PROFESSIONAL PRACTICE I [QSD 289]

Mohammad Nasharudine Shuib

SECTION 1 2 3 4 5 6 7 8

DESCRIPTIONS INTRODUCTION GENERAL MATTERS STANDARD FORM OF CONTRACT METHOD OF PRICE DETERMINANTION CONTRACTOR SELECTION & APPOINTMENT PROCUREMENT OPTIONS CONTRACT STRATEGY CLIENT PROCUREMENT NEEDS

LINKS

Client organizations are divided between those in private and public sectors although this distinction is becoming more difficult to define since the privatization of many national bodies. The private sector includes industrial, commercial, social, charitable and professional organizations, and individuals. The public sector is taken to mean government departments, nationalized industries, statutory authorities, local authorities and development agencies. The experience which a client has of building procurement ranges from extensive, in the case of a client with a project management team, to none, where a private individual may want a development only once in a lifetime.
4

The traditional method of organizing construction work starts with appointing a consultant designer, usually an architect or engineer, or both. Other specialists may be needed, in particular a quantity surveyor is appointed to provide cost information, prepare bills of quantity, compare bids and maintain financial management during construction.

10

11

12

13

14

CONTRACTUAL ARRANGEMENT

BASE ON CONTRACT PRICE Fixed Price Cost Reimbursement

BASE ON CONTRACTORS OBLIGATIONS Conventional Design and Build Management Contracting Others
15

BILLS OF QUANTITIES

MEASUREMENT CONTRACT @ CONTRACT PRICE

SCHEDULE OF RATES

BILLS OF APPROXIMATE QUANTITIES

DRAWINGS & SPECIFICATIONS

16

FIXED PRICE

LUMP SUM (contract sum pre-determined) Bills of Quantities (BQ) Drawing and Specifications

RE-MEASUREMENT (contract sum to be ascertained on completion) Schedule of Rates (adhoc/std) Approximate Bills of Quantities

17

FIXED PRICE CONTRACT

FIXED PRICE

LUMP SUM (contract sum pre-determined) Bills of Quantities (BQ) Drawing and Specifications

RE-MEASUREMENT (contract sum to be ascertained on completion) Schedule of Rates (adhoc/std) Approximate Bills of Quantities

19

The contractor contract to do the work at a price he estimated in advance. He takes the risks of calculating approximately how much work is involved & its cost. Contract sum is predetermined & stated in the contract. Traditional contracts are usually fixed price contract.

20

LUMP SUM CONTRACT

LUMP SUM (contract sum pre-determined)

Bills of Quantities (BQ)

Drawings and Specifications

22

The contract price is agreed at time of the formation of the contract. The contractor is responsible for carrying out all the works shown in BQ or Drawings and specifications. Example: PAM, PWD, CIDB etc. Advantages: client is able to define the works & prepare documentation. Drawbacks: Documentation must be complete before tender.
23

Prepared by QS Subject to adjustment for variations. For civil engineering works, the BQ are based on estimated quantities (Provisional Quantities), the whole work subject to re-measurement. All the contractor tender on the same measurement data. Drawback: provide the best basis for estimating, tender comparison & financial administrations.
24

25

The contractor is responsible for carrying out all the works as shown on drawings & specifications. The contractor must calculate his TENDER SUM based upon the CONTRACT DRAWINGS & SPECIFICATIONS. The contractor will calculate his own quantities. The contractor must submit & priced the schedule of rates in order to value variations. drawback: does not provide for easy comparison of tender sums.
26

27

28

29

RE-MEASUREMENT CONTRACT

RE-MEASUREMENT (contract sum to be ascertained on completion)

Schedule of Rates (adhoc/standard)

Approximate Bills of Quantities

31

The parties do not pre-agree any price for the works as a whole. But they do pre-agree the rates of payment to which the contractor shall be entitled. Sometimes described as dayworks contract or contract with approximate quantities.

32

The cost of the works is calculated by applying an agreed schedule of rates to the work actually done. The schedule is similar to a BQ but without the quantities. Contractor is required to insert his price against the items in the schedule. Alternatively, a priced schedule is prepared & the contractor is asked to quote a percentage adjustment (plus @ minus) to the rates. The contractor is paid for the actual workdone according to the schedule of rates. The total cost the project is unknown until the works is completed.
33

34

All the works would be re-measured upon completion. Approximate quantities are prepared & the contract price is based upon the actual quantities of works executed which are re-measured during the course of construction. Example: Civil Engineering Works

35

COST REIMBURSEMENT

COST + %

COST REIMBURSEMENT

COST + FIXED FEE COST + FLUCTUATING FEE

37

Also known as PRIME COST / COST PLUS because the method of payment is by reimbursement to the contractor of his prime cost plus management fee. Prime cost means: the total cost to the contractors, of using & hiring plant & employing labours to carry out construction works.

38

Advantages The time required for preparation of tender document & for obtaining tender is minimized. Early start on site to be made. Work on site may proceed before the detailed design is complete. Disadvantages The parties have least indication of their commitments. Cost of construction to the client is greater. The computation & verification of the total prime cost is a long & tedious process.
39

Most uneconomical type of contract & should only to be used in certain circumstances. For example: where cost is less important factor than time. 3 types:a. Cost Plus Percentage Fee b. Cost Plus Fixed Fee c. Cost Plus Fluctuating Fee

40

COST PLUS PERCENTAGE

COST REIMBURSEMENT CONTRACT

COST PLUS FIXED FEE

COST PLUS VARIABLE FEE

41

Contractor is paid actual cost of the work incurred plus a percentage of the actual cost, to cover his overhead & profit. May provide schedules to determine the prime cost. No incentive to contractor to make good progress or to save money because his fee rise with the total cost of the job.

42

The contractor is paid a fee equal to an agreed % of the prime costs. The fee paid to the contractor is a fixed sum which normally vary with the total prime cost.

43

Due to uneconomic organization of the contract, inefficiency & excessive waste, the total prime cost was RM55,000.00.

The contractors overhead still RM7,500 but the profit would be RM3,500 [RM11,000 RM7,500] More inefficient contractors operations, the greater waste of resources, the higher fee paid to the contractor.
44

The fee is a fixed lump sum. The fee remains constant even when cost vary. The contractor does not profit by increased expenditure unless the nature of the work is substantially altered. The contractor has more incentive to finish quickly & minimize his profit as percentage turnovers.

45

The fee paid to the contractor is a fixed sum which normally does not vary with the total prime cost.

46

Due uneconomic organization of the contract, inefficiency & excessive waste, the total Prime Cost RM60,000 (excess RM10,000), then the total cost would be:-

47

Similar to fixed fee. An estimate is made of the total cost. The amount of the fee received by the contractor varies inversely to the costs actually achieved a sliding scale.

48