Overview – Contract Management Failure

This is a contract management failure, not a contractor-bashing exercise.

In a nutshell, an HVAC contractor was engaged to replace a Fan Coil Unit (FCU). The contractor submitted a price, received a purchase order, and commenced the works. On paper, it was a small and straightforward job. In reality, it became a costly and avoidable failure driven by a flawed scope of works and poor contract governance at the very beginning of the process.

The lesson is not about behaviour after the fact — it is about what was written, what was assumed, and what was never questioned.

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“In the beginning” – where contract management failed

A scope of works document for the FCU replacement was issued by the Building Manager. On the surface, this appeared reasonable. However, the scope had not actually been authored by the Building Manager.

It had originally been written by the incumbent HVAC subcontractor — a contractor with long-standing site knowledge and a deep understanding of how the building operated.

That original scope relied heavily on assumptions:

• Isolation strategies were a given
• Reconnection of services was assumed
• BMS interfaces and electrical coordination were “understood”
• Notification of affected tenants was standard practice

The incumbent contractor had included wording such as “disconnect and reconnect services”, fully aware of what this meant in practice. Their price allowed for the time, labour, coordination, and commissioning effort required.

However, their price was deemed too high.

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Re-using another contractor’s scope

The Building Manager, a capable and well-intentioned individual employed by the owner, copied the incumbent’s scope onto company letterhead and issued it to alternative contractors for pricing.

This is a common industry practice and, in many cases, a reasonable strategy. It can promote competition, keep incumbents honest, and deliver cost savings.

In this case, however, it proved disastrous.

By reissuing the scope without challenge or clarification, several things happened simultaneously:

• The context embedded in the original scope was lost
• The scope appeared complete but was not self-contained
• The Building Manager unintentionally became the author and owner of the scope
• The owner was unknowingly exposed to unpriced operational risk

The incumbent had written a scope that functioned as a memory prompt.
The new contractor read it as a literal instruction set.

Those are not the same thing.

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The new contractor and the illusion of savings

A new HVAC contractor submitted a lower price and was awarded the work. The Building Manager reasonably believed he had achieved a saving while introducing competitive tension on site.

From the contractor’s perspective, he priced exactly what was written — nothing more and nothing less.

This is where the distinction between technical scope and operational impact became critical.

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How the disaster unfolded

1. Isolation without coordination

The contractor shut off the water to replace the FCU.

He did not notify anyone.
He did not know he was required to.

As a result, a server room lost cooling and shut down. The consequences were immediate and severe. The colour of the air was predictable.

This was not contractor negligence — it was a missing requirement.
There was no isolation strategy, no notification protocol, and no critical services mapping in the scope.

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2. Commissioning failures and system conflicts

Once the FCU was installed, commissioning began.

• The circuit breaker repeatedly tripped
  • Root cause: conflict between BMS fan speed commands and the FCU’s onboard controls
• BMS integration did not function correctly
• Additional commissioning time was required
• Ceiling tiles had to be reinstated
• Fire retardant penetrations had to be reinstalled and made compliant

Each issue was addressed — but none had been allowed for.

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Added costs and commercial reality

The new HVAC contractor had not priced:

• Extended commissioning time
• BMS conflict resolution
• Coordination with other systems
• Rectification and reinstatement works

These became variations.

The final cost more than doubled the original contract value and exceeded the incumbent contractor’s original price.

The lowest price became the most expensive outcome.

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What happened next

• The owner paid the invoice
• The Building Manager learned a hard lesson about reading, writing, and questioning scopes of works
• The incumbent HVAC contractor emerged with an even stronger position on site

But none of this is the real point.

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The real failure: scope governance

This was not a failure of:

• The new HVAC contractor
• The incumbent contractor
• The Building Manager as a person

It was a contract management failure.

Specifically:

• The scope of works was flawed
• It was not re-read critically
• It was not challenged
• It was not rewritten to transfer site knowledge into explicit requirements

A scope of works is not merely a technical description.
It is a risk allocation document.

In this case, risk was accidentally transferred to the owner.

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Broader exposure and missed protections

Beyond cost, the scope failed to address:

• Safety management
• Stakeholder communication
• Waste handling and sustainability
• Compliance reinstatement responsibilities

The Building Manager, acting in good faith, exposed the owner to unnecessary operational and commercial risk by issuing a scope that was incomplete but appeared adequate.

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Conclusion

We could debate for hours:

• Inclusions and exclusions
• Contractor behaviour
• Legal recovery options

None of that changes the core issue.

The initial document was flawed.
It should never have been used for pricing.

Everything that followed was predictable, avoidable, and expensive.

This is not an argument against competitive tendering.
It is an argument for competent scope authorship and contract governance, especially on “small” jobs — because small jobs fail quietly until they don’t.