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Topics: Construction, Procurement Management
When is Time to Dismiss the Contractor?
Dam Project Contractor completed 87% project work in more than 9 years, They are requesting one more year time extension, not sure they will be able to complete this, afraid they will waist time, at the same time they are not ready to pay liquidity damage, what do you think it is time to dismiss them and hire new contractor? Please share your experience.
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Without knowing the project detail I can tell you that there is always a certain point of no return after which the cost of dismissing a contractor (and starting over) is outweighed by the cost of pushing through. But there are many things to consider.

a) When this contractor walk away after doing 87% of the work, how easy would it be for another contractor to step into the breach? We always hope and assume that it won't put us back at square one but we need to be careful of what a setback would mean to the project.
b) What are your options wrt penalties etc? Sometimes at such a late stage enforcing contractual penalties is not better but the best of two evils. But your region would have a great impact on how effective this would be.

So in a nutshell at 87% of the work completed I would consider dismissing a contractor as the very last desperate act. When is it time to dismiss them then? Only after all other options are exhausted and this includes legal action.

Good luck because that is a very difficult situation to be in.
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1 reply by Ahmad Mushtaq Abdurahimzai
Feb 24, 2020 5:27 AM
Ahmad Mushtaq Abdurahimzai
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Dear Anton Oosthuizen, thank you so much for the information, i am newly hired as PM for this project, from last some weeks we tried all option but did not work, now we have two option to give them more money + remove LD or dismiss them.

Thank you for the information.
Feb 24, 2020 3:39 AM
Replying to Anton Oosthuizen
...
Without knowing the project detail I can tell you that there is always a certain point of no return after which the cost of dismissing a contractor (and starting over) is outweighed by the cost of pushing through. But there are many things to consider.

a) When this contractor walk away after doing 87% of the work, how easy would it be for another contractor to step into the breach? We always hope and assume that it won't put us back at square one but we need to be careful of what a setback would mean to the project.
b) What are your options wrt penalties etc? Sometimes at such a late stage enforcing contractual penalties is not better but the best of two evils. But your region would have a great impact on how effective this would be.

So in a nutshell at 87% of the work completed I would consider dismissing a contractor as the very last desperate act. When is it time to dismiss them then? Only after all other options are exhausted and this includes legal action.

Good luck because that is a very difficult situation to be in.
Dear Anton Oosthuizen, thank you so much for the information, i am newly hired as PM for this project, from last some weeks we tried all option but did not work, now we have two option to give them more money + remove LD or dismiss them.

Thank you for the information.
Ahmad -

This is a good example of where a decision tree could be used to weigh the costs and benefits of sticking with the contractor vs. dismissing them and going it alone or with a different one.

Frustration and emotions might be high on both sides, but the use of analytical, objective tools can help guide your leaders in making the best decision with the information available.

You will need to consider things such as:

1. What is the early termination penalties the contractor might impose?
2. What are the legal implications for the contractor or your company and what might legal costs be?
3. Do you need the contractor more than they need your company?
4. Is there a viable alternate provider who can step in and complete the work without further delays factoring in ramp up time, contract negotiation and so on?

Kiron
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1 reply by Ahmad Mushtaq Abdurahimzai
Feb 26, 2020 12:07 AM
Ahmad Mushtaq Abdurahimzai
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Dear Kiron,

Thank You so much, for giving such great information, all the points are noted.
I am assuming there is no performance bond and the client is blameless for the current situation.
One thing that has not been mentioned yet is work warranty. If there are any quality/performance issues a new contractor will not accept responsibility for the work done by the first contractor. Additionally, any warranty for products provided to and installed by the first contractor may not be honored.
Which ever way this is resolved will cost more, much more, both in terms of time and money.
I would suggest the point of no return was passed a while back.
One possibility is to eliminate any remaining work under the contract that can be undertaken independently later under a separate contract.
Get the personalities and frustrations out of the equation and address only the time and money issues. Kiron is right, accept the situation as it is and use the decision tree model or similar to plot a course going forward. There will be a cost.
...
1 reply by Ahmad Mushtaq Abdurahimzai
Feb 26, 2020 12:10 AM
Ahmad Mushtaq Abdurahimzai
...
Dear Peter Rapin,

thank you for such great information, and points are noted.
Feb 24, 2020 9:34 AM
Replying to Kiron Bondale
...
Ahmad -

This is a good example of where a decision tree could be used to weigh the costs and benefits of sticking with the contractor vs. dismissing them and going it alone or with a different one.

Frustration and emotions might be high on both sides, but the use of analytical, objective tools can help guide your leaders in making the best decision with the information available.

You will need to consider things such as:

1. What is the early termination penalties the contractor might impose?
2. What are the legal implications for the contractor or your company and what might legal costs be?
3. Do you need the contractor more than they need your company?
4. Is there a viable alternate provider who can step in and complete the work without further delays factoring in ramp up time, contract negotiation and so on?

Kiron
Dear Kiron,

Thank You so much, for giving such great information, all the points are noted.
Feb 24, 2020 11:19 AM
Replying to Peter Rapin
...
I am assuming there is no performance bond and the client is blameless for the current situation.
One thing that has not been mentioned yet is work warranty. If there are any quality/performance issues a new contractor will not accept responsibility for the work done by the first contractor. Additionally, any warranty for products provided to and installed by the first contractor may not be honored.
Which ever way this is resolved will cost more, much more, both in terms of time and money.
I would suggest the point of no return was passed a while back.
One possibility is to eliminate any remaining work under the contract that can be undertaken independently later under a separate contract.
Get the personalities and frustrations out of the equation and address only the time and money issues. Kiron is right, accept the situation as it is and use the decision tree model or similar to plot a course going forward. There will be a cost.
Dear Peter Rapin,

thank you for such great information, and points are noted.

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