FIDIC 2005 Beijing Workshop 13 Design - Build Opportunities and Challenges in Australasia Tony Barry, President Association of Consulting Engineers Australia Director Connell Wagner Pty Ltd

2 Project Delivery Traditional Construct Only Design & Construct (D&C) Design, Construct & Maintain (DCM) Build Own Operate (BOO) Build Own Operate & Transfer (BOOT) Public Private Partnerships (PPP) Alliances

3 Design & Construct Design-Build = Design & Construct There is a D&C Contract embedded in every PPP, BOOT, BOT, DCM contract D&C is the most common form of project delivery in the Building, Urban Infrastructure and Power Generation Markets in Australia Construct Only Contracts most common in NZ, D&C increasing

4 Roles for the Consulting Engineer in D&C Owner’s Planner and Engineer Banker’s Engineer Contractor’s Designer Contractor’s Verifier Proof Engineer (Principal & Contractor) Construction Verifier (Principal & Contractor) Independent Reviewer (Principal & Contractor)

5 Why Design & Construct ? Initially Reduce claims by contractors against Principals Innovation without risk Larger projects – contractors perceived with greater capacity to manage than government Speed of Delivery Cost and program, both risks to politicians

6 Why Design & Construct ? Now Total risk transfer from Principal to Contractor – very few claims Innovative Solutions Successful delivery, great projects Even larger projects Speed of Delivery Projects delivered in one political term

7 The Risk Environment for Consultants Legal framework – Common Law, Contract Law, Trade Practices Act, Occupational Health & Safety Acts Onerous Agreements Contractors capacity Contractors plan to deal with commercial loss

8 The Risks Client risk dumping Risks inherent in Design & Construct Tender process suppresses risk $ Client Information risk The risks are commercial risks Losses crystalise in the D&C team Contractor has no avenue to claim against client Claim against consultant PI cannot support commercial risks

9 Onerous Terms High standards of care Responsibility for client supplied information Absolute Fitness for Purpose warranties Strict compliance Open ended Indemnities Duty of Care to multiple parties Liability for delays outside control Disclosing terms of PI Policy

10 The Solution Don’t accept unreasonable terms – walk away Negotiate a good contract to maintain a good relationship and a good business Use Limits of Liability above which Clients carry the risk Adopt commercially sustainable PI Insurance levels and guidelines Negotiate scope carefully and exclude others’ responsibilities

11 The Future More Design & Construct Bigger projects Fewer contractors Higher cost to Principals More work and more opportunity for Consulting Engineers More claims and litigation Better risk management by all parties

12 Better Risk Management Open identification and pricing in tenders Risk sharing with agreed specified outcomes Limitation of liability for contractors and consultants Risk management record and tender evaluation criteria

13 Design & Construct Business Model Principal D & C Contractor ConsultantSubcontractors Total Risk Transfer Risk Transfer Risk Transferred or Managed

14 Contractor–Consultant Liability Transfer Model Master – servant relationship Head contract conditions passed down Risk transfer through onerous terms Impossible and impractical notice requirements Representations designed to create TPA breaches Certify compliance or breach contract Excessive and protective administration Aggressive and manipulative behaviours Designers site role suppressed / limited Post-contract claims and disputes Careers destroyed

15 Contractor–Consultant Liability Managed Model Co-operative integrated relationship Methods of managing Head contract conditions agreed without transfer to consultant Consultant carries negligence risk Consultant assists Contractor to identify and manage risks Contractor to certify compliance or non- conformance Consultant to retain independent judgement Consultant uses Contractor administrative systems Co-operative behaviours and excellent performance Designers site role expanded and integrated Post-contract awards Careers enhanced

16 Tony Barry Connell Wagner Pty Ltd on behalf of Level 12, 75 Miller Street | North Sydney NSW 2059 (02) | |