CONTRACT MANAGEMENT
OF THE CITY RAIL PROJECT
Report No 7 -
August 2005
Background
The biggest public infrastructure project underway in Western Australia is the $1.56 billion budget New MetroRail project. New MetroRail's most challenging component is the City Rail Project, which involves bored tunnelling through soft wet soils beneath Perth's central business district.
The Public Transport Authority (PTA) awarded the $324.5 million (design-and-construct price) City Rail contract on 14 February 2004, with a contracted completion date of 23 October 2006.
City Rail needs to be safe, structurally sound and functional throughout its expected 120 year life span. The design and construction responsibility rests with the Contractor. PTA's role in monitoring the Contractor's work is therefore crucial to protecting the State's interests.
We examined the effectiveness of PTA's contract management. At the time of our examination, City Rail was approaching the halfway point. Given this timing, and the many variables involved, this report cannot predict the end result.
What the examination found...
At 30 June 2005, PTA is capably fulfilling its contract management role
by:
- using suitably qualifi ed and experienced people
- maintaining sound systems and processes
- vigilantly monitoring the Contractor's performance
- carefully assessing Contractor claims
- working cooperatively with the Contractor.
We also found that:
- the pricing structure of the contract aims to provide price certainty for the State, to the extent practically achievable
- despite the contract's fixed-price nature, the final price paid will likely be higher as the contract provides for rise-andfall, scope variations and other Contractor claims. It is not possible at this stage to accurately estimate the fi nal price
- a few high value claims (in excess of $1 million each) were proceeding through the contract's dispute resolution process. The project's complexity, and mounting time and cost pressures, make more high value claims likely
- variations to the scope of works have been low to date, less than one per cent of the contract award price
- the Contractor was targeting a completion date about two months later than the contracted date. A number of key construction activities were more than two months behind, which could indicate further delays
- the rate of progress of the works is the responsibility of the Contractor. The contract therefore imposes fi nancial costs on the Contractor for late completion
- project delays will also affect the people of the State and PTA public transport operations. PTA was preparing to assess these risks and develop contingency plans
- the contract was adapted from a Main Roads (Western Australia) model that has worked well in the past 10 years for less complex projects and in less heated construction market. If this adapted contract model succeeds with City Rail, it will have further proven its viability.
What the examination recommended...
Building on its capable contract management to date, and recognising the mounting time and cost pressures on the Contractor, PTA should:
- continue to vigilantly monitor the Contractor's performance
- give priority to developing contingency plans in the event that the City Rail Project is signifi cantly late
- retain its contract management team to project conclusion
- periodically review the City Rail budget, in particular the adequacy of its provision for contingencies
- ensure that its contract management practices, together with any lessons learned, are shared with other agencies
- conduct a post-project evaluation of the contract model to inform the delivery of future infrastructure projects
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