Case Studies > Urban Heavy Rail and Tram System

Location Confidential

The entire design, supply, installation and maintenance of a complete urban heavy rail system including the track work, switchgear, power systems, control systems, tunnels, building and civil works, signalling, stations, and rolling stock. The contract was awarded by a European government agency for transportation (the Employer) to a design and build consortium of which our Client was the lead consortium member.

KEY FEATURES

The contract was awarded on a fixed-price, lump-sum turnkey basis under the Employer’s hybrid form of design & build contract. Our Client considered that the general conditions of contract contained a number of serious potential commercial risks vis-à-vis the Employer and vis-à-vis their civil works consortium partner. They concluded that they needed to ensure that the potential materialization of such risks was minimized and those that did materialize needed to be managed effectively and where possible obtain compensation. The contract was also subject also to the jurisdiction of a complex legal system. A number of post contract events had occurred which was causing serious slippage to the contract programme and a significant overrun to the project budget.

CONSULTANCY SERVICES -
Commercial and Contractual Management & Administration
Claims Management

Lancaster House International Consulting were asked to undertake the role of consultant commercial and contractual administrators and claims managers. Our primary functions required that we were based on site for a period of two years, working as an integrated member of the project management team. We reported on a daily basis to the Site Project Manager and Site Commercial Manager with regular support from our Düsseldorf office on complex contractual issues.

One of our initial tasks was to undertake a complete review of the main contract terms and conditions together with associated documentation, including the consortium agreement. The purpose of this review was to identify what financial / commercial / contractual risks currently existed or might arise, under which circumstances they had or might manifest themselves and what the real or potential consequences would / might be. [A Technical Risk Analysis had already been completed by our Client to which we had access]. We were then required to make recommendations for the effective control of those risks which had already and may very likely in future materialize and consequently we produced a strategy report covering events under the contract programme for completion, the contract price, payment provisions, contract variations, penalty provisions for breach of contract, warranties, and administrative matters in relation to claim handling and dispute resolution procedures. Various tools and procedures for the management of the various risks areas we determined were developed by us and integrated within the Client’s PM systems. We performed the day to day commercial and contractual administration of the main contract and the consortium agreement both towards the Employer and vis-à-vis our Client’s consortium partners which included the drafting and vetting of all project correspondence, progress reporting and contributed to the preparation of financial forecasts. We also carried out the administration of several key subcontracts and researched and prepared the contractual and financial bases for contract V.O.’s and claims.

Part of the added value we delivered included a local knowledge of the business culture aligned to our experience in the international rail industry and associated civils works.

Our close liaison with the Client’s Project Manager and his team as well as with internal and external teams of lawyers in connection with the interpretation of complex substantive legal issues, contributed to the successful application for extensions of time to various sectional completion dates through the demonstration of Employer caused or responsible delays. We were also instrumental in the award of substantial variation orders, dayworks orders and contractual claims for the reimbursement for additional cost and loss and expense. Ultimately, our Client recovered control of the project and with it its financial position was restored in line with original budget estimates.