Remedial work valuation with limited design information

We were instructed by a major national and international law firm acting for a market-leading, international main contractor who were defending an allegation of defective work to an existing structure at a major hospital. The parties were disputed as to liability and, if liability was established, what an appropriate remedial scheme would be and how much it would cost.

The parties had agreed to mediate the matter and wanted quantum expert opinion to be used in the mediation and, if required, in any subsequent adjudication.

The challenge

We were presented with three schemes that represented the Trust’s view, the main contractor’s view, and a ‘halfway house’ scope being somewhere between the two opposing views. The design information was conceptual and as this was a prospective assessment of cost to be incurred, there was very little cost information available. The work would be constructed in a live operational hospital, imposing a significant constraint on the methodology.

We considered the options available. The design information was sufficient to obtain quantities either directly or by making sensible assumptions about the likely design criteria. However, it was the rates which were not so straightforward. There were three primary options available:

1. Obtain market quotes.

   This could have provided accurate rate information because the prices would be current day, relevant to the location of the work, and reflect the production rates deemed suitable by specialists. However, we held concerns about whether the market would provide cost information and, if they did, would the prices be competitive given they were being submitted outside a formal procurement process.

2. Use cost plan rates.

   We considered this option because there are pricing books which would provide rates that can be applied to quantities to derive a valuation. Whilst the labour rates were suitable, we discounted the use of cost plan rates (e.g. a price per tonne of steel, or a price per cube of concrete) because they would not reflect the rate required to perform this work in a live hospital environment.

3. Use a first principles pricing approach.

   This option can be time consuming because it requires operative types and production rates that reflect the intended sequence. Given the live hospital constraint, the production rates would be bespoke to this specific scope. However, this approach would derive total operative hours / days which, when multiplied by a labour rate, would produce a valuation.

Our approach

We settled on a hybrid approach where we used a combination of pricing book information and first principles pricing to make a valuation.

We worked with the main contractor to inform the construction methodology and programme information we required. Whilst the client needed to be responsible for the assumptions within those documents, we identified the information we needed to make a valuation. This meant reviewing the information, asking questions, and closing the gaps in the information so that our valuation had a sound basis.

The valuation we produced provided an amount for each of the three schemes and was produced in a way that allowed us to make quick changes to the valuation if design and / or construction methodology changes were made. This did occur and because of our approach we were able to provide timely updates to our instructing lawyers about the impact of a different design or construction assumption.

Our quantity surveying expertise coupled with our understanding of design and construction allowed us to make a robust and detailed valuation that stands up to scrutiny, informed our client as to their potential financial liability, and increased the possibility of resolving the matter at mediation.