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A decision guide supporting Beat the DeadlineAll figures illustrative

The Contractor Calls: Should You Spend $25,000 to Save the Schedule?

A hypothetical call, and the thought process on the receiving end, from the first question to a documented decision.

Incoming call: the contractor
"The equipment delivery has slipped. We can expedite an alternate shipment for $25,000, but we need authorization today to protect the schedule."
Before you say yes, follow the decision through the six steps below.
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Interactive call

Take Dan's call

Investigate what you need, then decide. About three minutes.

Incoming call

Dan, the contractor's project manager

Thursday, 9:15 a.m. · Your project is racing a December 31 completion date.

You'll hear Dan's side; your questions are on screen. Every line is captioned.

The ripple: what one request touches
  1. Contractor request
  2. Schedule
  3. Total cost
  4. Remaining contingency
  5. Funding and returns
  6. Approvals
  7. Downstream teams

Step 1: Understand the problem before buying the solution.

The request

Expedite an alternate shipment.

$25,000. Authorization needed today.

Questions it should trigger
  • What changed from the agreed plan, and when did you learn about it?
  • Which milestone is affected?
  • What is the revised completion forecast?
  • Is this activity controlling completion, or does it have available float?
  • What supports the proposed recovery date: vendor confirmation, crew availability, an updated schedule?
  • What happens if we do nothing?
  • What alternatives did you evaluate?
Takeaway

A promised delivery improvement still needs to translate into a project completion improvement.

Step 2: Find the full cost, and who is responsible for it.

Costs and savings to verifyAll figures illustrative

Switch on each cost the quote might not cover, and the site cost you might avoid. The total starts at the contractor's quote.

Quoted expedite$25,000
True cost of this decision
$25,000
Quote only
Added costPotential avoided cost
Questions to ask
  • Is the quote complete, firm and time limited?
  • What costs does it exclude?
  • Is this an owner cost, a contractor obligation, or a disputed responsibility under the contract?
  • Does approving the action also approve a change in price or schedule?
  • What additional exposure remains if the recovery fails?
Takeaway

The quoted price may be only one part of the decision's cost.

Step 3: Check the remaining contingency before spending it.

Contingency waterfallAll figures illustrative
Starting contingency$100,000
Previously approved changes-$40,000
Other commitments against contingency-$20,000
Remaining contingency before this request$40,000
Proposed recovery action-$25,000
Remaining contingency afterward$15,000
$25,000
$15,000 remains after this request.Before you call that affordable, check it against the unresolved risks still ahead.
Questions to ask
  • Does "remaining contingency" already account for committed costs?
  • What unresolved risks still need that money?
  • Is $15,000 sufficient for the remaining work?
  • Who can authorize this expenditure?
  • If the action exceeds remaining contingency, what funding and approval are required?
Takeaway

Within budget does not automatically mean affordable given the risks still ahead.

Step 4: Trace the impact through the financial model.

Model areaAsk for each path
Construction costWhat is the revised total forecast cost, including secondary effects?
FundingIf existing funding is insufficient, where will the additional cash come from?
TimingWhen must the money be paid, and does that create a cash shortfall?
RevenueDoes the revised operating date change when revenue or savings begin?
Financing costsDoes a longer construction period change interest, fees or other carrying costs?
Returns and obligationsHow do the options affect modeled returns, debt metrics and contractual milestones, where applicable?

Contingency is a budget allowance, not a separate source of cash. Check how it is represented in the model so the same cost is not counted twice.

Step 5: Bring the right people into the decision.

KeySuppliesReviewsApprovesNotified

Approval authority varies by project and contract.

Project manager

Contractor/vendor

Can the recovery actually be delivered, and on what terms?

Supplies

Finance/model owner

What happens to forecast cost, cash requirements and returns?

SuppliesReviews

Scheduler/construction lead

Does it improve the controlling schedule path?

SuppliesReviews

Owner/authorized approver

Who accepts the expenditure and remaining risk?

Approves

Engineer

Does substitution require design changes, compatibility checks or new approvals?

SuppliesReviews

Contract/commercial lead

What do the contract and change process require?

Reviews

Asset management team

What changes in the updated operations schedule, and when does handover now happen?

Notified

Step 6: Close the call with a controlled decision.

Before you hang up
  • Can the expedite option be held for 48 hours while we confirm?
  • What do we tell the contractor today?
Make the call

Practice this decision in Beat the Deadlinechallenges.theenergy.academy

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