Page 20 - Civil Engineering Project Management, Fourth Edition

5
The development of construction procedures
and takes over ownership of them at the end of the operation period. A BOOT
‘build, own, operate and transfer’ contract usually implies the contractor
finances construction of the works (or negotiates with some funding agency to
provide the funds) and transfers ownership of the project to the client at the end
of the operational term of years.
A variety of ways of funding DBO contracts and re-imbursing the con-
tractor are possible. Where a contractor provides all the finance required under
a BOOT contract and receives income from the project output, this approach is
indistinguishable from ‘Private Finance Initiative’ (PFI) described below – save
that, under BOT and BOOT contracts the promoter usually identifies the size
and nature of project required, whereas under PFI the contractor may do this.

1.5 Developments in the later 1980s

During the 1980s, as competition between civil engineering contractors for
jobs in the UK intensified, contractors tended to reduce their margins for
profit and risks in order to gain work. Consequently a contractor getting a job
with low margins had to protect his position by making sure he billed the
promoter for every matter he was entitled to charge for under the contract.
However, some contractors developed the practice of submitting claims for
extra payment wherever they thought a weakness in the wording of the con-
tract might justify it. They employed quantity surveyors for this purpose, and it
was not uncommon for more than a hundred claims of this type to be submitted
on a major project. 2
The resulting ‘climate of dispute’ that seemed to arise – more particularly on
complex building projects than in civil engineering – led to other methods
being sought for controlling constructional work. Some promoters thought
that the independent Engineer, who had to decide on claims under the ICE
or FIDIC conditions of contract, was not being tough enough in rejecting con-
tractors’ claims. But claims would inevitably arise and some have to be paid,
especially in cases where a promoter did not allow enough time and money to be
spent on site investigations, or who let construction start before being certain of
his requirements. The practice of promoters to accept the lowest tendered price
on most projects also increased the chance of employing a contractor whose
price was so low he needed to use claims to safeguard his precarious financial
position on that contract. 3

2 Before about 1975 most civil engineering contractors did not employ quantity surveyors. It was only
the building industry which used them.
3 While a commercial company can place a contract with any contractor it favours a public authority
must ‘safeguard the public purse’, and cannot therefore reject the lowest tender without good reason.
But, although an experienced engineer can see when a tender price is perhaps too low, he cannot prove
this is bound to cause trouble. Nor can he guarantee that the next lowest tender, if adopted, will be free
of trouble over claims.