Travelers Canada on how to successfully complete a Mega Civil project

“At the Travelers, we [work with] It occupies a very large part of the North American construction market, “said Reyberset (pictured), Vice President and Chief Strategy Officer of the Travelers’ Construction Services Group. “We are the largest guaranteed credit provider in North America, with clients of nearly 5,000 contractors of all sectors and sizes in all parts of these markets.

“You will get a very detailed report. [from our clients]Includes sensitive information from companies in the process of each construction project being carried out over time. Margins, costs, schedule extensions, and disputed receivables are displayed. […] Mined that data [a 17-year span] See what trends you can identify. “

Through the exercise, Travelers found that many contractors working on large-scale civil engineering infrastructure projects such as highways and bridges were either not working well or were not generating sufficient financial benefits. The data show that project procurement types (from public-private partnerships (P3) to design builds, design bid builds, progressive design builds, and construction managers / general contractors) play an important role in the success of the job.

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“Contractors get into trouble when fixing prices [a heavy civil construction project] “Before the design matures,” Bassett told the insurance business. “If you’re asked to fix the price of work that’s 30% complete, that seems to be the biggest correlation of failure. If you have an advanced or complete design, most of the time. If the contractor can see it, they can bid and execute, which is what the data shows.

“Public owners, whether stimulating or just economic recovery, are pushing the boundaries of infrastructure and demanding more spending, so it’s important to pay attention to the procurement model. Models that ask construction space contractors to price-fix early before the design is fully developed [more likely to see] Trouble can result in disputes, delays, cost overruns, poor contractor performance, and sadness for project owners. “

According to Travelers data, the worst-performing procurement type from 2004 to 2020 is P3, which is heavily used in civil engineering infrastructure projects across Canada. This is because P3 usually follows a design-build model and contractors struggle to meet the price and funding commitments agreed upon before the design is complete.

In contrast, construction manager / general contractor procurement models, more traditional design-bidding-construction methodologies, and progressive design construction procurement models have proven to be more successful options for project owners and contractors. I did. With these procurement models, there is more collaboration and the price is fixed only when the design is very close to completion.

The results of this study, especially the poor performance of large P3 projects, highlight the importance of warranty and warranty products as risk management tools.

“From the perspective of those who use public debt, such as the owners of public projects, they hired contractors. What they want us to do is ensure that the contractors do the job. The answer. That’s the basic relationship, “Bassett explained. “Where there is a procurement model that is not suitable for performance, there is this early price commitment when the design is not evolving, but the owner is also at risk. [and they could also face] Delays, disputes, cost overruns, etc.

“The guarantor issues bonds, which is a formal means (guarantee), but what we actually do is pre-qualification screening. We look at the organization and say: “Do they know how to operate a company in this uncertainty? And if possible, issue bonds. Due to the uncertainty of the procurement model, public owners are now Want more bonds [and] This pre-screening and pre-qualification screening by the guarantee industry is more valuable than ever. “

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As Canada recovers from the COVID-19 pandemic, spending on civil engineering infrastructure may increase. Travelers are encouraging all parties to consider which sourcing method will bring the best performance out of the market. In some cases, P3 has been successful in Canada, especially in social infrastructure such as schools, hospitals, prisons and public buildings, and this method can provide good value to taxpayers.

“I think the jury is deciding if the P3 model is the right model to use to make a big investment in the market, as it is now. It’s a 30% design.” Bassett said. “And we know it’s not the secret to success for everyone. Owners think they’ll win, but not, contractors won’t, and designers can’t keep up. ..

“In a particular sector, P3 is fine. The data shows that. Many contractors are doing well in that area … but it’s because the contractor, for example, a light rail transit project, or A coin toss about whether you can make money at highway interchanges and bridges. Our message is that if you’re going to put money in, the procurement method is well designed before fixing the price. But it’s about adapting to the (perfect or near perfect) way, because you know the market. You can do it and get the value you expect from your investment. ”

Travelers Canada on how to successfully complete a Mega Civil project

Source link Travelers Canada on how to successfully complete a Mega Civil project

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