1 Large infrastructure projects − dealing with the public sector ESCL Conference, August 25, 2006 Stuart Graham President and CEO, Skanska AB

2 Large infrastructure projects are LARGER!  From billions of SEK to billions of Euros  More complex − public exposure, technical risks  Long duration − 4, 5, 6 years

3 Increased construction risks  Size of project = size of financial exposure  Interface with public  Tendered project and built project – not the same

4 Shifting of uncontrollable risks to contractor  Unreasonable − non/technical risks to contractor

5 Example In the event of a delay caused by the owner the contractor’s sole remedy will be on extension of time. NO MONEY.

6 Example The contractor shall, without any right to compensation for costs or extension of time, perform such works that are a consequence of unexpected or changed conditions at the site.

7 Example Any claim for a changed condition or an extension of time must be submitted to the owner in 48 hours of the onset of the event causing such claim.

8 Example The contractor shall be liable for direct and indirect damages the owner may suffer as a result of delay in completion of the project.

9 Why the shift of unreasonable risks  Lack of adequate budget and contingency  Lack of qualified resources  Contractors have taken risks for free

10 Another prevelant tactic  Ignore changed condition clauses  No resolution  Post construction legal procedures  Cost taken by ”next guy”

11 Example of all issues − Södra Länken  Large complex projects  Long duration  Contractors accepted additional risk for free  Settlements long after completion

12 Response to current conditions in public infrastructure market  Disciplined risk assessment, legal and technical  Mitigation of quantifiable risks with money (even low profitability risks)  Add resources to cost of tenders  Raise the price (risk&reward)  Refuse unacceptabel risk

13 During construction − how to act  Deliver!  Committ necessary resources  Follow the contract to the letter  Expect the worst − not ”partnering”  Ethical and Civility