Technical Audit

Redefining Internal Audit

of Construction Projects
www.pwc.com
By:
Syed Imtiaz Ahmed
B.E. (Civil), CCSA, CRMA, CCP, CCA
Senior Manager, Commercial Assurance, PwC, UAE
Chairman, Construction Audit Subgroup, IIA, UAE
Agenda
1
1. Ground Rules
2. Construction Project Stakeholders
3. Technical v/s Operational Audit of Construction projects
4. Reasons for auditing construction projects
5. Type & Scope of Construction Project Audit
6. Case studies
7. Surprise Quality and Safety Inspections
8. Value addition by Innovation
9. Questions
2
Ground Rules
3
The real life case studies presented are based
on actual events but modified for
confidentiality purposes
Case studies are selected from presenters 29
years of work experience
Mobiles on silent mode please
Questions at the end of presentation or
through email
4
Construction Project Stakeholders
5
I smell
money
The Contractor
I am
always
right
Third Parties
What is
your
scope?
Auditor
6
Technical v/s Operational Audit of
Construction projects
7
Normal audit teams generally consist of internal auditors with a
financial background
Technical audit teams consist of Engineers, Quantity Surveyors,
Planning Engineers, Contract Specialists, QA - QC Experts and
also include internal auditors with financial background
Normal audit teams verify general compliance to the policies and
procedures
Technical teams verify compliance to the contractual requirement
- contracts, specifications, codes and standards
Quality and EHS site visits can be conducted by technical auditors
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Reasons for auditing
construction projects
9
Top management is concerned about their exposure
Construction projects are costly
Delays and quality issues can result in brand erosion and lost
market opportunity
Provides a means of keeping projects on track, or gets them back on
track quickly
Provides independent assurance about project status not available
elsewhere
It saves 1% of project cost
It returns 40 times audit cost
10
Type & Scope of Construction
Project Audit
12 11
Project Development/Feasibility
Master Plan & Design Brief
Compliance to regulatory authority
Type & conditions of contract
Tender & Contract
Value Engineering, Project Planning & Scheduling
Contract Administration, Claim Management, Progress Payment
Construction & Safety Method Statements
Variation, Claims & Extension of Time
Contracts Close out, Defect liability & maintenance
Scope of Technical Audit Slide 1/2
12
Project QA/QC manual
Project Quality Control Plan / Quality manual
Project Quality Procedures
Site inspection reports
Inspection and test plan
Test reports
Non conformance report
Material delivered/used and compliance to specification
Safety Risk assessments and compliance to EHS
Scope of Technical Audit Slide 2/2
13
Case study
IIA UAE Regional Conference, March 2014
Tender
14
Scope added to attract more contractors and
achieve competitive rates
Deleted after a month
Instruction issued after a month
Work deleted preliminaries not recovered
Awarded to single source based on per unit area
9 different types of buildings
Contract drawings were available for 8 types
Awarded single source, lump sum, per square meter basis
Constructed area was less then calculated area
15
Case study
Value Engineering
16
Alternate material approved for cost savings
Bituminous membrane with protection board
Replaced with cementatious water proofing material
No test for Chloride and Sulphide resistance
Method of construction and project cost
Bridge redesign due to change in pier spacing
Changed from Cast in situ to post tension
Contractor offered 20 million savings
Post tender value engineering, scope deleted, cost not
adjusted
10 items deleted from scope
Cost and quantity adjusted for 6 items
4 items no change, Project was lump sum
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Case study
Project Schedule
18
Acceleration not achieved but cost paid
Project completion was moved forward for 3 months
Works completed 2 months from the original completion date
Acceleration cost paid in terms of full over time, cost of material,
full equipment rent, additional material etc
Extension of time approved, penalties not
applied
Contract was delayed , Scope reduced
Contractors delays not considered
Final result 5% penalty applied
Method of construction changed for time saving
Cast in situ to pre cast, no cast saving, only time saving
Not considered in EOT assessment
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Case study
Scope Changes
20
Variation with additional preliminaries issued in
re measurable contract
Developer added parallel parking
Works were within 20% (variation limit)
Variation issued with prelims for road diversions, additional
lighting etc.
Variation issued for original work
Contractor to select the method of reclamation to negate
additional compaction
Results were not satisfactory
Contractor applied for variation for ground improvement works
Ground improvement is not compaction, method use is Vibro
compaction
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Case study
Final settlement
22
Loss of profit paid violating the contract clause
20% work deleted 17% new work added,
No change in project time line
Preambles No loss of profit will be payable on deleted works
As built quantities not measured and reconciled
Re measured contract, same buildings, different contractors
Final as built quantities were different for both
Client supplied material was more then installed
Project completed with savings
Item deleted cost paid,
No negative variations issued
Fire fighting system additional cost
23
Case study
Quality
24
Non conformance issued and closed without
action
Panel design is not aesthetically matching with adjacent panels
It is as per approved drawing
Hence closed with out action
NCR Corrective actions not agreed with
Consultant
Design and build project
After repair consultant rejected
No agreed time line for corrective action
Material used was manufactured in China
specified was from France
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Surprise Quality and Safety Inspections
26
Honey comb
27
Asphalt without prime coat
28
Inspection at source
29
Value addition by Innovation
Control self assessments Formalization of
common contract conditions
Bridging the gap
Facilitate the lessons learned session
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syed.imtiaz.ahmed@ae.pwc.com
052 918 1299, 02 694 6800
Senior Manager, Commercial Assurance,
PwC, UAE
Chairman, Construction Audit Subgroup,
IIA, UAE
Experts are at telephone length..
Thank You
This publication has been prepared for general guidance on matters of interest only, and does not constitute
professional advice. You should not act upon the information contained in this publication without obtaining specific
professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of
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and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone
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on it.
2014 PwC, UAE. All rights reserved. In this document, PwC refers to PwC, UAE which is a member firm of
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