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Gd 0051/11 Isle of Man Water and Sewerage Authority

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Gd 0051/11 Isle of Man Water and Sewerage Authority GD 0051/11 ISLE OF MAN WATER AND SEWERAGE AUTHORITY COUNCIL OF MINISTERS’ REPORT ON RECOMMENDATION 4 OF THE REPORT BY THE STANDING COMMITTEE ON PUBLIC ACCOUNTS ON THE RENEWAL OF THE ISLAND’S INFRASTRUCTURE FOR THE COLLECTION AND TREATMENT OF SEWAGE (“IRIS”),1991 TO 2007 November 2011 Price Band A £2.05 “To: The Honourable Clare Christian MLC, President of Tynwald, and the Honourable Council and Keys in Tynwald assembled.” Council of Ministers’ Report on the Lessons Learned from the Meary Veg experience in terms of Contract Design and Contract Management Recommendation 4 of the Report by the Standing Committee on Public Accounts on the renewal of the Islands Infrastructure for the collection and treatment of sewage (―IRIS‖), 1991 to 2007 (PP83/10) was approved at the November 2010 sitting of Tynwald. This recommendation stated that within six months of the date of this Report the Council of Ministers consider: (a) what are the lessons learned from the Meary Veg experience in terms of Contract Design and Contract Management; and (b) how to ensure those lessons are shared across Government. And report to Tynwald with recommendations. In April 2011, the Treasury laid before Tynwald ‗The Treasury Response to the Standing Committee on Public Accounts Report on the Renewal of the Island‘s Infrastructure for the Collection and Treatment of Sewage (―IRIS‖) 1991 to 2008. The report (GD 0008/11) provided a response to Recommendation 3, but also within Appendix 1 referred to Recommendation 4, specifically item (b) – how the lessons learned may be shared across Government. It reaffirms that: ―Where lessons to be learned are identified these are communicated to other Departments, as appropriate, as part of the Capital Projects Unit‘s remit and role.‖ This report details the lessons learned from the Meary Veg experience, in terms of Contract Design and Contract Management, and these will be shared across other Government Departments and Boards, as outlined above and within the text of the items reviewed. On the advice of Queen‘s Counsel, this report was delayed pending completion of a Capital Procedures Stage 10 Review of the Contract which could only be undertaken following a resolution of all outstanding contractual matters. The Council of Ministers is assured that the changes already effected by amendments issued to the Capital Procedure Notes issued under Financial Regulations and encompassed within the redrafting of the Capital Procedure Notes shortly to be issued adequately address the matters identified in the Report of the Committee and no further recommendations are proposed. Signed ……A…Bell………………………………………………….. Hon A Bell, MHK Chief Minister November 2011 2 Contents Page 1.0 Introduction 4 2.0 The Project 4 3.0 Lessons Derived from the Review of the Meary Veg Sewage Treatment Plant Experience 8 4.0 Lessons to be Shared across Government 10 3 1.0 INTRODUCTION This Report has been prepared as a presentation of the lessons derived from a review of the Meary Veg Sewage Treatment Plant Contract, so that they may be shared for the benefit of other Government Projects and Government as a whole. At the November 2010 sitting, Tynwald approved a Report from the Standing Committee on Public Accounts in relation to the Renewal of the Island‘s Infrastructure for the Collection and Treatment of Sewage (―IRIS‖) 1991 to 2007. The Report contained four Recommendations. The Board of Isle of Man Water and Sewerage Authority has provided this Report in respect of Recommendation 4. ―That within six months of the date of this Report the Council of Ministers consider: (a) what are the lessons learned from the Meary Veg experience in terms of Contract Design and Contract Management; and (b) how to ensure those lessons are shared across Government. And report to Tynwald with recommendations.‖ In April 2011, the Treasury laid before Tynwald ‗The Treasury Response to the Standing Committee on Public Accounts Report on the Renewal of the Island‘s Infrastructure for the Collection and Treatment of Sewage (―IRIS‖) 1991 to 2008. The report (GD 0008/11) provided a response to Recommendation 3, but also within Appendix 1 referred to Recommendation 4, specifically item (b) – how the lessons learned may be shared across Government. It reaffirms that: ―Where lessons to be learned are identified these are communicated to other Departments, as appropriate, as part of the Capital Projects Unit‘s remit and role.‖ This report details the lessons learned from the Meary Veg experience, in terms of Contract Design and Contract Management, and advises how these lessons will be shared across other Government Departments and Boards. 2.0 THE PROJECT The scope of the main Construction Works was to provide a Sewage Treatment Plant at Meary Veg for a population equivalent of 65,000 which comprised three elements, encompassed within the one contract. Within each element, the contract facilitated various design responsibilities; a full design of the Civil Engineering elements by the Engineer; a performance specification by the Engineer for the mechanical and electrical elements and full design for the sludge dryer by the Main Contractor. 4 The three elements comprised: 1. ―Wet Works‖, predominantly the bio-chemical processes including: Office and Operations Building; Inlet Works; Oxidation Ditches for Aeration; Storm Overflow Tanks; Final Settlement tanks; Outfall; 2. ―Bio-solids Dryer‖, including associated Building Works; 3. Pumping Installations at Loch Promenade and White Hoe, but excluding the associated Civil Engineering Works. Foul sewage flows from Onchan, Newtown, Mount Murray, Douglas, Union Mills, Port Erin, Port St Mary, Ballabeg, Castletown, Derbyhaven, Colby and Ballasalla are presently connected to the Meary Veg Sewage Treatment Plant and the sewage flows are being treated to the standards defined by the Environmental Protection Unit. 2.1 Tynwald Approval Tynwald approved a Financial Motion for the Meary Veg Contract at the June 2001 sitting with an approved Project Budget of £20,045,000 to: treat the pumped sewage flows from Douglas and Onchan; treat the pumped sewage flows from Port Erin, Port St Mary and Castletown; and allow for additional capacity to be added in ―Phase 2‖, to treat pumped sewage which would then be received by a Transmission Main from the west and north, via the White Hoe Pumping Station. A Supplementary Vote was approved by Tynwald at the October 2007 sitting, with the objectives advised as: That Tynwald — (1) approves the Department of Transport incurring additional expenditure not exceeding £6,250,000 in order to bring to Completion the settlement 5 of the Final Account on the Meary Veg Sewage Treatment Plant Contract; (2) authorises the Treasury to spend out of the Capital Transactions Account during the financial year ending 31 March 2008, a sum not exceeding £6,250,000 in respect of the additional expenditure; (3) approves of and sanctions borrowings not exceeding £6,250,000 being made by Government, such borrowings to be repaid within a period of 30 years. The total Project Cost approved by Tynwald for the Meary Veg Sewage Treatment Plant Contract and associated Pumping Stations is, therefore, £26,295,000. The monies approved by the Supplementary Vote, and as advised to Tynwald at the time, were to settle the Contractor‘s Final Account (agreed at £20,690,967.84); fund the professional costs associated with Conciliation; fund the claims negotiation costs; works associated with searching for a solution to the noise and vibration problems at the White Hoe pumping station; additional commissioning support and Client costs and the purchase of the White Hoe and Ivy Cottages. 2.2 The Construction Team The Construction Team comprises: Department of Transport Client Lagan (IoM) Limited (Formerly Charles Brand (IoM) Limited) Principal Contractor Salcon Invent Limited Domestic Mechanical Sub-Contractor Salcon Invent Limited (SIL is now in Administration) Domestic Electrical Sub-Contractor Ove Arup Engineer and Lead Consultant Ove Arup M&E Consulting Engineers Cameron Hall Quantity Surveyor Partington Nixon Kinrade Architect Burroughs Stewart Associates Client Representative and Client Project Manager 6 2.3 Timescales The Design Team for the Project was appointed in April 1998, following a detailed pre-qualification evaluation and interview process. The agreed Contract Start and Completion Dates as determined at commencement of the Construction Contract were: Contract Start Date 3 September 2001 Contract Completion Date 30 November 2003 Extensions of Time were granted by the Engineer giving: Revised Completion Date for the whole Works 2 March 2004 Actual Completion being achieved separately for each of the three elements as follows: Wet Works 23 January 2008 Pump Works 27 May 2008 Sludge Dryer 14 November 2008 The delay in achieving completion from the Contract Completion Date to the Actual Completion Date was mainly due to the following: the Mechanical and Electrical Sub-Contractor went through a series of changes in ownership and ultimately went into liquidation; the pumps installed at the White Hoe pumping station were rejected by the Engineer. These were replaced at the Contractor‘s expense; the problems associated with noise and vibration experienced at the White Hoe and Ivy Cottages; the difficulties experienced by the Main Contractor in commissioning the Sludge Treatment Plant. Whilst the overall experience was poor and the delay unacceptable, the Client, Main Contractor and the Engineer, strove throughout to bring completion. 7 3.0 LESSONS DERIVED FROM THE REVIEW OF THE MEARY VEG SEWAGE TREATMENT PLANT EXPERIENCE 3.1 Team Appointments for Long Duration Projects (Implemented through amendments to Capital Procedure Notes) For all major Projects, the Project Team selection process should be through formal submissions, terms of appointment and interview. The roles and responsibilities of the Team Members, including the Client Representative / Employer‘s Project Manager, should be made clear to all throughout. For Projects of prolonged duration, the continued appointment of individual Project Team Members should be subject to formal reviews of performance and appointment terms.
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