Jason K. Firth, C.E.T.

Instrumentation, Control, and Automation

Big legal in engineering technology land

Apr 062015

April 6, 2015

I'm Jason Firth.

One part of the OACETT and CTTAM codes of conduct is a responsibility to learn the applicable laws and codes to your field. To that end, I often load up CanLII and search for information relating to the field of engineering technology, and people certified as engineering technologists.

I found this 1996 case, and it's interesting to me.

This case relates to the construction of a paper mill in Alberta in the late 80s. There are 3 main groups: A contractor called Dilcon, an engineering company called NLK, and a corporation created solely for the purpose of the construction of this new paper mill, called ANC.

What is disputed is the amount of money owed to Dilcon by ANC. The amount disputed is quite substantial, with Dilcon claiming they are owed a further $20 million dollars, and ANC claiming they have overpaid by $10 million dollars.

At first glance, Dilcon sort of accepted a dangerously vague contract: They placed a bid on a job for which the detailed engineering was only around 10% complete. They came up with a fixed bid for a contract for which scope wasn't even remotely defined yet. On the basic merits, this turned out to be as bad an idea as it sounds: In one area, the amount of work turned out to be literally twice as much as originally proposed, and in another area, it was 25% greater.

Luckily for them, the engineering company was set as the facilitator in contract measures, and acted in a fair and reasonable manner, allowing different additions to be considered as "extras" despite the fact that ANC ostensibly asked for a "no extras" contract.

The case provides a fairly in-depth look into how one major contract was negotiated and carried out, including a lot of detail about what looks like a fairly well done change management process. (the case centered around changes, but I don't think the problems related to the processes in place)

In addition, it gives painstaking details about the consequences of not considering lead times.

I started my career as an engineering technologist working in an engineering department, designing and managing projects and ordering parts. Later on, as a technician, I had broad latitude to manage my projects and order parts as well.

One lesson I learned is this: Stakeholders want to ignore lead times, and will pressure you to do so. However; especially if you're working in a remote site or remote community, failing to pay attention to lead times will result in looking like an idiot and wasting the company's money.

In this case, NLK took too long to deliver certified engineering documents, which caused several vendors to be delayed in delivering materials. In other cases, the vendors simply took long to deliver, with one vendor taking 5 months longer than scheduled to deliver a key part. In another case, Dilcon was fully mobilized on site for months before an acceptable number of pipes had been delivered. By not properly accounting for the amount of time it would take for tasks to get done and for parts to arrive, the entire project suffered massive cost overruns in the millions of dollars.

Of course, you could say "But you should be able to plan based on the best possible information!", which seems like a great idea on paper. In practice, if you don't have any good reason to believe that a part will be at your site, I don't think it's a good idea to start lining up huge resources. All it takes is a lack of a single critical component and suddenly you're not just not done, but you're down.

That's what happened in this case. The engineering wasn't complete, the shipping wasn't complete, the parts hadn't arrived, and they'd just mobilized a bunch of trades workers to stand around doing nothing for months at a time.

This sort of bad planning has massive consequences. In this case, Dilcon did manage to get their contract completed in time, but at huge cost: The court found that they were owed a full 10 million dollar more by ANC -- Considering the original contract was under $20M, that's a huge cost increase -- and all that was needed to avoid it was for someone to say "Slow down! We're going to make sure we're ready before we start signing contracts and hiring people."

 

Thanks for reading!