Margin assurance on technically complex subcontracts

We were commissioned by a market leading mechanical, electrical, and plumbing (MEP) specialist engineering subcontractor to review two major projects (£60m plus subcontracts) working under preconstruction services agreements. The purpose of the review was to test that the team are controlling risk and will deliver the committed margin.

Crafting an approach

We have extensive experience working on major projects. We know what factors will lead to a successful margin outcome and what factors will lead to an unsuccessful margin outcome.

We worked our knowledge and experience, and combined this with our client’s processes, to craft a critical success factors matrix. The matrix outlined 20 separate factors which were grouped into headings that included: baseline documents; productivity controls; performance controls; and people. A scoring system was devised where we defined what would score a 1 against a factor (the lowest score), and what would score a 5 against a factor (the highest score). The higher the score, the more certain the margin outcome.

Assessment

The critical success factors matrix was issued to the project team in advance of a review, allowing the team to undertake their own measure of performance. This was followed up with meetings where the team presented information to show how they were meeting the criteria. This enabled a constructive discussion about the issues and the potential impact of the issue which the teams took on board.

Once the review was complete, we scored the team. The scoring was strict, and the criteria and definitions were either satisfied, or they were not satisfied. There was no grey area. In some cases, a factor was not relevant at that stage, so it was taken out of the scoring. We provided detailed observations to support our scoring, and recommendations on how the team could score higher in future.

As an example of the scoring, “contract programme” was a success factor. If there was no contract programme (or the team were not in the process of agreeing one) the score would be 1, whereas if there was a contract programme containing all third-party interfaces and dependencies which connected to the team’s contract administration plan, this would score a 5.

In our final report, we acknowledged that projects are not perfect on day one and the structure of our assessment gave the team reassurance where they were on track with an improvement route map where areas of focus were needed.

Continuing the improvement

We delivered our recommendations to executive stakeholders in a written report and in meetings both one-to-one with key stakeholders and in group discussions with leadership teams; tailoring our feedback to suit the audience. In the discussions, we explored the strengths of the projects and development areas, and we were receptive to feedback if there was a point which needed further clarification.

The constructive discussions allowed our stakeholders understand the bearing that future issues could have on the margin position unless the risks are actively managed now. More crucially though, the fresh pair of eyes gave valuable insights that were used by our client in their final agreement of the contract sum and contract particulars.