Risk has always seemed a difficult issue, has the contractor included their costs within a contract value, within their CE quotations, or taking a chance?
It would seem a good solution to include a Risk Percentage, as we do for the Fee. I believe this is usable for most if not all options of the NEC contract.
The advantages being, the contractor has a means of payment, overall and in compensation, without argument for risk.
Where risk is shifted within the contract, often by Z clause or scope, the client can see how this alters the percentage of risk contractors make, over time and changes they make going forward.
If the risk has been submitted as zero or even negative (I’m sure some will), the client can ask why, this is so. Hopefully giving reason to reject.
You can also see there is value within the programme, where else is Time Risk Allowances paid for.
Has this been discussed previously? If so, I’d be interested to see the negatives.
It’s something to discuss… :sunglasses
Steve, whilst to the most part I agree with what you say, I am not a fan of adding a blanket risk % to all CE quotes, I believe that the assessment of risk can be more refined than that.
Clause 63.8 requires an allowance for both time and cost to be included for any risk that is not a compensation event that has a significant chance of occurring, so effectively any risk which the Contractor carries but there must be a significant chance of it occurring.
The Accepted Programme has to show a great deal of information including resources of Equipment and people and anything else, possibly even production levels, etc.
So when it comes to assessing risk, I believe that each CE quote should be an intelligent forecast of what’s likely to happen to the remaining work and the resources doing it. So in the same way we estimate those things we should be able to estimate and forecast the effects of risks.
If what you mean is to add an overall % similar to the fee percentage to the total of the quote, this will potentially be adding risk to everything in the quote whether it is applicable or not.
So my view is to think about it carefully, remembering that the Contractor has to show all this detail on their programme submitted for acceptance anyway, and hopefully this makes sure that the CE assessment represents value for money for both Parties.
Happy to discuss.
Steve, thanks for your comments, I fully understand your views, and these do work well when you have a fully compliant programme. Perhaps I had been unfortunate, but a programme being compliant with the contract was rarely the case. I wondered if there could be a different approach, but perhaps the variation between actual effect and the guess of a risk percentage, is just as divisive.
The real answer is to be able to establish trust and work together to have fair outcomes, but far too often, not everyone wants to play ball. Hence, looking for a different approach.
I’d still be interested in other’s view, based on their experience.