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independent assurance of construction projects: an overview C&S Dev Co
independent assurance of construction
projects: an overview
C&S Dev Co
introduction
DELAYS, COSTOVERRUNS, AND LOW BUILD QUALITY ARE PLAGUING PUBLIC AND PRIVATE CONSTRUCTION PROJECTS WORLDWIDE.
THE EUROPEAN CENTRAL BANK BUILDING IN FRANKFURT WAS 40% OVER-BUDGET AND 3 YEARS LATE WHEN FINALLY DELIVERED AT NEARLY EURO 1.3B IN 2014.
HANOI'S FIRST ELEVATED RAILWAY WAS 50% OVER-BUDGET AND 4 YEARS LATE IN 2017, AND ITS QUALITY HAS BEEN QUESTIONED.
PRACTITIONERS, RESEARCHERS, AND MEDIA HAVE LONG KNOWN THAT INADEQUATE PLANNING AND MONITORING, LEGAL AND STATUTORY PERMITS, INAPPROPRIATE DELIVERY METHODS (DESIGN-BID-BUILD, DESIGN-BUILD, CMGC/CMAR ETC.), FINANCING ISSUES, TECHNICAL CHALLENGES, WEATHER, AND FORCE MAJEURE ARE THE MAIN CAUSES.
introduction (contd.)
SOME BELIEVE DELIVERY PERFORMANCE OF MAJOR PROJECTS CONTINUES TO BE POOR BECAUSE OF “TECHNICAL CHALLENGES, OVER-OPTIMISM, AND STRATEGIC MISREPRESENTATIONS”--Cost Overruns on Infrastructure Projects: Patterns, Causes, and Cures by Matti Siemiatycki.
C&S DEVCO ATTRIBUTES IT TO STAKEHOLDERS’ OVER-AMBITIONS AND MISREPRESENTATIONS THROUGHOUT THE PROJECT CYCLE, WHICH CREATE SOME UNDUE TECHNICAL CHALLENGES.
GOVERNMENTS, CORPORATE BOARDS, FINANCIERS, PROJECT TEAMS, ENGINEER-ARCHITECTS, AND CONTRACTORS ARE EQUALLY GUILTY OF BEING OVER-AMBITIOUS AND/OR MISREPRESENTING.
OVER AMBITIOUS GOVERNMENTS, CORPORATION BOARDS, AND FINANCIERS--UNDER PRESSURE FROM THE PUBLIC AND SHAREHOLDERS, ETC.--ENDORSE UNWORTHY AND COMPLEX PROJECTS, SIMPLY TO MAKE GOOD ON CAMPAIGN PROMISES, SATISFY EGOS, ETC.
PROJECT TEAMS, EITHER UNDER PRESSURE FROM THEIR BOSSES AND/OR THEIR OWN OVER-AMBITIONS, UNDERTAKE TO DELIVER PROJECTS DESPITE KNOWING THAT THE LEAD TIMES FOR DELIVERY AND BUDGETS SET BY THE HIGHER-UPS ARE INSUFFICIENT.
Introduction
(contd.)
ENGINEERS AND ARCHITECTS, SELECTED THROUGH COST-BASED COMPETITIVE BIDDING, MISREPRESENT THEIR CAPABILITIES AND ASSURANCES TO DESIGN AND SUPERVISE PROJECTS, DESPITE KNOWING THAT THE TIME AND BUDGET ALLOCATIONS ARE INSUFFICIENT TO COMPLETE THEIR ASSIGNMENTS FULLY AND METICULOUSLY.
CONTRACTORS, OFTEN THE LOWEST PRICE BIDDERS, ALSO MISREPRESENT THEIR CAPABILITIES AND COMMITMENTS, AND AGREE TO COMPLETE WORKS ON-BUDGET AND ON-TIME, AND FULLY IN ACCORDANCE WITH THE SPECIFICATIONS, DESPITE KNOWING FULLY WELL THAT THE CONTRACT AMOUNTS AND TIMES FOR COMPLETION ARE INSUFFICIENT.
THIS PRESENTATION PROVIDES AN OVERVIEW OF INDEPENDENT ASSURANCE [IA] (A.K.A. GATEWAY REVIEWS, TECHNICAL AUDITS, THIRD-PARTY REVIEWS)—A PROCESS THAT CAN MINIMIZE THE RISKS OF COST-OVERRUNS AND DELAYS STEMMING FROM OVER-AMBITIONS AND MISREPRESENTATIONS OF STAKEHOLDERS.
IT OUTLINES ANSWERS TO FREQUENTLY ASKED QUESTIONS ABOUT IA--WHAT, WHY, WHEN, WHO WHERE AND HOW?
What is IA?
IA VERIFIES CONFORMANCE OF A PROJECT (OR ONE OR MORE ELEMENTS OF A PROJECT) WITH THE OUTPUTS, OUTCOME, AND IMPACT EXPECTED BY THE OWNERS/MANAGEMENT; CONTRACT CONDITIONS; STANDARDS AND PROCEDURES; BEST PRACTICES; RELEVANT LAWS AND REGULATIONS; AND MOST IMPORTANTLY THE BUDGET AND SCHEDULE.
IA IS LIKE GATEWAY REVIEW (GR)--“AN INDEPENDENT AND CONFIDENTIAL PEER REVIEW PROCESS THAT EXAMINES PROJECTS AND PROGRAMS AT KEY POINTS IN THEIR LIFECYCLES TO ASSESS THEIR PROGRESS AND TO RATE THE LIKELIHOOD OF SUCCESSFUL DELIVERY OF THEIR OUTCOMES”. (New Zealand Treasury).
IA COVERS TECHNICAL, FINANCIAL, ECONOMIC, SOCIAL, AND ENVIRONMENTAL COMPLIANCE.
IA FOCUSSES ON CURRENT AND FUTURE RISKS OF DEVIATIONS AND VARIATIONS FROM THE PRESCRIBED PROCESSES.
IA IS USED BY PRIVATE AND PUBLIC PROJECT OWNERS, AND BECOMING INCREASINGLY COMMON WORLDWIDE.
US HIGHWAY AGENCIES USE IA FOR EVALUATING SAMPLING AND TESTING PROCEDURES USED IN THE ACCEPTANCE OF ROAD WORKS.
THE UK, NZ , NETHERLANDS, AND AUSTRALIAN GOVERNMENTS USE GR OF MAJOR PROJECTS AND PROGRAMS OF ALL DEPARTMENTS AND AGENCIES.
Why do you need IA?
IA IS OPTIONAL AND DONE AT THE DISCRETION OF ONE OR MORE OF THE STAKEHOLDERS.
GR, ON THE CONTRARY, IS MANDATORY.
IA CAN HELP MINIMIZE THE COSTOVERRUNS AND DELAYS STEMMING FROM OVER-AMBITIONS AND MISREPRESENTATIONS.
IA CAN PROVIDE INFORMATION TO PROJECT OWNERS ON CURRENT AND FUTURE:
TECHNICAL AND ENGINEERING RISKS
OPTIMUM PROJECT DELIVERY METHOD
PRECISION OF THE COST ESTIMATES AND EFFICIENCY OF THE FINANCING PLANS
SCOPE, SCHEDULE, AND BUDGET DEVIATION RISKS
LIKELIHOOD OF CLAIMS AND DISPUTES
STRATEGIES FOR MANAGING ALL OF THE ABOVE
Why do you need IA? (contd.)
“IA HELPS US TO DRIVE CONTINUOUS IMPROVEMENT IN PERFORMANCE
AND IN THE QUALITY, RIGOUR AND CREDIBILITY OF OUR DATA”--Unilever's
global company website.
“IA PROVIDES CONFIDENCE TO STAKEHOLDERS THAT PROJECTS, PROGRAMMES AND PORTFOLIOS WILL ACHIEVE THEIR SCOPE, TIME, COST
AND QUALITY OBJECTIVES, AND REALISE THEIR BENEFITS.” UK Association for
Project Management.
When is IA done?
IA SHOULD DONE THROUGHOUT THE PROJECT
CYCLE FROM CONCEPTUALIZATION TO DETAILED
PLANNING AND DESIGN, AND CONSTRUCTION TO
CLOSE-OUT.
IA COMMENCES AROUND THE DETAILED
PLANNING STAGE IN MOST CASES, INSTEAD OF AT
CONCEPTUALIZATION AND ENDORSING STAGE,
WHICH IS DONE BY THE HIGHEST LEVELS OF
GOVERNMENTS AND CORPORATE BOARDS.
IA CAN ALSO BE A ONE-OFF EXERCISE OR DONE
AT DIFFERENT STAGES.
IA IN THE PAST WAS LIMITED TO MONITORING AND
EVALUATION, DONE BEFORE CLOSE-OUT.
Who would do IA?
INDIVIDUALS OR TEAMS PERFORM 1As, DEPENDING ON THE SCALE AND COMPLEXITY OF THE PROJECT
A TYPICAL TEAM WILL COMPRISE ONE OR MORE:
ENGINEERS
ACCOUNTANTS
ENVIRONMENTAL AND SOCIAL SPECIALISTS
ADMINISTRATIVE STAFF
MATERIALS TESTING LABORATORIES
Where is IA done?
THE INDIVIDUAL OR TEAM PERFORMING THE
IA WILL TYPICALLY SPEND AT LEAST 70% OF THE TIME IN THE FIELD, OBSERVING,
DISCUSSING WITH THE CONTRACTORS,
ENGINEERS, AUDITORS, ETC.
DOCUMENT REVIEWS AND
CONSULTATIONS WILL BE DONE INDOORS.
How is IA done?
IA TYPICALLY COMPRISES THREE MAIN ACTIVITIES, WHICH WILL VARY DEPENDING ON THE STAGE AT WHICH THE IA IS PERFORMED.
REVIEWING AND PLANNING
STAKEHOLDER MEETINGS
SITE VISITS
DOCUMENT REVIEW
SCOPE AND WORK PROGRAM FINALIZATION
DATA COLLECTION AND ANALYSIS
DOCUMENT REVIEW AND FIELD OBSERVATIONS
SAMPLING AND TESTING (IF NEEDED)
RISK IDENTIFICATION AND MITIGATION PLANNING
REPORTING
PERIODIC AND SPECIAL REPORTS AND RECOMMENDATIONS
PRESENTATIONS
How is IA done? (contd.)
DATA COLLECTION AND ANALYSIS ARE THE MOST IMPORTANT ACTIVITIES AND ABOUT 70% OF THE TIME AND
RESOURCES OF AN IA IS ALLOCATED TO THESE ACTIVITIES.
ASSESSMENTS DURING THE CONSTRUCTION PHASE WOULD TYPICALLY INCLUDE, BUT NOT LIMITED TO:
EVALUATING MATERIAL TESTING REPORTS, PRODUCTIVITY RATES DURING SELECTED PERIODS, ACTUAL VERSUS
REPORTED COMPLETED WORKS, FORWARD WORK PROGRAM AND AVAILABLE RESOURCES
SAMPLING AND TESTING (IF NECESSARY) AND CONFORMITY OF COMPLETED WORKS WITH THE DESIGN AND
SPECIFICATIONS
REVIEWING APPROVED AND PENDING VARIATIONS AND CLAIMS
IDENTIFYING POTENTIAL DISPUTES
COMPUTING RISKS AND PREPARING MITIGATION PLAN
REPORTING THE FINDINGS TO THE CLIENT
MOST OF THE ABOVE TASKS SHOULD HAVE BEEN ALREADY PERFORMED BY THE ENGINEER-ARCHITECT, AND
IA WILL VERIFY THEM. C&S DEVCO USES CHECKLISTS FOR THIS PURPOSE. WE ARE IN THE PROCESS OF
DEVELOPING A SMARTPHONE APPLICATION TO AUTOMATE VERIFICATION AND IMAGE-BASED REPORTING.
Summary
DELIVERY DELAYS AND COSTOVERRUNS CONTINUE TO BE SYNONYMOUS WITH CONSTRUCTION PROJECTS WORLDWIDE, AND BUILD QUALITY IS BEING INCREASINGLY QUESTIONED.
IA CAN HELP REDUCE DELAYS AND COSTOVERRUNS STEMMING FROM OVER-AMBITIONS AND REPRESENTATIONS.
IA IS BEING USED IN BOTH PRIVATE AND PUBLIC PROJECTS, MAINLY TO MINIMIZE MISREPRESENTATIONS.
IA’s VALUE HAS BEEN QUESTIONED. https://www.engineersaustralia.org.au/portal/news/what-real-value-independent-assurance
IA IS NEITHER AN ADDED LEVEL OF SCRUTINY BY A WATCHDOG, NOR PANACEA.
IA HAS LIMITED ABILITY TO CORRECT AMBITIOUSLY CONCEIVED PROJECTS, EVEN IF DONE AT THE START OF THE PRECONSTRUCTION PHASE.
Summary (contd.)
IA IS DONE BY PEOPLE WHO ARE NEITHER DIRECTLY INVOLVED NOR HAVE A STAKE IN THE PROJECTS.
IA PROVIDES A “FRESH PERSPECTIVE AND CONSTRUCTIVE CHALLENGE FOR TEAMS TASKED WITH DELIVERING
IN COMPLEX PROJECTS” --The Scottish Government. http://www.gov.scot/Topics/Government/ProgrammeProjectDelivery/GatewayReview/GatewayReviewProcess
IA OUTLINED IN THIS PRESENTATION IS DIFFERENT FROM THE TRADITIONAL ASSURANCE PROVIDED BY AUDIT
FIRMS ON FINANCIAL MATTERS.
IA OF CONSTRUCTION PROJECTS FOCUS ON TECHNICAL, SOCIAL, ECONOMICAL, AND ENVIRONMENTAL ASPECTS OF PROJECTS, IN ADDITION TO FINANCIAL ASPECTS.
IA PROVIDES OWNERS WITH INFORMATION ON RISKS OF COSTOVERRUNS, DELAYS, POOR QUALITY, FAILED
OUTCOMES AND IMPACTS, ETC., IF ANY, AND MITIGATION MEASURES BASED ON A SYSTEMATIC AND
IMPARTIAL REVIEW.
IA, WHEN WELL-DEFINED AND WELL-SCOPED, AND DONE BY AN EXPERIENCED INDIVIDUAL OR FIRM FROM
THE OUTSET, CAN ADD VALUE TO MOST PROJECTS AND BENEFIT ALL PARTIES TO A CONTRACT.
