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Case Study Preparation With Potential Q&A

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75 views3 pages

Case Study Preparation With Potential Q&A

Uploaded by

aalekhsrivastava
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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1.

Case Study Questions

Q1. Procurement, why did the Council want Project Co to appoint the designers and main contractor
as opposed to the Service Provider?

A1. To save costs and time.

Q2. The recommendation you made was to follow Option 2 can you please explain in detail why the
Council were considering these options that you offered when they were operating within a PFI
contract which had already been operating with the borrower?

A2. The high value of works of c£600k were above the contractual threshold o £100k which would
require a DoV. As the Deed would be specific to this variation, this allowed the flexibility to consider
various options on the merit of cost and time.

Q3. It appears that ultimately Option 1 was chosen which was against your recommendation, how did
you advise the Council on the risks associated and quantify them?

A3. As my client were the Lenders, it was not part of my scope to advise the Council. Although I did
inform them that this method would not have a minimal reduction in costs as the legal costs to draft a
DoV with a new risk transfer mechanism would offset the cost savings from appointing the Borrower
directly.

Q4. What type of independent specialist did you recommend for mitigating design and quality risk?

I requested that the Borrower should appoint a competent QS/PM for the role in line with the existing
Independent Certifier obligations to comply with contract requirements.

Q5. How did you cost the three options when presenting the case?

The build costs were confirmed by the Borrower through a competitive tender pricing during the earlier
stages and quotes were received from the legal / technical advisors. During the later stage when the
Authority chose to go the modular builds, the costs were confirmed by the Authority. As the final costs
when agreed would be paid by the Authority and not my clients (i.e. Lenders), the cost implication was
not a major concern for the Lenders.

Q6. 2.2.2 You recommended the JCT form of contract. When you executed the review on the internal
form of contract, in what way did you consider it wasn’t as favourable as using JCT? What was wrong
with the LD section and Security?

The main reasons are:


1. The JCT is more widely accepted and easy to be priced by majority of contractors
2. The provisions for bond / CW / LDs noted ‘may be applied’ and there was no clause to specify
these provisions.
3. Only the framework providers would use
4. The preferred bidder from Council (module provider) was not part of framework which made the
JCT use much quicker

Q7. 2.2.3 You used GIFA pro rated, did you consider any other alternative way of calculating the fee
increase?

Gross Internal Floor Area is the criteria to calculate the service costs under the contract hence, it was
the best way to calculate the increase in fees by identifying the increase in floor area to the Council.
Moreover, the financial model is based on GIFA which made is easier to demonstrate and justify the
increase.

Q8. What method of analysis did you use to conclude that the probability of default was low?

I used scenario analysis to quantify the potential failures to measure against the default thresholds.

1. Trend over the past 12 months for service on typical class rooms and used that data to pro-rata
against the GIFA.

2. Trend over the past 12 months of typical schools without Arcadis’ portfolio (benchmarking) to
ascertain the potential defaults (used 3 schools).

3. Maximum deduction in a month over the past 24 months period to ascertain the worst case
scenario.

Q9. 2.2.5 Compliance, you liaised with MEP specialists on the plant and equipment, please explain
what the outcome was.

The Authority had provided a room data sheet which listed the MEP requirements. The MEP specialist
reviewed the compliance requirement were captured in the construction drawings and eventual sign-
off of the commissioning data. All the documents were captured as part of Practical Completion and
Handover package.

Q10. Deeds of Variation, what exactly did the Deeds content cover?

The DoV is to vary the existing contract between the Borrower and Authority. The main elements are:

1. Changes to the capex of the building by adding these modules.

2. Increase in GIFA

3. Transfer of construction risk to borrower

4. Transfer of maintenance and lifecycle risk to the borrower

5. Capturing the actions arising from the works

6. Updating the monthly UC profile (changes to LC, FM and insurances).

Additionally, there is an additional DoV between the Borrower and the FM provider to transfer all the
above risk to FM Provider.

The main difference was that an additional Interface Agreement was required between the Building
Contractor appointed by Borrower and FM Provider to transfer the construction risk to FM Provider.

Q11. 2.2.7.3 You worked around not having DOV’s, could these have been provided by an alternative
legal source to save time?

No. Only a Deed can vary a Deed hence, alternative options were not possible.

Q12. 3.1 What is the content within the report template?

The key elements which allow risk transfer. In this case, the procurement mechanism was not
standard hence customized section was required to review this aspect. Otherwise the standard
contents are design / compliance / Capex / FM / LCC / thresholds / collateral deed requirements. The
last key element is funding and changes to the financial model.
Q13. The project construction period was 10 weeks yet the whole project took 40 months, a massive
increase in timescales so in hindsight is there anything that you could have done better which may
have reduced this?

The PFI model in itself is a long process and requires all parties to be aligned to move efficiently. In
this case, due to the limited funding available by the Authority, it took longer than usual to agree to the
basic costs arising from the works.

Q14. Was the issue of the Certificate of Making Goods Defects affected by Covid19? If so please
explain how and how the issue may have been dealt with.

There was minimal impact from COVID as the works were undertaken during summer half terms
which allowed full access to the contractors. The SOPs were updated to reflect the covid situation by
the contractor and FM providers with no issues reported during the works.

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