Cyril Engineering entered into a contract with Dojo Ltd for electrical engineering services to a power station.

The contract was successful for two years, but Cyril Engineering failed to fulfill obligations recently.

Q: What is this situation known as? Answer Options:

Reveal Solution Hide Solution

Green Thumb Ltd, a landscaping company, is considering investing in a new lawn mower costing £10,000. The CFO estimates that the new machinery would increase annual income by approximately £2,000.

What is the payback period of the investment?

Reveal Solution Hide Solution

Petra is setting up a contract for a new construction project that must be robust with little flexibility. The contract stipulates that the client will bear the risk of unforeseen negative circumstances.

Which type of contract is most suitable?

Reveal Solution Hide Solution

According to Hofstede’s Cultural Dimensions, Individualism is when a person prioritises themselves over a group. Is this correct?

Reveal Solution Hide Solution

Manchester City Council is planning to construct a new hospital using an EPC style of contract.

Which two of the following are the greatest risks to the Council?

Reveal Solution Hide Solution

Under which style of contract is the client, rather than the construction company, responsible for the design of a building?

Reveal Solution Hide Solution

Which elements define an organization’s culture? (Select all that apply.)

Reveal Solution Hide Solution

DRAG DROP

XYZ is a large construction organization running five different projects. Each project has a specific type of contract and pricing mechanism.

Your task is to match the correct type of contract and pricing mechanism to each project.

Projects and Descriptions

Project 1

Description: Construction of an apartment block, where XYZ is responsible for both design and construction. Upon completion, ownership is transferred to the client. Pricing Mechanism: Based on past experience of similar projects.

Project 2

Description: Facilities management for a 6-year period after construction. The budget is constantly adjusted due to industry volatility.

Pricing Mechanism: Budget changes continuously over time.

Project 3

Description: XYZ was involved from an early stage, but does not bear the design risk. The budget resets at the start of each new accounting period. Pricing Mechanism: The budget is refreshed periodically.

Project 4

Description: XYZ is responsible for certain parts of the design and build, while another company handles other aspects. XYZ is paid upon milestone completion. Pricing Mechanism: Payment is milestone-based.

Project 5

Description: Construction of a new toll bridge which will be operated by XYZ for the first 6 years post-construction. The pricing includes costs of raw materials, labor, and a profit margin. Pricing Mechanism: Costs plus profit.

Reveal Solution Hide Solution

Correct Answer:

Explanation:

Project 1 – Full Turnkey & Top-down Pricing

The project is a full turnkey contract because XYZ is responsible for both design and construction, and ownership is transferred to the client upon completion.

The pricing mechanism is top-down, as it is determined based on past experience of similar projects. Project 2 – Design and Operate & Rolling Pricing

This is a design and operate contract since XYZ is managing the facility for 6 years after construction. The rolling pricing mechanism applies because the budget changes continuously over the years due to industry volatility.

Project 3 – Management Contracting & Zero Pricing

Management contracting applies because XYZ was involved early but does not carry design risk. The pricing mechanism is zero, meaning the budget resets at the beginning of each new accounting period.

Project 4 – Partial Turnkey & Activity-Based Pricing

This is a partial turnkey contract because XYZ is responsible for only certain aspects of the design and

build, while another contractor is also involved.

Activity-based pricing is used since XYZ is paid upon milestone completion.

Project 5 – Design Build Operate and Ownership & Bottom-up Pricing

This project follows a Design Build Operate and Ownership (DBOO) model because XYZ is responsible for construction and will operate the toll bridge for 6 years before transferring full control. The pricing is bottom-up, as it includes raw materials, labor costs, and a profit margin.

DRAG DROP

Giant Construction Company is working on five large-scale projects. Each project has a specific contract type and pricing mechanism.

Your task is to match the correct contract type and pricing mechanism to each project.

Project Descriptions

Project 1

Description: Giant is collaborating closely with the client to construct a hospital. The client has

provided a cost estimate, and any savings will be shared between the parties. This contract is popular

in the public sector due to its flexibility.

Project 2

Description: This suite of contracts is known as the "rainbow suite". It is rigid, meaning no changes can be made after signing. The price was fixed at the date of signing. Project 3

Description: This international project involves the construction of wind turbines. The pricing mechanism calculates costs for each individual turbine. Project 4

Description: The most popular form of contract in construction, utilizing a Contract Administrator to ensure timely information flow. Since the scope was not clearly defined, Giant is working with the client on a cost-sharing basis plus a small profit margin. Project 5

Description: The project involves ICT services and software provision. Payments are linked to milestone completion during the project implementation phase.

Reveal Solution Hide Solution

Correct Answer:

Explanation:

Project 1 – NEC & Target Costing

NEC (New Engineering Contract) is used in public sector projects because of its flexibility and collaborative nature.

The Target Costing pricing mechanism is used, as cost savings are shared between the client and the contractor.

Project 2 – FIDIC & Fixed Lump Sum

FIDIC (Fédération Internationale des Ingénieurs-Conseils) is known as the "Rainbow Suite", which is rigid and does not allow changes.

The Fixed Lump Sum pricing mechanism applies since the price was set at contract signing.

Project 3 – Joint Venture Contract & Bill of Quantities

Joint Venture Contracts are commonly used in international construction projects, such as wind turbine projects.

Bill of Quantities pricing applies since the cost is calculated per unit (each wind turbine).

Project 4 – JCT & Cost Reimbursable

JCT (Joint Contracts Tribunal) is the most popular contract type in the construction industry, and it includes a Contract Administrator.

The Cost Reimbursable pricing mechanism is used because costs are shared plus a profit margin. Project 5 – IMechE & Activity-Based Pricing

IMechE (Institution of Mechanical Engineers) is used for ICT and engineering-related projects.

Activity-Based Pricing applies because payments are milestone-based.

A person who disrupts progress and hinders culture change holds which type of power?

Answer Options:

Reveal Solution Hide Solution