Ever wondered if you were maximising the return on your MEP Contracts?
Want to know how to save up to £2 million on a £20 Million MEP project?
We recently undertook a study on some alternative methods of project delivery for both the pre-construction and the construction phases of a London based MEP contract with an MEP value of £20million. The findings would make you reflect on a lot of traditional methods and certainly brings home the phrase “If you keep doing the same thing you will get the same results”.
Please enjoy the read and we are very happy to discuss any of the points below in detail with you and your colleagues.
PRE-CONSTRUCTION
1) The current methods of delivering pre-construction MEP contracts are flawed. They waste pre-construction time and money by 35% – 45% and end up wasting up to 4 months of the program.
As per the traditional method of procurement, MEP engineering house verifies the engineering, develops the remaining design work to be carried out and follows it up by issuing a set of drawings that reflect the final design.
This engineering and drawing package is then given to the MEP working drawing company (cad-house) for coordination of the design and issuing of a working drawing package thereby, increasing the time and efforts of the contractor’s team.
A simple and efficient way to deliver the above is to have a single company to deliver both the services. This will result in a substantial cost saving to the contractor, reduction in the program and will make the job a whole lot easier for the entire pre-construction team.
Cost Saving: £350,000
2) How many times have you asked the estimating department for a commercial impact of a technical review after it has been carried out during Phase 4 of a project?
Such a move will incur more cost and result in delaying the project. To save time and money, it is recommended that the contractor requests a commercial review from his engineering partner at the same time that the technical review is being carried out.
Cost Saving: £4,000
3) How often have you been asked for additional fees to create Revit families for specific components?
You can overcome this problem by requesting your procurement department to include 3D Revit families as part of the supply agreement. There may be an occasion when your supplier or manufacturer is unable to provide a 3D model. In that case, you charge the supplier the cost incurred by your engineering partner in producing the 3D model for you.
Cost Saving: £9,000
4) Which company in your opinion generally carries out most of the design work at pre-construction?
It is often the Engineering Partner. However, in most jobs at pre-construction, there are up to three document controllers who are exclusively working for various companies to supply delivery teams and are a drain on the company. This results in wasteful expenditure which needs a review. Your engineering partner is very much capable of managing the document control process for that pre-construction phase. Therefore, instruct the engineering partner to look into document control requirements and save on cost.
Cost Saving: £27,600
5) DfMA – this is a big one.
As of now, a contractor looks up to the specialist supply chain for ideas about what they can Prefab offsite. After that, he gets a design and seeks a solution from a supplier without any commercial advantage from working a tender process. There is a better economic option than this – the engineering partner can evaluate all options for offsite manufacturing, design engineering solution for offsite manufacture (including for the structural elements) which then allows you to open up your market to multiple suppliers with a designed tender package. The economy and value that this practice can bring to the contractor will be immense.
This method of procurement will allow the specialist supplier to offer you his keenest pricing without pricing in for risks.
Cost Saving: £75,000
6) A project summary document is a simple but critical addition to every project.
Having completed a design review, the engineering Partner is very well placed to produce this document. It will include a simple summary of each system on the project (maybe one or two pages on every system) explaining the key concepts, any special design requirements, commercial risks and any special construction ability risks. This document can then be utilized gainfully to educate the entire staff of the contractor’s team working on the project right from pre-construction stage to the delivery stage. With this document, the staff will be able to save many hours of labour and start giving valuable inputs to the project in a quicker time frame.
Cost Saving: £4,400
CONSTRUCTION PHASE
1) How to avoid re-visits to the site?
Frequent re-visits to the site to redo work result in wastage of precious time and money and also frustration between teams sets in. This single factor can make a big difference between profit and loss on most projects. To get over this problem, it is advisable to hire an extra supervisor to carry out QA control. Even if the QA inspector costs say £60,000 on a project, his genuine efforts will have the potential to save millions in the long run. All contractors need to understand this aspect very well.
Cost Saving: £760,000
2) Carry out a first in kind, a simple investment that can give a huge return on investment.
Contractors should adopt the approach of insisting on a first in kind without waiting for the client or the main building contractor to request for it. The quality of work on the main project should never be compromised. Laying down the standards and the quality requirements will assist the contractor’s staff, the client’s engineers and the main contractor’s staff in focusing on the project without getting involved in any redundant work. The principle to be followed is – Do it once, do it right.
Cost Saving: £404,000
3) Save money on meetings.
A contractor can save up to 50% of the meeting costs between travel time if 50% of the meetings can be attended online. This cost-saving relates to the staff of the contractor, the engineering partner, specialist suppliers and specialist designers. It should be negotiated upfront at the contract awards stage to plan and realize these savings for the Contractor. It is worth noting that some people believe that 100% of meetings can be attended online.
Cost Saving: £62,400
4) How is your cash flow? Do you have good cash reserves? Put the reserves to work.
On a £20 million project, the amount shared by specialist subcontractors and suppliers is a significant £10 million (easily 50%). If you have a strong cash flow or cash reserves, you can negotiate a 2% to 3% discount with the supply chain if you choose to pay them early. This is obviously subject to negotiation. On figures of £10 million, the saving can typically work out to be £200,000. Don’t ignore it.
Cost Saving: £200,000
Program
12-16 weeks can be saved at pre-construction by implementing the changes detailed. Any time invested at pre-construction can save multiples of this when installation works commence.
An estimated 1-2 months can be saved with implementation on construction program but equally important is to prevent program delays and associated penalties and costs as well ensuring your own prelims stay on budget.
