Bidding And Contracting Risks For Construction Projects – Report To The CEO

Proposal for developing new areas of building

Project costing and estimation of time is essential for managing the project and proper planning of the operations to meet the specification. According to the given scenario, the report will find out the information related to the bidding and contracting approach for big construction projects (Kerzner and Kerzner, 2017, p. 21). The report will analyze risk factors in bidding and contracting of the construction project and provide the recommendations for managing the risks properly. Moreover, the report will prepare the plan for the cost of the bid and scheduled the tasks for managing the operations for the final bidding process for the identified projects. The cost planning for bidding project will involve the resources, timing and typical contracting elements that have a significant impact on the decision making for the expanding the business in new areas.

Proposal for developing new areas of building  

The report is mainly intended to explore and evaluate the information related to the construction projects undertaken in Australia. The three major projects being selected for the report are Pacific highway upgrade Warrell creek to Nambucca heads, Princes highway upgrade for foxgroung and berry bypass and Aubin grove train station and Russell road upgrade. The report would be focusing upon the contracting risks faced within the construction industry. It would describe the selected projects in detail along with the risk impacting the projects. The report has identified that there are various risks involved in contracting in the construction industry. The major risks being identified in contracting are the Legal risk, Contract language, Project risk, Liability risk, Government contract risk and business risk which could impact the contracts of construction project between two parties. It is been found that all the three projects are been initiated after the year 1990 in Australia and had come across various risks as well.

The total working time for the project will be around 5 months from 4th March to 5th August 2019. The total cost of human resources for managing the bidding and contracting plan for new construction projects would be $404,720.00. The major departments that will contribute to planning and implementation of scheduled activities are administration, marketing, construction, engineering and estimating as well as planning. The bidding production manager will try to manage the tasks according to the Gantt chart which will help in monitoring and analysis of the performance of the groups and individual to complete the actions. For the current project of bidding and contracting, the WBS will focus on the planning, scope management, estimation, review, and submission of the information for the final bid.

Risk assessment and recommendations

The projects were mainly carried out by using the Single Source Responsibility and Design-Build Project Delivery method in which the construction companies were the sole responsibility for the project delivery to their clients. It further identified that these projects included various risks which impacted their costs and timeframes to the great extent. Moreover, the major risks being identified within the projects of Pacific highway upgrade Warrell creek to Nambucca heads was project risk which impacted its cost and time schedules. The Princes highway upgrade for foxgroung and berry bypass project came across the safety risk due to the limited availability of resources and safety concerns of the workers at the road. The report even revealed that operational risk was the major risk which impacted the project of Aubin grove train station and Russell road upgrade.

Risk refers to the possibility of loss and injury in the project that influence and overall performance and progress of the project. A project risk is an uncertain event or condition that affects the planning and implementation of project operation and achievement of the project objectives (Turner, 2014, p. 11). The process of risk management focuses on the identification and analysis of the potential risks in the particular project and planning of the mitigation functions. The project manager or authority that handling the project is responsible for developing the plan for analyzing the risks and look for minimizing the impact of risks on the project.

Major risk in contracting for construction project:

For the expansion of business, the organization is focusing on the three major construction projects such as Pacific highway upgrade Warrell creek to Nambucca heads, princes highway upgrade for foxgroung and berry bypass and Aubin grove train station and Russel road upgrade. These are big construction projects in Australia that can help the organization to expand the business in new areas. The company is looking for bidding and contracting for these projects. However, the organization has good knowledge of bidding and contracting of the projects that can help in acquiring these projects but there are some risks in the contracting process (Lee, Lam, and Lee, 2015, p. 116-127). The lack of consideration of these risks can influence the approach and actions of the company.  In order to develop the contract for projects, management will face the following risks:

Design risk:

Contract insurance requirements for design professionals like architects, engineers should include auto and commercial general liability. The limits of design professionals’ professional liability coverage are particularly important. Because a professional liability policy typically will cover losses arising on all of a design professional’s projects, not just your project, it is important that the aggregate limit be sufficiently high. Indeed, owners often consider requiring excess limits for professional liability coverage or requiring that the coverage be project specific either through a separate project policy or sub-limits applicable only to the project (Beazer, and Blake, 2017, p. 1372). For large projects, an owner also may wish to consider obtaining owners protective professional liability insurance coverage, which indemnifies the owner directly for losses arising out of the design professional’s professional negligence that exceeds the limits available under the design professional’s own professional liability policy.    

Major risk in contracting for construction project

Legal risk  

The legal risks mainly include compliance with the regulations, contracts, legal action risk, and intellectual property rights. It is very important for the project owners to bring these aspects into considerations so that could manage the risk effectively. The projects could also face some legal issues concerning when, how and at what price the project would be delivered, what project is to be delivered, the consequences in case of any defects, infringements, delays, and issues of coordination among the parties (Duclos-Gosselin, Rigaux-Bricmont, and Darmon, 2015, p. 1-13).

Liability risk

This risk in the contract bounds the project owners with various legal accountabilities which must not be overlooked by the parties. It mainly involves the breach of contract issues, alleged confidentiality disclosures, warranty problems, disputes, and litigation while implementing the project practices specifically. Violation of these aspects could lead the parties towards severe legal actions or penalties out of the contract.

Business risk

This risk arises due to the poor relationships, instability, declining revenue or profits, failure to achieve the objectives, loss of goodwill, weak brand integrity and bad public relations. These factors could highly impact the project as well as the contract. The project owners must consider effective measures to manage the risk and avoid certain consequences out of the same.  

Contract language

This is also one of the risks to the parties which lie in the contract itself.  It has been found that the construction contracts are often flooded with unclear language which makes complicated to identify reimbursable project costs (Hefetz, Warner, and Vigoda-Gadot, 2014, p. 365-386). It is important that the contract is drafted with clear and understandable language so that the parties could identify the scopes, clauses, and provisions related to the contract. The concise and clear language of the contract would also overcome the risk to owner related to the possible issues over project costs.

Government contract risk

It is essential for the parties to meet the government contractual regulations like environmental safety and security, human rights and health and safety measures within the project. The parties must ensure that the project does not breach any of the contractual elements throughout the contract.

Ethics risk

This is another riskier aspect where the parties could not overlook the ethical considerations while commencing the contract for the project. Ethics are the set rules and standards to be followed by the parties while initiating any of the acts.  The reasons for breaching a contract could include the ethical issues or considerations which might be evident in the durability of the contracts are moral relativism and cultural relativism.

Commercial contract risk

This type of risk mainly impacts the work environment of the project to be initiated. It mainly involves the entities such as licensors, sellers, prime contractors, buyers, subcontractors and all other parties concerned to the commercial agreement. It is very important for the entities to manage the risk so that to survive in the current challenging business environment.

Operational risk

The operational risk differs on the basis of the contract type and the compensation model of the construction model. It has been found that the degree of this risk is proportionate to the project size and also depends upon how the risk management is carried out (Blocher, 2015, p. 27).

Project risk

Project risks are mainly the risk towards the liabilities, scopes, objectives, costs, time and the outcome of the project. It has been found that many of the owners or parties tend to shift their project risks to other contracting parties mostly the contractors through disclaimer clauses. The clauses mainly attempt to transfer the risk of one party which could be a legal liability to the other party through contractual terms.

The risk matrix below indicates the most significant risk involved in the contracting of the construction project:

Table 1: Risk matrix

RISK	IMPACT	SOLUTION
Legal risk	This type of risk could lead the parties towards legal actions or penalties out of the consequences.	Abiding by the regulations and legislations involved in the contract would help in reducing the risks of legal penalties to the project.
Contract language	The unclear or vague language in the contract could result in conflicts between the parties and even impact the construction project extensively	Ensuring to include clear and understandable language in the contract would eradicate the risk of any misunderstanding or conflict among the contractual parties.
Project risk	The risk highly impacts the scopes and objectives of the project as the parties’ transfers the obligation from one another under the disclaimers (Mouzas 2016, p. 50-62). It even lead to delays and cost overruns to the project	The contracting parties must ensure to meet their liabilities and avoid transferring the clauses to one another
Liability risk	Violation of the elements included contract could lead the parties towards severe legal actions or losses out of the contract.	It is essential to understand the liability and avoid any of the breach out of the contract.
Government contract risk	This risk could also impact the parties by legal actions or fines out of the breaches.	The rules and regulations must be met effectively.
Business risk	This risk impacts the outcome of the proposed project in terms of either profits or losses.	It is important to maintain healthy relationship with the parties, develop positive brand value and public relations to manage the risk specifically (Hou, J. and Neely, A., 2018, p. 2103-2115).

The costing of biding project and contracting will focus on the requirements and utilization of the resources that have a significant impact on the estimation of the budget. There are various resources that involve in the planning and implementation of the bidding and contracting plan for the organization to achieve the goals and objectives. The estimation of the cost of the whole plan will involve the salary of the human resources, documentation, business unit overheads, travelling, and accommodation (Marsh, 2017, p. 32). The total working time for the project will be around 5 months from 4th March to 5th August 2019. The salary of the human resource team will be decided by the HR and administrator team to identify the estimated budget.  

Table 2: Costing

Name	Position	Total working hours	Salary per hour	Total Salary
Chintan Patel	Bid coordinator	1352	$70	$94640
Lucy Wang	Bid production manager	1360	$70	$95200
John Cavenor	Production assistant	136	$30	$4080
Design	Design engineer	920	$50	$46000
Contract	Contract	584	$50	$29200
Construction	Construction engineer	800	$50	$40000
John Robinson	Scheduler	704	$50	$28160
Annabel Nguyen	Planning engineer	304	$40	$12160
Chen Wang	Lead estimator	248	$30	$7440
Janice NG	Estimator	400	$30	$12000
Andy Akdogan	Estimator	552	$30	$16560
Alan Woden	Estimator	160	$30	$4800
Joanne Shedden	Clerical support	248	$30	$7440
CEO	CEO	1624
Total				$404,720.00

The total cost of human resources for managing the bidding and contracting plan for new construction projects would be $404,720.00. This is between the estimated costs proposed by the organization $ 400 billion to $1 billion. The organization will provide estimated salary and benefits to the project team members that will help to keep them motivated and engaged in working.  The costing of the project does not include other expenses related to the project (Kaya, 2018, p. 18). The human resources and their travelling and accommodation costing are considered for developing the budget planning of the contracting and bidding project.

In order to bid and develop the contract for the three construction projects from Australia, the management team will develop and follow a scheduled plan. Scheduling in the project management refers to a mechanism to communicate what tasks need to be get done and what organizational resources will be allocated to complete those tasks within a specific timeframe (Larson et al., 2014, p. 28). The production manager and coordinator will develop the plan of scheduling of the activities by considering the standards and objectives of the bidding and contracting plan. The activities that involve in scheduling of the task will based on the available human resource, time and scope of the project to complete the tasks according to desired functions.     

Table 3: Schedule

Task Name	Duration	Start	Finish	Predecessors	Resource Names	Cost
Project	106 days	Mon 04-03-19	Mon 05-08-19		CEO	$404,720.00
Planning	26 days	Mon 04-03-19	Tue 09-04-19		Coordinator ,Lucy Wang ,CEO,Construction ,Design ,John Robinson	$118,000.00
Receive bid documents & decide to bid (Plan for bid)	11 days	Mon 04-03-19	Tue 19-03-19		Annabel Nguyen ,CEO,Joanne Snedden ,Contract ,Coordinator ,John Robinson ,Lucy Wang	$27,280.00
Brief bid participants & stakeholders	10 days	Wed 20-03-19	Tue 02-04-19	3	John Robinson ,Lucy Wang ,CEO,Coordinator ,Janice Ng	$17,600.00
Site Project Evaluation visit	5 days	Wed 03-04-19	Tue 09-04-19	4	Construction ,Design ,Lucy Wang ,Contract ,Coordinator ,Joanne Snedden	$12,800.00
Scope definition	14 days	Wed 10-04-19	Thu 02-05-19	5	CEO,Lucy Wang ,Contract ,Coordinator ,Design	$57,360.00
Construction / Design prepare build strategy	9 days	Wed 10-04-19	Wed 24-04-19	4	Construction ,Coordinator ,Design ,Lucy Wang	$17,280.00
Engineering prepare bid design & sizing	5 days	Fri 26-04-19	Thu 02-05-19	7	Alan Wooden ,Andy Akdogam ,John Cavenor ,Construction ,Coordinator ,Design ,Lucy Wang	$13,200.00
Estimation	34 days	Fri 03-05-19	Thu 20-06-19	8	Andy Akdogam ,Janice Ng	$89,680.00
Quantity takeoff and BOQ	4 days	Fri 03-05-19	Wed 08-05-19	7,8	Annabel Nguyen ,Joanne Snedden ,Contract ,Coordinator ,Lucy Wang	$8,320.00
Pricing standards for bid	4 days	Thu 09-05-19	Tue 14-05-19	10	Janice Ng,Joanne Snedden	$1,920.00
Pricing of BOQ	3 days	Wed 15-05-19	Fri 17-05-19	11	Coordinator ,Annabel Nguyen ,Chen Wang ,Design ,Joanne Snedden ,Lucy Wang	$6,960.00
Planning of Project	12 days	Mon 20-05-19	Tue 04-06-19	12	Construction ,Coordinator ,Lucy Wang ,Alan Wooden ,Andy Akdogam ,Contract ,Design ,John Robinson	$38,400.00
Risk assessment of project	7 days	Wed 05-06-19	Fri 14-06-19	13	John Cavenor ,John Robinson ,Lucy Wang ,Annabel Nguyen ,Coordinator	$14,560.00
Set contingency & allowances	4 days	Mon 17-06-19	Thu 20-06-19	14	Coordinator ,Joanne Snedden	$3,200.00
Review	19 days	Fri 21-06-19	Wed 17-07-19	15	Chen Wang ,Design ,CEO,Construction ,Coordinator ,Lucy Wang	$87,680.00
Prepare Draft Bid document	5 days	Fri 21-06-19	Thu 27-06-19	15	Construction ,Coordinator ,John Cavenor ,Contract ,Design ,Lucy Wang	$12,800.00
Bid clarification meeting (on site)	3 days	Fri 28-06-19	Tue 02-07-19	17	Annabel Nguyen ,Lucy Wang ,Alan Wooden ,CEO,Coordinator	$5,040.00
Review bid with stakeholders	2 days	Wed 03-07-19	Thu 04-07-19	18	Coordinator ,Janice Ng,Lucy Wang ,Annabel Nguyen ,CEO,Construction	$4,160.00
Convert Draft to Final Bid	5 days	Fri 05-07-19	Thu 11-07-19	19	Contract ,Coordinator ,John Robinson ,Andy Akdogam ,Chen Wang ,Construction ,Design ,Lucy Wang	$16,000.00
Senior mgt Review	4 days	Fri 12-07-19	Wed 17-07-19	20	CEO,Chen Wang ,Construction ,Coordinator ,Design ,Lucy Wang	$8,640.00
Submission	13 days	Thu 18-07-19	Mon 05-08-19	21	Lucy Wang ,Andy Akdogam ,Contract ,Coordinator ,John Robinson	$52,000.00
Finalize bid for CEO review	4 days	Thu 18-07-19	Tue 23-07-19	20	John Robinson ,Annabel Nguyen ,Construction ,Coordinator ,CEO,Design ,Lucy Wang	$10,560.00
CEO Final Review	4 days	Wed 24-07-19	Mon 29-07-19	23	Lucy Wang	$2,240.00
Finalize documents for bid submission	4 days	Tue 30-07-19	Fri 02-08-19	24	Construction ,Contract ,Coordinator ,Design ,Lucy Wang ,Annabel Nguyen ,CEO	$10,560.00
Submit Bid by 12 Noon	1 day	Mon 05-08-19	Mon 05-08-19	25	Lucy Wang	$560.00

The project scheduling will be beneficial for planning and management of bidding and contracting project of the organization to expand the business in new areas. According to the schedule of the project, the start date of the project will be 4th March 2019 and completed by the 5th of August 2019 (Excluding holidays). The estimated cost of the project would be $404,720.00 that offered by the financial department of the organization. The major resources that will contribute to the planning and completion of the project involve CEO, bid production manager, planner, coordinator, estimator, and scheduler. Moreover, the resources will also include the clerical support, design engineer, construction engineer, and contractor. Apart from that, the major departments that will contribute to planning and implementation of scheduled activities are administration, marketing, construction, engineering and estimating as well as planning. All project team members will try to complete the allocated tasks as per the estimated time and standards to meet the desired objectives of the bidding (Cooper, 2017, p. 17).

Gantt chart

The Gantt chart will help to identify the interrelationship among the tasks and specific time and resources of the project operation. The bidding production manager will try to manage the tasks according to the Gantt chart which will help in monitoring and analysis of the performance of the groups and individual to complete the actions. Additionally, the consideration of proposed Gantt chart activities and time will support to manage the biding plan as per the standards (Kerzner, 2018, p. 19). The bidding and contract planning requires the follow up of the Gantt chart activities to meet the objectives.  

WBS

Work Breakdown Structure (WBS) is a key project deliverable that helps the project manager to divide the operations into smaller tasks to get the best results and effective utilization of resources. For the current project of bidding and contracting, the WBS will focus on the planning, scope management, estimation, review, and submission of the information for the final bid (Martinelli, and Milosevic, 2016, p. 34). The proper consideration of WBS is helpful for a project manager to analyze the requirements of human, financial and other resources for the project. in addition to this, the proper consideration of WBS activities will also helpful for identifying and minimizing the risks in the bidding and contracting project. Apart from that, knowledge about the smallest activity in the project gives the advantage for allocation of tasks and resources to the team members.

Resources and departments:

Following are the key resources that will take part on the biding and contracting project for the organization:

Table 4: Resources and department

Name	Department	Position
Lucy Wang	Marketing and sales	Bid production manager
John Cavenor	Marketing and sales	Production assistant
Design	Engineering	Design engineer
Contract	Contracts	Contract
Construction	Construction	Construction engineer
John Robinson	Planning	Scheduler
Annabel Nguyen	Planning	Planning engineer
Chen Wang	Estimating	Lead estimator
Janice NG	Estimating	Estimator
Andy Akdogan	Estimating	Estimator
Alan Woden	Estimating	Estimator
Joanne Shedden	Estimating	Clerical support
CEO	Administration	CEO

 The planning and implantation of actions related to bidding and contracting of the construction projects, the mentioned human resources and departments are responsible. These will monitor and perform the activities according to schedule and look to meet the objectives (Tonchia, 2018, p. 117-129). The proper accountability and involvement in the approach of managing the operation will influence the effectiveness of the project.           

The specific project being selected to conduct the report are Pacific highway upgrade Warrell creek to Nambucca heads, Princes highway upgrade for foxgroung and berry bypass and Aubin grove train station and Russell road upgrade.  All the three projects are been initiated after the year 1990 and had come across various risks as well. The projects meet the criteria of the key aspects of the proposed report which displays sufficient information and understanding related to the same.

Table 5: Background analysis of the project

Projects name / description	Pacific highway upgrade warrell creek to nambucca heads	Princes highway upgrade for foxgroung and berry bypass	Aubin grove train station and Russell road upgrade
Client name	Roads and Maritime Services	Roads and Maritime Services and NSW government	Public Transport Authority (PTA) and Main Roads WA (MRWA)
Project manager	Fernando Fajardo	Saman Liyanaarachchi	Sarah Cheung
Major constructions companies	ACCIONA Infrastructure, Ferrovial joint venture and Roads and Maritime Services	Seymour Whyte Constructions	Georgiou Group
Location	Macksville, New south Wales , Australia	Berry NSW	Australia
Start and finish date	December 2014 to 29 June 2018 (About  pacific highway upgrade warrell creek to nambucca heads, 2018)	January 2015 to July 2018	February 2015 – June  2017
Project delivery system	Single Source Responsibility and Design-Build Project Delivery	Single Source Responsibility and Design-Build Project Delivery	Single Source Responsibility and Design-Build Project Delivery (About Aubin grove train station & Russell road upgrade, 2018)
Key construction methods	innovative and sustainable construction method was used	Concrete road construction method	Precast Method of Bridge Construction
Value of project	$830 million	$580 million (About  princes highway upgrade for foxgroung and berry bypass, 2018)	$71.4 million
Risk that contribute to time and cost overrun	The improper execution of the design led to the project risk and resulted in the cost and time overrun.	The major risk was safety risk which impacted the project by various incidents. The higher risk of safety of the labour made the project authorities implement additional measures which resulted in cost overrun.	Operational risk was that been faced by the authorities. There was space constraint for working which required more time to complete the project.

Table 6: Risk matrix

Likelihood
Minor	Moderate	Major
1	2	3
A	Almost Certain	Medium	High	Extreme
B	Likely	Medium	Medium	High
C	Moderate	Medium	Medium	High
D	Unlikely	Low	Medium	Medium
E	Rare	Low	Medium	Medium

Table 7: Risk assessment

Project	Risk identified	Impact of risk	Measures to treat risk
Pacific highway upgrade warrell creek to nambucca heads	Geotechnical, environmental, project risk	The higher risks of environmental impacts made the project to invest upon the investigations and excavations for the highway.	Effective mitigation of the risk could be undertaken by acquiring expert advice upon the geotechnical design and construction activities
Princes highway upgrade for foxgroung and berry bypass	Safety, management related risk and logistical risks	There was a safety concern of the workers due to the limited space at the road. The roads were open for traffic which confined the construction areas and increased the risk of accidents over it.  Additionally, the transportation facilities for the raw material and availability of the labour also impacted the project (Clark et al., 2016, p. 4615-4622).	Specific safety measures and equipments could have helped to overcome with the incidents and reduce the risk of safety.
Aubin grove train station and Russell road upgrade	Operational risk and  environmental risk	The risks impacted the project majorly in terms of delays in the set timeframe. The risk involved safety issues due to the lack of space for construction	In this case, the risk have to be avoided as the space for construction could not be increased and have to be managed in the same risk.

Conclusion 

From the above study, it has been considered that project planning and implementation requires proper analysis of operations and activities to meet the objectives. The CEO of construction organization can consider the developed bidding and contracting plan for expending the business through undertaking the new projects. The report has discussed about major risks in the contracting activities that involve operational, legal, language and validity. Moreover, the report has developed and presented the risk matrix for mitigating the 6 major risks of the contracting. In addition to this, the report has estimated the costing of human resources involved in the contracting and bidding project including the travelling and accommodation expenses. Apart from that, the report has developed the scheduling plan for managing and implementing the actions for the project. Moreover, the report has explained the use of Gantt chart and provided the WBS of whole planning for dividing the activities into small operation for proper monitoring. In the end, report has provided the brief background of projects that are selected for bidding and contracting.       

References

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About  pacific highway upgrade warrell creek to nambucca heads, 2018 [Accessed through] < https://www.rms.nsw.gov.au/projects/northern-nsw/warrell-creek-to-nambucca-heads/index.html > [Accessed on 27^th October 2018]

About  princes highway upgrade for foxgroung and berry bypass, 2018 [Accessed through] <https://www.transport.nsw.gov.au/newsroom-and-events/media-releases/berry-bypass-opens-to-traffic> [Accessed on 27^th October 2018]

About Aubin grove train station & Russell road upgrade, 2018 [Accessed through] < https://www.pta.wa.gov.au/projects/completed-projects/aubin-grove-station/russell-road-upgrade > [Accessed on 27^th October 2018]