Quelle Suprise

[stressederic]

The 2006 FA Cup final will not be played at the new Wembley stadium, according to Australian construction giant Multiplex.

 

Fears have grown for some time that the 90,000-seater would not be ready in time for the end-of-season showpiece, and the FA are expected to confirm the situation in the next 24 hours.

 

In a statement issued by Multiplex, the FA are understood to have already made the decision to switch the fixture to the Millennium Stadium, which has hosted the previous five finals.

 

Multiplex confirmed: "We understand that the FA has made this decision on the basis that it requires 100 percent certainty that the venue will be fully functional by 13 May 2006, the scheduled date for the 2006 FA Cup Final."

 

Work started on the new Wembley complex back in 2002, but it has since undergone a series of setbacks that have eventually resulted in the postponement of its opening.

 

A group of 10 teams are currently fighting for a place in the final of football's oldest cup competition, as Charlton host Middlesbrough, Newcastle travel to Chelsea and Liverpool face Birmingham.

 

A combination of Manchester City or Aston Villa, and Bolton or West Ham, will contest the other quarter-final.

 

Sky Sports

 

Who'da thunk it.

[Garduen]

Has been definitely known for quite a while in Oz construction circles (I was first told about 3 months ago) that despite what Multiplex were saying in press, they were never really going to achieve the completion date. They have been delaying the announcement for as long as possible prior to some Stock Exchange announcements that they have to make this week.

 

They have been getting a smacking in both countries from the sounds of it. Behind the scenes in Australia they are looking to consolidate operations back to Sydney (and probably Perth given that is their home city) while from everything that friends have told me - the losses that they are looking at on the White City project in London will make Wembley look like a successful job. To top this off, class actions on behalf of a certain section of their shareholders against the company are due to commence shortly so with all this going on it is no wonder that the FA has concerns regarding the long term financial viability of the company.

Edited February 21, 2006 by Garduen

[Scally the Wag]

Perth? Not one of John Bond's old operations are they?

[Garduen]

You mean Alan Bond? Nah - they were started by a man called John Roberts and then run for a good few years by the Roberts family prior to their public listing. I think the family still owns a good share of the stock and also fill a fair few of the key operational and executive positions in the company

[Benitez]

might be a really dumb question, being as I've not followed the boring Wembley saga. But why is an Australian construction company building it?

 

 

And being as they are making a total pigs ear out of it too, the other options must have been really chite.

Edited February 21, 2006 by Benitez

[Garduen]

might be a really dumb question, being as I've not followed the boring Wembley saga. But why is an Australian construction company building it?

And being as they are making a total pigs ear out of it too, the other options must have been really chite.

 

From what I remember of the process however many years back (and I am happy to be corrected if incorrect), Multiplex were brought in as a construction partner of Bovis Lend Lease during the initial tender period. The FA at some point then wanted whoever was going to build the stadium to do 2 things - 1) warrant the construction costs in a form of Guaranteed Construction Sum and 2) stump up some of the capital (or at least bring some of the finance to the table). At around this point Bovis pulled the pin on their involvement in the project so Multiplex, who were looking to break into the UK construction and property market, decided to go it alone. Multiplex had the stadium project experience having just built Stadium Australia for the Sydney Olympics and were in the process of completing the Lang park (now Suncorp stadium) in Brisbane to potentially take on this job.

 

I believe it was the nature of the contract and finance requirements that put off most of the normal main competitors for this type of project. From what I have heard, it is point number 1 above that is causing most of the financial heartache for MPX as the FA is not going to be subject to the majority of the construction cost increases over and above the GCS that have been experienced throughout the job.

[Tosh]

so the buyer put together a decent contract which put the bulk of the risk of cost over-runs onto the builder

 

Well done the FA. We should sack Parry, nonetheless.

 

Only downside is.... who'll now build Olympic sites and on Stanley Par?k!

[Eskimo]

Builders miss deadline shocker.....is what I think.

[Cobs]

£1Million a week over-run penalties

 

 

OUCH!!!!

[Stevie H]

From what I remember of the process however many years back (and I am happy to be corrected if incorrect), Multiplex were brought in as a construction partner of Bovis Lend Lease during the initial tender period. The FA at some point then wanted whoever was going to build the stadium to do 2 things - 1) warrant the construction costs in a form of Guaranteed Construction Sum and 2) stump up some of the capital (or at least bring some of the finance to the table). At around this point Bovis pulled the pin on their involvement in the project so Multiplex, who were looking to break into the UK construction and property market, decided to go it alone. Multiplex had the stadium project experience having just built Stadium Australia for the Sydney Olympics and were in the process of completing the Lang park (now Suncorp stadium) in Brisbane to potentially take on this job.

 

 

was speaking to a mate who works for laing last week, and that's exactly what happened. the FA insisted on a lump sum quote so that the contructor would take any hits for overdue work. at the moment multiplex looks set to lose at least £100m on the deal, and is apparently cutting costs ridiculously on materials for finishing the stadium.

[boohog]

Gents, that is called bonding and all construction companies do it and have to do it in order to win most contracts. The company puts up a bond guaranteed by their bank(s) which can only be called under certain agreed circumstances, in this case delivery on time.

 

There is nothing strange about this. What would have been strange would be if the cost of overruns was in the hands of the FA.

 

The likely problem with this is that either the FA put an unrealistic deadline on the project which drove competitors away, or they chose the construction firm on the basis of price rather than ability to provide the service.

[Cobs]

thought the deadline was last Autumn and the FA have given them two extensions?

 

 

Aussie t***ts

[Stevie H]

thought the deadline was last Autumn and the FA have given them two extensions?

Aussie t***ts

 

the joke will be on the FA when it's finished and the pitch turns out to be oval shaped.

[Garduen]

Gents, that is called bonding and all construction companies do it and have to do it in order to win most contracts. The company puts up a bond guaranteed by their bank(s) which can only be called under certain agreed circumstances, in this case delivery on time.

 

There is nothing strange about this. What would have been strange would be if the cost of overruns was in the hands of the FA.

 

 

 

Sort of but not quite. Money is usually held in the form of a bank guarantee or in some cases retentions (depending on the size and liquidity of a contractor) to cover a number of circumstances - for example the repair of defective work or a disincentive to ensure that a company doesn't walk away when a job goes pear shaped - usually depending on the contract - the amount varies from 3 - 5% of the total of the contract sum (or works carried out at a given point in time on the project) is required.

 

This has nothing to do with who bears the responsibility of paying for any cost overruns. If the FA had not chosen to go with a GCS (guaranteed contract sum - also called sometimes a GMP (guaranteed maximum price) as well) or D&C (design and construct) contract - not sure which type they are operating under - and gone for a managing contractor type of contract - very common in the industry - where the contractor performs the job of project manager essentially but bares minimal responsibility (beyond normal good practices) for cost overruns caused by design changes (of which there have been many on the job) or escalation in the industry or any other possibilities for cost overruns. It is all dependent upon what the contract signed up on is based on.

 

 

The likely problem with this is that either the FA put an unrealistic deadline on the project which drove competitors away, or they chose the construction firm on the basis of price rather than ability to provide the service.

 

As for the time problem, despite the inadequacies and faults of Multiplex, the problems they encountered with steel supply at a minimum in all reality could not have been expected to the degree that was experienced at the time that they signed up for the contract. This alone will probably go down as one of the main sources of delay to the problems. I have been told from people involved at the time that the dominant factor in others not been willing to sign up were the financial requirements to guarantee the contract sum in a rising market, as well as bringing project finance to the negotiating table. Time is always tight on projects like these but if there is adequate money in the job then generally it is something that can be overcome.

 

thought the deadline was last Autumn and the FA have given them two extensions?

Aussie t***ts

 

The extensions of time so far haven't exactly been from the FA feling generous towards MPX. They had problems sorting out neighbouring land acquisitions as well as certain development approvals that prevented Multi's from commencing/completing certain works

 

 

Only downside is.... who'll now build Olympic sites and on Stanley Par?k!

 

At a minimum you have McAlpines - currently doing Arsenal stadium, Laing O'Rourkes - more than capable of completing large scale projects and Bovis Lend Lease - also more than capable of large scale projects and have worked on various projects aspects of the last 3 Olympics

[boohog]

Sort of but not quite. Money is usually held in the form of a bank guarantee or in some cases retentions (depending on the size and liquidity of a contractor) to cover a number of circumstances - for example the repair of defective work or a disincentive to ensure that a company doesn't walk away when a job goes pear shaped - usually depending on the contract - the amount varies from 3 - 5% of the total of the contract sum (or works carried out at a given point in time on the project) is required.

 

I often work with companies that are required to put a bond in place for the entire contract value, however I defer to you as to whether this is commonplace or not.

 

Bonds have nothing to do with cash being held anywhere. It is the construction firms bank taking the payment responsibility on behalf of the company. Thus the procurer of the services is not worried about taking a double risk on a construction firm defaulting and therefore not being able to complete the work or pay out on a guarantee. The bank takes the risk of the construction firm defaulting.

 

This has nothing to do with who bears the responsibility of paying for any cost overruns. If the FA had not chosen to go with a GCS (guaranteed contract sum - also called sometimes a GMP (guaranteed maximum price) as well) or D&C (design and construct) contract - not sure which type they are operating under - and gone for a managing contractor type of contract - very common in the industry - where the contractor performs the job of project manager essentially but bares minimal responsibility (beyond normal good practices) for cost overruns caused by design changes (of which there have been many on the job) or escalation in the industry or any other possibilities for cost overruns. It is all dependent upon what the contract signed up on is based on.

As for the time problem, despite the inadequacies and faults of Multiplex, the problems they encountered with steel supply at a minimum in all reality could not have been expected to the degree that was experienced at the time that they signed up for the contract. This alone will probably go down as one of the main sources of delay to the problems. I have been told from people involved at the time that the dominant factor in others not been willing to sign up were the financial requirements to guarantee the contract sum in a rising market, as well as bringing project finance to the negotiating table. Time is always tight on projects like these but if there is adequate money in the job then generally it is something that can be overcome.

The extensions of time so far haven't exactly been from the FA feling generous towards MPX. They had problems sorting out neighbouring land acquisitions as well as certain development approvals that prevented Multi's from commencing/completing certain works

 

Most construction firms would enter into forward contracts on a job like this which would be priced into the bid. Either MPX the FA or both have cocked up here because once a job of this magitude is taken on, all material cost risks should be hedged. The FA may have not cottoned on to this and MPX may not have bothered as a result, or the FA may have wanted to minimise costs and gone with a contractor who did not propose the service (and additional cost), but the simple fact is it should have been done.

[Garduen]

I often work with companies that are required to put a bond in place for the entire contract value, however I defer to you as to whether this is commonplace or not.

 

Bonds have nothing to do with cash being held anywhere. It is the construction firms bank taking the payment responsibility on behalf of the company. Thus the procurer of the services is not worried about taking a double risk on a construction firm defaulting and therefore not being able to complete the work or pay out on a guarantee. The bank takes the risk of the construction firm defaulting.

 

Sorry was thinking of another contract requirement altogether when I mentioned retentions and bank guarantees - I agree completely with what you have explained above.

 

Most construction firms would enter into forward contracts on a job like this which would be priced into the bid. Either MPX the FA or both have cocked up here because once a job of this magitude is taken on, all material cost risks should be hedged. The FA may have not cottoned on to this and MPX may not have bothered as a result, or the FA may have wanted to minimise costs and gone with a contractor who did not propose the service (and additional cost), but the simple fact is it should have been done.

 

In an ideal world this is what you would do but I suspect that Multiplex were unable to do this due to a number of factors. They would have received pricing on the steel prior to submitting their bid but would have been unwilling to commit to any suppliers prior to receiving the commitment from the FA. If there is an extended period in between submitting a bid and award of contract then in some cases you get suppliers unwilling to hold their pricing previously submitted (usually happens in a heated and rising market). This would probably have been compounded by the fact that due to the length of the contract period, most suppliers/subcontractors would be unwilling to keep their pricing for the entire duration of the project (reserving the right to re-rate the work at a period down the time due to escalation of costs). Contractors will include trade reserves/contingencies/escalation allowances but if a market heats up in a major way (the way the world steel market did when China started buying up steel en masse) then to try and get these allowances correct is really crystal ball gazing at best.

[boohog]

Sorry was thinking of another contract requirement altogether when I mentioned retentions and bank guarantees - I agree completely with what you have explained above.

It's not often that happens

In an ideal world this is what you would do but I suspect that Multiplex were unable to do this due to a number of factors. They would have received pricing on the steel prior to submitting their bid but would have been unwilling to commit to any suppliers prior to receiving the commitment from the FA. If there is an extended period in between submitting a bid and award of contract then in some cases you get suppliers unwilling to hold their pricing previously submitted (usually happens in a heated and rising market). This would probably have been compounded by the fact that due to the length of the contract period, most suppliers/subcontractors would be unwilling to keep their pricing for the entire duration of the project (reserving the right to re-rate the work at a period down the time due to escalation of costs). Contractors will include trade reserves/contingencies/escalation allowances but if a market heats up in a major way (the way the world steel market did when China started buying up steel en masse) then to try and get these allowances correct is really crystal ball gazing at best.

 

Fair point, given the delays, forward contracts could have left Multiplex on the hook for steel shipments before they were necessary, but did the steel price volatility hit before or after the contract was awarded - i can't remember? If it was before, then not hedging is potentially understandable. If after, then it should not have been a problem. On award of the contract, MPX should have been able to estimate timing of their steel requirements and hedged accordingly, with any increase (or decrease) in forward costs being taken on the chin by the FA. The fact that this didn't happen implies that either the FA was badly advised (by its own advisers and MPX) or that they were prepared to take the gamble, which points towards incompetence. Any additional delays as a result of the FA should have resulted in reimbursement to MPX for the opportunity cost of having to hold on to early steel shipments for a period before being able to utilise the materials.

[The Hitman]

Builders miss deadline shocker.....is what I think.

You are Orelly men?