Scenario 1 – Contract Damages Situation (900 words)
You are a private sector project manager tasked to identify the heads of damages associated with a
complex project that is to be delivered by one of your strategic suppliers. In particular, you are
required to estimate the costs associated with late delivery of the project so that an appropriate
liquidated damages schedule can be drafted. Total contract value is $100 million. You have
calculated the monthly damages for late delivery as per the following table.
Item Monthly Cost Notes
Extending the life of existing
Equipment and Plant
$250,000 Life extension only available for a maximum 12
months after planned project completion date.
Leasing alternate
infrastructure and equipment
to fill the capability gap
$500,000 Only required if existing infrastructure and
equipment is unavailable.
Retaining the project team
after the planned project
completion date
$300,000 30 full time project staff at a fully burdened
labour rate of $500 per day (30 people x 20
working days x $500).
Fixed site costs including
General and Administrative
costs
$100,000 Office space lease, IT equipment, insurance
costs etc.
Reputational damage $100,000 Brand reputation will be damaged which will
affect sales and market confidence. Likewise,
company share price and borrowing capacity
may be affected.
Opportunity Loss $200,000 Resources are unavailable for the next major
project. The next project is expected to deliver
monthly profits of $200,000.
Calculate a liquidated damages schedule that is legally enforceable and protects the commercial
interests of your organization. Explain how you arrived at the damages schedule and identify risks
associated with enforceability of the liquidated damages provisions.
Scenario 2 – Tendering Situation (800 words)
Your public sector organization released aRequestforTender(RFT)six months ago.TheRFT was
open to all bidders. Tender responses were received three months ago. After initial screening, there
are two tenderers remaining for evaluation. Both tenderers are offering compliant solutions with
very similar cost,schedule and risk profiles. One tenderer though is offering an ‘alternate solution’
that is most likely to deliver best for value for money as this alternate solution is much cheaper,
lower risk, and provides 95 percent of the project capability needs. Unfortunately, the alternate
solution fails to meet the minimum performance requirements specified in the RFT and the
approved Tender Evaluation Plan. Nonetheless, the project sponsor has made it very clear that a 95
percent solution is acceptable. The project team wishes to select the tenderer that is offering the
alternate solution.
The Request for Tender included a ‘Hughes Aircraft’ clause as follows:
“This RFT is an invitation to treat and to the extent permitted by law, no binding contract
(including process contract) or other understanding (including any form of contractual or rights
based upon similar legal or equitable grounds) will exist between the Commonwealth and a
tenderer unless and until a contract is signed by the Customer and successful tenderer.”
Prepare a briefidentifying the legal and ethical principlesfor progressing thisissue including
recommendations for progressing the Tender Selection?
Scenario 3 – Termination for Convenience (800 words)
You are a Commonwealth public sector project manager who is in a contract with a prime contractor for the delivery
of a major project. You are two years into the acquisition phase and approximately half of the acquisition funding
has been expended. The contract covers both acquisition and sustainment with the prime contractor. Progress on the
project to date has been satisfactory.
Your contract includes a termination for convenience clause of the following form:
“In addition to any other rights it has in relation to the Contract, the Commonwealth may at any time
terminate the Contract or reduce the scope of the Contract by notifying the Contractor.
If the Contract is terminated or reduced under this clause, the Commonwealth’s liability in respect of the
termination or reduction is limited to:
a. payments under the payment provisions ofthe Contract in respect of work performed before the
date the termination or reduction takes effect; and
b. any reasonable costs incurred by the Contractor that are directly attributable to the termination
or reduction,
and then only when the Contractor substantiates these amounts to the satisfaction of the Commonwealth
Representative. In particular, the Contractor shall not be entitled to profit calculated by reference to any
period after the date the termination or reduction takes effect.”
Three months ago, your portfolio minister advised your project (under cabinet-in-confidence provisions) that the
Commonwealth is facing significant budget pressures and economic conditions will likely require cancellation of
several projects in your department. Your project has been identified as the project that will be one of the first
cancelled as it is least valuable to the government. You have not disclosed any of this information to your prime
contractor.
This morning, your project was notified by the responsible minister that your project is to be cancelled with
immediate effect.
Prepare a brief exploring the options available to your project to execute the ministerial directions. Your answer
must include an assessment of legal risk
Sample Solution
