Week 5.1_John Agbo_ Managing discrepancy in drawings issued to client for construction (IFC) on a tank farm project._ Lanre Giwa

Problem Recognition / Identification

During the periodic QMS surveillance audit in my company, it was observed that Engineering drawings issued for Construction (IFC) Drawings were sent out to the client without reflecting new changes advised by the consultant’s representative. The company intends to work out modalities on how to remedy the situation.

Root Cause Analysis

The consultant representative informed the Lead, Mechanical engineering that the client wanted the number of tanks increased by one (1) and height of the tanks increased by 3metres. The changes were made on Mechanical drawings ONLY by the Lead engineer but he forgot to communicate the change to other disciplines. The consultant representative also forgot to mention the request of the client at the weekly meeting where all disciplines were in attendance.

The company does not intend to lose the client, neither do we intend to spend more on cost ,time and resources doing a re-work and company is thinking of the best way of handling the discrepancy.

The following are excerpts from the Conditions of Contract in the signed contract: “Tanks will be 3No, 20m diameter tanks. Driveway will be concrete grade 25. Engineering design duration will be 6 weeks. Engineering Contractor to submit schedule to Client within 2 days of project kick-off. All correspondences, clarifications and comments shall be conveyed through Principal Consultant (on behalf of client) and Contractor’s Project Manager (on behalf of contractor)”.

In – house records show that jobs of this magnitude were previously executed within 3 months.

Development of Feasible Alternatives/Solutions

The following are the alternatives being considered:

Alternative 1: Retrieve the drawings from the client and re – work at a shared cost with the client .

Alternative 2: Retrieve the drawings from the client and re – work at a shared cost with the client for a period of 6 weeks.

Alternative 3: Advice the client to stop the loan and adopt the initial plan without any increase of quantity of tank and height, while only mechanical drawings are re-worked / revised at the client’s cost.

Alternative 4: Retrieve and re-work drawings at the client’s cost and time.

Alternative 5: Retrieve and re-work drawings at cost and time.

Possible Outcomes and Cash flow of Alternatives / Solution

Alternative 1: The drawings can be retrieved from the client and re-worked within a period of which is the usual duration we execute projects of this nature and magnitude while the cost of re-work is to be shared equally by the client and ourselves. Our company will be at a loss due to the fact that we will share the cost of re-work with the client.

Alternative 2: The drawings may be retrieved and re-worked within 6 weeks and the cost of re-work shared equally between us and the client. But this will put our resources under so much pressure a second time as works of this nature are usually executed within 3 months. It will also entail us committing more cost (by way of extra salary, overtime and overheads), time (burnt man hours) and resources (labor which should have been used on other projects and non-labor) in order to deliver within the tight schedule. Even though the Mechanical scope will not be part of the deliverables, the schedule will still be tight.

Alternative 3: The client can be advised to adopt the initial plan without making increases. This is option will entail that only mechanical deliverables will be re-worked and at so short a time. The client will only have to pay a token compared to what he would have paid for a major re-work of the entire deliverables.

Alternative 4: The drawings can be retrieve and re-work drawings at the client’s cost and time. If he wants it done within the shortest or longest period, he’ll be charged extra for it without compromise.

Alternative 5: The drawings can be retrieve and re-work drawings at our cost and time. We can chose to commit as much or as little resources as we deem fit and deliver the job at the time we please. This will be to the disadvantage of the client since a delay in Engineering design will mean a delay in commencement of construction works and a subsequent delay in return on investment.

Selection Criteria / Attributes of best solution

· Profitability

· Conditions of Contract

· Cheapest in terms of Cost, Time and Resources

· Customer satisfaction

· Reputation

· Most Economical

Analysis and comparison of the Alternatives/Solutions

ALTERNATIVE	OUTCOME	PREFERENCE
1	We will be bearing some cost for an error from the client’s rep(consultants). As a results its not profitable	Not preferred
2	Same as above	Same as above
3	Client will be paying. Profitable to us. Economical to the client due to less work and therefore give him satisfaction. Cheap in terms of time, cost and resources. We’ll preserve our corporate image.	Preferred
4	Profitable to us. Will take longer time to execute. Client will be unsatisfied since it will be cost intensive.	Least preferred
5	Not profitable to us. Our reputation will be at stake. Will take longer time to achieve. Client (customer) will not be satisfied.	Least preferred

Best Alternative to be Selected

Based on the analysis, alternative 3 will be recommended as it will minimize our resources, be profitable (since the client is paying), satisfies the conditions of contract and will leave the client satisfied.

Performance Monitoring / Post evaluation

We will ensure that all information sent to us by the client’s rep will be as per the conditions of contact. All discipline leads and subordinates will be advised not to accept information from any party to the contract but refer them to the Project Manager who must receive only written instructions.

Recommendations

We will advise the client to stop the bank facility and go ahead with the initial plans and construct the tank farm based on that plan as phase 1. When he begins to yield returns on his investment he can increase the number of tanks as phase 2 of the same project using his returns and will not need to take a bank facility.

References:

1. AACE International Education Board. (2006). Project Performance Assessment. In J.K.Hollmann (Ed), Total cost management framework – A process for applying the Skills & knowledge of cost engineering (1^st ed) (chapter 10.1) (pp.199-208). Morgantown, West Virginia: AACE International.

2. Sulliven, W. G., Wicks, E.M., Koelling, C. P., et al. (2009). Engineering Economy (14th ed.), Chp 14 pp551 -570. New Jersey: Pearson Education.
3. AACE International. Skills & Knowledge of Cost Engineering, 5th Edition Revised.Chapter-9, pp.9.1-9.9 Edited by Dr. Scott J. Amos, PE. 2010. AACE International. Morgantown, WV, USA.