Building and construction

New head office for a professional society (the Society of Danish Engineers) (A1)

Two Danish engineering societies had merged. It was therefore decided to build new headquarters and sell the two existing ones, with the strict proviso that future administrative costs would not increase. A risk analysis or budget quality control of the lifecycle costs of the building was conducted to verify compliance with this requirement. The analysis showed a convincing reduction of the lifecycle costs compared with the previous budget. This slack alleviated the criticism by some members of the Society, and part of the slack was allocated to making the building more “green” and advanced. A follow-up audit at project completion confirmed the actual result to be very close to the mean value established by the analysis.

Converting a former silo into new company headquarters (A2)

This unique building project was subjected to a cost risk estimate. A firm tender was given based upon this estimate. The project was completed with commercial success in 1997.

Regaining schedule control over a major project (A3)

During erection of a large office building complex the schedule appeared to be running somewhat out of control. The main contractor’s management team performed an analysis over three four-hour sessions. A considerable potential delay was confirmed. The analysis, however, also identified substantial options for counteracting the delay. Some – but unfortunately not enough - of these were implemented: the forecast proved to be accurate, as half of the forecast delay materialised.

Stabilisation of a major public investment programme (A4)

The investment budget for the 1994 Winter Olympics in Norway increased unacceptably during 1988/89. A firm and acceptable investment limit was required by both government and parliament. An investment analysis disclosed the final expected result of the current plans, as well as the critical factors. This considerably exceeded the acceptable level. The plans were then drastically scaled down and strengthened, followed by successive further analyses until a politically acceptable level was reached four months later. The mean value was frozen as a working budget for the organisers. The official committee was allocated a budget reserve to be used in case of augmented costs due to adverse market conditions and other negative trends.

After the successful Games the management of the Norwegian Olympic Organising Committee, LOOC, reported to the press that the Games had come in within the working budget, without recourse to the allocated reserves. It was probably the first Olympics not to have run into investment budget problems.

The profitability of re-developing a hospital complex (A5)

A former hospital complex was available for use as an integrated research and office centre. Analysis revealed the likely level of profitability, as well as the critical factors involved, thus providing indispensable parameters, not least as a support during negotiations with the owners and other stakeholders.

A design and turnkey competition for a large research centre (A6)

To provide the necessary commercial competitiveness, analyses of the cost-effectiveness potentials and threats were performed throughout the tendering period. The results were then regularly factored into the design and contractual proposals and, of course, into the tender price.

A contractor moving into the project development market (A7)

A large contractor had gradually moved into the development market and had developed a considerable number of buildings. Economic downturn then brought financial problems in its wake. A group analysis session involving – in an unusual departure - the company’s bankers, clarified the potential of various strategies and at the same time substantially improved the mutual understanding and trust between the company and its bankers.

A BOT hotel project in the former USSR (A8)

The profitability and not least its uncertainty were analysed. The results disclosed many threats and the contractor decided to abandon the project. A competitor took over. He later called that project the largest catastrophe in his company’s history.

A unique museum project tender (A9)

A museum building for a large 350 year old warship (the Wasa) in Stockholm had been designed, and tenders were invited. A risk analysis was performed for one of the bidders as part of his tendering procedure. He was not the winner, as a considerably lower tender came in. The low bidder, however, finally incurred total costs of the same order as the risk analysis had identified as the most likely.

A building construction tender in Greenland (A10)

The less well-known and more uncertain conditions in Greenland were analysed with a contractor as part of a tendering process; particular focus was on the company’s decisions in respect of the threat allowance, which it was necessary to include in this tender price.

Financial quality assurance of an advanced multi-use arena (A11)

Having finally financed the OSLO-SPECTRUM project, the city authorities wanted a risk assurance of the cost estimates of the updated project. They overran the maximum available by 100%. A one-year re-design period followed, achieving a reduction of more than some 30%. A new threat estimate proved to be politically acceptable and the project was permitted to proceed. A similar threat estimate of the completion date was performed. The detail design and erection period followed. The project was completed three months earlier than promised and final costs were under 1% below the three year old forecast, according to official project accounts.

A chemical plant delay (A12)

A chemical plant was halfway through its erection phase. A one-day preliminary time risk analysis estimated 8 weeks of delay and indicated the main preventive measures which could be taken. The management, however, did not believe the procedure and its result, being convinced that they were on track, and no change was made. The plant was delivered 8 weeks delayed, exactly as forecast.

Steen Lichtenberg

Dr. Steen Lichtenberg

Lichtenberg & Partners
Baneskellet 16
DK-2950 Vedbæk
Denmark
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Building and construction, concrete cases
12 concrete cases summarised below. Among others regaining schedule control, the profitability of a re-developing project,an advanced multi-use arena.