so too late to be used for that. However, I feel more comfortable with my recommendations based on the comments you made. They will put me in a better position to justify the recommendations should I be called back in by hospital management or challenged by the contractor and the internal department that served (very badly) as the Employer Representative.

In the end, there were indications of collusion between the internal Employer Representative department and the contractor, but we were never able to find solid evidence documents. The hospital is currently almost a year into a 3 year program to remediate all the defects left by the contractor and will be out an additional almost almost equal to the original cost of the entire hospital. Unlikely that they will ever collect, even if taken to court. Court cases of this nature in the UAE can take 5 years or more to bring to an end.

Again, I really appreciate your comments. I'm headed to SE Asia in May and will be doing project based work from there. Hope we can stay in contact.


Best wishes,


 


Richard

 
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