You are right the government and councils don’t have a great track record in large scale projects. But that was why TIE was set up to supposedly provide the private sector expertise that the council didn't have. From what I can see although it had people from the private sector it didn't have anyone who had been involved in the big trams projects in England . Until we have a private enquiry we will not really know what happened as all parties still have contracts in force so cannot prejudice them in public.
The big thing to take away is that all the budget is spent and the job is only half complete. If the contractor had made a ham fist of the project TIE would be in arbitration or court forcing him to complete the work at his loss and at no cost to the public sector. As TIE lost most of the claims in arbitration and it has paid the contractor although he was massively behind in programme suggests the problem has been mainly at TIE's end.
From the snippets of info gleaned from the audit Scotland and the press here I put my thoughts in a previous
post my thoughts on why it went wrong.
Basically it sounds as if I broadly concur with Watcher Zero and tbtc on the problems. Watcher Zero mentions the number of claims and how TIE kept on loosing. Indeed TIE will have to pay the contractors costs for delaying and paying his standing workforce every time they lost a claim. Think of how many guys they had working on the trams and how much they would have to pay them each day after they downed tools? Greenback is right, no one wins when both parties get into claims and disputes, everyone loses money.
tbtc mentions the service relocations, they heavily delayed the project but they didn’t go that much over budget compared to the total cost. It was the contractual wrangling that ended up ramping up the costs and possibly the lack of complete design and ground investigation.
I work in the construction industry for the private sector and there are various problems with the way we do things including our end and the public sector bodies acquiring the work. These are what I thinks wrong and it is pretty extensive. On our part the bad things we do are:
Consultants (ie designers) tend to over specify and overdesign work to avoid the perceived risk of making a mistake and getting sued or to follow standards slavishly. Designers tend to be trained as specialists in their respective area so they don’t work very well at being intergrated across a complex project. There tends not be much common sense used to proportion the amount of design required.
The industry contrary to popular belief is very low margin, it was 5% profit tops before the recession now most companies are lucky to be doing work at cost. Obviously construction is not like manufacturing where you design a product, test it thoroughly and repeat it. Most of our work involves a lot of bespoke work as no two sites or design is the same. So it always carries a lot of inherent risk.
Some contractors try and get around the low margins by looking at holes in the contract to exploit. They go in very low in a bid and possibly at a loss and try and make it back in claims. I have heard that Bilfiger Berger did this on the trams. Even if it was true if the design and contract were water tight BB wouldn’t have been able to win the claims. Consultants and the public bodies are rightly wary of this happening which makes them more conservative.
Public bodies don’t do contingency and risk. They think the contract can be written so everything is offloaded onto the contractor and it leaves them with no risk, this is a fallacy. For a start they have to use and adopt the infrastructure when it is completed so it is in their interests to get the best job done. This is where the public sector falls down, this works if the contractor makes a hash but if you leave gaps, give them bad information or change your mind on work items then no contract will cover that and you have to pay the contractor accordingly..
Clients don’t like paying for the upfront work like ground investigations and design as they see is wasted expense. So quite often you go into a project blind with a lack of information and therefore more likely to be either overdesigned or plain wrong.
Indecision by the public sector. This is a real problem, no one making a decision or starting projects and changing things half way through (the Scottish parliament, IEP and the Sydney opera house are all salient examples of this.
Bean counters always wanting the lowest cost. This looks good on paper but is the contractor up to scratch? Did he get his price right?. Did he deliberately go too low hoping to claim? Are corners going to be cut? What about the whole life cost of the project would it be better to go for something more expensive, better built that costs less in operational and maintenance costs? All this goes out of the window and the lowest cost is always picked. In addition it is hard for public servants not to pick the lowest cost as it would get jumped on by Politicians the press.
Yep the public sector is hopeless with contracts. Some of the modern contracts understand the fact we deal with risk and uncertainty and have contract options to share the risk between the public bodies and the contractors. So it has terms like if the contractor takes on all the uncertainty and it comes in under budget the savings are shared between the contractor and the employer. All seems fair, but try getting that past a politician and the press. That comes out as "we are giving the contractors a bonus' that could be paying for more schools". So most public sector bodies go lump sum with no contingency.
If you tell a bean counter that you should hold back an extra 20% in case of say something like finding archaeological sites under the works the 20% gets knocked off. The public sector doesn’t do ‘risk pots’.
Other things that add costs on to large UK jobs are:
Planning. Our systems terrible, it burns up years of time and cost, more time than it will take to construct it. In France , if it is deemed in the national interest it gets fast tracked without 10 years of monkeying around.
Land costs. Britain ’s densely populated and land acquisition is based on market value. I.e. in the SE and home counties for HS2 very pricey!
Environmental and safety standards for our infrastructure is higher than some other European countries.
Optimisation Bias by the Treasury. It’s another word for contingency used by treasury wonks. They worry too many capital projects go over so they add a large extra lump of cash on top of the actual cost estimate ‘just in case’. The problem with this approach is it get locked in as an ‘actual cost’ and everyone aims towards it and it ends up costing that amount. Every large government project is affected by this. My solution would be for the treasury to hold a central risk pot for all projects.
There is a report called ‘never waste a good crisis’ by Constructing Excellence that analyses what’s wrong with the industry, it makes great bedtime reading!
In defence i would say you hear about all the bad jobs and never hear when jobs go well. Manchester have a good handle on their trams network and it is clearly a success. Look at the Newcastle metro. HS1 was built to time and budget.
