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Author: Paulina Orrego Olivares

704205

ENGM90006 Engineering Contracts and Procurement


Assignment

Tender Preparation: Supply and


Delivery of Aerators for WTP
Melbourne Water

Page | 1

Contents
1. Introduction and Purpose......................................................................................... 2
2. The Owner perspective Melbourne Water................................................................2
2.1 Contract Benefits and Risk evaluation..................................................................2
2.1.1 Time Frame of the Project.............................................................................. 3
2.1.2 Reasons behind the Time Frame.....................................................................4
2.2 Contract Term Evaluation using Australian Standard General Conditions...............4
3. The Contractor perspective....................................................................................... 6
3.1 CEO Briefing document....................................................................................... 6
3.2 Analysis of Risk and Opportunities.......................................................................9
3.3 Tender Strategy................................................................................................. 10
3.4 Tender Preparation Plan..................................................................................... 11
3.4.1 Tender Gantt chart....................................................................................... 11
3.4.2 Bid Team organization.................................................................................12
3.4.2 Develop Tender Price (Flow chart)................................................................14

1. Introduction and Purpose


Page | 2

This report discusses the tendering preparation for Supply and delivery of thirty
(estimated) floating surface aerators to the Melbourne Water Western Treatment Plant
(WTP) site in Weribee, Victoria. The project objectives are to oxygenate the lagoon to
enhance wastewater treatment and circulate water to mix the contents into the lagoon.
The lagoon design reduces organic and inorganic pollutants (reduces odour) and
pathogens to acceptable levels (Stenstrom and Rosso, 2008).
This assignment will explain two separate perspective for this tender preparation:
Principal and provider, in this case Melbourne Water and H20 respectively. The first
perspective aims to discuss and analyses the Procurement strategy and the selection of
specific contract terms, both tasks are focus on evaluate the Principals needs and risks
associated with this project. The second perspective purposes to prepare the bidding
process for this project. During this process is crucial elaborate a market evaluation,
analyses contract conditions, risk and elaborate a planning program for the tender.

2. The Owner perspective Melbourne Water.


2.1 Contract Benefits and Risk evaluation
The strategy contract nominated was a Fixed fee/Lump sum payment, which had two
payment options: Lump sum or Milestone Payment.
Fixed-Price contracts are the most common traditional contracts conditions. The
contractor can claims provisional or prime cost, variations and adjustments during the
execution of the project. Generally, the original contract price will be different than the
final cost of the project (Uher and Davenport, 2002)
Benefits:
I.
II.
III.

IV.
V.

Budget: Contract price is known before the supply of goods and services.
Melbourne Water can set in advance the budget.
Experience: Important experience with this contract and tend to reduce the
mistake during the tendering process. Might reduce cost caused by decreasing
number of amends.
Potential Low Risk: The Principal prepares the scope of the project and the risk
of design and supply lie to the Contractor. Melbourne Water pay a fixed price for
goods and service, any risk might affect the delivery and supply during the
project, the Contractor undertake the risk.
Competition: Large number of potential tenders might increase the price
competition. The market has interest to apply this contracts.
Stakeholder Plan: The principal can manage stakeholder engagement during the
execution of the project.

Risks:
I. High price: The Contractor retains the risk of the constructability of design and
fitness for purpose so the price may be high.
II. Innovation: Low incentive for innovation.
Page | 3

III.
IV.

Flexible: Tend to be less flexible for manage any change of the scope of the
project. New requirements need to re-negotiate with the Contractor, and it can
affect the schedule of the contract.
Quality: The quality of the contractors work can be compromised, if the principal
does not know the value of the risk contingency for the project. The performance
operation and quality of WTP can compromise in long terms, when tenders tend
to compete by price. The Value money become less important and increase the
risk operation in WTP.

Risk reduction
Melbourne Water Western Treatment Plant, should delete any conditions that the
contractor can use to claim any adjustments or variations of the price. To satisfy this
requirement, the following points should be reviewed:
I.
II.
III.

Determine the level of risk of the project; when the risk is low, a Fixed price
strategy should be implemented.
To provide accurate information during the tendering process to reduce
uncertainty, errors and omissions. Prepare accurate project documentation
including drawings, specifications and technical requirements.
Minimize the ability to vary the design of the project.
Risk
High price
Low Innovation
Flexibility
Low Quality

Likelihood Consequence
D
Moderate
C
Minor
C
Moderate
C
Catastrophic

Management
Significant
Moderate
Moderate
High

2.1.1 Time Frame of the Project.


Phases
Tender
preparati
on

Activities
Project Definition and
Scoping
Selection Process for
Tenderers
Tender Documentation

Criteria for Selection


Tendering Call for Tenders (Public or
Closed)
Responding to Invitations
to Tender / Developing the
Commercial Offer
Tender Meetings and
enquiries

Dates
18/05/201
5
28/05/201
5
12/6/2015
22/06/201
5
29/06/201
5

Documentat
ion

29/06/201
5
02/07/201
5
Page | 4

Amendments to Tender
documents
Submission and Closing of
Tenders
Tender Analysis
Tender
Evaluatio
n

Tender Clarifications
Tender Selection & Award
Site inspection
Delivery of aerators

Delivery
of Goods
and
service

Installation of Aerators
Test and analysis
Firm acceptance of
Aerators
Maintenance operations
Finish or Renew Contract

10/07/201
5
24/07/201
5 4pm
8/10/2015
10/11/201
5
28/12/201
5
22/03/201
5
30/04/201
6

30/5/2016
5/6/2016
4/6/2016

2.1.2 Reasons behind the Time Frame


2.2 Contract Term Evaluation using Australian Standard General Conditions
Annexure A
In this project it is recommend to apply AS 4911-2003, General conditions of contract,
for the supply of equipment without installation. This standard is used to deliver
equipment, which includes manufacture and delivery. The equilibrium in the allocation of
the risk between the parties is an important factor that differentiates it from other
standards. The Australian Standards (AS) are used in varied market and wide range of
values.
Sharkey,Bell, Jocic and Marginean (2014) point out that, the Market is familiar with AS
and there are not barrier to apply this standards. Generally, when the companies are
familiar with the term of contract can optimize the administration of the Contract.
McMullan (2015) points out that, this standard (AS21241992) not discuss quality in the
contract and there are room for error in design.
Contract requires amended in some clause to reduce the risk and define the scope of
the work, these points are important to consider:
1. Extensions of time
Page | 5

2.
3.
4.
5.
6.
7.

Delay damages (including liquidated damages)


Site conditions
Payment
Claims
Variations
Warranties as to quality

The next table explain some items and clause of AS 4911-2003.(Details Appendix A)
Ite
m
6

Name

Clause

Description

Date for delivery

1, Item
6

Qualifying cause of
delay, causes of
delay for which EOTs
will not be granted
(page 3,
subparagraph (b)(iii)
of clause 1 and
sublcause 17.2)

17.2

The Supplier must deliver the aerators on site


4/30/2016.This date can be change by
extensions of time by approval of the
superintender.
Any delay will loss value to the Principal and
may occurs in this project. It is necessary identify
the responsable and the reason of the delay. If
the Supplier cannot submit a provision for the
delay, the Supplier must deliver the goods on
time. However, if the Principal cause the delay
(f.e provide late instructions and approvals), the
Supplier can claim extension of time to the
Principal within 14 days after the delay.

23

Liquidated damages

17.5

21

Public liability
insurance

13.1
13.2

20

Insurance of the
Equipment

13.1

32 /
36

Payment and
variations

23.1 ,
23.2

22

It applies this clause "Liquidated damage" when


the Supplier fails to complete the contract.
The Supplier need to pay a fee for this damage.
WTP determines the fee in the RFT: Rate of
liquidated damage: $1000 per day) (Delay
delivery). Limit of Liquidated damages normally
is 10% of the Contract, however in this RFT is
not mention.
The insurance Liability covers injury to labor
(Heath and safety injuries, between minor to
death), damage property (material) which can
accurs during the contract. In this case the
insurance is $20 million. In this contract the
professional indemnity is for $5 million.This
clause protects the client against the risk.
This clause protect Melbourne Water againt any
loss or damage of the equipement. Supplier must
to provide a warranty for long period (50 months
in this project)
The Supplier have to prove by evidence the
value of variations to the Principal.

Page | 6

3. The Contractor perspective


3.1 CEO Briefing document
H20 Aqua Technology PTY. (H20)
Document: Tender Manager
Report to: CEO
From: Commercial Director and Bid Manager.
Topic: Supply and Delivery of Aerators for WTP with sustainable consumption of energy
for Melbourne Water.
General Conditions
Tender Selection & Award
Delivery of aerators
Payments

28/12/2015
30/04/2016
Lump sum or Milestone payment.

Public liability insurance

$20 million

SWOT Analysis

General Market
The Water supply market are provided under diverse industry structures, which are
divided by states and local government ownership. The Water Utilities market is
integrated for 81 companies around Australia. New South Wales and Victoria represent
Page | 7

more than 60% of these companies (National Water Commission, 2014). 28 days
define the negotiation of the contract and 14 days to sign the contract for both parties.
Table 1.1: Utilities reporting in the 201213 Urban NPR

The
aeration
essential part of
treatment plants.
cost is a relevant
consider,
as
consume 45 to
plant energy cost
and Rosso, 2008).
floating
aerator
of solar energy
effective solution
energy cost for this market. Unfortunately, it is not possible estimate
aerators operating in Australia.

process is an
wastewater
The
energy
factor
to
aerators can
75% of the
(Stenstrom
The design of
with the use
can be an
to reduce the
the number of

Economic expectation
Increase population growth: In 2006 The Australian Bureau of Statistics, as well as
CSIROs Water Book, stated that the national population would increase to 35 million by
2056. (National Water Commission, 2014). The increase on water demand for municipal
purposes, which is related to population growth, will increase the pressure on the water
market, especially in water suppliers and wastewater treatment services.
Low investment in water Infrastructure: Since 2000s, the investment in water
infrastructure has been relatively small in comparison with other services. Recently, the
Government has increased the level of investment and has encouraged the use of
sustainable energy into the wastewater market. The Water Smart Australian program
has also invested $1.5 billion in sustainable and productive solutions in Water Market
since 2005.
Company Strategy
In order to evaluate if this tender is a worthwhile opportunity for the company, it is
necessary to consider the following points:
Product Differentiation strategy: our product Floating Solar-Aerator (anchored) is a
viable solution for MWT to reduce their energy cost. This new system has been
operating in East Gippsland since 2010. In addition, this hi-tech alternative can reduce
greenhouse gas emissions by up to 100 tonnes a year and decrease the consumption
of energy by around 20% (McKean, Waddell, 2010).
Compliance: H20 can comply with the conditions of the contract. The insurance
Policies are in place for this bid. Also, our company has been certificated in Quality
Assurance (ISO 9001),OHS (OHSAS 18001) and Environmental Management Systems
(ISO 14001).
Page | 8

Viability: The Company has high expectation to win this bid, our principal advantages
are Technology, I&D, resources and an experienced labor force.
Profitability: The revenue of this tender is acceptable, approximately 10%.

Competitors Analysis
Company Name
Aquatec-Maxcon
Pty Ltd

Overse
as
YES

Size
Large

Hydroflux Pty Ltd

YES

Magytec Australia
Pty Ltd

YES

Mediu
m
Small

Patrick Charles
Pty Ltd
Veolia Australia

YES

Large

YES

Large

ABB Australia

YES

Large

Alfa Laval
Australia Pty Ltd

NO

Mediu
m

Registrati
Strengths
on ASIC
1981
Experience,
Design and
Quality
2013
Partnership with
RWL Water Int.
2012
Partnership with
Siemens and
Waterix
1988
Experience and
Design
1993
Experience,
Design and
Quality
1987
Experience,
Design, Structure
and Quality
1926
Experience and
Design

Weakness

Price and
Experience
Structure

Price

Price

Technology

Resourcing
In financial aspect: According to the cash flow statement and our financial situation,
there is enough funding and capital to bid for the work.
The workload: The Company can arrange sufficient resources for this work. We have
several experienced project managers and enough engineers for this project.
The Labor force: Vertically integrated Civil, mechanical and electrical from design and
construction. The company provides intensive training along career paths. Over 200
permanent staff of different disciplines. The capability of the manufacturing operation is
divided between Australia and overseas
Finance
The company was debt free last year. The Net Assets is over $ 23 million. In addition,
the financial capability permits it to fund Goods and services Contracts and BOOT
projects. The organization has Liability Insurance Cover value over than $50 million.
Recommendation

Page | 9

Payment time of the project other Risks


Risk appetite.
28 days define the negotiation of the contract and 14 days to sign the contract for both
parties.
3.2 Analysis of Risk and Opportunities
Risk Tendering
Likelih
ood

Conseque
nce

Managem
ent

Delayed goods

Reduce reputation. Pay


damage to the Principal.

Major

Significant

Contract
and
Operation

Minor changes to
principal
requirements

The expectation of the


service is not achieved.
Technical issues.

Minor

Moderate

Contract

Change of scope
of procurement
strategy

New restriction and


penalties

Moderate

Moderate

Bid not
profitable
Poor
Stakeholder
Engagement
plan

Raised prices of material,


the bid may not profitable.

Major

Moderate

Moderate

Moderate

Insignifica
nt

Low

Likelih
ood

Conseque
nce

Managem
ent

Minor

Moderate

Insignific
ant

Low

Moderate

Moderate

Moderate

Moderate

Minor

Moderate

Typology

Contract

Risk

Financial

Contract
Financial
and
Contract

Need to involve
Sub-contractor

Description

Problems with stakeholders


can affect the service.
Sub-contract assistance
not predicted, increased
cost.

Risk Operation
Typology

Risk

Low dissolved
Oxygen (DO)
Operation,
Maintenan
ce and
Quality

Labor
Safety

Water weeds
and Sludge
build up
Poor periodic
maintenance
Corrosive
Environmental
Safety
operation

Description

Reduction of effectiveness
during the operation. Old
aerators and blowers.
Reduce the turbulence
produced by obstructions.
Low performance of aerators.
Problems with lubrication,
adjustment and replace
spares.
Materials not suitable for
operation in high level of
corrosion.
Unclear Manuals and poor
training.

Page | 10

Opportunities
Accumulate Experience

Future Partnership with Local Government

Description
This tender can be an excellent opportunity to
increase the experience and promote our
high-tech solution into other Wastewater
treatment plants.
This relationship may provide skills transfers
and experience. H20 can offer consultancy
and support service (Integrate service).

3.3 Tender Strategy


Bidding Strategy
The focus on H20`s strategy is to demonstrate, through past experience, capacity and
capability to deliver contracts without litigation Low Risk.
The market conditions are stable and with the small number of competitors, we predict
that our company has high chance to win this project. The size, complexity and type of
the contract is acceptable. Our competent Bid team can develop an accurate Tender
Plan and Risk analysis. The company is inclined to take risk and accept all obligations
and liabilities described in the tender.
Commercial Strategy
Focusses on understanding and delivering the requirements of the Principal.
Demonstrating strong safety record and non-penalty with EPA. Our company promote
fluid communications with the Principal; we will notify any variation as soon as we can.
Deliver quality technology and service, solar aerators into the wastewater plant.
Provide the reference of past-Project and results. The capital base is adequate to
respond this bid. The company is willing to reduce the profit, to demonstrate the cost
saving for future clients.
Commitments
The company is committed to agree with the responsibilities and obligation described in
the tender. H20 will supply and deliver the aerators on time to avoid any consequential
loss. Attempt to minimize claims and variations, and if not possible, provide enough
evidence to support the claims. Prepare a strong mitigation plan, operations guideline,
training plan, quality and safety plan to reduce any risk during the operations.
3.4 Tender Preparation Plan
3.4.1 Tender Gantt chart
The follow diagram shows the Planning Gantt chart for the tendering process. The
time-frame for this bid is tight, only one month to prepare and submit the bid. The
Critical path displays the crucial activities red tasks which can delay the bid
Page | 11

submission. The evaluation of RFT, construction method and programming and bidreview
are
the
most
important
process
in
this
bid.

3.4.2 Bid Team organization


The organizational chart shows the resources required during the tendering process.
This team involves staff from different areas of the company, which can provide a rich
interaction to create a winning bid.

Page | 12

The following table identified the principal role of the bid team.
Table N1: Principal Roles of the Bidding team.
Bid Manager

Internal Departments
Consultant
Commercial Specialist

Specialist Design and


Technical Advisor
Legal and Procurement specialist
Project Manager

Delivery and Maintenance Manager


Project Cost Assistant
Quality Assistant
Project Programmer

This role has to deliver the bid and manage multiple


resources, complex business relationships and
interpret RFT to deliver a competitive bid.
Internal Head Office support the bid team. HR, Health
and Safety.
External Consultant provides specialist knowledge,
experience and suggest directions to the tender
process.
The principal function is create a Sales Strategy,
maintain communication with the client and write the
tender with close support of Project Manager, and the
other areas. Estimate the markup and cost structure.
This specialist delivers an overall technical and design,
measure of performance and specifications.
This role ensures that the company satisfies Legal
and contractual agreements ( AS standards)
This role needs tendering experience, creates a
detailed Project plan as required by client. Analyses
the capability and capacity of the contractor to deliver
the project. Evaluate cost, risk, time frame and quality.
This person controls the aerators delivery and
prepares a Maintenance Guide.
Assist to Commercial area to define the price of the
bid.
Provide technical advice.
Elaborate Project plan.

Page | 13

In addition, during the tendering process, it is crucial that the Owner, Bid Manager,
Commercial Manager and Project Manager integrates a Team review. This team
evaluates and review the commercial, technical tender and risk that complies with the
evaluation criteria.
3.4.2 Develop Tender Price (Flow chart)
The price of the bid is the result of estimating process, which is influenced by
procurement planning, work scope, evaluation and calculation. H2O creates a
monitoring and post evaluation process for bids. In this process is important analyses
the cause of unsuccessful bids for further bidding. The follow flow chart explains the
estimating price process.

Page | 14

References

Page | 15

Uher, TE, & Davenport, P 2002, Fundamentals of building contract management,


Sydney: UNSW Press.
National Water Commission, 2013, National performance report 201314: Urban water
utilities, Canberra.
Department of Environment, 2015, Annual Report 2013-2014, AGPS Canberra.
Stenstrom, M and Rosso,D, Biological Wastewater Treatment: Principles, Modelling and
Design, IWA Publishing, England, London 2008.
McKean, T and Waddell, B, Investigation into the effectiveness of a solar-powered
circulation unit, East Gippsland Water,2010.

Page | 16

Sharkey, J, Bell, M, Jocic, W, & Marginean, R 2014, Standard Forms of Contract in the
Australian Construction Industry: Research Report, Parkville : Melbourne Law School,
June 2014. APPENDIX A
ANNEXURE A: AS 4910-202
1

The Purchaser:
ACN and ABN

Melbourne Water Corporation


81 945 386 953

Purchasers address:

The Supplier:
ACN and ABN

Melbourne Water Contract Manager /PO Box 3173,


Brighton, Victoria, 3186;
H20 Aqua Technology PTY
81 145 290 781

Suppliers address:

192 Nicholson St, Abbotsford, Victoria

Stated purpose for the Equipment (clause 1


definition of acceptable):

Date for delivery: a)


Period of time for delivery
(clause 1 and sub clause 19.1)
Delivery Place

1) The aerator must be designed and constructed to


operate in a corrosive environment.
2) Power rating of 30kW/3 phase 400V and
Efficiency/operation: minimum 1.50kg O2/kWh. 3)Safe
to operate and maintain
4)The aerator must have a floating surface.
30-Apr-16
N/A

8
9

Mode of delivery (sub clause 19.1)


Governing law

Victoria

10

Currency
Place for payments
Place of business of bank

Australian dollar
Purchasers Address
Victoria

11

Limits of quantities to be supplied and


delivered (clause 2.2)
Upper Limit

N/A

Lower Limit

N/A

Supplier's security
Form (Claus 3)
Amount or maximum percentage of Contract
sum *If nothing stated, 5% of the contract
sum
If retention moneys, percentage of each
progress certificate (clause 3 and subclause
24.1)

N/A
Retention
5 % contract sum

Time for provision (except for retention


moneys) (clause 3)

N/A

12

Additional security for equipment not


delivered (subclauses 3.4 and 24.2)
Supplier's security upon certificate of
practical completion is reduced by (sb 3.4)
13

Purchaser's security
Form (Claus 3)

Melbourne Water, Western Treatment


Plant, Werribee, Victoria.

N/A

N/A

50% of amount held (Revision)


N/A

Page | 17

Amount or maximum percentage of Contract


sum *If nothing stated, 5% of the contract
sum
Time for provision (clause 3)
Purchaser's security upon certificate of
practical completion is reduced by
(subclause 3.4)
14

Purchaser-supplied documents (subclause


6.2)

RFT #2459 , Schedule 1) Agreements,2) Goods, 3)


Services, 4) Service Fees and 5)Variation Procedure
and 6)Melbourne Water Policies and
Procedures. Returnable Schedule Pricing Aerators
and Returnable Schedule Questionnaire OHSEQ

15

Supplier-supplied documents (subclause


6.3)

1)Specification and design of aertors.


2)Maintenance Guideline.
3) Risk Management

16

Time for Purcharser's direction about


documents (subclause 6.3)
Subcontract work requiring approval
(subclause 7.2)
Legislative requirements those excepted
(Clause 10.1)
Time by which insurance cover for the
Equipment is to be effected (subclause
13.1)
Time for insurance of undelivered
Equipment (subclause 16.1)
Public liability insurance (clause 13.2)
(a) Is public liability insurance required?
(b) If yes to (a), level of cover required
c) Period for which public liability insurance
is required
d)Is product liability insurance required
e) If yes to (d), level of cover required
f) Period for which product liability insurance
cover is required
Qualifying cause of delay, causes of delay
for which EOTs will not be granted (page 3,
subparagraph (b)(iii) of clause 1 and
sublcause 17.2)
Liquidated damages (subclause 17.5 ) rate

28 days

17
18
19

20
21

22

23
24

25
26

Delay damages
a) Other compensable causes (page 1,
paragraph (b) of clause 1 and subclause
17.6)
(b) rate (subclause 17.6)

All works
N/A
24 months from commissioning or 26
months from delivery whichever comes
Before the Supplier commences performance of the
Contract.
yes
$20 million
For the duration of the contract.
yes
$20 million
For the duration of the contract.
N/A

$1000 per day


N/A

$1000 per day

Date for completion of acceptance testing


(subclauses 18.1 and 21.1)
Party responsible for unloading the
Equipment (subclauses 19.1)

Page | 18

27

When risk in the Equipment passes


(subclause 20.1)

Risk in the equipment shall pass on the later of


delivery acceptance or passing of ownership in
accordance with subclause 20.2.

28

20 business days

31

Time at which ownership of the Equipment


passes to the Purchaser (subclause 20.2)
Period for Purchaser's notice that
Equipment is acceptable or rejected
(subclause 21.1)
Period for Purchaser's notice accepting or
rejecting Supplier's proposal (subclause
21.4)
Defects liability period (clause 35)

32

Invoice (subclause 24.1)


12-May-16
N/A

33

a) Time for invoices


b) Milestones for the rendering of Milestone
Amount invoices
Period for payment (subclause 24.1)
Equipment for which prepayment may be
claimed (subclause 24.2
Interest rate on overdue payments
(subclause 24.5)
Arbitration (subclause 28.3)
(a) Person to nominate an arbitrator
(b) Rules for arbitration

N/A

29

30

34
35
36

(c) Appointing Authority under UNCITRAL


Arbitration Rules
37

38

The Supplier's liability is limited as follows


(clause 29) The respective limits apply to
the sum of the respective claims and not to
each claim.
a) for claims in respect of or arising out of
death or personal injury
b) for loss of rents, income (other than
arising out of death or personal injury) and
the opportunity to earn profits, and indirect
and consequential loss
c) for all other claims whatsoever
The Purchaser's liability is limited as follows
(clause 29)

5 Business Days

5 Business Days

24 months from commissioning or 26


months from delivery whichever comes

30 days after receive the receipt.

6% per annum

Mark Hunter
Rules 518 of the Rules of The Institute of Arbitrators
& Mediators Australia
for the Conduct of Commercial Arbitrations
President of the Institute of Arbitrators & Mediators
Australia.

$ 20 million
$5 million

$5 million
The contractor fixed Price as adjusted pursuant to the
contract.

Page | 19

APPENDIXE B: Melbourne Water Management Matrix


Insignific
ant
Minor
change
without
impact

Contract

Consequence
Likelihood
Almost Certain
Likely
Possible
Unlikely
Rare

E
D
C
B
A

Minor
Conditions
of the
contract

Moderate
Problems
with claims
and
payments

Catastro
phic

Major
Redefinition
Contract.

Insignific
ant
Minor
Moderate
Major
1
2
3
4
Moderate Significant Significant
High
Low
Moderate
Significant
High
Low
Moderate
Moderate
Significant
Low
Low
Moderate
Significant
Low
Low
Moderate
Moderate

Contract
severely
affected.
Dispute
pay
damage

Catastro
phic
5
High
High
High
Significant
Significant

Legend
H = high risk, detailed research and management required at
senior
S = significant risk, senior management attention needed
M = moderate risk, management responsibility must be
specified
L = low risk, manage by routine procedures

Page | 20

Contractor Risk Management Matrix

Insignificant

Minor

Consequence
Major
Catastrophic

Moderate

Labor Safety

Injuries not
requiring
Medical
assistant

First Aid
treatment

Serious injury/
Treatment

Multiple
serious
injuries
Hospitalization

Contract

Minor
change
without
impact

Conditions
of the
contract

Problems with
claims and
payments

Re-definition
Contract.

Minor delay
with minor
impact

Re-scheduling
some tasks,
delayed less
than 1 week

Time and Conditions

Operation, Maintenance
and Quality

Financial
Consequence
Likelihood
Almost Certain
Likely
Possible
Unlikely

Contract severely affe

Minor delay
without
impact

1% Bid price

Replace
minor
equipment
or redesign
the
Maintenance
Guideline
2.5% Bid
price

Insignificant

Minor

Minor
adjustment
in operation
without
impact

1
E
D
C
B

Moderate
Low
Low
Low

Timing se

>5% Bid price

Repetitive
problems in
operation.
Service is
degraded.
>10% Bid
price

>20% Bid price

Moderate

Major

Catastrophic

Inconvenient
but not client
service
compromise

2
Significant
Moderate
Moderate
Moderate

Delivery
delayed in 1
week.

Service failur

Significant
Significant
Moderate
Moderate

High
Significant
Significant
Significant

Si

Rare
A
Low
Low
Moderate
Legend
H = high risk, detailed research and management required at senior
management
S = significant risk, senior management attention needed
M = moderate risk, management responsibility must be specified
L = low risk, managed by routine procedures

Moderate

Si

Likelihood Rating
Almost Certain
E
Likely
D
Possible
C
Unlikely
B

Description
Is expected to occur in most circumstances
Will probably occur in most circumstances
Might occur at some time
Could occur at some time

Rare

May occur only in exceptional circumstances

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