• Barbara Le Gallez
    69
    Seeking advice, please.
    Our PCC are almost ready to place the order for our augmentation project. But one of the PCC members is worried, as per the following email he has just sent us:
    "Meanwhile the rest of us have a responsibility to ensure that the project will be delivered properly, within the established budget. There was a lot of stress involving contingencies and changes to the scope of works with the last major project [not a bells project]. We will need to ensure that the quote really is a fixed price quote, and that there is no deviation then from the scope of the project."
    How do I calm his fears, so he agrees to go ahead with placing the order without adding a massive contingency sum (which we don't have)?. How do augmentation projects usually measure up to his standards?
    Thanks, Barbara
  • John de Overa
    366
    We followed the Heritage Lottery guidance:

    A contingency is only used to pay for unexpected costs required to deliver your project. The total contingency figure may be up to 10% of the total costs of the project, unless you have a particularly complex capital project where a higher level may be required.

    The figure we used was around 7%. But if you don't have any contingency at all then I wouldn't sign it off either - sorry.
  • Barbara Le Gallez
    69
    Thanks John, that's very helpful.
  • John de Overa
    366
    When we went to the HLF "How to write your bid" session, they made it clear to us that if we put "We don't need contingency, we have everything covered" in our bid it would result in it being rejected. And they were right, we used it all - and them some. Nobody's fault, until we started to take everything apart we didn't find some pretty significant issues.

    I may be telling you something you already know, but don't forget the "VAT hole". Suppliers will charge you VAT and although you'll be able to claim it back, there will be a delay and in the meantime you'll have to cover the difference.
  • John Harrison
    359
    Contingency is intended to offset the risk of unknowns, so a responsible prone t manager will allocate contingency according to the risk. In fact I've heard the phrase costing risk in.
    So the question is how much risk is in your project? How many things are known and costed, and how many things can't be known until 'we take it apart' or until 'we open it up'. How many of the processes used have a significant failure rate?
    The contractors involved should have the experience to be able to answer those questions, and assuming they have given a fixed price bid will have costed them in. If a single contractor is responsible for all works (including any subcontractors) then you should be able to rely on the contract because the prime contractor will have built in the cost of the subcontractor risk. Of course if you employ several contractors to avoid the prime contractor overhead then you carry the risk of problems that fall between the contractors.
  • Simon Linford
    305
    I understand one of the things that is causing a lot of extra work at the NHLF at the moment is reconsidering all the grants awarded where building cost inflation in particular has resulted in a funding gap compared with when the orginal grant was agreed. For instance this has happened to the CCT on their Old Black Lion project - such a long time has elapsed from the award of the grant to actually getting to a position of being able to draw it down that the grant request needed to go up more than 10%.

    It must be getting difficult on bell projects, which tend to have a long period of time between getting quotes from bell firms and contractors, to actually getting the money and proceeding, for any supplier to accept inflation risk and give a fixed price.
  • Alison Hodge
    148
    Simon is correct that inflation is a problem now but there are ways to account for that in contract terms. People who lived and worked through the 1970s and 80s were well aware of that!

    What should be considered is who is actually leading and managing the project. I note the comment "The rest of us have a responsibility to ensure that the project will be delivered properly" This seems to suggest that no single person (or perhaps 2 people) was really grasping and managing the project. With several people involved it is easy for one person to think someone else is checking something. This then leads to comments like "oh, I never realised that that was needed and it will cost £......!"

    A good way of avoiding extra unexpected costs (no they are NOT "unforseen", they mainly arise because of insufficient planning and managment) is to think through everything in great detail by mentally and even physically "walking through" the project from start to finish. Consider what will happen now and what will be needed, who provides it and so on. It is often the most obvious things that are missed!

    There are also a few hints on bell projects here: https://cccbr.org.uk/major-projects/
  • J Martin Rushton
    99
    (Bit OT) Nothing changes; when Rochester Cathedral bells were recast in 1921 there was a significant price hike between Gillett & Johnston quoting, and the price that they charged once the old bells were in their foundry. See Love's guide for some of the story.
  • Roger Booth
    66
    To quote Donald Rumsfeld there are”… known unknowns an unknown unknowns”. Any contractual arrangement involves allocating risks between the client and contractor, and in my 40+ years of experience the term ‘fixed price contract’ is a misnomer.

    For example, a bell project that I am currently involved with involves a ring where the church was gutted by fire. Two of the bells were cracked, but the other four are OK, although they need to be annealed (heated up and cooled back down) so that there are no stresses left in the metal induced by the fire. Some of the bellhangers had quoted for re-tuning the bells after annealing, others had not. We therefore included a ‘Provisional Sum’ for this known unknown in our analysis and budget, so that we could compare all the quotes on a like for like basis.

    It was quite interesting when we compared all the quotes on a like for like basis. All the companies had similar cost structures, so there was not much difference in the final bottom line. Had we simply accepted the lowest quote we might have been approached for an extra once the bells had been annealed, but we now have this risk mitigated.

    On previous projects that I have been involved with there have been various unknown unknows that have surfaced, although beforehand we have tried to eliminate them by spending a little money up-front to carry out some investigations and tests. One tower suffered tower sway and rather than just risk proceeding with the cheapest, we employed a well-known ringing Structural Engineer to advise on the best technical solution. Many other towers have metal frames, but the older ones were often painted with lead-based paint. Therefore, I would recommend that paint samples be taken and analysed, rather than going ahead and finding out later. Similarly, foundation beams embedded in tower walls can suffer hidden corrosion or rot, which to the un-trained eye might otherwise only become apparent once work commenced. If the church electrical installation is being used for the hoists, has it been inspected and tested recently? is it adequate for the load and safe to use? Are sockets nearby? Is lighting adequate?

    Also, do look carefully at the exclusions in any quote and make sure that they are properly costed in, especially where there are demarcation lines. Does the clock specialist just connect up the hammers, or is he expected to modify the hammers as well?

    Contingencies are there to cover the unforeseeable, but being thorough and taking a view on what is covered by provisional sums, and the risk of them being required, you can allow a reasonable level of contingency. Typically, this might range from 5% from a very straightforward project to 10% or even 15% for a very complex one.
  • Simon Meyer
    8
    In my commercial world I wouldn't include less than 33% contingency, often 50% and sometimes 100%. The reason being that you cannot possibly think of everything and cost for it - or, if you did, you'd come up with the higher figure anyway. It's just not worth spending the time thinking about it - just accept you will almost certainly use contingency.

    The thing with bell projects is that, in the scheme of things, they are small & simple (may not seem so to many involved but they are a well trodden path with more certainty then the stuff I deal with). So less contingency is probably OK although I feel 10% is light.
  • Barbara Le Gallez
    69
    Thank you all for these very helpful comments, which are quite fascinating and will be very useful to me as project manager.
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