Handling Contractor Insolvency And Contingency Measures In Construction Projects

Risk Assessment In Construction Industry

Despite the background checks and due diligence studies carried out before awarding contracts to contractors, there is always the remote possibility that solvency and liquidity problems may arise. This becomes an even greater challenge when the main contractor is in the process of executing the project, but them becomes insolvent and is forced to go into administration.

This may be unexpected and the high level of its impact on the execution of a project can easily throw everything into a spin; handling such unexpected scenarios is what matters though as something will almost certainly go against the plan for any project. The first this that should be done is to initiate contingency measures to arrest the situation and ensure the project proceeds to completion.  The contingency measure may have been stipulated in the risk management plan, or not, but a contingency plan must immediately be put into place to ensure project objectives are achieved (Kennedy, 2018).  

The most appropriate way to handle such a conundrum is to form an ad hoc subsidiary construction or project delivery company to take over the project. This should be done by the project owner to ensure no time is lost since cancelling and tendering afresh for the project will inevitably lead to increased costs and time lost, plus the potential for further cost increases due to reworks. 

After setting up the subsidiary construction firm, the next step is to take up all or most of the site team members that were already working on the project with the now insolvent main contractor and proceed with the project. This will require novation where a new contract is substituted for the old contract. This way, all the rights and obligations of the old contract signed with the new insolvent company are extinguished, allowing work to proceed, but using the skills and manpower of persons that were already working on the project (Barker, 2014)

Question 2 Part 1

SWOT analysis for the introduction of a disruptive technology (Unmanned Aerial Vehicles – UAV’s)

The use of UAV’s that are autonomous has become ubiquitous and commonplace in modern times, especially in the agricultural, extraction, and military/ security sectors.  However, any disruptive technology has its own merits and demerits, and these needs to be evaluated, along with the attendant opportunities to be explored, and the threats that could affect the disruptive technology. This is done through a SWOT analysis that identifies and evaluates the strengths, weaknesses, threats, and opportunities inherent in a project to help with decision making.

SWOT Analysis for Introduction of Unmanned Aerial Vehicles (UAV’s)

 The analysis below is for the introduction of Autonomous robots in military and security applications (the military scenario is used as the organization). Military personnel face numerous challenges, especially in active battle field situations where they face hazardous risks of injury, death, while the organization faces the ever present risk of losing and getting a lot of critical equipment damaged.

Strengths

Cost effectiveness: The cost effectiveness factor makes a very significant difference between drones and other aerostats in military applications; UAV have a small price outlay, compared to say, buying a jet fighter or attack helicopter.

Minimal crew: A UAV can be manned and operated remotely by just a single operator; this is much better in terms or resource (human) allocation because sending out a whole team of say 12 people with an aircraft puts the lives of many more people at risk, while having huge manpower costs impact.

Reduced risks to human personnel: using UAV’s that are remotely controlled and operated removes the need to have personnel in the battlefield; human costs of war can sometimes be astounding, with families left behind in anguish, or injured personnel requiring extensive medical interventions that further increase costs.  

Dual purpose: Undertaking missions in enemy territory usually requires tons of intelligence information that can only be collected through surveillance.  Drones (UAV’s) can be effectively used for non-invasive surveillance and then be used as attach devices such that they can deploy missiles or other armament during surveillance missions after gathering enough positive data

Flexibility and versatility: Some military application drones can be deployed from the back of a truck or even by a soldier walking in the battle field; it can also cover wide areas autonomously and discreetly; providing valuable intelligence to security units. This obviates the need for expensive platforms to be used for launching other types of warfare aircraft, such as aircraft carriers or the need for an airport/ air field (‘Dawn’, 2018)

Enhanced productivity: With few people required to manage the UAV’s and more able to be achieved using significantly less and in significantly less time, the use of UAV’s in military applications results inn increased productivity as finances and personnel can be redeployed to areas where they are most needed. Further, UAV’s can consistently perform for a long time without human intervention

Weaknesses

Limited payload: UAV’s are small in size and take off weights an important hindrance factor in using them; because they have a very small payload, only so much can be achieved  and this becomes a limitation in far climes where a heavier military payload are required urgently

Procurement Process for Design-Build-Maintain Contracts in Queensland

UAV’s also have a limited altitude range, being required to fly low to improve visibility, and enable remove access and controlling.

 Opportunities

Innovations in composite materials: Materials made of composite materials that can ensure the highest strength for the UAV’s or even make them invisible provides opportunities for developments in this area

Advanced swarm technologies:  UAV’s can be programed using advanced algorithms to operate in unison like a swarm; this will ensure greater efficiency in neutralizing targets and can enable an equivalent of a platoon to be sent out into the battle filed

Innovations and integration of sensors:  with universal payload stations, new and advanced sensors can be implemented in UAV’s and integrated with existing systems; for instance, UAV’s with optical cameras can be integrated with laser and infra-red vision for greater efficiency and accuracy

Threats

Use by enemy groups: because of its low cost, small footprint, and ease of operation. UAV‘s pose a threat where known enemy groups, such as terror organizations can develop and harness its power to devastating effect; a terrorist attack can be executed suing a cheap drone strapped with bombs.

Poor weather: In bad/ poor weather, UAV effectiveness can become limited

Limited Survivability: because of their low operating altitude, the UAV’s remain vulnerable to enemy fire, even using small arms and any impact will result in extensive damages to the AUV (Wolf, 2016)

Question 1 Part 2

The EMV is computed by multiplying the probabilities by the monetary cost (total for each risk)

These were computed in a spreadsheet and are shown below

	EMV
	Optimistic	Most Likely	Pessimistic
Excavation and ground water infiltration	1500	40000	35000
geotechnical	50000	260000	315000
Weather	25000	90000	120000
Interior and exterior	30000	45000	80000
Labor union	1650	17000	82500
Inflation	0.01125	0.03575	0.016
Total	108150.01	452000.04	632500.02

The required amounts to manage the risks for each scenario is shown as the totals for each row EMV’s.

Question 2 part 2

The values were computed in a spreadsheet as shown below;

Prequalified DBM Contractor	Technical proposal score	Price proposal	Time	Price for M	Technical score for M	Selection Score
Alpha	76.9	2940000	369	150000	80.5	3095591
Beta	79.5	3060000	335	160000	76.8	3220000
Gamma	68.7	2880000	385	125000	84.3	3033758
Delta	84.2	3900000	394	175000	88.8	4111879
Theta	78.5	3850000	357	160000	83.1	4010000
Rho	80	3000000	365	140000	80	3140000

The best value DBM is for Gamma, with the lowest score

In considering the best and final offer, all the factors would be given weights, so that time to complete works and price proposal are given larger weights, and the other factors are also scored (Pennington, 2017). Below is a weighted score for each factor;

Weighted Score	0.25	0.2	0.2	0.15	0.2
Prequalified DBM Contractor	Technical proposal score	Price proposal	Time	Price for M	Technical score for M	Selection Score
Alpha	19.225	588000	73.8	22500	16.1	610500
Beta	19.875	612000	67	24000	15.36	636000
Gamma	17.175	576000	77	18750	16.86	594750
Delta	21.05	780000	78.8	26250	17.76	806250
Theta	19.625	770000	71.4	24000	16.62	794000
Rho	20	600000	73	21000	16	621000

The best company still then remains Gamma.  Factors such as CSR, social impact, and environmental sustainability would also be considered

References

Barker, K. (2014). Maintain the chain: dealing with insolvency in the supply chain. [online] Construction News.

‘Dawn’ (2018). The civil and social use of drones: strengths and concerns. [online] Create Innovate-GOSFORD City.

Kennedy, T. (2018). Insolvency risk in construction – be proactive.

Pennington, R. (2017). Two Faces of Negotiation in Public Procurement. 

Usmani, F. (2018). A Short Guide to Expected Monetary Value (EMV).

Wolf, G. (2016). The Drone Advantage. [online] Transmission & Distribution World.