Writing a schedule that helps you get paid.
Safe in the knowledge that everyone will be too busy fawning after Mike’s baby…
I just reviewed the FtIG boiler project schedule, again. Now, on version 4, the contractor has lowered my expectations sufficiently that I am now focused only on the money. Their timings for installing pipe work are unrealistically short and everything appears to be on the critical path. These, though annoying, are their problem as the contractor is responsible to ensure there is no gap in service for hot water, heating or cooling within certain seasons.
So resigned to failure on the time side I have turned to look at the money. USACE pay for definable elements, rather than the alternative of paying for percentage complete on the whole job. From the pay reviews that I have conducted for the Waste Water Treatment Plant this appears to be a better form of holding the contractor to account for finishing up individual elements. By paying 98% of an element that isn’t quite finished it leaves a virtual snagging list in dollars. These are more likely to be completed by the next pay period rather than being forgotten until the end of the project, when especially if there is a staff turnover, they get swept under the rug. We will pay for stored materials but, it has to be a significant element, the contractor has to show ownership and we prefer if it at least in place. For this project the boilers and water heaters may come into this but certainly nothing else. Again, for the waste water treatment plant we have paid for stored materials for a $60k generator and a $130k pump set so that really sets the magnitude. I’d be interested to hear what everybody else’s clients’ are happy to pay for on that?
So what’s my issue with the FtIG values? I have two:
To me definable elements are like a product breakdown structure (PBS) and when it comes to pay time I want to be able to go to the element, look at it, tick a box and pay the contractor. This is not me being an idle box ticker rather ensuring that each element is well defined, and I assume this will help them with their sub-contractors. The FtIG programme has not been built from a PBS so I can foresee the arguments coming at pay time. The lesson from this is do a detailed PBS, even for a simple job, because it has ongoing utility beyond just being the start of a programme.
I remember Steve Payne hammering the PBS into us in phase 1 but this experience and if I had any doubt then it has gone. The issue of everything being definable is important too in order to communicate the plan to different people. I am, reasonably, sure that the sub contractor knows how to do this work, however they have not managed to communicate this effectively to the contractor who, in turn, has not managed to communicate it to me. I am sure this is a lot worse in the larger projects with more people involved.
Front loading. The contractor admitted before that the project was front loaded, we all laughed and I told him that we wouldn’t accept front loading. They went away and when version 2 came back it was worse rather than better. I am aware that the contractor requires cash flow. Working for the Federal Government cash flow is not a problem, however I need to ensure that if the contractor goes bankrupt that I still have the money left in the project budget to put the remainder of the contract back out for tender. The solution to us meeting a better agreement actually came from the contractor letting me loose on his values. I can’t pay them any less than the contract value, all I am doing is moving around what the money is tied to. I am sure there will still be more iterations required before we come to final agreement but it’s a start.
In terms of submittals, over here the Navy ask for a ‘schedule of values’ as well as a schedule (programme), but USACE ask for both as part of the same submittal: the schedule. I’d be interested to hear how others have seen this being asked for by clients? For checking on the client side I think breaking them out would be best.
Apologies for the lack of pictures, I have avoided putting the programme in as it is little changed from a couple of blogs ago, and looks pretty difficult to see on a computer screen.
Holdfast Training Services Trial Blog 
Henry,
I see you’ve been overwhelmed by responses, so here’s my experience for what it’s worth.
I sit next to the two MEP commercial chaps for Carillion. My involvement with payments is to cross check what SRW are claiming for: payment for the installation of x no of pump skids or x percentage of containment. Mostly it’s accurate, but occassionally they chance their arm. We pay for materials off-site and also track items of relatively little value, £800 for a set of pre-fabricated corridor modules, but there are over 1000 of them for the project so it soon starts to add up. Interestingly SRW’s QS have been trying to double account by including the same items under materials held offsite, on site or incorporated works. This is going to result in their certificate being £2.5M lower than they were expecting this month.
What do you class as defineable elements? Is it once a subsytem is online or is it linked to ITP hold points such as pipework being hydraulicly tested?
Rich,
As I am working on a relatively small project it needs to be something quite large to trigger the payment. For something with a lot of repetition like your job I can imagine we’d listen. As far as a definition USACE don’t have one but I would say it needs to be a significant fabricated element, likely with a long lead time or built to order. Also we expect to see their receipt of payment. The theory being that we are happy to support their cash flow but we want to see that there is actually cash flow. Also, and Greg might be able to explain this better (or tell me I’m wrong) but: If thecontractor files for bankrupcy and there is a product that is on our site and we have paid for we would assume we own it. However, if the contractor hasn’t paid for it then they can’t have sold it to us so the supplier will take it back.
I would class a definable element as something I can see has been done. You could keep it large for payment like boiler installed. In which case I would expect it to have been commissioned unless there was a seperate pay element for commissioning. We will pay percentages within each element so there is alway the flex there. The issue with this project, which is a lot of piping, that they don’t define which piece. They could define it as ‘all boiler piping’ and ‘all hot water heater piping’ or break it down but the issue is that they are not specific enough.
Rich, I don’t suppose you have access to see how Carillion are paid so you? It would be interesting to see it from the contractor’s side to the client.
Chaps,
It’s interesting your involvement with valuations; something I have yet to get to grips with as we have a whole other department dealing with that. Indicative of the size of this project I suppose but I do have it as an activity on my DAP. However, I have gleaned snippets here and there and know that, like Henry’s example of pipe installation, we pay based on milestone payments when an entire plantroom has been fitted-out.
Henry,
We repeat the prcoess that we conducted with the sub-contractor with the client. From what I’ve seen it’s all a big game of smoke and mirrors.
Fran,
But what is entirely fitted out? I can understand avoiding paying percentages as it keeps pressure on a contractor to put in a system that works, but you’ll only know that quite far along the line. My first plant room started in April and now has all the equipment installed in it. Is that fitted out? It’s only had an pneumatic test on 50% of the pipework, then we need to hyrdaulically test it, then we need to flush it and then we need to commission it. It won’t be up and running till November. This is the only point at which we’ll know we’ve got what we paid for, which seems an undually long time to with hold payment from the subcontractor.
Rich,
Agreed you can’t have a payment milestone once the whole plantroom is complete; that is far too long to wait for payment. What I meant was milestones can be split down to specific stages of particular systems. Take AHU chilled water pipework for instance; one milestone might be the physical installation; which is tangible. Another might be commissioning and another proportional balancing. Similarly for ductwork, electrical supply etc etc.
But like I said, I’ve not worked in the valuations department as yet so I have a lot more detail and understanding to learn.
Fran,
Makes more sense now, cheers.
Fran,
Sounds similar in breakdown to what I am doing, the difference just being scale. Do you think that waiting until something, even a small system is 100% complete before paying any money might lead to sub contractors overly focussing on the small details that will keep them in cash flow for this month rather than looking at the project as a whole?
Henry,
Possibly, but it can be the small details that if not linked to a subcontractor’s payment will potentially not get done or done poorly due to rushing.
Conversely, you could say the same if it is linked; especially if a small job/rework is the only thing standing in their way of payment.
As Jim mentions below, in either case you need a good QS to check the work has been completed to the correct standard and only then do they receive payment.
My experiences of this, both positive and negative were directly related to the quality of the QS I was working with; good QS equals good experience, bad equals nightmare. Pretty much 100% of the problems that I had holding contractors on site to account on the MOD estate were because the MOD have very few QS and those they do have can’t keep up with the contractor’s.
Jim,
We don’t have QSs here. So the job of determining what is to be paid falls to the Project Engineer; which is me. What could possibly go wrong…