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View Full Version : Contracts - Fraud or Incompetence



dwells
24-02-2007, 07:27 AM
Once upon a time, a contract meant that everyone involved knew what was expected and how much it would cost.

Today, it seems to be generally accepted in government circles that such contracts are no longer possible.

Why do we continue to allow this myth to be perpetrated on the taxpayers and the consumers? Why do we continue to allow ourselves to be locked into worthless contracts? Why do we accept escape clauses that allow contractors to pass on cost increases? A proper contract is not subject to cost increases.

Whether it's a traffic interchange, a public building, a new home, energy delivery, or any other example, a contract must have an all encompassing bottom line or it is worthless. Anyone who accepts such a worthless contract should be held liable and should feel lucky to only be considered incompetent and fired. Anyone who offers such a contract should absorb any and all losses or should be charged with fraud.

How, for example, can we accept cost overruns due to the price of concrete? Did the general contractor not know how much concrete is required for a job and contract a fixed price with the premix company? Why should such a risk be paid for from your and my pocket. Why is the contractor not required to carry some form of insurance to guarantee adherence to the contract?

In the absence of a law that places such requirements on contracts, it is left to the city to take responsibility and ensure the competence of our employees and pursue legal action against fraudulent contractors.

Let Darwinism prevail and weed out incompetence and fraud.

yxdca
03-03-2007, 02:11 PM
It would be nice if they could do it but that's kind of difficult with the number of variables involved in a consrtuction contract. Even the price of diesel can effect the difference cost overruns. It would be shame to wreck a good construction company because gas costs more than expected.

ralph60
03-03-2007, 02:34 PM
I don't know why government contracts should be different than industrial contracts.
The company I work for does "Hard Dollar" projects all the time. We are currently bidding lots of them and there is no expectation of a change in price on any of them.
Where we see cost escalation is when the customer changes the scope of the project after construction has began. These are common occurances and happen in everything from garage packages to Syncrude.
This is probably a source of a lot of the cost overuns on government projects as well.
Changes in scope are common on even the best planned projects and I can easily envision that they would be more common on a government project because of the myriad affected parties involved.
If government tenders allow escape clauses due to contractor cost changes then whoever is writing the tender for the government is at fault. My company doesn't get involved in infrastructure projects but we do a lot of work on industrial mega-projects and these are all still being bid with a firm price.
In fact a major project in Fort Mac. being built right now was let to the general contractor three years ago and there is no recourse, the general contractor has been forced to honor their contract and is doing so even though they will probably lose Millions.

dwells
16-03-2007, 06:12 AM
It would be nice if they could do it ... It would be shame to wreck a good construction company because gas costs more than expected.
But that's just it. Every aspect CAN be locked in. Even the price of fuel. We know that in non-government jobs it's done every day as Ralph confirms. So we know that the private sector knows HOW to do it if it's demanded.

So, where does this stink-bomb land? It's not just the city. Provincial and federal projects are just as likely to bloat.

dwells
16-03-2007, 06:23 AM
Where we see cost escalation is when the customer changes the scope of the project after construction has began. These are common occurances and happen in everything from garage packages to Syncrude.
This is probably a source of a lot of the cost overuns on government projects as well.

I can understand changes in cost due to changes in the contract. But if a contract needs to be altered, in almost all cases it means that someone hasn't done a thorough job.

But even so, the reasons we are given for recent cost overruns are that the price of fuel, cement, labor, steel, or some other known commodity has risen. These are not changes to the contract with the city and should not be passed on to the taxpayer.

ralph60
16-03-2007, 08:29 PM
I am the last person on earth to defend bloated government infrastructure spending, but dwells is being unfair when he says contract alterations means somebody hasn't done a thorough job.
The complexity of a large project makes it almost impossible to avoid some changes in scope and thus contract alterations. I see it in even the best run private projects and I don't recall ever going through any hard dollar job without some change in scope somewhere along the line.

dwells
17-03-2007, 08:34 AM
I am the last person on earth to defend bloated government infrastructure spending, but dwells is being unfair when he says contract alterations means somebody hasn't done a thorough job.
OK, I'm willing to listen. I accept there are occasions where it's necessary (I did say: 'in almost all cases') but as yet, I can only think of politics as a semi-valid reason to change a contract. Politics includes things like the boss changing her mind, trying to serve a different demographic, even lack of confidence in a co-worker. In short, people intrude into the work.


The complexity of a large project makes it almost impossible to avoid some changes in scope and thus contract alterations. That's actually quite close to my thoughts, but mine need a few more words and would go something like this: "The complexity of a large project makes it necessary to make unsubstantiated assumptions and if these assumptions are wrong it's almost impossible to avoid some changes in scope and thus contract alterations."

And there may be the crux of the matter. Politics aside, with the resources available to government offices and their agents, with the technology that can calculate (not estimate) to more decimals than is reasonable, with all the maps, blueprints, feasibility studies, surveys, measurements and samples, with all the knowledge and expertise that's supposed to be at hand, why should it still be necessary to make changes after everyone has signed off on the specifications and the work has begun?