We are having discussions with our subcontractor regarding the item description ‘preliminary items’ which includes mainly their staff for the duration of the contract and the the production of RAMS and site surveys. This has been inserted by the subcontractor as a lump sum item. We’re aware the subcontractor would not be able to apply this item until it is completed.
What is the best approach when dealing with these types of costs under an option A ?
Should the preliminary items be spread within other rates detailed in the activity schedule as i’ve seen suggested on Reachback ?
Or could an item be added in the Activity schedule and Accepted Programme such as ‘produce risk assessment for foundation A’ and the associated preliminary item be applied against that ?
Payment of the item will obviously affect the subcontractor’s cash flow and it appears you are looking for a pragmatic solution to assist.
One way to assist would be to spread the value of the lump sum over a series of monthly prelim items covering the subcontract period eg Prelims April 2018 £XXXX, Prelims May 2018 £////. The value of these items could be simply the lump sum divided by the period in months or, if required, based on a resource profile (in either case the collective value of the items being the same as the lump sum). If this approach is used then you should make an agreement that the new lump sum items will be revisited and extended (but the total £ not changed) if the subcontractor gets in to delay.
There are two options here. Either the “prelim” type cost can be spread across the main programme activities, meaning that as these activities are complete then the Subcontractor will be recovering prelim costs by default as they go. The alternative is to create monthly activities for Jan prelims, Feb prelims etc so they can be complete and paid each month - which is almost certainly better for the Subcontractor cashflow.
Rather than being part of prelims, production of RAMS and site surveys however I suggest should probably be activities in their own right on both the programme and the activity schedule and can then be priced accordingly.