[ Spotlight: Project integration ]
own insurance against being the cause of a claim. Then, if there are extra costs, the various parties argue amongst themselves – especially with professional indemnity claims. It’s notable that for every £1 paid out in professional indemnity claims, £5 in legal and forensic costs are paid out first, and the whole process takes at least five years! IPI enables a different approach and insures the effect of
something going wrong, rather than the cause – members of the team agree a project budget, then insure that rather than themselves. An IPI policy will cover all of the risks that a company
might insure itself against, so that individual companies will not need their own contractor all risk (CAR), public liability (PL) or professional indemnity (PI) cover. Our analysis shows the combined cost of CAR, PL and PI insurances throughout the supply chain adds up to 2 per cent to 2.5 per cent just on ‘normal risks’. For pilot projects, the cost of IPI will be 2.5 per cent – that is, cost neutral. This, however, also includes cost overrun cover and latent defects insurance for 12 years (see Figure 1).
Q. The theory sounds fine but how will it work in practice? There are several pre-requisites to making this work. Firstly, all team members will waive their rights to sue each other (except for fraud). Also, consultants and contractors should not include their
fees for the project in their declaration of fees to insurers for annual CAR, PL and PI policies, and will be expected to omit all allowances for these insurances from their overhead margins.
Q. How is the project team selected? The first stage is to understand the client’s needs and define ‘success criteria’ that will drive the selection criteria and a scoring mechanism, The brief should include the benchmark cost within which the project has to be delivered. Applicants are then invited to demonstrate how they meet
those criteria, and shortlisted applicants will be subject to further scrutiny. This process is set out in the Construction Industry Council document Selecting the Team.
Q. Who is eligible to be part of the core team? The key here is to tailor the core team so that those most vital to the project’s success are core members, while others may be ‘cluster partners’ to them. The M&E contractor will always be a core team member, but ductwork, controls and any important specialist electrical packages would typically be cluster partners.
Q. What happens once the team has been selected? The first task for the core team is to develop alternative design solutions and cost plans in accordance with the success criteria. This replaces estimating in competition, and is paid for. Detailed designs are not required at this stage, as collectively the team knows the order of costs. In parallel, technical and financial risks are independently
assessed to satisfy the insurer and client that adequate allowance has been made for risk. This process reinforces the benefits of collaborative working in a ‘virtual company’. For instance, the consultant
March 2012 ECA Today 49
SHUTTERSTOCK/LIVIU IONUT PANTELIMO
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72