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REPORT OF THE BOARD OF MANAGEMENT
ANNUAL REPORT 2016 – BOSKALIS
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critical point of attention in operational management and in its
capital allocation decisions. As a consequence, individual
investment proposals are subjected to a thorough evaluation
and approval process.
In the course of executing its strategy, Boskalis also regularly
acquires companies. To achieve the anticipated results, Boskalis
attaches great importance to integrating such acquisitions with
care. Creating value for our stakeholders and retaining key
personnel are important elements in this process.
OPERATIONAL RISKS
CONTRACTING AND EXECUTION RISKS
The main operational risks for Boskalis are related to the contracting
and execution of projects. For most of our contracting activities the
most common type of contract is fixed price/lump sum. Under this
type of contract the contractor’s price must take into account virtually
all the operational risks as well as the (cost) risks associated with the
procurement of materials and subcontractor services. In most cases,
it is not possible to charge clients for any unforeseen costs.
Furthermore, many contracts include milestones and associated
penalty clauses for if the milestones are not achieved on time. That
is why great emphasis is placed on identifying, analyzing and
quantifying such delay risks and the associated operating costs
during the tendering procedure and the preparation and execution
phase of a project.
Operational risks mainly relate to variable weather or working
conditions, technical suitability and availability of the equipment,
unexpected soil and settlement conditions, wear and tear of
equipment (especially dredging equipment), damage to third-party
equipment and property, the performance of subcontractors and
suppliers, and the timely availability of cargo or services provided
by the client in case of heavy marine transport and/or installation
activities.
The following measures are taken systematically to manage the
aforementioned risks in the tender, preparation and/or execution
phase of a contract:
During the tendering procedure and the contracting phase of
projects much emphasis is placed on identifying, analyzing and
quantifying execution, costs and delay risks. Contracts are
classified based on their size and risk profile. This classification
determines the subsequent course of the tender procedure and
the requirements for authorization of the tender price and
conditions. Above a certain level of risk, tender commitments
require authorization at Board of Management/Group
Management level.
In the preparation phase of a project tender and depending on
the nature and risk classification of the project, we gain insight
by conducting surveys and soil investigations, by consulting
readily accessible databases containing historical data and by
applying extensive risk analysis techniques. The results of the
risk analysis are then used in the process of costing the project
and in setting the commercial and contractual terms and
conditions for the offer to be issued to the client.
Risks related to price developments on the procurement elements
of a project, such as costs of materials and services, sub-
contracting costs and fuel prices, as well as the cost of labor,
are all taken into account in calculating cost prices. Wherever
possible, and especially on projects with a long execution time,
cost indexation clauses are included in the contract terms and
conditions, particularly regarding labor and fuel costs.
When a contract is awarded, an updated risk analysis is part of
the project preparation phase, based upon which measures are
taken to mitigate the risks identified.
In addition, much attention is devoted to the education and
training of staff, appropriate project planning and project
management, the execution and implementation of certified
quality, safety and environmental systems, and the optimal
maintenance of equipment.
Construction of a terminal in
Lazaro Cardenas, Mexico.