Date(s) - April 9, 2022
7:00 am - 9:00 am
Categories No Categories
The 23rd Monthly Talk Program at Khimti Forum
Saturday, April 9, 2022
Risk Shedding vs Risk Sharing in Mega Projects: The good, the bad, the ugly
Joe O’Carroll, P.E. & Randall Essex, P.E., G.E.
Infrastructure owners often shift as much risk as possible to the contractor. With surface facilities, project delivery alternatives such as Design-Build or CM at Risk incentivize contractors to take those risks. In underground construction, however, the risk/reward dynamics are different because of the uncertainties associated with subsurface conditions. Owners attempting to “shed risk” experience sticker shock when the bids are well above their budgets. Underground Contractors do not accept risk, they price it. Further, given limited bases upon which to base their bids, optimistic Contractors will lodge differing site condition (DSC) claims. The industry has moved from: the “ugly” days, where owners shed all risk to contractors; to the “bad” days where owners understood that they “owned the ground” but made no provisions for DSC claims; to the “good” days where owners now identify and quantify underground risks through risk registers, risk analysis, and transparent risk allocation through a Geotechnical Baselines Report (GBR) in the contract.
The presentation will cover the reason that GBRs were created for underground construction; principles for their use, preparation, and application; how their use has spread to other geotech projects including dams, deep foundations, reservoirs, and pipelines; and how they dovetail with Dispute Review Boards. This will be followed by presenting methods for establishing appropriate risk contingency funds, approaches used for sharing the financial risk between owner and contractor, and how contingency drawdown should be managed throughout the lifecycle of a project.
Mr. O’Carroll has 40 years of global experience in the design, construction, and risk management of major infrastructure projects procured under a variety of delivery methods including traditional design-bid-build, design-build, CMGC, alliancing and early contractor involvement. He has worked for Owners, Contractors and Consultants and currently serves as Senior Vice President and North American Tunnel Practice Leader for Mott MacDonald. Mr. O’Carroll is the co-author of the Underground Construction Association’s Guidelines for Improved Risk Management on Tunnels and Underground Projects in North America.
Mr. Essex is a Senior Tunnel Consultant with Mott MacDonald. His 45-year career has involved planning, design, construction engineering, expert witness, and dispute review board services for more than 180 tunneling projects around the world. Among his 50 publications and articles, he is the principal author of ASCE’s Geotechnical Baseline Reports for Construction, known as the “Gold Book”. He is a Vice President of the International Tunnelling and Underground Space Association and is a recipient of the prestigious Beaver’s Golden Beaver Award for Engineering.