Valuing remedial options in an operational hospital

We supported a main contractor and its solicitors with independent quantum evidence for a hospital defects dispute involving a claim of approximately £2 million. The parties had different views of the remedial works required, and the available designs were still at outline stage. We developed valuations of the alternative schemes that reflected the practical constraints of working in an operational hospital and could be updated as the proposals changed.

Background

The proposed works involved an existing hospital structure, with competing technical opinions on the extent and form of remediation. The parties intended to use quantum evidence at mediation, with the possibility of later proceedings if the dispute remained unresolved.

The challenge was to value prospective work from incomplete design information. Small quantities, discrete activities and restrictions within an occupied building meant that general construction rates would not adequately describe the resources required. The design and methodology assumptions therefore needed to remain visible within the valuation.

Our approach

We reviewed the engineering reports with the contractor’s methodology and programme information. We identified the scope, sequencing and resource information needed for each valuation, then sought clarification where the information did not provide a sufficient basis. The technical advisers remained responsible for their proposed schemes; our role was to assess the costs on the stated assumptions.

Each scheme was valued separately using a resource-based approach. Labour hours and operative types were related to the proposed activities, with adjustments for matters such as briefings, inductions and other non-installation time. Price-book information provided a basis for labour rates, while supplier and hire information informed material and plant costs.

The later intermediate scheme illustrates the detail of the exercise. We translated the construction methodology into a resource histogram, identifying operative and plant quantities. Day and night working were distinguished, allowing the relevant labour and staff rates to be applied to the periods in which the resources were needed.

Materials were assessed using a combination of measured quantities and suitable rates. Structural steel quantities were derived from the engineering information, with treatment requirements considered where relevant. Smaller building works were assessed by location and the associated scope, so that the model retained the difference between the principal structural work and its supporting activities.

Preliminaries combined identifiable staff and labour resources with allowances for establishing and running the works. We considered welfare, accommodation, waste disposal and the working period. We also examined which costs might be shared if remedial and other building works were procured together, and which resources would remain specific to an individual scope.

Risk, overheads and profit, and inflation were considered separately. The uncertainty of an outline scheme, the delivery model and the proposed timing affected those allowances. Inflation was applied with regard to the pricing date of the information used, rather than treating price-book and contemporary supplier information as if they had the same basis.

The valuations retained the supporting quantities, resource assumptions and calculations. We compared the resulting positions with the other cost information provided, explaining differences in scope and assumptions. When the remedial proposals changed, the structure allowed us to revise the relevant inputs and explain the effect on the valuation.

Outcome

We provided valuations and subsequent updates covering the competing proposals and an intermediate remedial scheme. The contractor and its legal advisers could examine the financial implications of the different scopes, with the assumptions available for challenge during mediation discussions.

The work gave them a detailed basis for evaluating prospective financial exposure as the design and construction proposals developed. The Legal Director said our flexible approach “helped keep the overall programme on target”.