APC - Theory Preparation

APC Theory Preparation
PRIVATE SECTOR QUANTITY SURVEYING CONSULTANT ROLES AND FUNCTIONS

Prepared by ABIODUN AWOSINA May 2012
APC Theory Preparation TABLE OF CONTENTS
SECTION 1 - COST ADVISE AND COST PLANNING........................................................................................................2 ECONOMIC FACTORS.................................................................................................................................................................3 FINANCIAL DESIGN CRITERIA....................................................................................................................................................4 EFFICIENCY OF DESIGN.............................................................................................................................................................4 COST ANALYSIS.........................................................................................................................................................................5 COST PLANNING........................................................................................................................................................................5 COST CONTROL..........................................................................................................................................................................6 PRINCIPLE OF COST CONTROL...................................................................................................................................................7 SECTION 2 - FEASIBILITY STUDY......................................................................................................................................7 ECONOMIC, MARKET, PHYSICAL FEASIBILITY STUDY................................................................................................................8 FINANCIAL FEASIBILITY STUDY.................................................................................................................................................9 SECTION 3 - CONTRACT ADMINISTRATION................................................................................................................11 OBJECTIVE AND PREPARATION................................................................................................................................................11 EXECUTION..............................................................................................................................................................................12 COMPLETION...........................................................................................................................................................................12 PAYMENTS...............................................................................................................................................................................13 COST MANAGEMENT................................................................................................................................................................17 TERMINATION..........................................................................................................................................................................19 DISPUTE...................................................................................................................................................................................21 SECTION 4 CONTRACTUAL PROCURMENT, PROCUDURES AND DOCUMENTATION.................................23 ESTABLISH WHAT TO BE PROCURED........................................................................................................................................23 PROCUREMENT STRATEGIES....................................................................................................................................................23 CALLING FOR TENDER (MAY BE QUALIFIED WITH CIDB STANDARDS)...................................................................................24 EVALUATE TENDER.................................................................................................................................................................25 ACCEPTANCE / AWARD OF TENDER........................................................................................................................................25 ADMINISTER CONTRACT AND CONFIRM COMPLIANCE............................................................................................................26 SECTION 5 CONTRACT CONDITIONS AND RELATED MATTERS........................................................................26 FIDIC 1999.............................................................................................................................................................................27 GCC 2004...............................................................................................................................................................................29 JBCC SERIES 2000...............................................................................................................................................................30 NEC3......................................................................................................................................................................................31 SECTION 6 SACQSP TARIFF OF PROFESSIONAL FEES...........................................................................................32
SECTION 1 - COST ADVISE AND COST PLANNING The Quantity Surveyor performs and advice on the cost aspect of the project. The main technique engaged includes cost analysis, cost planning and cost control. In general, cost control mechanisms are performed at the inception, during the design, construction and close out stage of the project.
The following factors are considered to significantly affect the project cost: I. Economic factors II. Financial design criteria III. Efficiency of design Economic factors Inflation (escalation) The general progressive increase in prices of commodities (labour, plant and materials) is a significant factor to be considered in cost advice and planning for development projects. Escalation has significant effect on the cost of project, similar to time value of money. This should be considered when calculating project cost. Escalation in construction is forecast in 2 stages viz: I. II. Pre-tender escalation - based on publication of BER building cost indices Contract escalation (post tender) prior based on publication of JBCC contract price adjustment provision indices. As of 1 st March 2012 document from Stats SA.
Economic cycles (market conditions) These are changes in the economic situation of a Nation, also internationally. Quantity Surveyors make logical reference to these changes when providing cost advice. The different cycles have significant effect on the demand and supply of construction industry. I. Growth increase in demand for construction, competition reduce, profit increase, resources reducing, prices increasing, contractor insist on fair conditions II. Peak demand increase, little competition, high profit margin, resource long delay, resource exceed budget, every one become builder III. Recession demand weakening, competition increase, profit margin decline, resource cost reduce IV. Trough high competition, profit discounted, resources not available, industry fragmented, good building conditions, and productivity high. Interest rate The interest rates have effect on the repayment of project cost (finance cost). This is a mechanism used by a Nations monetary policy to control inflation and other macro-economic issue i.e. price indices, investment, international trade and finance.
APC Theory Preparation Financial design criteria
The following design criteria are to be considered for effect on project cost: Composition of building material e.g. usage of brickwork compared with concrete block, choice of finishes and fittings Depth of filling and surface bed compared with suspended reinforced slab Comparison of different types of slabs i.e. coffer slabs, flat reinforced slab, prestressed slab, alternatives should be considered depending on the thickness, span and other design requirements Increase in height of building compared to ground floor construction to be considered in relation to structural element, lifts, plumbing and electrical service owing to increase in height Location and usage of space in the building i.e. halls in multistorey building is economically recommended to be located on the top floor in order to avoid design of long span of beams at the lower structure . Efficiency of design The following efficiency factors are to be considered for effect on project cost: Faade of building in terms of straight edge or any deviation i.e. steeping, angle, curve should be considered in relation to cost Material composition in relation to heat, light and ventilation control to be considered in relation to power consumption of plants, i.e. Air-conditioning, sunlight control etc Increase in allocation of rentable area usually increase the efficiency ratio of revenue generating area Area of toilets to be group together to reduce the plumbing connection of different point Sustainability of the building Green Building will have effect on the maintenance and protection of the environment. The following techniques are engaged in cost advice and cost planning: I. Cost analysis II. Cost planning III. Cost control
Cost analysis The cost investigation of the various components of the building and their relationship in making up the whole comparison for elemental estimating and cost planning for construction projects. These cost information are derived from various cost data from previous project and information supplied by other Consultants including annual publicised information Merkel (standard reference publication of rate analysis for building in SA). Cost planning The cost planning technique is engaged during the design concept stage (concept and viability) and fully developed during the design development and documentation stage of the project into a detailed estimate. The Quantity Surveyor participates in the design decision with particular contribution to the project comparative cost and initial cost plan in form of elemental estimate, which later develops into detailed estimate (i.e. bills of quantities, etc). Elemental estimate - The Quantity Surveyor prepare the elemental estimate of the building, taking into account the various sections, elements (part of building that performs same function irrespective of construction or specifications) and the components (sub-division of elements). In addition to the initial cost plan, the elemental estimate derives measurement and cost for various elements and components of the building in various percentages with relation to the construction area. This can be transformed into detailed estimate. Detailed estimate The Quantity Surveyor prepares a detailed estimate of building in a form of bills of quantity or any other document produced in accordance with Standard System of Measuring Building Works or any other similar system of measuring building works. Detailed estimate provide greater degree of accuracy of cost plan, budget, it also facilitate competitive tender, comparative evaluation of tender price, measurement and pricing strategy, cost control, progress valuation, payment certification and compilation of final accounts and determination of value of works for the calculation of professional fees.
The Cost plan is updated by the Quantity Surveyor at various stages of the project, when detailed and new information are made available in order to provide actual project cost and to reconcile with the project budget. Cost control Cost control is the financial and cost management technique used by Quantity Surveyors from the inception of the project to the close out stage of the project in order to maintain the project budget as determined and approved by the Employer. The primary aim of project cost control is to guide, protect, report, advice and maintain the financial interest of the Employer to avoid exposure to negative or unforseen financial situation and also to advice other Consultants on the financial implications of the design. The process of cost control is administered by Quantity Surveyors in a financial statement and entails the following aspect: Preparation of cash flows - financial projections which highlight the monthly financial commitment of the Employer for planning and allocation of funds. This information is required to be update through different stages of the project when variation, claims and adjustment with financial implication are made. Budget report / cost report regular financial statements prepared by the Quantity Surveyor providing details of the anticipated project cost, based on information made available at the time of the report. The following should be taken into consideration when preparing cost report: I. Value of all contingencies II. Value of contract instruction III. Value of variation order (anticipated, issued, to be issued) IV. Value of provisional sums and PC amounts V. Value of claims by Contractor (anticipated or actual) VI. Value of remeasured work VII. Value of contract price adjustment provisions (CPAP) VIII. If applicable, legal fees, plan submission fees, municipal connect fees IX. Professional fees and disbursement
APC Theory Preparation Principle of cost control Cost control is based on 3 main principles: I. There must be a frame of reference i.e. cost plans II. There must be a method of checking - check against frame of reference III. There must be a means of remedial action
SECTION 2 - FEASIBILITY STUDY Feasibility study is an instrument used to evaluate the success of a development project at the early stage of the property development. The feasibility study of development project consists of 5 main frameworks as follow: 1. The objective of the project 2. Economic feasibility 3. Market feasibility 4. Physical feasibility 5. Financial feasibility The objective of the project is a clear definition of the developers objective in order to determine the success of the potential development. This is translated in form of a strategic planning which considered the overall aspect of the project from planning to occupancy stage. It also considers the economic, market, physical
and financial feasibility framework in which the development project will be implemented. Economic, market, physical feasibility study The economic, market, physical feasibility study comprises of the following factors for consideration: General market characteristic o Competitions o Historical occupancy, rental and sales in the area o Historical average rate of income o Identification of services Site evaluation o Property zoning, size, visibility, permits o Traffic counts, accessibility from street / free way / airport / train, etc o Proximity to guest / work / travel / inhabit o Master area development plan Demand and supply information o Economy of the area o Major employer / government agencies o Business trend o Leisure to travel / nearby tourist attraction / convention, etc Demand and supply analysis o Calculate recent average occupancy / tenancy / sales rate of the other competitors o Calculate composite growth rate of demand from various sources (sale mix, rentals, etc)
APC Theory Preparation o Calculate additional facilitates (i.e. residential, offices, shops or other commercial space) required year by year o Calculate future supply of facilities required Financial feasibility study
The Quantity Surveyor is responsible for the preparation of financial feasibility study which comprises of the following factors: Total capital cost o Building and improvement cost Building and site work Contingencies Escalation (pre and post tender) Consultancy fee Disbursement
o Land cost Land cost Legal cost in connection with transfer Transfer cost
o Development cost Rate and taxes (pre and post contract) Rezoning, demolition, survey Equity / borrowing raising fee Legal / bound registration Plan scrutiny / town planning fee
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Site investigation, geotechnical, survey, traffic & environmental study Agent fee Market research, promotion, advertisement, brochure Administrative cost Development and Management fee
o Finance cost Net Income o Income Rentals, sales, retail, hotel income Ancillary income i.e. parking, advert, service charge, etc Interest on land cost Interest on building and improvement cost Interest on development cost Interest on VAT
o Operating expense Staff emoluments Cleaning material and special maintenance (lift, AC, etc) Disposal services and utilities Insurances Property rates and taxes Administrative charges
Profitability and projections (return on investment) o Return on investment
APC Theory Preparation Initial return Rate of return - return expressed as a percentage per annum of the anticipated capital cost Cash flow analysis
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Net present value - is determined by summation of all cash flow (both inflow, outflow and initial investment) and discounted to present value at the project cost of capital Internal rate of return - rate of interest that equate the present value of future net income with the present value of cost of investment o Residual land value - what a developer can afford to pay for a parcel of land given a specific return on particular investment.
SECTION 3 - CONTRACT ADMINISTRATION Contract administration roles commence at documentation and procurement stage to the close out stage. The Quantity Surveyor administers several duties and functions for the Employer in contract administration for construction projects as follows: 1. 2. 3. 4. 5. 6. 7. Objective and preparation Execution Completion Payments Cost management Termination Dispute
Objective and preparation The Quantity Surveyor is responsible for the compilation of contract document for procurement and preparation for formal signing after the offer (tender) and acceptance.
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The following documents are checked and verified for preparation of contract document: Bills of quantities / lump sum documents Construction guarantee / performance security Insurances Payment guarantees Other related contractual documentation i.e. JBCC 2000 series document or other form of contract. Execution The execution of work commence with the process of site handover to the completion stage. The following activities and functions are performed by the Quantity Surveyor: Provision of copy of signed contract documents Provision of construction information i.e. un-priced bills of quantity Preparation of tender documentation (nominated or selected subcontractor) Acknowledge, verify and if applicable adjust the value of contract instruction / variation orders and report in the monthly cost report Attend and participate in progress and technical meeting Advise on contractors claims and calculation for adjustment of contract value Prepare financial statements to include the followings: o Cash flow (monthly payment due to contractor and consultants fees) o Budget reports / cost report (anticipated final cost, contingency sums, value of contract instruction, provisional sums, value of re-measured works, and value of contract price adjustment provisions). Completion The different stages of completion activate other conditions in relation to performance of obligation under the contract. The Quantity Surveyor performs certain roles during the completion stage of the project as follows in terms of JBCC series 2000: Interim completion - applicable to nominated / selected subcontractor only. The n/s subcontractor liable to activation of penalty clause by the Contractor for later achievement of interim completion.
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Practical completion - the following activities and functions are performed by the Quantity Surveyor: o Deduction of penalty applicable if practical completion achieved and extension of time is not granted o Prepare valuation for issue of payment certificate after issue of practical completion certificate by the Principal Agent o Reduction of security o No penalties applicable after achievement of practical completion o Calculate compensatory interest entitled to the Contractor o Prepare final account within 90 working days Works completion - the following activities and functions are performed by the Quantity Surveyor: o Calculation of compensatory interest, if items listed under works completion list are completed within 30 days o Certificate valuation prepared until issue of final account o Reduction of security Final completion - the following activities and functions are performed by the Quantity Surveyor: o Reduction of security to nil upon achievement of final completion o Finalise CPAP indices in final account o Prepare and agree final account o Issue valuation for final payment certificate after the issue of certificate of final completion by Principal Agent.
Payments Interim payment certificates are issued by the Principal Agent based on the monthly valuation prepared by the Quantity Surveyor and other Consultant Engineers. The interim certificate valuation are prepared regularly during the execution of the project at intervals specified in the contract data (7 days before date of issue of Interim Payment Certificate in terms of JBCC series 2000 PBA). The Quantity Surveyors valuation is a recommendation to the Principal Agent who determines the amount of Interim Payment Certificate in terms of JBCC series 2000 PBA.
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The valuation is prepared and issued to the Principal Agent which includes the following: I. Value of work executed II. Value of material on site III. Value of material off site IV. Value of specialist work V. Value of provisional quantities work VI. Value of preliminaries VII. Value of fluctuation (CPAP) VIII. Defective work IX. Valuation statement X. Recovery statement Value of work executed - the following procedure are adopted by the Quantity Surveyor to determine the value of work executed: o Visit the site to establish the extent of work executed o Record and measure the work executed and take notes o Take note of work executed by the nominated or selected subcontractor o Receive measurement or valuation from Consulting Engineer on the value of work executed and determined. Value of material on site - the following procedure are adopted by the Quantity Surveyor to determine the value of material on site: o Visit the site to establish and verify the material delivered to site and should take note of the following: Not prematurely delivered If prematurely delivered upon instruction of the Principal Agent Stored and protected against loss and damage Covered by insurance in terms of the Condition of Contract. Value of material off site - the following procedure are adopted by the Quantity Surveyor to determine the value of material off site: o Visit the site to establish and verify the material off site o Confirm that advance payment guarantee against material off site is put in place in terms of JBCC series 2000 PBA (guarantee may serve against insurance similar to material on site)
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Value of specialist work - the following procedure are adopted by the Quantity Surveyor to determine the value of specialist work under the control of Consulting Engineer: o Request valuation prepared by the Consulting Engineer in charge of the specialist work o Incorporate the value of specialist work provided by Consulting Engineer into the Quantity Surveyors valuation o Where the Quantity Surveyor is responsible for preparing the bills of quantity for the specialist work, the Quantity Surveyor is responsible to value the work similar to the main contractor as stated above (Valuation of work executed, material on site and material off site). Value of provisional quantities work - the following procedure are adopted by the Quantity Surveyor to determine the value of provisional quantities work: o Re-measured all works measured provisional by the Quantity Surveyor as at when executed and reflected in the valuation. Value of preliminaries - the following procedure are adopted by the Quantity Surveyor to determine the value of preliminaries: o Preliminaries in terms of JBCC series 2000 PBA is valued in accordance with 2 options stated below: Options A - assessment of preliminaries amount prorated to the value of work executed excluding amount of preliminaries, contingency and amount in respect of CPAP Option B assessment of preliminaries amount items of bills of quantity/lump sum document divided into initial establishment, monthly charge and final or disestablishment. Value of fluctuation (Contract Price Adjustment Provisions) - the following procedure are adopted by the Quantity Surveyor to determine the value of fluctuation: o Record of works must be noted and kept when actual work is carried out o Fluctuation to be calculated using applicable base date and cost indices o Every valuation must be accurate as possible and each valuation must be calculated and adjusted in terms of value of work for each period o Adjustment of value of material must be related to the value / cost at the time to tender
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o The cost of variation or new item should be priced in relation to tender base date to avoid error in adjustment. Defective work - the following procedure are adopted by the Quantity Surveyor to determine the defective work: o Quantity Surveyor is required to check with the Principal Agent whether any works or material are considered defective o Value of defective work to be withheld and adjusted from the valuation o Upon rectification of defective work, the Quantity Surveyor should apply CPAP at the time of execution of defective work. Valuation statement - the following procedure are adopted by the Quantity Surveyor to determine the valuation statement: o Detailed statement indicating the formulation of valuation o Details showing amount due to main contractor o Details showing amount due to nominated / selected subcontractor o Detailed statement to the employer and contractor indicating records of all amount certified to date with any adjustments. Recovery statement - the following procedure are adopted by the Quantity Surveyor to determine the recovery statement which deals with expense and losses suffered by employer and contractor which does not affect the contract value and therefore not part of valuation of works: o Detailed statement indicating amount due to the employer i.e. insurances, nominated subcontractor, termination, default by contractor, direct payment to n/s contractor, penalties, default interest, recoupment of advance payment. o Details showing indicating amount due to the contractor i.e. compensatory interest, default interest, advance payment, damages. o Calculate the total amount to be recovered. o Adjust amount previously recovered o Determine the amount of recovery for each period of valuation.
Other payment and certificate responsibilities and function issued by others include the following: I. Payment certificate Principal Agent II. Payment certificate notification Principal Agent III. N/S Recovery statement - Contractor
APC Theory Preparation IV. Payment advice - Contractor
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Cost management Cost management functions are performed by the Quantity Surveyor from the planning stage (inception) to the completion stage (close out) of the project development. Project cost management include but not limited to the following: I. Cost advice and cost planning (discussed in previous section) II. Valuation, payment and certification (discussed in previous section) III. Contractual claims IV. Final account Contractual claims this may arise from defaults of contractual obligation or issue of contract instructions by the Principal Agent. The Quantity Surveyor is responsible for determination of contractual claims both against the Employer or the Contractor. Certain contractual claims are dealt with in recovery statement (discussed in previous section) while the following are determined in respect of contract instructions: o Contract instructions (that has effect on cost determination by Quantity Surveyor) Alteration to design, quality or quantity Omission or addition to work Appointment of n/s subcontractor Adjustment of prime cost of material and goods Budgetary allowance and work executed Contingency and monetary provision in contract sum Work by direct contract o The Quantity Surveyor shall assist the Principal Agent in determining the value of adjustment to contract value as follows: Adjustment to contract value as a result of contract instruction for additional works Adjustment of work identified in the contract as provisional shall be omitted and work shall be measured as executed Determine the items not included in the contract which payment are made by the Contractor
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Determine the value incurred under expense and loss due to fault of Contractor Determine prorated profit and attendance in relation to n/s subcontractor and direct contractor Adjustment of CPAP Adjustment of preliminaries.
Final account the Quantity Surveyor is responsible for the preparation and issue of final account statement. The final account culminates towards the completion stage valuation and certification. Stages of final account include the following in terms of JBCC 2000 PBA: I. Preparation of final account II. Presentation of final account III. Settlement of final account o Preparation of final account Determine the contract value (final account) within 90 days of practical completion Where the project is a government contract, the Quantity Surveyor allow 20 days within the 90 days for the Employer to accept final account The Contractor to accept the final account with 45 days after determination by the Quantity Surveyor
o Presentation of final account The final account is normally presented in bills of quantity format The final account to highlight all contract instruction with reference to contract bills of quantities
o Settlement of final account It is common practice that the Quantity Surveyor send the final account statement to the Contractor for acceptance for settlement of final claim under the contract The final account statement (summary) could be highlighted as follows: I. Contract reference II. Contractor name
APC Theory Preparation III. IV. V. VI. VII. VIII. IX.
19 Employer name Contract sum at tender Total omission at final account Total addition at final account Total VAT Agreed final account Acknowledgment / confirmation statement to be signed in respect of acceptance of full and final settlement of claims under the contract (signed by Contract and Employer including witnesses with date)
Termination Termination is entitlement to both the Employer and Contractor taking into account particular situation in accordance with the Contract. Termination may be optional or remedy for default. Termination by Employer (Contractors Default) the Employer is entail to termination under the following conditions: o Employer notifies the Contractor of default, give notice of cancellation and should the Contractor remain in default after specified numbers of days in accordance with the Contract o The Employer may terminate if the Contractor fail to continue to take and carry out contract instructions. The Quantity Surveyor shall after termination proceed to perform following functions: o Valuation of works for final account o Continue to apply any applicable penalties up to date of termination and thereafter recover damages. Termination by Employer (Loss and Damage) the Employer is entail to termination under the following conditions: o Where substantial portion of completed work is destroyed o The principal Agent issue contract instruction specifying protective measures before cessation of works. The Quantity Surveyor shall after termination proceed to perform following functions: o Valuation of works for final account
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o The Employer shall be responsible for value of material and goods including orders before such termination and make payment o Neither party shall be liable for loss and expense. Termination by Contractor (Employers Default) the Contractor is entail to termination under the following conditions: o Where payment is not made o The Employer fails to provide a payment guarantee o The Employer fails to appoint of Principal Agent or fail to allow Principal Agent to exercise judgement o The Employer fails to effect special insurance or give possession of site o The Principal Agent fails to issue statement / payment certificate o The Principal Agent fails to issue completion certificate The Contractor shall give notice to the Employer and the Principal Agent. Should such default persist beyond the specified number of day in accordance with the Contract, the Contractor may proceed to terminate with any prejudice to rights of Contractor under the Contractor. The Contractor shall continue to be responsible for work until relinquish to the Employer. The Quantity Surveyor shall after termination proceed to perform following functions: o Valuation of works for final account o The Employer shall be responsible for any damages resulting from such termination o The Employer shall be responsible for value of material and goods including orders before such termination and make payment o The Security shall expire and be returned to the Contractor. Termination (Cessation of the works) either party is entail to termination under the following conditions: o Where work cease continuous period of number of days specified in the Contract (in terms of JBCC 2000 PBA for continuous period of 90 days or intermittent 120 days) due to circumstances beyond their control
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The terminating party shall give notice to the other party, such termination shall not prejudice any other rights that either party may have. The following shall be applicable after such termination: o The principal Agent issue contract instruction specifying protective measures before cessation of works while the Contractor may cease to carry out such contract instruction due to reason beyond its control. o The Contractor shall remain responsible until the work is relinquished to the Employer. The Quantity Surveyor shall after termination proceed to perform following functions: o Valuation of works for final account o The Employer shall be responsible for value of material and goods including orders before such termination and make payment o Neither party shall be liable for loss and expense. Dispute Disputes arise due to consequence of default of either party during the execution and performance of contract in which either party seek remedy by means of dispute resolution. The Quantity Surveyor perform significant role in the dispute resolution which comprise of the following: I. Mediation II. Adjudication III. Arbitration IV. Litigation Mediation the Quantity Surveyor may perform the role of a mediator. Mediator is responsible for facilitating the necessary negotiations and resolving the dispute between the parties and arriving at a mutual understanding and agreement. The Mediator is a neutral third person trained to assist disputing parties in reaching a mutually acceptable agreement in resolution of their dispute but does not have any authority to make a binding decision on either party.
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Adjudication this is a process in which both parties agreed to appoint dispute adjudication board (DAB). The Quantity Surveyor is qualified to be appointed as member of the board due to vast knowledge of contract management. The DAB adjudicate the dispute in accordance with the adjudication procedural rules. The DAB may conduct hearing and both parties make presentation and evidence. The DAB shall give a decision which is binding unless overturned by Arbitration.
Arbitration the process is where the party or parties refer the dispute to a third party for settlement. The third party review the dispute and impose a decision (award) which is binding on both parties. The possibility of an award being set aside is of importance for the process. The reasons for which an award can be set aside by court of law are: I. any member of the arbitration tribunal has misconducted himself in relation to his duties as arbitrator II. an arbitration tribunal has committed a gross irregularity in the conduct of the proceedings III. an award has been improperly obtained. The Quantity Surveyor is required to gain additional knowledge or professional recognition to perform the role of arbitrator as required in some Arbitration statute.
Litigation the process of litigation is pursuit in the court of law. The party which claims loss or demand remedy is required to fill a lawsuit against the other party. The Quantity Surveyor could only be admitted to testify as an expert or witness to provide the court of law substantial evidence in make a court judgement which is final and legally binding on the parties.
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SECTION 4 CONTRACTUAL DOCUMENTATION
PROCURMENT,
PROCUDURES
AND
The Quantity Surveyor plays a major role in the planning and process of procurement. Project procurement creates, manages and fulfils contractual obligations and thus forms an integral part of the construction project. The procurement activity is approached in the following steps: I. Establish what to be procured II. Decide procurement strategies III. Calling for tender IV. Evaluate tender V. Acceptance / Award contract VI. Administer contract and confirm compliance Establish what to be procured Detail scope of work to be defined Estimate the financial value of the scope of work Procurement strategies Establish any preferential policy of the Employer Establish contracting and pricing strategy o Contract strategy Design by Employer Engineering, procure and construction (EPC) Construction management Management contract o Pricing strategy Bills of quantities Cost plus (cost reimbursable) Lump sum (activity schedule) Establish targeting strategy (in relation to preferential policy) Establish procurement procedures o Negotiated o Competitive (nominated, pre-qualified, open, quotation and proposal)
APC Theory Preparation o Competitive negotiations (open and restricted) Calling for tender (may be qualified with CIDB standards) Preparing tender document o Prequalification document o Tender document comprise:
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Notice and invitation to tender Tender data (condition of tender) Returnable schedule (forms to be returned) Form of offer and acceptance Contract data (contract, particular conditions, specifications, drawings) Pricing instruction Schedule of quantities (pricing document) Scope of work Location and site information Issue of tender document Tender period (recommended 3 weeks) Amendment to tender document procedures: o Changes to be notified in writing by Quantity Surveyor and acknowledged in writing by tenderer o Changes in respect of bills of quantity should be made by replacement of the affected page and superseded o Where changes in document relate to subcontractor, such should be made at least one week prior to submission date of principal tender o Where changes do not concern subcontractor, such changes should be made at least 4 days prior to submission date of principal tender o Subcontractor should not be advice directly of any changes o Where changes are of material effect and tender can not be notified of required time limit, the submission date should be extended. Receipt of tenders to be as follows: o Submitted tender to be in sealed envelope o Opening of tender should be performed in the presence of tender at the previously notified time, date and place o Tender amount should be read out and wether tender are qualified o Late tender should not be accepted and should be returned unopened.
APC Theory Preparation Evaluate tender Check tender validity o Check whether tender is responsive i.e. price, capacity of signatory o Check if tender is qualified i.e. additional conditions by tender o Check completeness of tender Tender ability o Previous experience o Technical competence Financial capacity o Financial / bank rating o Construction guarantee Tender report o Points to be considered in report:
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Name of project List Consultants List of tenders issued, received and amount Perform risk analysis and comment on validity and financial position of tenderers Rank and compare tenderers with ranking Report on ability and financial position of three (3) lowest tenderers Recommendation
Acceptance / Award of tender All tenderers (both non-successful and successful) to be advise of the acceptance Acceptance to be subject to fulfilment and provision of insurances and construction guarantee or performance security Formal contract to be arranged upon fulfilment of other conditions Documents required to be included for contract signing: o Agreement and condition of contract o Specifications and contract drawings o Bills of quantities (to be checked for arithmetic error and inconsistence, tender amount not subject to any change) o Tender forms, any qualification and notice to tenders o Any other particular conditions
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Administer contract and confirm compliance Administer contract in accordance with conditions of contract Ensure compliance and performance of contractual obligation Completion and handover
SECTION 5 CONTRACT CONDITIONS AND RELATED MATTERS
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The Quantity Surveyor provides advice to the Employer on the choice of form of contract conditions to be utilised on the project with specific objectives and consideration to Employer requirements. The following are the forms of contracts recommended in South Africa: FIDIC 1999 (French acronym for International Federation of Consulting Engineers) GCC 2004 (General Conditions of Contract for Construction) JBCC Series 2000 (Joint Building Contracts Committee) NEC3 family of standard contracts FIDIC 1999 The FIDIC conditions of contract are sets of family of contracts comprising the following: I. Conditions of Contract for Construction (Red Book) This form of contract is applicable to the following: o Design by employer contracting strategy o Bills of quantities pricing strategy II. Conditions of Contract for Plant and Design-Build (Yellow Book) This form of contract is applicable to the following: o Design and build / develop and construct contracting strategy o Lump sum (activities schedule) pricing strategy Conditions of Contract for EPC Turnkey Project (Silver Book) This form of contract is applicable to the following (EPC Engineering, Procurement and Construction): o Design (engineering) by Contractor, procured and construct contracting strategy o Management contract / design and build / develop and construct contracting strategy o Lump sum (activities schedule) pricing strategy
III.
Short Forms of Contract (Green Book) This form of contract is applicable to the following: o Design by employer / design and build / develop and construct contracting strategy o No standard provisions of pricing strategy The FIDIC 1999 Conditions of contract have the following features:
IV.
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The series of FIDIC 1999 contract are recommended for the following: o Red book - Building and Civil engineering contracts o Yellow book - Mechanical and Electrical process plant contracts o Silver book - Major turnkey project including specialised project delivery. The legality and effectiveness of series of FIDIC 1999 contract are as follow: o Red book - The contract become effective when the Employer issues letter of acceptance o Yellow book - The contract become effective when the Employer issues letter of acceptance o Silver book - The contract becomes effective in accordance with Contract Agreement or be worded for alternative of effective upon issue of letter of acceptance. The contract administration of series of FIDIC 1999 contract are as follow: o Red book - Contract administer by the Engineer, who is appointed by the Employer o Yellow book - Contract administer by the Engineer, who is appointed by the Employer o Silver book - Contract administer by the Employer, he may also appoint an Employers Representative who endeavours to reach agreement with he Contractor on each claim. The payment under the FIDIC 1999 contract are determined as follow: o Red book - The interim and final payments are certified by Engineer, determined by measurement (valuation) o Yellow book - The interim and final payment are certified by Engineer with reference to schedule of payments o Silver book - The interim and final payments are made without certification, determined by reference to schedule of payments. The series of FIDIC 1999 contract allocate risk as follow: o Red book - The condition allocate risk between the parties on a fair and equitable basis taking into consideration each party insurability, ability to foresee and mitigate circumstances relating to the risk o Yellow book - The condition allocate risk between the parties on a fair and equitable basis taking into consideration each party insurability, ability to foresee and mitigate circumstances relating to the risk
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o Silver book - More risk are allocated to the Contractor, due to his ability to review data and evaluate such risk. Other applicable features of FIDIC 1999 set of contract are as follows: Limit of liability - Loss of revenue, loss of profit, indirect and consequential loss are capped to specified amount as indicated in particular conditions Subcontracting - Main Contractor is liable as if he has not subcontract. Allow provision for Nominated Subcontractor. No back-back condition of subcontract Claim procedures - If the Contractor consider himself entitled to any claim under the contract, such claim should be notified to the Engineer with 28 working days, after which no further liability shall be accepted by the Employer Payment - The Engineer certify payment within 28 days of receiving a statement from the Contractor, and the Employer pay within 28 days after issue of interim payment certificate by Engineer (total of 56 days) Dispute management - DAB (Dispute Adjudication Board) of single or 3 persons may be appointed. If a party notify of dissatisfactory of DAB, the agreement provided for arbitration under ICC (international chamber of commerce) rules Short form of contract - recommended for small capital value project or with short duration that is needed for specialist subcontracts. GCC 2004 The South African Institute of Civil Engineering developed, published and maintained the six edition of General Condition of Contract for Civil Engineering work and it comprise of the following form of contract: I. General Condition of Contract for Civil Engineering work - This form of contract is for the following: o Design by employer contracting strategy and may also be used for design and build strategy o Lump sum (activities schedule) / bills of quantities pricing strategy Other applicable features of GCC 2004 contract are as follows: Contract is suitable for both building and engineering construction works Contract - the tender and contract are separate Contract administration - The Engineer administer the Contract Structure - Only one set and no back to back contracting agreement
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Limit of liability - Loss of revenue, loss of profit, indirect and consequential loss are to be address as an additional condition Direct loss unlimited for defect to the extent of Contractors responsibility Financial risk - The condition allocate risk between the parties on a fair and equitable basis taking into consideration each party insurability, ability to foresee and mitigate circumstances relating to the risk Subcontracting - Main Contractor is liable as if he has not subcontract. Provision is made for appointment of Subcontractor in consultation with the Employer Claim procedures - If the Contractor consider himself entitled to any claim under the contract, such claim should be notified to the Engineer with 28 working days, after which no further liability shall be accepted by the Employer Dispute management - All dispute referred to mediator or adjudicator, if either party is dissatisfied it is referred to arbitration or litigation.
JBCC SERIES 2000 The JBCC series 2000 contract document is supported by professional and contracting bodies in the South African building industry. The documents comprise of the following: I. JBCC PBA and N/S Subcontract Agreement - This form of contract is for the following: o Design by employer contracting strategy o Lump sum (activities schedule) / bills of quantities pricing strategy o Nominated / selected subcontract agreement (back to back subcontract) between the Contractor and Subcontractor. II. JBCC Minor Works Agreement - This form of contract is for the following: o Design by employer contracting strategy o Lump sum (activities schedule) / bills of quantities pricing strategy.
The JBCC series 2000 Conditions of contract have the following features: The JBCC series 2000 are recommended for the following: o Suitable for building works where designed and administered by agents of the Employer and co-ordinated by a Principal Agent. Contract - Tender included as part of the Contract Contract administration - The Principal Agent is given full authority and obligation to act on behalf of the Employer
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Structure - Separate document with common clauses repeated in each document Limit of liability - Loss of revenue, loss of profit, indirect and consequential loss are to be address as an additional condition Director loss unlimited for defect to the extent of Contractors responsibility, uncertain for others Financial risk - The condition allocate risk between the parties on a fair and equitable basis taking into consideration each party insurability, ability to foresee and mitigate circumstances relating to the risk Subcontracting - Provisions are made for nominated and subcontractor. The Main Contractor is liable as if he has not subcontract where the subcontractor is selected. Back to back agreement facilitates appointment of subcontractor. Claim procedures - Provision made for adjustment of contract value and state of practical completion. If the Contractor consider himself entitled to any claim under the contract, such claim should be notified between the specified numbers of days in the contract otherwise no compensation shall be made Dispute management - In State all dispute referred to litigation. In nonstate contract all dispute are referred to mediator or arbitration Minor work agreement - Commonly used to carry our small work of direct contract for specialised work. Mainly used where contractor is a small to medium enterprise and the Employer carries major liabilities and risk.
NEC3 The NEC3 family standard of contract is set of contract for building and engineering construction project. It also covers professional services. The documents comprise of the following: I. NEC3 Engineering and Construction Contract (ECC2) - This form of contract is for the following: o Construction management contracting strategy o Design by employer contracting strategy o Management contract contracting strategy o Design and build contracting strategy o Develop and construct contracting strategy o Lump sum (activities schedule) pricing strategy o Bills of quantities pricing strategy o Cost plus (cost reimbursable)pricing strategy o Two (2) standard subcontracts agreement.
APC Theory Preparation II.
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NEC3 Engineering and Construction Short Contract (ECSC) - This form of contract is for the following: o Design by employer contracting strategy o Design and build contracting strategy o Develop and construct contracting strategy o Lump sum (activities schedule) pricing strategy o Bills of quantities pricing strategy
The ECC (Engineering and Construction Contract) incorporate the following features: Conditions of contract Risk management Process management (supply chain management) Project management.
SECTION 6 SACQSP TARIFF OF PROFESSIONAL FEES The SACQSP Tariff of Professional fee is published in Government Gazette in terms of section 34(2) of the Quantity Surveying Profession Act 2000, (Act 49 of 2000). These fees are determined from time to by the South African Council for Quantity Surveying Profession.
APC Theory Preparation Quantity Surveyors are required to determine their fees based recommended tariff of professional fee in respect of services rendered. on
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The following services are rendered by Quantity Surveyor as determined in SACQP tariff of fess: Building works o Alteration works o Building works o Redecoration works Engineering works o Civil engineering works o Electrical engineering works o Mechanical engineering works o Process engineering works Management services o Principal agency o Principal consultancy o Project monitoring o Quality inspection Supplementary services o Cost norms o Locational bills of quantities o Payment valuation o Target procurement o Valuation of property o Financial viability studies o Tenant requirement o Value management o Dispute resolution Quantity surveyors charges are based on the following: I. Basic fees II. Time charge Basic fees to include primary charges and marginal rate the basic fee are determined by appropriate percentages for services rendered.
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Time charge the time charges are based on rate per hour of service render by principals, registered persons and salary personnel on the service rendered. The rate charge is determined by the years of experience of principals, registered persons and gross remuneration of salary personnel.
In addition to fees charged, Quantity Surveyor charge for additional disbursement for the following expenses incurred during the provision of services: Printing, plotting, copying and other documentations Accommodation, subsistence and travelling allowance Other expense to include telecommunication, etc Quantity Surveyors are paid based on rendered invoices for a fee or part therefore and disbursement for stages of works or equivalent. The following fees: I. Stage 1 II. Stage 2 III. Stage 3 IV. Stage 4 V. Stage 5 VI. Stage 6 are stages of works as outlined in the SACQP tariffs of professional Inception Concept and viability Design development Documentation and procurement Construction Close-out.
The following are examples of fee account calculation: I. Contract with single category (bills of quantities) II. Contract with single category (simplified bills of quantities) III. Contract with single category (provisional bills of quantities) IV. Contract with single category (bills of quantities: engineering service) V. Management service VI. Supplementary services VII. Schedule of materials VIII. Multiple category contract - with alteration IX. Replication contract (performance bases bills of quantity) X. Replication contract (multiple procurement) XI. Contract with bills of quantities (excessive variation on value of work) XII. Contract with bills of quantities (excessive variation on construction period).
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APC - Theory Preparation

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APC Theory Preparation

PRIVATE SECTOR QUANTITY SURVEYING CONSULTANT ROLES AND FUNCTIONS