Guiding difficult business decisions with the hard truth

Our client is one of the UK’s leading offsite modular building specialists and agreed to a subcontract to supply and install semi-permanent offices for a major rail project. There were nine (9) compensation events where the valuation difference was circa £5m, and we were instructed to prepare a valuation of those compensation events to inform our client’s resolution strategy.

Our approach

Given the size of the valuation difference and the nearly two years of history, there were a lot of issues and information. We managed this by dividing the compensation events into three tranches, with the first tranche being ones we felt were easier to tackle and the third tranche involving the more complex issues.

This approach was informed by distilling the valuations, putting these into a simpler Excel document, and identifying both the amounts and points of difference. Through this initial analysis, we established the themes of difference between the parties and identified where there were common issues cutting across multiple compensation events. We used our experience to decide whether those issues were easier to address or whether more time and effort would be required to conclude a valuation.

We discussed this plan with our client and took onboard feedback before agreeing it as a plan of action to deliver our services. The agreed plan required information to be provided, us to perform work, and
regular dialogue to ensure we remained on track by resolving issues that occurred. We were disciplined in following this plan and actively managed our client.

The advice we gave

At the end of each tranche, we presented our valuation to the client to get feedback and agree any actions so that we could finalise our valuation. Our presentation was a high-level communication suitable for executives, but we ensured that the detail was available so that we could drill down into every amount if this was required.

We looked at all the angles and took on board all the points raised by our client, but our valuation was much lower than the client’s expectation. Whilst delivering undesirable news is not easy, we wanted to be up front with our advice so that our client could make informed decisions about next steps.

We gave feedback that the main contractor’s valuations were not as unreasonable as our client believed and they should attempt to agree an outcome through negotiation before pressing on with adjudication. At the outset of the process, there was a desire to adjudicate but given the costs involved
and the potentially low prospects of success, we advised that this should be used only as an absolute last resort.