Reference no: EM133190304
Assignment: The following information has been provided on a project opportunity. Your company has a standard risk assessment model (see the framework shown in tabular format below) and it wishes to use this so that a preliminary decision can be made on whether to increase the resource provided for the project and proceed with more detailed preparation. When there is no information provided on the given risk factor for the project, it is customary to assume the maximum risk. Complete the risk assessment and report your total risk score range (e.g.,130-155). Identify risk factors that can be mitigated to some extent by negotiating different terms and conditions with the client so as to bring down the overall risk score. Evaluate your new overall risk score range. (Hint: Use excel spread sheet to calculate the risk score and also state the assumptions under each risk factor for taking that risk score).
The project
The project is a new 70MW hydro-electric power station in Central Vietnam. The company has been asked to bid for the engineering, procurement and construction management of the mechanical and electrical engineering (M&E) works, with a contract value of approximately US$45 M. The project calls for the commissioning of two turbines, one to be completed in two years and t he other following 3to 6 months later. The owner has requested that a 100% financing proposal is required, i.e., the contractor will need to find a bank o r export credit agency or finance it in some other manner during construction. The bid will be fixed price.
The form of contract will be the client's own conditions and the governing law of the contract will be the laws of Vietnam, although the contract language will be E n g l i s h and payment will b e in US dollars. Advance payments of 10% are available for both equipment and construction management although the follow-up payments are upon receiptof major equipment and on a monthly measure basis for construction management work.
The contract documents call for the following:$500,000 bid bond, Performance security of 10% of contract price, recognition of the usual force-majeure situations, a defects liability period of 12 months from handover although it willbe specifically 6000 hours use for the actual turbines. There are no retention clauses specified although liquidated damages for delay can be up to 10% of contract value and for performance can be up to 2.5% of turbine cost.
The company would like to work with a consortium which is led by a large Japanese company. The Japanese are known to the company but they have no previous experience of working together.