Show Me the Money: The Real Savings in Tunnel Contract Payment Provisions
Abstract
Bidders read the contract general conditions for projects under consideration for bid before committing to the expense of preparing a bid. This is a smart practice because it oftentimes reveals that the payment terms dictate
that the bidder must either add significant financing costs or front-load the bid to obtain a reasonable cash flow. While the industry has made qualitative recommendations to reduce financing costs and discourage unbalanced bids
for common contract clauses relating to retention, capped mobilization, the timing of their payment, and the use of equipment mobilization items, there has been no attempt to quantify these savings. By use of a “typical” example tunnel contract, this paper first guides the reader through these payment provisions while quantifying their savings. It then concludes by reinforcing the message that when owners do not consider contractor cash flow in the contract language, they are ultimately either subsidizing significant financing costs or receiving unbalanced bids, and calls for engineer’s estimates to have the ability to make these analyses to owners’ benefit.
2010
North American Tunneling (NAT) Conference Proceedings
John Stolz
Jacobs Associates
