Keeping Projects on Budget and Over Budget Negotiations

Not only can budget concerns jeopardize the potential for a project proceeding, where it does proceed there may be costly over-budget negotiations or a re-bidding of the project. Over-budget negotiations are an expensive exercise for owners, design professionals, and contractors. As a result, contractors would rather avoid over budget negotiations and they would much prefer to see owners making every effort to do the same.

There has been a lot of discussion regarding the substantial amount of construction on the books and being planned for British Columbia over the next few years. There are some proven actions that will help ensure a successful project, built on time, on budget and with as few surprises as possible. The following are some brief recommendations:

• Prepare accurate and complete bidding documents with a pragmatic view to constructability and cost.
• Regardless of what procurement method is used, employ contractors early in the design phase to assist with decisions on constructability and cost.
• Make the project as attractive to as many bidders as possible by:
  • Using Standard Tender Documents (i.e. CCDC2) with few Supplementary General Conditions.
  • Establishing realistic tender periods and realistic construction duration.
  • Allowing adequate time for the preparation of bids.
  • Limiting the time period for acceptance
    of bids to thirty (30) days or
    less. (see Note)
  • Creating fair allocation of risk in insurance
    and indemnification clauses.
  • Making sure that there is maximum
    exposure to the project documents.
    Place plans in physical planrooms,
    and on the electronic planroom.
  • Not applying non-refundable document
    deposits.
  • Outlining attractive terms of payment.
  • Limiting warrantees to one year.
  • Using the Bid Depository System.
• During the construction phase of the project:
  • Consider using Conflict Resolution
    consultants to deal with issues expeditiously
    as they arise.
  • Set out Progressive payment schedules
    for changes to the work.
  • Be amenable to reasonable overhead
    and profit for changes.

In the event that you are not successful in keeping your project within budget, you should be prepared by including some specific wording in your project documents. Allow yourself the opportunity to negotiate without having to cancel the tenders and comply with the requirements of the Agreement On Internal Trade.