Background
You need to imagine that you are the Client’s Project Manager involved in the following fictitious scenario:
Bishopsgate is a large and prosperous town, where a developer, Dover Street PV, is building a mixed use shopping centre. Adjacent and above the main entrance to the scheme, there is a flying freehold[1] owned by the Local Authority (LA) and used as a public lending library.
Both the Local Authority and Dover Street see the benefits of upgrading the entrance. From the Developer’s point of view a better entrance will enhance the value of the scheme, and for the Local Authority it is an opportunity to upgrade the library. It is important to recognise that the Developer will finance the external upgrade. In exchange for allowing this improvement to the scheme, the Local Authority wishes to add internal upgrade works to the library within the scope of the library upgrade.
The library was built in 1970 and very little money has been spent on its upkeep. It comprises two principal levels of 1,000 sq m together with ground floor reception and basement. The problem with this type of building is the inability to ascertain the condition of the structure behind the fittings before works start on site. Potentially, there could be a number of issues including; leaking roofs, fire safety, asbestos, dated and poorly functioning air conditioning, and ducts that had never been connected.
In terms of project delivery, there has been a recent change in the Client Team. Mr Strong, who was an experienced Project Manager, unexpectedly resigned quoting issues with managing the architectural design team. Previously, he had successfully worked with the LA’s Project Sponsor, Andrew Holt, in other, smaller library refurbishment projects across the County. Mr Strong felt that he did not receive the support he needed to fulfil his responsibilities as a Project Manager from the Sponsor. Another point of contention was that Mr Holt kept directly consulting his colleagues at the LA’s Estates Department to make design decisions and to informally communicate them to the Architects. Hence, Mr Strong was deprived of the opportunity to finalise the incomplete design brief for the external works and issue it to the Architects, fulfilling one of his bridging roles between the Client and the consultants.
On Mr Strong’s resignation the Project Owner said:
“I am disappointed, but not surprised. Disappointed because we had worked successfully with William previously on some refurbishment projects and had greatly admired his commitment, organisation, singlemindedness and attention to systems and detail which had served us well in those projects; not surprised because as this project developed it became clear that those qualities which carried with them a certain rigidity and inflexibility would not in themselves be enough to develop and sustain a productive relationship with the design team in this project.”
Following Mr Strong’s resignation, you have been instructed by the Client as the new PM. You are not directly employed by the Council, and are providing services as a consultant.
During discussions with the Local Authority in order to agree your instructions as a consultant, certain personal relationship problems concerning the project came to light. It transpires that Mr Strong is a driven character and does not ‘suffer fools gladly’. He is used to getting his own way, and rumour has it he keeps a tarantula on his desk!
On the other hand, the Project Sponsor, Andrew Holt is a consummate ‘politician’ and is anxious with maintaining his status within the political structure of the Local Authority. It is suggested that he has a low opinion of property developers, viewing them as ‘fat cats’ more interested in making excessive profits, rather than improving the town centre and its facilities. He was also worried about the reaction of the trade unions if he forced staff to relocate from the library. This matter was one of the reasons behind the delay in deciding whether the Library was to be relocated while the refurbishment works were carried out.
Unfortunately, the Project Sponsor’s and Project Manager’s relationship irrevocably broke down following several strong emails Mr Strong sent to the Project Sponsor and to Jean Edwards, lead architect at Library Fit Out and Design, on issues of communication, mainly of design information, and the time it was taking to make decisions. In frustration, he had taken to airing his views on social media. Whilst not abusive they were certainly insulting. The Project Sponsor also responded on social media in an equally vociferous manner, stating that the Project Managers were replaceable, but the architects in this case were not.
Scenario
There has been an ongoing issue with agreeing the scope of the works to the library, with Dover Street wanting to do as little as possible, and the Local Authority taking a diametrically opposite position; as they see the developer as a wealthy organisation that is going to make a lot of profit out of this project. In principle, the scope includes replacing the front and overhang of the library together with some consequential works. The Developer is also committed to fulfilling its planning obligations to open new windows on a solid concrete wall facing a side street to improve the daylight conditions in the reading rooms. These are predominantly external works.
As the negotiations on the scope continued, the Local Authority decided to internally fit out the library as well. In consultation with the library staff, the Council needs to decide whether the library can remain open while refurbishment works are being carried out, or whether it should temporarily be relocated. This relocation is estimated to cost an additional £250k.
The Developer will cover this cost, because the Contractor can make quicker progress on the external works if the library is vacant. They also think that this relocation will cost them less than the estimate as long as their purchase of a nearby property completes. Although the Council needs to decide soon, they are taking their time going through several user groups and internal committees.
The additional works for the internal fit out will be designed by the Architects, who are instructed by the LA, and will be carried out, for an agreed price by the Developer’s Contractor. This has added another layer of complexity to agreeing the scope, as the Developer is very keen to separate the ‘Works’ they are responsible for, and those that fall under the Council’s responsibility. The Developers are also determined to make sure that any internal fit out work is not going to result in additional consequential work that they need to undertake in order to comply with the current building regulations. Such additional works would not only increase the cost but would also be a distraction to the Design & Build contract that the Developers signed with their contractors.
At first, the Developers thought that they could manage the scope creep through regular meetings with the Architects and keeping the Council in the loop. The Architects have a different view of their obligations regarding collaboration with the developers and their contractor. They are employed by the Council using a traditional contract. Therefore, they will closely work with the LA and only take instructions from their Client.
Mr Strong, on the other hand, tried very hard to facilitate collaboration between the Architects, the Developer and the Contractor as he could see, as an experienced Project Manager, the benefit of this approach during the construction and close-out stages. The Project Sponsor’s approach was similar to the Architects’, however. This meant that design-related decisions were being made between the Sponsor and the Principal Architect without the knowledge of Mr Strong. By being kept out of the loop he was unable to have meaningful discussions with the Developer’s Project Manager, John Santos.
Some of these decisions have building regulations implications, and some lead to further scope creep in the project. Ultimately, the cost of the Developer’s consequential works would increase, and the programme’s timetable would be extended. While the Developer might be willing to accrue additional costs in order not to delay the opening of the shopping centre, delaying the opening is out of the question because the shopping centre should be ready in time for the Christmas season. Therefore, these design decisions cannot be implemented as far as the Developer is concerned.
The current position is that work started in October 2017 and was estimated to last 12 months. It is now October 2018, and it is likely the project will take a further 12 months. Initial estimates suggested a cost of £5m, but these could rise to as much as £8m by sign off. In addition, the developer has practically lost a year’s rental income.
The Project Sponsor is aware of the cost increase and the delay, which have recently become a familiar headline in the local press. The lack of a complete design brief is considered to be one of the contributing factors. Despite Mr Strong’s opposition, the Sponsor chose not to inform the Project Owner of these issues until the press got hold of the story.
The local opposition to the development of the shopping centre was somewhat diluted with announcements that the developers would pay for the enhancement of amenities such as the library. At the time, the press coverage was not clear about the scope of the works that would be covered. Now, word got out that the developer would not pay for all the works. This coverage, which does not distinguish between internal and external works, has ignited some public hostility towards the project as a whole. The Developers are very keen that public perceptions of this project are well-managed to protect their national standing.
When Mr Strong tried hard to get the architects, the developer and their contractor collaborate to find solutions to challenging design problems in order to reign in these issues long before; the Sponsor and the Project Owner regarded his approach to be too rigid and lacking in vision. They could not see why Mr Strong had possibly suggested that the architects could be sacked if they were unwilling to collaborate, even if their approach would result in further delays to the production of design information that would enable the contractors to continue on site.
In addition, the following problems have occurred:
First, staff did not want to relocate to a temporary library for the duration of the works, but changed their minds as soon as the construction works on the shopping centre started.
Second, once the front section of the library was removed there were a number of problems which triggered issues regarding compliance with current building regulations, and which have become more demanding since the library was originally constructed.
Third, there has been scope creep concerning the re-roofing of the library and its internal fit out.
Fourth, the Developer has received complaints concerning damage to plant etc caused by Carillion before their insolvency.
Fifth, following the insolvency of Carillion PLC, the main contractors on this development, a new contract is entered into with Moran Ltd who under insolvency provisions became the main contractor instead of Carillion.
Henry Smith the contracts manager with Moran Ltd has received angry emails from Clive Morris the managing director of Morris Electrical Ltd. It has emerged on reading the emails that Morris Electrical had a contract with Carillion for a package of electrical work to be carried out for the library refurbishment programme. Morris Electrical’s invoices for week 3 and 4 for £20,000 each have not been paid. They were sent after Carillion had become insolvent.
Clive Morris has sent a copy of the sub-contract Carillion and Morris Electrical entered into for this work which is reproduced below. The contract was never signed and remained in a draft form while the parties negotiated the amount of time the electrical work should take.
Work commenced on 1st September and Carillion’s insolvency was effective from 17th September. Morris Electrical submitted an invoice for week 1 and week 2 as they fell due and Carillion paid them both after Bob Drew had certified that the work was satisfactory.
Morris Ltd has submitted invoices for week 3 and 4 to Moran Ltd arising under the draft contract but they have not been paid.
Draft contract between Carillion and Morris Electrical.
This contract is made between Carillion PLC and Morris Electrical Ltd whereby Morris Electrical Ltd agrees to carry out the work (“The Works”) shown in Schedule 1 and Carillion PLC agrees to pay the sums shown in schedule 2
The Works shall be completed within four weeks from the date of commencement
The Works shall be carried out to the satisfaction of Bob Drew, Site Foreman for Carillion
In respect of all work undertaken Morris Electrical Ltd agrees to make good any building fabric damaged in the execution of The Works
Signed for [ ]
Signed for [ ]
Schedule 1
The Works
Strip out all electrical wiring and associated sockets and junction boxes from library building
Provide a temporary electrical supply to the area of The Works for the duration of The Works
Fit and make good all electrical wiring and installations indicated on the site drawings 124B
Make safe and test all new wiring
Schedule 2
Payment from the date of commencement
Week 1 – £10,000
Week 2 – £10,000
Week 3 – £20,000
Week 4 – £20,000
