Construction Handbook

Update 15 published December 2003Update 14 published September 2003Update 13 published May 2003Update 12 published January 2003Update 11 published October 2002Update 10 published August 2002Update 9 published December 2001Update 8 published October 2001Update 7 published July 2001Update 6 published December 2000Update 5 published October 2000Update 4 published May 2000Update 3 published December 1999Update 2 published October 1999Update 1 published April 1999

Please note: References to the masculine include, where appropriate, the feminine.

Extracts from Parry’s Valuation and Conversion Tables, A W Davidson (1989),(Estates Gazette) reproduced by permission of the College of Estate Managementwhich owns the copyright.

Appendix A, Section 2.3 is reproduced from the Building Cost Information Service publication,Standard Form of Cost Analysis: Principles, Instructions and Definitions (1969).

Published by RICS Business Services Limiteda wholly owned subsidiary ofThe Royal Institution of Chartered Surveyorsunder the RICS Books imprintSurveyor CourtWestwood Business ParkCoventry CV4 8JEUK

No responsibility for loss occasioned to any person acting or refraining fromaction as a result of the material included in this publication can be accepted by theauthor or publisher.

ISBN 0 85406 865 1

© RICS Business Services Limited (RBS) December 2003. Copyright in all or partof this publication rests with RBS, and save by prior consent of RBS, no part or partsshall be reproduced by any means electronic, mechanical, photocopying, recording orotherwise, now known or to be devised.

Typeset and printed by Q3 Print Project Management Ltd, Loughborough.

1998 FOREWORD

Knowledge is of two kinds: we know a subject ourselves, or we knowwhere we can find information upon it.

Samuel Johnson (1709–1784)

The fact that our profession serves a changing world increases the need forit to rely on well thought-out and reliable practices and procedures. Eventsmove at an ever-increasing pace, imposing a requirement for quickerresponse times. Modern communication methods such as facsimile and nowe-mail result in the need for information to be available almost instantly.This is made more difficult by an industry growing in complexity and whichis subject to increasing customer expectations in terms of service andquality.

The RICS has published this Surveyors’ Construction Handbook to helpsurveyors meet these needs. It is intended to become an important source ofreliable information and guidance to all Chartered Surveyors who practise inconstruction. Much of the excellent information produced by the divisionsin the past has now been updated for inclusion. Other material not yetrevised will be added. The whole will be regularly reviewed and updated asnecessary. RICS practice panels are continuing to produce information forinclusion to make it a useful construction reference document.

We hope that this Handbook will become an invaluable aid to yourday-to-day activities.

Christopher Powell, FRICS

PRESIDENT, QUANTITY SURVEYORS DIVISION, 1997–98

Trevor Mole, FRICS

PRESIDENT, BUILDING SURVEYORS DIVISION, 1997–98

ACKNOWLEDGEMENTS

Professor Roy Morledge, Professor of Construction Procurement at TheNottingham Trent University, for contributing the text of Part 3, Section 1.

Major D.R. Bassett, Royal Engineers, for his contribution to the researchunderpinning the construction time charts in Part 3, Section 1; Central Unit forProcurement, HM Treasury (now Office for Government Commerce), forpermission to use CUP guides extensively in the drafting of Part 1, Section 1and Part 3, Section 1.

Alan Turner, JP FRICS ACIArb, author of Building Procurement, forpermission to use a number of the diagrams from his text in Part 3, Section 1.

The Surveyors’ Construction Handbook Contents (12/03) Page 1

CONTENTS

Foreword

Acknowledgements

List of Abbreviations

Introduction 1A Aim and Scope of this Handbook 1B Arrangement of Content 1C Status of Content 2D Currency of References 3E Invitation 3F Subscription Service 3

Part 1: The ClientSection 1.1: The Client’s Requirements and Roles 11.1.1 Establishing the Client’s Objectives 11.1.2 The Role for Independent Advice 31.1.3 Project Brief 31.1.4 The Client’s Role 41.1.5 The Client’s Responsibilities 61.1.6 Appointment of Project Manager (where appropriate) 81.1.7 Appointment of Consultants 81.1.8 Appointment of Constructors 9Appendix A: Further Reading 1

Section 1.2: Value Engineering 1Introduction 1

1.2.1 Why Value Engineering? 21.2.2 Applicability 21.2.3 At What Stage Should Value Engineering be Carried Out? 31.2.4 Who Should Carry Out Value Engineering? 41.2.5 How Long Should It Last? 51.2.6 Preparing for a Value Engineering Workshop 51.2.7 Functional Analysis of Design Relative to the Client’s

Requirements 51.2.8 Pricing the FAST Diagram 81.2.9 Presenting a Design Solution to a Value Engineering Workshop 81.2.10 The Workshop 81.2.11 Assessing the Value of the Workshop 91.2.12 Implementing the Results 101.2.13 Feedback from Post-Occupancy Evaluation 10Appendix A: Health Centre Value Tree 1Appendix B: Typical Example of a Value Engineering Process 1Appendix C: Further Reading 1

Page 2 Contents (12/03) The Surveyors’ Construction Handbook

Part 2: Construction Design and Economics

Section 2.1: Pre-contract Cost Planning and Cost Management 1Introduction 1

2.1.1 Pre-contract Cost Planning and Cost Management 22.1.2 Preliminary Cost Studies and Feasibility Studies 42.1.3 Budget 42.1.4 The Cost Plan at Outline Proposals Stage 82.1.5 The Cost Plan at Scheme Design Stage 112.1.6 Cost Checking 132.1.7 Action after Receipt of Tenders 14Appendix A: Sources of Cost Information 1Appendix B: Format of Budget and Cost Plans 1Appendix C: Element Unit Quantities Generation for Hypothetical

Buildings 1Appendix D: Further Reading 1

Section 2.2: Life Cycle Costing 1Introduction 1

2.2.1 The Client Context 12.2.2 The Life Cycle Costing Calculation 52.2.3 Tax Allowances, Incentives and Business Rates 102.2.4 Data Sources 142.2.5 Worked Examples 15Appendix A: Residual Values 1Appendix B: Obsolescence 1Appendix C: Costs And Values 1Appendix D: Glossary of Terms for Taxation 1Appendix E: Examples of Items of Expenditure Likely to Attract

Taxation Allowances 1Appendix F: Further Reading 1

Section 2.3: Elements for Buildings 1Introduction 1

2.3.1 Elements 12.3.2 Elemental Cost Analysis 12.3.3 Other Uses 2Appendix A: BCIS Standard Elements 1

Section 2.4: Design and Build - Guidance for Employer’s Agents 1Introduction 1

2.4.1 Background 22.4.2 Contract Documentation 32.4.3 Additional Services 32.4.4 Employer’s Requirements and Contractor’s Proposals

(including contract sum analysis) 52.4.5 Design and Build Variants 62.4.6 Novation 8Appendix A: Potential Services Associated with the Role

of Employer’s Agent 1Appendix B: Employer’s Requirements/Contractor’s Proposal Checklist 1


Section 2.5: The Chartered Surveyor as Lead Consultant 1Introduction 1

2.5.1 Definitions: The Difference Between a Project Manager andLead Consultant 1

2.5.2 Benefits of Appointing a Chartered Surveyor as Lead Consultant 22.5.3 Issues to Consider before Undertaking the Role 32.5.4 Schedule of Lead Consultant Duties 3

Section 2.6 Defining Sustainable Construction 1Introduction 1

2.6.1 Technology Swaps 22.6.2 How Can the Environment and Sustainability be Valued? 32.6.3 How Does This Effect the Construction Industry? 42.6.4 Green Building Materials 72.6.5 Whole Building Sustainability 82.6.6 The Government Line 92.6.7 What Might the Future Hold 11Appendix A: Embodied Energy Content of Building Material 1Appendix B: Useful Addresses 1

Part 3: Construction Planning and ProcurementSection 3.1: Developing an Appropriate Building Procurement Strategy 1

Introduction 13.1.1 The Client’s Role 23.1.2 Procurement Strategy 123.1.3 Selection of Most Appropriate Procurement Strategy 253.1.4 Implementation 29Appendix A: Procurement Options 1

Section 3.2: Building Services Procurement 1Introduction 1

3.2.1 Appointing the Building Services Designer 33.2.2 Design Coordination 113.2.3 Appointing a Building Services Contractor 193.2.4 Tender Documents 34Appendix A: Typical Example 1

Part 4: Construction Administration and ManagementSection 4.1: The Problems of Practical Completion 1

Introduction 14.1.1 What Happens in Practice 14.1.2 Standard Form Approaches 34.1.3 Effects of Practical Completion 134.1.4 Methods for Dealing with Practical Completion 144.1.5 Definitions 164.1.6 Subsidiary Issues 20Appendix A: General Objectives to be Achieved at Practical

Completion for Small to Medium-sized Building Projects 1Appendix B: Table of Cases 1Appendix C: Further Reading 1

Page 4 Contents (12/03) The Surveyors’ Construction Handbook

Section 4.2: Ascertaining the Amount of Loss andExpense Incurred in Building Projects 1

Introduction 14.2.1 General Principles 14.2.2 Definitions 44.2.3 Entitlement 44.2.4 Ascertainment 74.2.5 Admissible Items 94.2.6 Inadmissible Items 13Appendix A: Ascertaining the Cost of Running a Site 1Appendix B: Disruption 1Appendix C: Ascertaining the Cost of Head Office Overheads 1Appendix D: Checklist of Items for which Loss and/or Expense are

Allowed 1Appendix E: Checklist of Steps Required when Considering

Submissions by Contractor 1Appendix F: Further Reading 1

Section 4.3: The Management of Risk 1Introduction 1

4.3.1 Definitions 24.3.2 The Rationale for Risk Management in the Construction Process 24.3.3 The Risk Management Process 54.3.4 Summary 14Appendix A: Further Reading 1

Section 4.4: Valuations for Interim Certificates 1Introduction 1

4.4.1 Valuations 14.4.2 Assumptions 24.4.3 Valuation Under a JCT Contract: Background 34.4.4 Recommended Action at the Start of a Contract 44.4.5 Communications 54.4.6 Approach 64.4.7 Content of a Valuation 84.4.8 Administration 154.4.9 Special Situations 164.4.10 Other Contract Terms (relative to valuations) 174.4.11 Valuations Under Other Forms of Contract 18Appendix A: Further Reading 1Appendix B: JCT Definition of ‘Reasonable Proof’ 1Appendix C: Example of Priced Activity Schedule 1

Section 4.5: Extension of Time 1Introduction 1

4.5.1 Extension of Time Clauses 24.5.2 Assumptions 24.5.3 Extension of Time Under a JCT Contract 34.5.4 Notice by the Contractor of Delay to Progress 44.5.5 The Award of an Extension of Time during the Contract

Period and Before the Completion Date 54.5.6 The Award of an Extension of Time after the Completion Date 64.5.7 Relevant Events 74.5.8 Concurrent Delays 124.5.9 Consequential Entitlement 13


4.5.10 Administration 134.5.11 Extension of Time under an ICE Contract 144.5.12 Extension of Time under a GC Works Contract 14Appendix A: Further Reading 1

Part 5: Additional Guidance and InformationSection 5.1: Surveying Safely 1

Section 5.2: Construction (Design and Management) Information 15.2.1 Schedule of Sources of Useful CDM Information 2

Section 5.3: Built environment group roles and information 1

Section 5.4: Building Cost Information Service 15.4.3 BCIS Online 15.4.4 Other BCIS Publications and Services 25.4.5 Further details 4

Section 5.5: Building Occupancy Cost Information (BMI) 15.5.2 BMI Quarterly Cost Briefing 15.5.3 Building Maintenance Price Book 15.5.4 Special Reports for Benchmarking 25.5.5 News, Digests and Reports 2

Section 5.6: Electronic document storage – legal admissibility 1Introduction 1

5.6.1 Code of Practice – DISC PD 0008: 1999 25.6.2 Weight of evidence and document destruction 35.6.3 Authenticity 35.6.4 Photocopies, microfilm and image processing 45.6.5 Document storage 45.6.6 Storage and access procedures 55.6.7 Format of the Code of Practice 65.6.8 Conclusion 20Appendix A: Specimen form for recording scanning information 1Appendix B: Specimen form for recording retrieval 1Appendix C: References 1

Index 1

The Surveyors’ Construction Handbook Abbreviations (10/02) Page 1

LIST OF ABBREVIATIONS

ABE Association of Building EngineersABI Association of British InsurersACA Association of Consultant ArchitectsACE Association of Consulting EngineersAQL Acceptable quality levelBCIS Building Cost Information ServiceBEC Building Employers’ ConfederationBMI Building Maintenance InformationBRE Building Research EstablishmentBRECSU Building Research Energy Conservation Support UnitBREEAM Building Research Establishment Environmental

Assessment MethodBSI Building Standards’ InstitutionBSRIA Building Services Research and Information AssociationBWIC Builder’s Work in ConnectionCA Contract AdministratorCAWS Common Arrangement of Works Section for Building

WorksCDM Construction (Design and Management)CD-R Compact disc recordableCECA Civil Engineering Contractors’ AssociationCIB Construction Industry BoardCIBSE Chartered Institution of Building Services EngineersCIC Construction Industry CouncilCIRIA Construction Industry Research and Information

AssociationCITES Control in Trade of Endangered SpeciesCCT Compulsory Competitive TenderingCSM Chartered Surveyors MonthlyDBFO Design Build Fund and OperateDoE Department of the Environment (now known as the

DETR)DETR Department of the Environment, Transport and the

Regions (formerly the DoE)DMS Document Management SystemDOM Domestic Sub-ContractEC European CommissionEU European UnionFAST Functional Analysis Systems TechniqueFCEC Federation of Civil Engineering ContractorsGNP Gross National ProductHBF House Builders’ FederationHMSO Her Majesty’s Stationery Office (now known as

The Stationery Office)HSE Health and Safety ExecutiveIChemE Institution of Chemical EngineersICE Institution of Civil EngineersIDMA Information and Document Management Association

Page 2 Abbreviations (10/02) The Surveyors’ Construction Handbook

IFC Intermediage Form of ContractJCT Joint Contracts TribunalLCC Life Cycle CostingLQ Limiting qualityM & E Mechanical and ElectricalMERA Multiple Estimate Risk AnaylsisMW Minor WorksNEC New Engineering ContractNEDO National Economics Development OfficeNJCC National Joint Consultative Committee for BuildingNSC Nominated Sub-ContractOMR Optical Mark ReadingPFI Private Finance InitiativePSA Property Services AgencyRIBA Royal Institute of British ArchitectsRICS Royal Institution of Chartered SurveyorsVAT Value Added TaxWCD With Contractor’s DesignWORM Write-Once-Read-ManyWRC Water Research Centre

INTRODUCTION

The Surveyors’ Construction Handbook Introduction (4/98) Effective from 1/6/98 Page 1

INTRODUCTION

A Aim and Scope of this Handbook

A1 The aim of this Handbook is to help both building and quantity surveyors toprovide construction-related professional services effectively and efficiently.It seeks to achieve this by providing guidance which reflects what is oftengood custom and practice, and relevant information (including references toother useful material). It should be appreciated that this Handbook does notattempt comprehensive coverage of necessary or good practice. TheHandbook is addressed to surveyors providing services to clients (as defined),not surveyors undertaking the role of the client’s representative who givesinstructions to surveyors on behalf of the Client.

A2 ‘Construction’ in this Handbook means new construction, conversion,refurbishment works and alterations to the form of buildings, and also civilengineering works. The contents of this Handbook apply across the completerange of this definition unless otherwise stated. So ‘construction’ does notembrace building surveys or building maintenance.

A3 ‘Client’ in this Handbook is used to include companies and their Directors orOfficers, Trusts and their Trustees, partners, managers and employees whomay instruct a surveyor.

A4 Throughout the Handbook, it is assumed that possession and necessary accessto the site are available and, in principle, the rights to construct thedevelopment and use the buildings when constructed. The Handbook does notcover project management services, obtaining planning permission andbuilding regulation approvals, or dispute resolution.

A5 The document is drafted on the basis of UK law and practice, although muchof it is relevant to practice elsewhere.

B Arrangement of Content

B1 After sets of Definitions and Abbreviations which apply throughout, theHandbook is arranged in five Parts. The first four Parts represent sequentialphases of the construction process. The last Part, Part 5, provides AdditionalGuidance and Information. Each part is followed by Further Reading, towhich the numbered cross references in the Parts apply.

B2 The first four Parts are as follows:

Part 1: The Client seeks to help surveyors to work with clients. It discusses theestablishment of their construction objectives and constraints, leading to the

INTRODUCTION

Page 2 Introduction (4/98) Effective from 1/6/98 The Surveyors’ Construction Handbook

development of construction briefs. It defines the client’s roles during theconstruction process, and comments on the engagement of professionalsinvolved in the construction process.

Part 2: Construction Design and Economics covers development of the designconcept, feasibility studies, design and economics (including life-cyclecosting, risk assessment, and cost-value relationships), and confirmation ofthe final design proposal.

Part 3 relates to Construction Planning and Procurement, i.e. to the time theconstruction contract is placed.

Part 4 covers Construction Administration and Management, i.e. allpost-contract matters.

Any Appendices are situated at the end of each Part.

B3 An Index follows Part 5.

C Status of Content

C1 For convenience, Guidance and Information is integrated. Each paragraph isprefixed with a or an to indicate its status.

C2 ‘Guidance’, as the word implies advice to Members of the RICS on aspects oftheir profession. Where recommended for specific professional tasks,procedures are intended to embody ‘best practice’, i.e. procedures which inthe opinion of the RICS meet a high standard of professional competence.

Members are not required to follow the advice and recommendationscontained in such paragraphs. They should, however, note the followingpoints.

Should an allegation of professional negligence be made against a surveyor,the Court is likely to take account of the contents of any relevant guidancenotes published by the RICS in deciding whether or not the surveyor had actedwith reasonable competence.

In the opinion of the RICS, a Member conforming to the practicesrecommended in this Note should have at least a partial defence to anallegation of negligence by virtue of having followed those practices.However, Members have the responsibility of deciding when it is appropriateto follow the guidance. If the guidance has been followed in an appropriatecase, the Member will not necessarily be exonerated merely because therecommendations were found in RICS Guidance.

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The Surveyors’ Construction Handbook Introduction (revised 10/01) Effective from 1/12/01 Page 3

On the other hand, it does not follow that a Member will be adjudgednegligent if he has not followed the practices recommended in this Handbook.It is the responsibility of each individual surveyor to decide on the appropriateprocedure to follow in any professional task. However, where Membersdepart from any practices recommended in this Handbook, they should do soonly for good reason. In the event of litigation, the Court may require them toexplain why they decided not to adopt a recommended practice.

In addition, Guidance Notes are relevant to professional competence in thateach surveyor should be up to date and should have informed himself ofGuidance Notes within a reasonable time of their promulgation.

C3 Material classified as ‘information’ is intended to provide information andexplanations to Members of the RICS on specific topics of relevance to theprofession. The function is not to recommend or advise on professionalprocedures to be followed by surveyors. It is again, however, relevant toprofessional competence to the extent that a surveyor should be up to date andshould have informed himself of such information within a reasonable time ofits promulgation.

Members should note that if an allegation of professional negligence is madeagainst a surveyor, the Court is likely to take account of the contents of anyrelevant information published by the RICS in deciding whether or not thesurveyor has acted with reasonable competence.

D Currency of References

The cases cited and the editions quoted were up-to-date at the time of writing.However, readers should check current rulings and additions.

E Invitation

RICS Books would welcome comments upon and suggestions for additionsand amendments to this Handbook. They should be provided in writing toRICS Books Publishing, Surveyor Court, Westwood Business Park,Coventry, CV4 8JE.

F Subscription Service

Any change of address should be notified to the address appearing below:

The Surveyors’ Construction Handbook Subscription ServiceRICS BooksSurveyor CourtWestwood Business ParkCoventry CV4 8JETel: 020 7222 7000 ext 647

PART 1, SECTION 1

The Surveyors’ Construction Handbook Part 1, Section 1 (01/03) Effective from 1/3/03 Page 1

PART ONE: THE CLIENT

SECTION 1: THE CLIENT’S REQUIREMENTS ANDROLES

1.1.1 Establishing the Client’s Objectives

1.1.1.1 Client satisfaction will be maximised if the client’s objectives as establishedin the business case for the project are met. The surveyor should be able toassist with the development of the business case and the prioritisation ofproject objectives (see 3.1.1.6 and 3.1.1.9).

1.1.1.2 The type of client will affect the criteria which must be met if the client is tobe satisfied with the project.

1.1.1.3 Owner occupiers are usually primarily concerned with buildingperformance in terms of functionality and costs in use. They may also beconcerned with image and building style. In this sense, value for money is akey criterion. Developers, on the other hand, may be driven by marketconditions which enable the project to be let or sold at maximumcommercial advantage. They may be predominantly concerned with speedrather than performance.

1.1.1.4 This is not to say that owner occupiers are unconcerned about time. Indeed,certainty of completion date may be a key issue. Nor is it fair to suggest thatdevelopers are unconcerned about building performance or cost. There aremarket conditions where both of these issues may become important.

1.1.1.5 However, the client’s purpose in initiating a building project is usuallydriven by the need for the project as a functional unit or as an investment.There will usually be particular criteria for achievement which are critical orimportant to each particular client. Possible objectives are as follows:

(a) Cost-related• minimise capital cost• maximise capital cost/value ratio• maximise capital cost/worth to client ratio• achieve necessary income cash flow profile• minimise management costs• minimise maintenance and insurance costs• minimise tax liability• respect capital cost constraint• be energy efficient.

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(b) Marketability• maximise prompt or future disposal (freehold or otherwise).

(c) Use-related• optimise operational requirements of intended occupier(s)• provide greatest flexibility in potential uses• reflect intended occupier’s requirements/preferences/ability to afford• meet social/management/occupier’s special needs (e.g. disabled).

(d) Environmental• minimise health and safety risks• choose materials which reflect sustainability• aesthetically please (e.g. impression on occupier’s customers)• minimise any alterations to specific features• reflect planning authority’s brief/policies• minimise potential opposition• reflect corporate style or personal preferences of proposed

occupier/employees• maximise comfort of occupants• minimise inconvenience to others during construction.

(e) Timing• construct within a defined period• minimise risks of delay during construction.

1.1.1.6 The importance of each of these criteria will be relative to the objectives of theclient, the business case for the project and to the extent to which he/she isable to cope with risk (see 3.1.2.9). It is important that the client seekinvestment appraisal advice in respect of the project and that the appraisalconsiders ‘what if’ questions to ensure that the impact of changes of keycomponents in the appraisal is clearly understood. A chartered surveyor willbe able to assist the client in these matters. However, the giving of advice onsome of the requirements listed above is, of course, outside the competence ofthe surveyor. Where such a particular requirement is important to the clientand outside the client’s expertise, the client should be advised to seek otherprofessional advice.

1.1.1.7 Many construction projects suffer from poor definition due to inadequate timeand thought being given at an early stage1. This is often because there is asense of urgency fuelled by the desire for an immediate solution. Investingtime at the beginning of a project in developing a complete definition takingaccount of all the requirements will reduce the likelihood of changes later. Thelater that changes are made in a project, the more they are likely to cost in bothdirect and knock-on effects (see 3.1.4.14 and 3.1.2.14(f) & (g)).

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1 Construction Industry Board, Briefing the Team, Thomas Telford Publishing, London, 1997.

PART 1, SECTION 1


1.1.2 The Role for Independent Advice

1.1.2.1 With the potential for the involvement of many consultants and/orconstructors in a project and the range of contracts associated with theiremployment, all but the most experienced client may need advice. The adviceoffered should be informed and unbiased and it should be based upon a logicalanalysis of the needs of the client, the type and character of the project and therange of appropriate strategies available.

1.1.2.2 This advice can be offered by a member of the client’s design team or can bea separate function. It may be more difficult for a design team member toremain impartial in carrying out this process and it is recommended that anyexpert retained should be solely for this purpose. This function can beidentified as the role of the principal adviser and may encompass:

• Assistance in preparing the business case (the business case)underpinning the project

• Identifying the needs and requirements (briefing)of the client

• Defining the project (project definition)• Matching needs and project characteristics (procurement strategy)

with appropriate procurement strategy• Facilitating the associated selection and (implementation)

contractual processes and policies

1.1.2.3 Possible sources for the appointment of independent advisers include suitablyqualified and experienced construction professionals such as charteredsurveyors.

1.1.3 Project Brief

1.1.3.1 The importance of a clear project brief to the successful completion of theproject and in ensuring appropriate performance of the project cannot be overemphasised. The inexperienced client will need professional help in thepreparation of the brief. The project brief is a comprehensive statement of theclient’s requirements for the project based on close consultation between theclient and users and based upon the parameters established (see 3.1.1.10 and3.1.1.12).

The project brief may include:

(a) project description;

(b) how it fits into the client’s corporate plan (e.g. it may be part of a largerplanned development);

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(c) number of people that are to occupy the building, together with their spacerequirements;

(d) schedule of accommodation and quality of internal environment;

(e) standards;

(f) equipment and special services/requirements;

(g) when the building needs to be available for use;

(h) quality and cost limitations;

(i) life span;

(j) site; and

(k) statutory controls.

1.1.3.2 This is the initial control document for the early planning of the project;without it, little constructive work can be done. If all the information requiredfor the project brief is not readily available, it is better to issue it in anincomplete form and to update it progressively1.

1.1.4 The Client’s Role

1.1.4.1 This section briefly explains the client’s responsibilities through the life of aconstruction project. In carrying out their role, clients, depending on theirknowledge and expertise, will need help from their professional advisers,project managers and other consultants, whose roles are also explained in thishandbook. This section aims to outline the client’s task in setting policy andformulating strategy, and explains how it should be carried out.

1.1.4.2 The success of any project will depend upon the motivation given by theclient. Experienced clients may take a leading role in the procurement process;less experienced clients will need to seek advice or to appoint advisers toassist them. Where projects are of a large or complex nature it may beadvisable to consider the appointment of a project manager.

1.1.4.3 Effective management is vital in any construction project. The client’s primerole is to establish a structure for the management of the project and to makesure that it works. A crucial part of any effective management structure isefficient communication. To perform effectively, all parties must have timely

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access to all information relevant to their tasks and the project’s objectives andstatus (see 3.1.4.11).

1.1.4.4 The client has substantial influence on the design of the project in respect bothof functional efficiency and of overall appearance, and, therefore, has to takeparticular care to:

(a) understand fully the purpose of the building; ensure that the requirementsof the users are accommodated; and communicate those requirements to thedesigners (see 3.1.1.10); and

(b) appoint designers with proven ability in designing buildings which satisfyusers’ requirements and harmonise with and contribute to the quality of thebuilt environment. The selection of the right people is emphasised as a key tosuccess (see 3.1.4.8).

1.1.4.5 The accompanying figure indicates the activities in the procurement processand when activities are usually performed. As can be seen, the client’s role issignificant, with a wide range of activities to perform and implement beforeboth the design and the construction processes. In the performance of theseactivities, the client can expect to be supported and advised by his/her adviseror (if appointed) the project manager. More detail for each of these activitiescan be found in the section of this handbook indicated in brackets in thefigure.

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1.1.5 The Client’s Responsibilities

1.1.5.1 The client should set policy and outline strategy including:

(a) setting and prioritising the project objectives within the business plan;

(b) planing to meet the objectives (the pre-design phase);

(c) implementing the plans (the pre-construction phase);

(d) controlling their implementation (the construction phase);

FIGURE TO INDICATE THE ACTIVITIES IN THE PROCUREMENT PROCESS

Pre-Design Phase Pre-Construction Phase Construction Post-Construction

Client’s Role Develop business case for project (3.1.1.9)

Appoint adviser(3.1.1.6)

Define client’s responsibilities (3.1.1.7)

Project Brief(3.1.1.12)

Appointment of PM (if appropriate) (3.1.4.7)

Appointment of design andcost consultants (3.1.4.8)

Procurement strategy* (3.1.1.13)

Value management (3.1.4.16)

Procurement strategy (3.1.1.13)

Design overview* (3.1.4.12)

Cost Control overview* (3.1.4.13)

Whole-life Costs(3.1.4.15)

Value Engineering(3.1.4.17)

Time control overview* (3.1.4.14)

Quality control overview* (3.1.4.18)

Appointment of constructors (3.1.4.9)

Confirming the business case (3.1.1.9)

Design overview (3.1.4.12)

Cost control overview (3.1.4.13)

Time control overview (3.1.4.14)

Quality control overview (3.1.4.18)

Change control overview(3.1.4.19)

Commissioning (3.1.1.17)

Occupation and takeover (3.1.1.18)

Procurement Strategy

Procurement strategy development (3.1.2)

Implementation Resources (Client) (3.1.4.3–5)

Organisational structure (3.1.4.6)

Contractual arrangements* (3.1.4.10)

Systems and controls* (3.1.4.11)

Implementation policy (3.1.4.2)

Contractual arrangements (3.1.4.10)

Systems and controls (3.1.4.11)

Systems and controls (3.1.4.11)

* Indicates the activity will continue into the next phase( ) Indicates the section of this document referring to the activity in more detail

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(e) arbitrating between conflicting demands; and

(f) evaluating the complete project against the objectives (thepost-construction phase).

1.1.5.2 The client also has a dual management function:

(a) to manage the client input; to co-ordinate functional and administrativeneeds; to resolve conflicts; to act as the formal point of contact for the project(see 3.1.4.11); and

(b) to supply the technical expertise, to assess, procure, monitor and controlthe external resources needed to implement the project (see 3.1.4.3–5).

1.1.5.3 In particular, the client should be satisfied that:

(a) the project brief is comprehensive and clear and has the full support of theusers1&2 (see 3.1.1.12);

(b) any constraints demanded by the project funder(s) are known and theirimpact understood;

(c) the critical assumptions made in preparing the initial estimates andprogrammes are valid, realistic and achievable (see 3.1.1.9);

(d) cost estimates are comprehensive and include all capital and resourcecosts;

(e) allowances made in the feasibility and viability assessments to coverpossible risks are sufficient (contingency allowance);

(f) substantial sensitivity analysis and ‘what if’ studies have been carried outto assess the effect of possible changed criteria on the viability of the project;and

(g) plans are in place for adequate project management including systems forcost, time, quality and change control.

1.1.5.4 The client should also co-ordinate and resolve conflicts between all interestedsections of the client organisation including (see 3.1.4.6):

(a) user groups – who will work in the building;

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1 Kelly, J., MacPherson, S., and Male, S. (1992), The Briefing Process: A Review and Critique, RICS, Department ofBuilding Engineering and Surveying, Heriot Watt University. This document is out of print.2 Construction Industry Board, Briefing the Team, Thomas Telford Publishing, London, 1997.

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(b) specialist groups – responsible for technical systems within the building,e.g. communications, computers;

(c) facilities management – who will manage the completed buildingincluding maintenance and security;

(d) finance and accounts – who will plan and control expenditure and pay billsas they arise; and

(e) legal advisers – who will advise on and monitor the client’s formalrelationships with outside parties.

1.1.5.5 The client is responsible for ensuring that all necessary decisions are made ontime. Timely decisions are necessary to avoid delays and increased costs: thedecision-making process requires as much planning and management as anyother activity. This will include (see 3.1.4.11):

(a) scheduling the key decisions to be made;

(b) identifying the decision makers and their required procedures;

(c) ascertaining the time required for making decisions;

(d) establishing a formal programme for decisions;

(e) warning decision makers regarding forthcoming submissions – makingsure items are on the agenda;

(f) preparing on time fully detailed submissions and/or presentations in fullcompliance with procedural requirements;

(g) following up submissions throughout the decision making process; and

(h) promptly communicating decisions made to the parties affected bythem.

1.1.6 Appointment of Project Manager (where appropriate)(see 3.1.4.7)

1.1.6.1 Due to the complexity of modern buildings and the potentially large numberof parties involved in the process the client may wish to appoint a singleperson to draw the process together and manage it to ensure that the overallperformance, time, cost and quality requirements are achieved. The projectmanager may be a member of the client organisation who is given sole, orpredominant, responsibility for the project. Project management practices alsoexist to enable appointment to be made on a consultancy basis. In this case,

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selection should be based upon resources, reputation, and price; and servicesshould be clearly identified.

1.1.6.2 It should be emphasised that the role of the project manager should be to actas part of the client organisation.

1.1.7 Appointment of Consultants (see 3.1.4.8)

The process of selecting and appointing the design team and the costconsultant is carried out by the client who may seek the advice of his/heradvisers. The terms and conditions of these appointments are governed by theprocurement strategy adopted for the project.

1.1.8 Appointment of Constructors (see 3.1.4.9)

The selection of those who will actually construct the project is often key to asuccessful outcome. Selection should always be on quality as well as price andideally the procurement strategy governing when they are appointed shouldfacilitate the early involvement of constructors in the design process.

The selection of procurement strategy is a complex one and is referred to inPart 3 section 1 of this handbook.

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PART 1, SECTION 1, APPENDIX A

The Surveyors’ Construction Handbook Part 1, Section 1 Effective from 1/3/03 Page 1Appendix A (01/03)

Appendix A: Further Reading

Construction Industry Board, Briefing the Team, Thomas Telford Publishing, London,1997

Construction Industry Board, Partnering in the Team, Thomas Telford Publishing,London, 1997

Construction Industry Board, Selecting Consultants for the Team: Balancing Qualityand Price, Thomas Telford Publishing, London, 1997

Construction Industry Council, The Procurement of Professional Services: Guidelinesfor the Value Assessment of Competitive Tenders, CIC, London, 1997

European Construction Institute, Partnering in the Public Sector: a Toolkit for theImplementation of Post-Award, Project Specific Partnering on Construction Projects,ECI, Loughborough, 1997

Kelly, J., MacPherson, S., and Male, S., The Briefing Process: A Review and Critique,RICS, Department of Building Engineering and Surveying, Heriot Watt University,1992. This document is out of print.

PART 1, SECTION 2


PART ONE: THE CLIENT

SECTION 2: VALUE ENGINEERING

Introduction

Value management (and within it, value engineering) is a structured methodof eliminating waste from a client’s brief and from the design on aconstruction project before binding commitments are made. Used to delivermore effective and better quality buildings, for example, through takingunnecessary costs out of designs, value management ensures a clearerunderstanding of the brief by all project participants and improves teamworking. According to the Construction Task Force report, ‘RethinkingConstruction’ (published by the DETR in July 1998) it is practiced by up to aquarter of the construction industry in the UK. The report also estimates thatwhile the objective of value management is to increase value, it can alsoreduce costs by up to 10 per cent.

Value management is the wider term used in the UK to describe the overallstructured team-based approach to a construction project. It involves clearlydefining the client’s strategic objectives, considering optimum designsolutions within the context of the client’s business objectives and decidingwhich of these provides the optimum lifetime value to the client, as well as areview of the whole process after occupancy. Value management includesvalue engineering as part of this process.

Value engineering is a ‘systematic approach to delivering the requiredfunctions to the required quality at the least cost’, i.e. a method of ensuringthat the client gets the best possible value for money in terms of safety,performance and delivery targets. It is a structured form of consensusdecision making that compares and assesses the design solutions against thevalue systems declared by the client.

This section of the handbook looks at the carrying out of a value engineeringexercise during the early design phase of a project, i.e. an evaluation of designsolutions against the client’s brief. Value engineering, as described here, canbe a stand-alone exercise (a value engineering workshop) or may be part of anoverall value management process.

In describing the value engineering process this section aims to assistsurveyors both in advising clients on the use of value engineering and takingpart in a value engineering exercise as part of the design team. It is notintended for surveyors acting as value engineering facilitators and makes noattempt to address the very particular skills required for this role.

PART 1, SECTION 2

1.2.1 Why Value Engineering?

1.2.1.1 Value engineering has grown in popularity for the simple reason that itactually works. Construction projects can often take on a life of their ownwhen members of the design team become focused on their own particularproblems and time constraints. Consequently, the true objectives of the clientget lost along the way. Value engineering relates design proposals directlyback to a client’s business, thus ensuring that a management system is in placewhich forces designers to justify their decisions when tested against theclient’s required function.

1.2.1.2 A value engineering exercise can only relate design proposals to a client’sbusiness requirements if early value management studies have encapsulatedthese requirements within the brief. If a value engineering exercise is carriedout in isolation from any strategic review of the project requirements, it canonly act as a functional assessment of the technical design solutions and theirrelative cost. However, even in this limited function it can still be very useful.

1.2.2 Applicability

1.2.2.1 The technique of value engineering can be employed on any project. However,more complicated and higher value buildings are likely to benefit the most(see figure 1). This is because it is more difficult to develop the design briefin such instances and consequently a design solution may be adopted withoutbeing questioned, usually because of time constraints placed upon thedesigners.

1.2.2.2 Many client organisations will only undertake value engineering on schemesover a certain value. For example, Railtrack will carry out the technique onprojects valued at £250,000 or more and Northumbrian Water will onlyconsider it for projects worth over £1m. Despite this, there is no reason whythe process should not be applied to smaller schemes. Furthermore, valueengineering will be invaluable where repetitive schemes are being considered


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Optional

EssentialHigh

Complexity

Low

Value

Low High

Figure 1: Projects Benefiting from Value Engineering

PART 1, SECTION 2

The Surveyors’ Construction Handbook Part 1, Section 2 (revised 10/01) Effective from 1/12/01 Page 3

as improvements and savings can be incorporated into future schemes. Theycan also be tested in practice, leading to the sort of continuous improvementrecommended by the ‘Rethinking Construction’ report.

1.2.2.3 Value engineering works irrespective of the procurement route taken. It is adiscipline upon the design team members and the clients who appoint them.Where the contractor is mainly responsible for the design, for example, designand build, develop and construct or PFI projects, the technique is just asappropriate in ensuring that a well-defined statement of requirements is firstestablished and that subsequent design solutions address the function of thebuilding most economically.

1.2.3 At What Stage Should Value Engineering be Carried Out?

1.2.3.1 The greatest benefits can be obtained by commencing the VE process at theearliest possible stage. Once it has been established that the client’s needs willbest be met through a construction project the purpose of the first VE exerciseshould be to inform the brief. When an experienced client has prepared thebrief, or a value management exercise has already examined the client’srequirements, the value engineering exercise (which will address the proposeddesign solutions) is best done towards the end of the ‘scheme design’. Severalworkshops may be necessary at each of the crucial decision-making stages ofa project:

(a) A first exercise (a functional analysis of requirements), to define theproject needs and inform the brief, could be carried out as early as ‘optionappraisal’, and since this could generate the greatest benefit to the client thetiming is crucial. Carry it out too early and not enough will be known aboutthe problems associated with the building function, whereas too late andminds become set on the solutions formulated by the design team.

(b) A review of the project at ‘outline design’ could be conducted to ensurethat the decisions taken earlier have been implemented or, if changed, thatthey still meet the functional requirements.

(c) Another review (a functional analysis of the solutions) would then becarried out at ‘scheme design’ to test individual building elements involvingtraditional cost planning/life cycle costing techniques.

1.2.3.2 This section of the handbook considers the evaluation of a design at the end ofthe scheme design phase, but the process will be the same whenever it iscarried out. The ‘objectives’ of the project should remain the same throughoutthe process and they should be validated at the beginning of each workshop.The objectives of each workshop may be different. If the project objectives dochange the whole direction of the project will need to reassessed.

1.2.3.3 It is important that time for the value engineering process and any resultantredesign is included in the scheme design programme at the outset.

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1.2.4 Who Should Carry Out Value Engineering?

1.2.4.1 It is strongly recommended that a value engineering exercise is organized byan experienced value management facilitator to ensure that the valueengineering participants retain their objectivity and that an unbiased approachis maintained.

1.2.4.2 The value engineering participants should represent the principal stakeholdersin the project namely, the client, the building users and the design team(designer, engineers and quantity surveyor) and also the contractor, whereapplicable. It is important that each of the participants have the authority tomake decisions at the workshop. It may also be appropriate to include clients’advisers, for example, letting agents or rating valuers.

The participants should be those who can make decisions and provideinformation related to the specific aims and objectives of the workshop. Thesemay include:

• those people with responsibility for the needs of the business;

• those with specific responsibility for development, design andimplementation of the operation/project;

• those with responsibility for the management and/or maintenance of theoperation; and

• those who will be affected by the outcome.

Different stakeholders will be required to participate at different stages of theproject.

1.2.4.3 The optimum size of a value engineering panel would depend upon thecomplexity of the project as well as the skills of the facilitator. However, it isconsidered that panels of more than twelve members are difficult to manage.Panels with fewer than four members could be considered ineffective.However, it is important that all stakeholders are represented even if thisresults in a larger group.

1.2.4.4 It is common practice in North America to appoint an outside team ofconsultants to question the design team’s solutions. However, this practice hasbeen known to cause resentment between the project team and the externaladvisers and might therefore compromise the final design solutions. It isconsidered that an experienced facilitator independent of the design team,with an appropriately briefed panel, will ensure that the design team’ssolutions are adequately tested at the workshop.

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1.2.5 How Long Should It Last?

1.2.5.1 The length of time taken over the value engineering workshop will depend onthe complexity of the project and the level of design detail that has beencompleted.

1.2.5.2 The ‘40-hour workshop’ is the classic industrial value engineering standard.However, two-day workshops at key points during the design process aremore common in the UK construction industry.

1.2.6 Preparing for a Value Engineering Workshop

1.2.6.1 Prior to the workshop, it is most important that an agenda is agreed by thepanel and distributed by the facilitator.

1.2.6.2 In addition to an agenda, a functional analysis of the client’s requirementsshould be drawn up.

The client’s value criteria will have been developed in the first valuemanagement workshop. With each successive workshop these criteria will bedeveloped further into a function diagram. This should be included in theworkshop handbook. If it is to be developed further this will take place as partof the information stage of the workshop.

The functional analysis should always be generated by the clientrepresentatives with the help of the other members of the workshop. It is therole of the facilitator to facilitate this process, not to take part in it.

All participants must be prepared to propose and challenge design solutions.The input of all participants (not just those who are experts in a particulardiscipline) is one of the strengths of the VE process and should be encouragedby the facilitator.

1.2.7 Functional Analysis of Design Relative to the Client’s Requirements

1.2.7.1 It should be understood that it is not possible to find meaningful alternativesto a technical solution without first identifying the function required of it.

1.2.7.2 Functional analysis is any technique designed to appraise value by carefulanalysis of function. This can be simple ‘creative session’ of the functions andpossible alternatives, but the most common method is using a functionalanalysis systems technique (FAST) diagram.

1.2.7.3 The FAST system uses a ‘function diagram’ which identifies the basicfunction ‘what is required’ on the left-hand side and more detailed secondaryfunctions working from left to right until all the means of achieving these

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functions ‘how are they to be fulfilled’ are identified on the right. See figure 2for an example of a FAST diagram. It should be understood that this is abroad-brush technique.

The objective of functional analysis is to produce a complete description ofthe end purpose of the design in terms of what it must do.

Reference is sometimes made to different types of FAST diagram: ClassicalFAST, Technical FAST or Customer/Task FAST.

The original FAST diagram was a presentation of the user-related andproduct-related functions of a design solution. It was a technique used toassemble the functions of a product in a hierarchy and to assess ‘why’ and‘how’ they are delivered. This is known as a Classical FAST.

Subsequently it was recognized that all functions did not fit into the flow logicso it was decided to separate out the functions that are always active, whetherthe product is operational or not. It was also decided to separate out thosefunctions that only occur one time regardless of repetitiveness of the process.This diagram describes what a product, element or component must do and isknown as a Technical FAST.

It was then recognized that, ideally, it is the customer who should determinethe value of the product and that the FAST diagram should include thecustomer/user in the development of value study projects. The resulting FAST

Figure 2: FAST Diagram

PART 1, SECTION 2


diagram has become known as a Customer or Task FAST. It is this conceptfrom which the Value Tree has developed.

All FAST diagrams should include a scope line on the left-hand side of thediagram. The scope line limits the area of the project on which attention isbeing focused. The scope is the portion of the project that is selected for thevalue study.

The FAST model displays functions in a logical sequence and tests theirdependency. It does not indicate how a function should be performed.

There is no such thing as a correct FAST model, only a valid FAST model.

1.2.7.4 Most practitioners insist that functions are defined in terms of ‘activeverb/measurable noun (or phrase)’ combinations, for example, ‘minimizeenergy consumption’. This improves clarity, helps all panel members developa shared understanding and promotes the examination process. These shouldbe interrogated by asking ‘why’ the client requires this in order to examinehow it should be achieved.

1.2.7.5 The process of setting up a FAST diagram is of matching the functionalelements of the building (object functions) to the client’s required functions(user functions). The functional requirements need to be broken down untilthey are reflected in elements which can be priced (and built). This process iscalled ‘functional decomposition’. For example, the requirement for increasedenergy efficiency might be provided by increased levels of insulation whichmight be achieved by changes to all or any of roof, walls, floor, windows anddoors or finishes. The number of levels ‘of decomposition’ required cannot bepredetermined.

1.2.7.6 VALUE TREE

A Value Tree is a diagram that describes the business driver (mission) for aproject or need and the criteria that need to be satisfied in order to achieve it.A Value Tree should be developed at an early stage in order to inform thebrief. However, it can be developed at any stage in order to confirm the brief.It will generally be carried out by the client organization in order to establishwhether a project is the solution to their needs. The criteria are then developedfurther into the functions required in order to achieve them. The scope line fora project will begin to the right of the Value Tree.

1.2.7.7 Appendix A gives an example of part of a Value Tree and a FAST diagram fora health centre.

Function elements (object functions) are defined in the BCIS publication,Standard Form of Cost Analysis: Principles, Instructions and Definitions andin Section 2.3 of this handbook.

A typical example of a value engineering process is included in Appendix B.

PART 1, SECTION 2


1.2.8 Pricing the FAST Diagram

1.2.8.1 As the FAST diagram progresses and different solutions are found, it becomespossible to establish alternative costs for achieving a given function.However, it is important that all functions are clearly defined if costs ofalternative proposals are to be meaningful. Also, it should be remembered thatit is the design solutions to the functional requirements that are being pricedand compared to the value and importance that the client puts on that function.For example, the client can identify the value of savings from reduced energyconsumption or may rank this as important for other reasons. The valueengineering team’s task is to put a price on the various design solutionssuggested that will achieve this end. It is creativity in finding the mosteconomical solution that is the essence of the value engineering exercise.

1.2.8.2 Fees and value added tax (VAT) and other financial and fiscal matters mayalso need to be considered.

1.2.9 Presenting a Design Solution to a Value Engineering Workshop

1.2.9.1 Design solutions should be presented as designers normally would to anypanel of users. However, they should expect to be questioned quiteextensively. They should keep an open mind and maintain objectivity injustifying their proposals because the objective is to find the mostcost-effective solution, not to criticize for the sake of it. On the other hand,designers should be prepared to stand by their design solution if they think itis correct for the function being considered.

1.2.10 The Workshop

1.2.10.1 A value engineering workshop will work through phases of information,speculation, evaluation, development and presentation:

(a) The ‘information phase’ identifies the spaces, elements and components interms of the functions they fulfill. It asks the questions about what is the primefunction of an element?; what are it’s subsidiary functions?; what does itcost?; what is it’s value? It is at this stage that the FAST diagram is developedand it is against the background of this information that the value engineeringevaluation will be made.

(b) ‘Speculation’ is the brainstorming stage which will generate the ideas fromwhich solutions will be developed. It is important that each member of thepanel thinks positively. The facilitator will ensure that no one is allowed tobecome overly critical of another member’s contribution in order that ideasflow. All ideas should be logged at this stage. However, in order to encourageidea building, they should not be analysed or rejected. It is important that theunderlying functions of suggestions for improvement are listed for evaluationlater. Design solutions should not be developed at this stage to ensure that

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‘what is to be achieved’ is properly addressed. All optional solutions shouldonly be considered at the evaluation stage.

(c) ‘Evaluation’ is the analysis of the ideas generated by the earlierspeculation. Again, a positive feeling will be encouraged by the facilitatorwith advantages/disadvantages being discussed in an even-handed manner. Atthis stage some ideas will be rejected and the best taken forward. It is essentialto ensure that all the ramifications of any suggested changes should beconsidered. For example, if the exercise has suggested a change to a piece ofM&E equipment, the effects on the control management systems andstructural requirements must also be considered.

Life cycle costing can be an important factor in the process when consideringoptional solutions but the criticality of this aspect will hinge on the client’sphilosophy.

(d) ‘Development’ of the ideas to be taken forward will be initiated at themeeting and a programme established for completion of this stage. Often thedetailed development including life cycle costing, if appropriate, will becontinued beyond the initial meeting and the outcome presented to asubsequent meeting for the panel to determine which design options to adopt.

(e) ‘Presentation’ takes the form of a report prepared by the facilitator whichrecords in some detail all elements of the study and concludes with thoseoptions to be incorporated in the developed design. This report is normallypresented to the client by the value engineering panel at a meeting held withinone or two weeks of the date of the workshop.

1.2.10.2 The workshop should focus on expensive items or ‘mismatches’, for example,parts of the FAST diagram which are important to the client but which havebeen allocated little money or have cost a lot of money but do not contributeto the function.

1.2.11 Assessing the Value of the Workshop

1.2.11.1 Areas for research/change identified at the workshop could be grouped intothree categories:

(i) those that are removed/changed and result in reduced cost;(ii) those that are added/changed and result in additional cost; and(iii) those that are identified for investigation but not implemented

1.2.11.2 The financial benefit should then be identified against all elements withincategories (i) or (ii).

1.2.11.3 A major benefit of the workshop which will be enjoyed by the panel membersis a better understanding of the project functions and common ownership ofthe team-based designs solutions which have evolved.

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1.2.12 Implementing the Results

1.2.12.1 The value engineering panel’s decisions are recommendations that need to beaccepted by all stakeholders. Those stakeholders that are not part of the panelare likely to have a right to comment before decisions are adopted.

1.2.12.2 Once the workshop’s proposals have been sanctioned by the client, decisionsshould be fed back to the design team, briefing those members whose work isaffected as to why the changes were made.

1.2.12.3 If necessary, amendments to the design brief, design programme and scope ofprofessional team’s brief should be incorporated into these documents.

1.2.13 Feedback from Post-Occupancy Evaluation

1.2.13.1 It is important for any client to carry out a project review to demonstrate howproject objectives have been achieved and particular problems overcome. Aspart of the project evaluation process, it should be established whether theproject represents best value for money and whether or not key design changesmade as a result of value engineering have achieved the benefits expected.These should always be set against the cost of carrying out the exercise.

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The Surveyors’ Construction Handbook Part 1, Section 2 Effective from 1/12/01 Page 1Appendix A (revised 10/01)

Appendix A: Health Centre Value Tree

PART 1, SECTION 2, APPENDIX B

The Surveyors’ Construction Handbook Part 1, Section 2 Effective from 1/1/00 Page 1Appendix B (12/99)

Appendix B: Typical Example of a Value Engineering Process

B1 BACKGROUND

A retail client with a regular development programme for a series of newstores (typical size 8,000m2) entered into a partnering agreement with keymembers of the construction team for four new projects.

To encourage value engineering, the partnering contractors share in anysavings that relate to any accepted proposals.

For two of these projects the client opted for a design and build contract forthe services installations (mechanical, sprinklers and electrical).

In an effort to reduce costs and ultimately add value to the schemes, the clientset a target of reducing the costs on these projects by 10 per cent, with nomaterial effect on quality or health and safety.

To set a benchmark for this reduction model cost plan costs for a typical store(derived from historical records) were modified to suit the new schemelayouts. Allowances were included for any items that were classified as ‘sitespecific’ (e.g. acoustic requirements stipulated by the district surveyor). Costplan figures were based on the client’s current specification.

Due to the volume of developments undertaken by the client and the repetitivenature of the works, the savings generated by value engineering can beincorporated in any future schemes.

B2 SPECIFIC EXAMPLE: VENTILATION TO SALES FLOOR

The original design was based on previous solutions and included ‘traditional’ventilation.

At the ‘information phase’, the functional requirement, including the need forventilation, was examined against the client’s desire to reduce capital costs.This identified that a high proportion of the cost of the mechanical installationrelated to the provision of ventilation to the sales floor of the store (plant,distribution ductwork, diffusers, etc.)

At the ‘speculation phase’, the client’s engineering department worked closelywith the mechanical partnering contractor to consider alternative methods ofventilating the sales floor of the store.

The alternative method of ventilation proposed was of the displacement type.With displacement ventilation, air is only conditioned at the level at whichoccupiers are breathing. Air is introduced at low level and at low velocity.Natural convection currents are utilised to remove excess heat and pollutantsout of the occupied zone. There is a saving in the amount of ductworkrequired, as only two runs of ductwork are needed on the sales floor. (The


Page 2 Part 1, Section 2 Effective from 1/1/00 The Surveyors’ Construction HandbookAppendix B (12/99)

traditional method is designed for four separate branches of ductwork.) Thenew specification requires diffusers of the displacement type, with the facilityof automatically varying the air throw pattern whether in heating or coolingmode.

Furthermore, the proposed system required ventilation to the occupied zoneonly rather than the full building space. This has resulted in capital costsavings on plant and in the likely running costs of the system.

The evaluation identified significant savings.

Summary of Value Engineering Exercise

Original installation: Traditional ventilation

Value engineering proposal: Displacement ventilation

Benefits: Saving on air handling plant sizeSaving on chiller plant sizeSaving on sales floor ductwork

Savings on capital cost: Air handling plant 10%Chiller plant 5%Ductwork and diffusers 25%

At the ‘development phase’, the proposed method was discussed with othermembers of the design team to ensure that any impact on the other buildingelements, the project programme and the interface with other subcontractorswere taken into account.

PART 1, SECTION 2, APPENDIX C

The Surveyors’ Construction Handbook Part 1, Section 2 Effective from 1/12/01 Page 1Appendix C (revised 10/01)

Appendix C: Further Reading

British Standards Institute. Value Engineering, Value Analysis Vocabulary – Part 1:Value Analysis and Functional Analysis, BS EN 1325–1 1997, British StandardsInstitute, London, 2000.

Building Cost Information Service. Elements for Design and Build, BCIS Ltd, 1996

Building Cost Information Service. Standard Form of Cost Analysis; Principles,Instructions and Definitions, BCIS Ltd, 1969 (Reprinted 1997)

Connaughton, John, N., Green, Stuart, D., Construction Industry Research andInformation Association. Value Management in Construction: A Client’s Guide,CIRIA, London, 1996

Dell’isola, Alphonse. Value Engineering in the Construction Industry, Van NostrandReinhold Co., New York, 1983

Dell’isola, Alphonse. Value Engineering: Practical Software Applications for Design,Construction, Maintenance and Operations, R. S. Means & Co., Kingston, MA, 1997

Green, Stuart, D. and Popper, Peter, A. Value Engineering: The Search forUnnecessary Cost, Chartered Institute of Building, Berkshire, 1990

Institution of Civil Engineers. Creating Value in Enginering, Thomas TelfordPublishing, London, 1996

Kelly, John and Male, Stephen. A Study of Value Management and Quantity SurveyingPractice, RICS Books, Coventry, 1988

Kelly, J.R. and Male, S.P. A Study of Value Engineering and Quantity SurveyingPractice, Heriott-Watt University, Edinburgh, 1989

Kelly, J.R. and Male, S.P., Heriot-Watt University, Department of BuildingEngineering and Surveying, Royal Institution of Chartered Surveyors. The Practice ofValue Management: Enhancing Value or Cutting Cost? RICS, London, 1991

Law, Alastair, G. An Introduction to Value Engineering: A New Technique inTechnology Assessment and Evalution, Alastair G. Law, Washington DC, 1981

May, Susan, C., College of Estate Management. Value Engineering and ValueManagement: A CPD Study Pack, College of Estate Management, Reading, 1994

Mole, Kelly, Fernie, Grongvist and Bowles. The Value Management Benchmark:Good Practice Framework for Clients and Practitioners. Thomas Telford Publishing,London 1998

Norton, Brian, R. and McElligott, William, C. Value Management in Construction: APractical Guide, Macmillan, Basingstoke, 1995


Page 2 Part 1, Section 2 Effective from 1/12/01 The Surveyors’ Construction HandbookAppendix C (10/01)

Palmer, Angela. A Critique of Value Management, Chartered Institute of Building,Berkshire, 1990

Royal Institution of Chartered Surveyors. Value and the Client (papers presented at aconference held at the RICS on 29 January 1992), RICS, London, 1992

Smith, J., Jackson, N., Wyatt, R., Smyth, H., Beck, M., Chapman, K., Shirazi, A.,Hampson, K., Royal Institution of Chartered Surveyors. Can Any Facilitator Run aValue Engineering Workshop? RICS, London, 1998

Zimmerman, Larry, W. and Hart, Glen, D. Value Engineering: A Practical Approachfor Owners, Designers and Contractors, Van Nostrand Reinhold & Co, New York,1982

PART 2, SECTION 1


PART TWO: CONSTRUCTION DESIGN AND ECONOMICS

SECTION 1: PRE-CONTRACT COST PLANNING AND COST MANAGEMENT

Introduction

This Section of the Handbook sets out procedures which enable pre-contractcost management of building projects to be carried out from the client’s brief,through the various design stages to the acceptance of a contractor’s tender.

Control of costs can only be achieved by the actions of the whole project team,including the client. The quantity surveyor’s role is to facilitate the designprocess by systematic application of cost criteria so as to maintain a sensibleand economic relationship between cost, quality, utility and appearance whichthus helps in achieving the client’s requirements within the agreed budget.

The information and guidance which follow are based on a traditionallyprocured new-build project, but varying client requirements and differentprocurement methods may prevent implementation of some aspects of thefollowing procedures. In practice, the design of the elements may proceed atdifferent speeds and the stages described here may overlap. However, theprinciples of budget, cost plan, cost checks and reconciliation should beadhered to whenever possible. (See the figure showing the outline of the costplanning procedure.)

On projects where non-traditional procurement routes are used, theresponsibility for developing the cost plan may change but the stagessuggested here remain appropriate. For example, on Design and Build (D&B)schemes, the client’s quantity surveyor will be responsible for the cost plan atfeasibility and outline proposal stage and the D&B contractor’s quantitysurveyor will be responsible for developing the cost plan with the contractor’sdesign team to produce the tender.

The process described would apply to refurbishment or conversion schemesand the elemental approach would be suitable even if all elements were notrequired.

The procedures are not designed for use with civil engineering projects, butshould provide a framework appropriate to civil engineering needs.

PART 2, SECTION 1


2.1.1 Pre-contract Cost Planning and Cost Management

2.1.1.1 DEFINITION

Pre-contract cost planning is the technique by which the budget is allocated tothe various elements of an intended building project to provide the designteam with a balanced cost framework within which to produce a successfuldesign. It allows for the redistribution of the budget between elements as thedesign develops.

Cost management is the total process which ensures that the contract sum iswithin the client’s approved budget or cost limit. It is the process of helpingthe design team design to a cost rather than the quantity surveyor costing adesign.

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2.1.1.2 OBJECTIVES

(a) To ensure that the client obtains an economical and efficient project inaccordance with the agreed brief and budget;

(b) to make the design process more efficient, thus reducing the time neededto produce a successful design;

(c) to ensure that all requirements arising from the client’s brief to the designteam are included in the cost planning process (e.g. the engineering servicesshould also be subject to the cost planning process); and

(d) to advise the client and members of the design team of cost-in-use orlife-cycle costing techniques.

2.1.1.3 GENERALLY

(a) A general principle applies throughout the cost planning process that anyagreed budget or cost limit is seen as the maximum cost, and the quantitysurveyor should, at all times, work with the other design team members tosatisfy the client at a lower cost if possible, whilst still maintaining the desiredobjectives for quality and function.

(b) If, at any time, sums have been included in the approved budget, forexample, for abnormal site costs which subsequently are found to have beenwholly or partially unnecessary, the consequential saving should always benotified to the client.

2.1.1.4 DESIGN STAGES

References to Design Stages are to the RIBA Plan of Work (taken from theRIBA Handbook of Architectural Practice and Management) and refer to themain stages through which a project design typically passes. The links to thecost planning procedures outlined in this section are summarised here:

Design Stages Quantity Surveyor

Stage B: Feasibility Prepare feasibility studies and determinethe budget

Stage C: Outline Proposals Consider with client and design teamalternative strategies and prepare cost plan

Stage D: Scheme Design Carry out cost checks and update cost planif necessary

Stage E: Detail Design

Stage F: Production Information Carry out cost checks

Stage H: Tender Action Prepare reconciliation statement

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2.1.1.5 VALUE ENGINEERING

A value engineering exercise may be carried out on all or part of the designduring the design process. (For further details see part 1, section 2 of thishandbook.)

This might affect both the client’s requirements and the chosen designsolution and changes would, therefore, affect the budget and the cost plan.

2.1.2 Preliminary cost studies and feasibility studies

2.1.2.1 It is recommended, as a matter of importance, that before and during theformulation of the client’s brief (Design Stage B: Feasibility), the quantitysurveyor, in consultation with other members of the design team and theclient, should undertake such feasibility studies as may be necessary to ensurethat the client’s requirements can be reasonably accommodated within thefinance that is available for the project. The client’s budget is established as aresult of these studies. (See 2.1.3.)

2.1.3 Budget

2.1.3.1 DEFINITION

Budget is the total expenditure authorised by the client which is theresponsibility of the design team at the end of the feasibility stage (DesignStage B).

2.1.3.2 OBJECTIVES

(a) To establish the limit of expenditure necessary to meet the client’s brief.The client’s and project’s status with regard to VAT (Value Added Tax) willalso need to be established;

(b) to provide the client with a statement of the likely area and quality ofbuilding, which is achievable within the limit of expenditure;

(c) to provide a statement of the recommended methods of construction and ofthe contractual procedures to achieve the required occupation date; and

(d) to provide the client with alternative budgets for different occupation datesand qualities of building, if appropriate.

2.1.3.3 INFORMATION REQUIREMENTS

(a) The ideal requirements from the client and members of the project teamto the quantity surveyor are given below. On projects where this level ofinformation is not available, the quantity surveyor should state clearly anyassumptions made. It is possible to produce a typical elemental estimate for

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a particular type of building from very little information, but it is important toclarify as many information issues as possible before such an estimate isaccepted as the budget for a particular project.

(b) Information required from the client:• location of the site; availability of the site for commencement of

construction work;• in conjunction with the designer, architect or building surveyor, a

schedule of accommodation;• names of other similar buildings of broadly suitable quality if

appropriate;• the required occupation date or phased occupation dates;• any specific requirements relating to life-cycle costs;• any specific requirements as to specification and/or procedures;• requirements in respect of the treatment of inflation;• instructions regarding Construction (Design and Management)

Regulations; and• the client’s VAT status and any other tax matters which may affect the

overall cost of the project.

(c) Information required from the designer, architect, building surveyor, orother source:

• approximate location of the building on the site;• advice on necessary storey heights for any specialist areas shown on

schedule of accommodation;• advice on statutory regulations;• advice on routes of public sewers and the like;• designer’s concept of building; and• names of similar projects previously designed by the practice.

(d) Information required from the structural engineer:• advice on probable ground conditions;• advice on probable floor loadings; and• any information on structural solutions.

(e) Information required from the services engineer:• advice on areas of building which will require specialist engineering

services;• any information on the types of systems; and• advice on availability of public utility services.

Note: If the quantity surveyor is not responsible for cost planning theengineering services, this should be clearly stated in the budget and cost plan.

The information from the quantity surveyor to the design team is as follows:

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(An example of a format for the quantity surveyor’s report is given inAppendix B to this Section.)

(f) Information to be provided to the client involves a report containing:• the budget, with alternative proposals if appropriate;• a statement of the basis of the budget calculation including any

important assumptions made;• a statement setting out the programme for design and construction on

which the budget is based;• an outline cash-flow forecast;• a statement of any items not included; and• assumptions in respect of inflation forecasts and current/future market

conditions.

(g) Information to be provided to the designer:• a copy of the report sent to the client; and• a more detailed statement of the quantity and quality parameters

included in the calculations.

(h) Information to be provided to other consultants:• such quantity and quality parameters as relate to their area of design.

2.1.3.4 METHODS OF PREPARATION

(a) The method of preparation depends on the type of project involved.Unusual projects, projects of great complexity and projects containing a largeelement of alterations are more difficult to budget accurately at an early stage.

(b) For most types of project, it is possible to build up an elemental budgetusing the parameters set out under 2.1.3.5. This can be based on costinformation from previous projects, from the RICS Building Cost InformationService (BCIS), other published sources, or on an appropriate cost model.

(c) The main elemental quantities of hypothetical buildings can be generatedusing agreed parameters, to which rates applicable to agreed quality andperformance standards can be applied. An example of a method of calculatinghypothetical quantities is described in Appendix C to this Section.

(d) Once the budget has been established, it provides the first cost plan for theproject, and the framework for the actual design to be developed.

2.1.3.5 STATEMENT OF QUANTITY AND QUALITY PARAMETERS

The main parameters which should normally be incorporated in thecalculation are as follows (the list is not exhaustive):

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(a) Quantity• in addition to the briefed areas, a statement of the allowances (e.g.

circulation) used to calculate a gross floor area;• the number of storeys of a possible solution;• the storey height(s);• the square index or wall/floor ratio (see appendix C to this section);• the density of vertical division or partition/floor ratio (see appendix C

to this section);• proportion of window area;• floor loadings;• thermal resistance values of fabric;• air change rates;• heating and hot-water loads;• lighting levels;• total electrical load;• areas of the brief with special functions of significant cost;• road area and number of car parking spaces;• paved pedestrian areas; and• length of boundary walls or fencing.

(b) Quality• A general statement of quality and specification which relates to the

rates used for the budget calculation. This should cover specifically atleast the following: foundations, roof, external walls, floors andvertical circulation, internal vertical division, internal finishes,lighting and other services. External works should include roads,paths, landscape, boundary walls and fences, and service mains,planting and the like.

2.1.3.6 INFLATION

(a) The prediction of future inflation may not be necessary for some clients,and a statement of cost at current prices may be adequate. Where anassessment of inflation is required for more than a few months ahead, a rangeof probable inflation is best provided. This can be calculated usingpredictions published, for example by BCIS or the Department of Trade andIndustry. The assumptions upon which the prediction is made should bestated.

(b) Some clients, particularly in the public sector, have their own inflationcontrols. Where the client requests that a particular level of inflation beincluded in the budget, the quantity surveyor should inform the client if he orshe believes it to be unrealistic.

2.1.3.7 COST REPORTING

If at any time during the design process it becomes apparent that the agreedbudget is likely to be exceeded without the brief being changed, the clientshould be informed and instructions requested. Likewise, if it becomes

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apparent that the whole of the agreed budget will not be required, the clientshould be informed.

2.1.4 The cost plan at outline proposals stage

2.1.4.1 DEFINITION

The cost plan at outline proposals stage is a statement of the probable cost ofthe project at Design Stage C which sets out the cost targets for the mainelements of a building, together with their approximate quantity and qualityparameters.

2.1.4.2 OBJECTIVES

(a) To describe, together with the outline proposal drawings, the chosendistribution of the resources within the budget to provide a balanced design tomeet the client’s needs;

(b) to set cost targets for the main elements so that, as the design develops, thetargets can be checked and adjustments made so that the overall cost of theproject is managed within the budget;

(c) to provide the design team with controls which communicate the costs,quantity, quality and time parameters to be followed; and

(d) to provide the opportunity for consideration of life-cycle costs.


The basic information requirements from the members of the project team tobe provided to the quantity surveyor are as follows:

(a) Information required from the client:• the budget. Where alternative budgets have been quoted in the budget

report, the client should state the preferred alternative;• confirmation of the programme for design and construction times stated

in the budget report;• confirmation of the brief;• acceptance or variation of any other matters within the budget report;

and• authority to proceed.

(b) Information required from the designer:• outline drawings of the building and site works indicating alternative

solutions; and• an indication of the preferred specification for the main elements.

(c) Information required from the structural engineer:• outline proposals or alternative structural solutions.

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(d) Information required from the services engineer:• outline proposals for installations, indicating any alternative systems;

and• an indication of the preferred specification, after acceptance by the

designer of its visual implications.

(e) Information required from specialist consultants:• outline proposals.

The basic information requirements from the quantity surveyor to the designteam are as follows:


(f) Information to be provided to the client involves a report containing:• a statement of cost;• a broad indication of the specification;• a statement of floor areas;• a request for decisions on any alternative proposals and/or procurement

routes, with advice thereon;• an updated cash-flow forecast;• allowances for contingencies and design reserve; and• an update of inflation projections.

(g) Information to be provided to the designer:• a copy of the documents sent to the client; and• the cost plan with target costs for each element.

(h) Information to be provided to other consultants:• such quality and quantity parameters as relate to their design

responsibilities and target costs.


(a) The method of preparation should be appropriate to the level of detailavailable for each element and may be:

• the measurement of approximate quantities and the application of ratesto the quantities generated;

• comparison of the requirements with analyses of previous projects of asimilar character;

• use of appropriate cost models; and/or• a mixture of the above methods.

(b) Evaluation should be made of the alternative forms of construction, orsystems, of the ‘key’ elements, e.g. structural elements, and serviceinstallations. The ‘key’ elements on each project will vary. However, they arelikely to be those with major financial consequences, and to include thestructural and service elements.

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The quantity surveyor’s statement should include the following:

(a) QuantityConfirmation of information provided at budget stage with the addition of:

• the areas of the accommodation divided into use classification (e.g.office/classroom space, sanitary accommodation space, plant-roomspace, circulation space), totalled to give gross floor area; and

• a schedule of those items for which lump sum allowances have beenincorporated and a note on the sources of this information.

(b) Quality• a statement of quality and specification, in a similar format to that

provided at budget stage, expanded to incorporate additionalinformation. The parameters should follow those included at the budgetstage, and where possible, be based upon the outline drawings andpreferred specifications.

2.1.4.6 DESIGN AND CONSTRUCTION PERIOD

(a) In establishing the outline cost plan, it is recommended that the quantitysurveyor take account of proposals made by the other members of the designteam and their effects upon both the design and construction programmes.

(b) If completion dates are critical, components and/or systems should beselected with a view to the availability of acceptable alternatives so as to avoidsupply difficulties.

2.1.4.7 CONTROLLING CHANGES TO THE COST PLAN

Should a change be proposed to the outline cost plan, or to the scope of thework, the following procedures should be implemented:

• all relevant members of the design team should be informed;• the designer should confirm his agreement, in principle, to the

proposal;• no proposal should be incorporated into the cost plan without the

agreement of the quantity surveyor, and his confirmation or otherwisethat the proposal can be met within the elemental target;

• where the proposal involves additional cost over the elemental target,or would cause the total budget to be exceeded, the quantity surveyorshould identify to the design team alternative savings that are availablein order to maintain the overall budget;

• the quantity surveyor should take into account, when considering aproposed change, any likely effect on the design and constructionprogramme;

• in all considerations of alternative proposals, the use of consultants foradditional work should take into account any consequential addition toprofessional fees. In particular, this applies to consulting engineers,whose fees are calculated only on specific parts of the project; and

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• upon the determination of a proposed change, the quantity surveyorshould communicate to the client and all members of the design team,the effects of such change and provide an updated cost plan.

2.1.4.8 INFLATION

Any changes in inflation forecasts should be reported periodically.

2.1.5 The Cost Plan at Scheme Design Stage

Note: If the cost plan has been produced at an earlier design stage onlyupdating may be required.

2.1.5.1 DEFINITION

The cost plan at scheme design stage is a statement of the cost of a selecteddesign at Design Stage D which details the cost targets for all elements of abuilding, together with the quantity and quality parameters described by thescheme drawings and specifications.

2.1.5.2 OBJECTIVES

(a) To set out for the design team the actual distribution of resources describedby the scheme design;

(b) To set cost targets for all the elements so that, as the detail design develops,the targets are checked and adjustments made in order that the overall cost ofthe project is managed within the budget; and

(c) To provide the whole design team with a control document whichdescribes, in detail, the costs, quantity, quality and time parameters whichhave been adopted.


The information to be provided to the quantity surveyor is as follows:

(a) Information required from the client:• confirmation or otherwise that the cost plan prepared at the outline

stage is accepted;• confirmation of the brief;• an indication of any preferred alternatives in a previous cost plan;• acceptance or variation of any other matters within the previous cost

plan report; and• authority to proceed.

(b) Information required from the designer:• scheme drawings and scheme specifications.

(c) Information required from the structural engineer;• scheme drawings and scheme specifications;

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• confirmation of floor loadings and the like; and• provisional indication of reinforcement weights, where appropriate.

(d) Information required from the services engineer:• scheme drawings and scheme specifications; and• detailed design parameters, e.g. heat loads, and electrical loads.

(e) Information required from specialist consultants:• scheme drawings and scheme specifications.

The basic information requirements from the quantity surveyor to the designteam are as follows:


(f) Information to be provided to the client, involves a report containing:• a statement of the cost;• a statement of the specification;• a statement of the floor areas;• a statement of the proposed design and construction programme;• a cash-flow forecast, where appropriate;• a statement of the relevant life-cycle costs, where appropriate; and• an update of inflation forecasts.

(g) Information to be provided to the designer:• a copy of documents sent to the client; and• the cost plan with target costs for each element.

(h) Information to be provided to the other consultants:• such quality and quantity parameters as relate to their area of design

and their target costs.


(a) The method of preparation is normally by measurement of approximatequantities from the proposed scheme drawings. The degree of detail to bemeasured should relate to the cost significance of the elements in the particulardesign. The pricing should be similarly related. Some elements may still bemost suitably priced on an elemental unit rate basis, where the cost significanceis low. Major elements will normally need to be priced in greater detail.

(b) The preliminary engineering and specialist services scheme drawings andoutline specification notes will be required from the consulting engineers,from which approximate quantities of equipment can be measured and pricedusing all-in rates. Pipework and cables will normally still need to be priced onan overall basis relating to floor area or service points at this stage. Thisensures that the likely implications of the builder’s work are understood by thedesign team and the costs are taken into account.

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The quantity surveyor’s statement should include the following:

(a) Quantityconfirmation of the information provided at outline proposal stage

(b) Qualitya statement of quality and specification based on scheme drawings insufficient detail to provide control of the production information drawings bythe designer and consultants

(c) Life-cycle informationa statement of the likely relevant maintenance, cleaning, and running costswhich are required or implied by the scheme design proposals and theexpected life of major components.

2.1.5.6 CONTROLLING CHANGES TO THE COST PLAN

The principles have been described in 2.1.4.7.

2.1.5.7 INFLATION

Any changes in inflation forecasts should be reported.

2.1.6 Cost Checking

2.1.6.1 DEFINITION

Cost checking is the process of calculating the costs of specific designproposals and comparing them with the cost plan during the whole designprocess (Design Stages D–F).

2.1.6.2 OBJECTIVES

(a) To confirm that as the design develops, the cost remains within the budget;and

(b) To reduce the abortive design work and lost time caused throughproceeding too far in the design process before realisation that the budget willbe exceeded.

2.1.6.3 PRINCIPLES

(a) The methods will vary according to the stage reached in the design process.Normally, however, this takes the form of measurement of approximatequantities from the consultants’ drawings to provide a check on the quantityand quality of parameters set down in the appropriate cost plan. The grossfloor area should always be the first check at any stage.

(b) The dominant considerations in deciding the priorities for cost checkingelements are as follows:

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• the cost significance of an element related to the total cost of theproject; and

• the known variability in cost of any element. Should a wide range ofcost be possible in an element, it becomes necessary to cost check itbefore checking any elements of low variability but of the same overallcost significance.

2.1.6.4 IDENTIFICATION AND NOTIFICATION OF EXCESS COSTS

(a) It is recommended that judgement be applied before notifying the designerof possible excess expenditure in a particular element. If an excess revealedduring cost checking is of such significance that it is highly improbable thatcompensating savings are available elsewhere, then such excess should bereported immediately and the design team be asked to consider modificationof the cost plan. If, however, the excess (or saving) revealed in an element isrelatively small and there are still a number of elements to be checked, it isusually more appropriate to advise the designer of the difference and tosuggest that action is held until other cost checks have been carried out.

(b) It is important for the quantity surveyor to maintain records of the costchecking process, and to set down in summary the value of the elements costchecked compared with the cost plan targets. Identification of the drawingsand information upon which the cost check has been based is also important.

2.1.7 Action after Receipt of Tenders

2.1.7.1 DEFINITION

(a) Action after receipt of tenders is that required at the tender stage (DesignStage H) in analysing each tender and updating information for the client andconsultants.

(b) The following points should be noted:• In most cases, sound cost planning will produce tenders within budget.

If, due to market conditions or late changes in designs andspecification, adjustments need to be made to a tender, information onpotential savings will need to be identified by the design team; and

• If there are significant changes from the initial tender documents,consideration should be given to the need for seeking revised tenders.

2.1.7.2 OBJECTIVES

(a) To obtain a contract sum within the approved budget; and

(b) To provide suitable analyses for future projects.

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Information to be provided to the quantity surveyor is as follows:

(a) Information required from the client:• acceptance of potential savings, if required;• details in respect of any analyses required. (Where the client body is a

Public Authority or similar, where standard analyses are alwaysrequired, consideration of this matter should be given during thepreparation of the Bills of Quantities); and

• permission to submit analyses to BCIS if appropriate.

(b) Information required from the designer, architect, building surveyor andother consultants;

• a provisional list of potential areas of saving (to be considered duringtendering period and before tender acceptance); and

• a detailed list of drawings and other sources of data from which todetermine actual savings, if required.

(c) Information required from other sources:• indexing of the tender by BCIS to establish confirmation of tender

levels, if appropriate.

The basic information requirements from the quantity surveyor are as follows:

(d) Information to be provided to the client involves a report containing:• a statement of the cost reconciled to the latest budget;• any further information in respect of the construction programme; and• an updated preliminary cash-flow forecast, where appropriate.

(e) Information to be provided to the designer:• a copy of documents sent to the client; and• a detailed reconciliation between the tender and the latest cost plan.

(f) Information to be provided to the other consultants:• such information as relates to their area of design and associated costs.

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The Surveyors’ Construction Handbook Part 2, Section 1, Effective from 1/7/03 Page 1Appendix A (05/03)

Appendix A: Sources of cost information

A1 OBJECTIVE

To ensure that all costs used are up to date and accurate.

A2 SOURCES

A2.1 Elemental cost analysis• in-house cost analyses of previous projects;• Building Cost Information Service (BCIS); and• Architects’ Journal.

A2.2 Unit rate information• in-house priced bills of quantities;• specialist suppliers’ quotations;• Spon’s (E & FN Spon) – a range of price books covering most areas of

construction;• Laxton’s – a range of price books covering most areas of construction;• Ti Wessex – a range of price books covering most areas of construction;• Griffiths Building Price Book;• Building Maintenance Information’s Building Maintenance Price Book;

and• Glenigan Cost Information Services – Material Price Guides.

Note: Current editions of price books are available from RICS Books.

A2.3 Published indices• tender indices and cost studies on regional variations – BCIS;• the published indices of the Department of Trade and Industry;• Price Adjustment Formulae for Construction Contracts (NEDO) Indices –

Department of the Environment, Transport and the Regions;• Architects’ Journal; and• Building.

A3 The use of published information

The following points should be considered carefully when using any of theabove information:• differential rates of inflation on various aspects/elements of the

building;• acute shortages in specific trades at different times;• regional variations;• market conditions applicable to information based on project specific

information such as elemental cost analyses and bills of quantities;• external published information;


Page 2 Part 2, Section 1, Effective from 1/7/03 The Surveyors’ Construction HandbookAppendix A (05/03)

• consideration of the tender period of the analysis and its relationship to thecurrent project’s tender period;

• high levels of inflation demand constant checking and revision of rates andprices;

• the assumption that cost information in elemental cost analysis is tenderedprice information, whereas a significant amount could be in prime cost orprovisional sums;

• initial quotations from specialists are likely to be low;• building regulations can be statutorily amended, e.g. energy conservation

measures have increased the ‘U’ value (a measurement of thermalresistance) requirements for insulation properties of roofs and walls. Caremust therefore be taken to ensure that the analysis used is consistent withcurrent building standards;

• firm price or fluctuating contract terms;• special planning conditions applying either to the analysed or to the

current project; and• site-specific constraints in either the analysed or current project.


The Surveyors’ Construction Handbook Part 2, Section 1, Effective from 1/7/03 Page 1Appendix B (05/03)

Appendix B: Format of budget and cost plans

B1 OBJECTIVE

B1.1 To communicate clearly the basis of the budget and cost plans to the client,designer and consultants.

B2 FORMAT

B2.1 The presentation of information to the client and design team should be of ahigh standard. Budget and cost plans result from the application of a high levelof professional skill, and the format of documents should reflect theimportance that the profession attaches to this service.

B2.2 The example format included here is intended to be an example of goodpractice showing the main areas of information that may require coverage.The presentation and content will need to be adjusted to meet the specificrequirements of individual organisations and their clients. The ‘Report toClient and Design Team’ is intended as a guide as to what can be provided toa client to ensure that there is a clear statement of the budget or cost limits, itsinclusions and exclusions, together with the total programme to which thebudget relates and the standards which have been used in its calculation.These are client orientated. Provision is made for the quantity surveyor tosuggest alternatives which the client may wish to consider. A copy ofinformation sent to the client should also be sent to the design team.

B2.3 Additional information to be sent to the design team once the cost plan isprepared is set out in the ‘Report to the Design Team’. The main parametersaffecting the cost targets should be clearly set out.

B2.4 The level of detail to be included in these documents should relate to the sizeand complexity of projects. Simple projects may require less information thanshown in the example; complex projects significantly more.


Page 2 Part 2, Section 1, Effective from 1/7/03 The Surveyors’ Construction HandbookAppendix B (05/03)

REPORT TO CLIENT AND DESIGN TEAM (referred to in B2.2 of this appendix)

C O N S T R U C T I O N B U D G E T A N D P R O G R A M M E

Client

Project

Location

Budget serial number:

COSTS (for basis see sheet .......)

Price base date:

New building work:

Site works:

Alterations:

Construction costs (at stated price base)

Estimate inflation to probable tender date of

Construction costs at tender

Estimated increased costs payable tocontractors during construction period

Construction costs at completion

Professional fees of all consultantsincluding expenses

Value Added Tax – On construction %

On fee %

Total budget of construction works and fees

Exclusions from budget



zzz

REPORT TO CLIENT AND DESIGN TEAM (continued)

TIME

Preliminary/Final Programme (weeks)as Budget Cost Alternative 1 Alternative 2

0 0 0Client decision to accept budget and proceed

Final brief and scheme design approved

Receipt of first tenders

Formation of contract

Construction commencement

Client occupation: phasephasephasephase

Contractor and/or construction implications of programme

The alternative time scales shown make the following assumptions:

Alternative 1

Alternative 2

CASH FLOW – FORECASTQuarterly from acceptance of budget and authority to proceed (including fees)

Note: All figures in thousands Construction commencement quarter indicated by ‘C’Occupation quarter indicated by ‘O’ Balance shown normally payable during first year of occupation

Total Cost Variation (including fees)

1Q 2Q 3Q 4Q 5Q 6Q 7Q 8Q 9Q 10Q 11Q 12Q Balance Total

As Budget Cost

Alternative 1

Alternative 2




BASIS OF BUDGETAreas

Schedule of accommodation Area m2 Min. floor to ceiling height (m)

Max. floor loadings – kN/m2

Comment

TOTAL FLOOR AREA

Quality Standards

External elevations:

Internal finishes:

Heating & ventilation:

Lighting:

Site works:

Other (specify):

Exclusions from budget:




Alternative standards

Alternatives Cost:extra/saving

Comment

Budget prepared by:

Signature: ____________________________________________ Date: ____________________

Firm: ____________________________________________

____________________________________________

____________________________________________

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REPORT TO DESIGN TEAM (referred to in B2.3 of this appendix)

TECHNICAL QUANTITY AND QUALITY PARAMETERS

Budget serial number

BUILDING

Quantity

Gross floor area m2

Maximum square index (Perimeter on plan m.)

No. of storeys Floor to ceiling heights:lowest floor m.

intermediate floors m.

highest floor m.

Floor/roof zone m.

Calculated external wall/floor ratio Proportion of glazed external wall area %

Density of vertical division (length of partitions and internal walls measured over door openings m.)

Calculated partition/floor ratio

Lifts Number Type____________________________ ____________________ _______________________________

Stairs: number of flights

Structural

Ground bearing pressure kN/m2 Ground water level

Floor loadings: Ground kN/m2 (maximum live)

Intermediate kN/m2 (maximum live)

Highest kN/m2 (maximum live)

Roof loading: kN/m2 (maximum live)

Environmental

Fabric ‘U’ values: Roof W/m2°C

Walls (average) W/m2°C

Ground floor W/m2°C

Air change rates and air temperature

(Specify spaces and rates/hour and minimum temperatures)

Heating load kW ( W/m2)

Hot water load kW




TECHNICAL QUANTITY AND QUALITY PARAMETERS (continued)

Lighting levels(Specify spaces, lux level and load in W/m2)

Total lighting load kW ( w/m2)

Total power load kW ( w/m2)

Special areas with higher than average service or other costs (specify)

Other

External Works

Site area hectares

Road area m2 Car Parking: Number of spaces No.

Area m2

Pedestrian paved area m2

Boundary walls or fencing m2

Other

If quantities calculated from drawings state drawing number(s) etc.

REPORT TO DESIGN TEAM (continued)




COST PLAN Building: .....................................................................................................

Element Total cost Cost per m2 Element unit quantity

Element unit rate

1 Substructure

2A Frame2B Upper floors2C Roof2D Stairs2E External walls2F Windows and external doors2G Internal walls and partitions2H Internal doors2 Superstructure

3A Wall finishes3B Floor finishes3C Ceiling finishes

Internal finishes

4 Fittings

5A Sanitary appliances5B Services equipment5C Disposal installations5D Water installations5E Heat source5F Space heating and air treatment5G Ventilating systems5H Electrical installations5I Gas installations5J Lift and conveyor installations5K Protective installations5L Communications installations5M Special installations5N Builder’s work in connection5O Builder’s profit and attendance5 Services

Building sub-total

6A Site works6B Drainage6C External services6D Minor building works6 External works

7 PreliminariesTotal (less contingencies)

8 Contingencies

Construction costs





COST PLAN Building: .....................................................................................................

Elements Specification included in budget/cost plan

Alternatives Cost + or –

1 Substructure

2A Frame

2B Upper floors

2C Roof

2D Stairs

2E External walls

2F Windows and external doors

2G Internal walls and partitions

2H Internal doors

3A Wall finishes

3B Floor finishes

3C Ceiling finishes

4 Fittings and furnishings

5A Sanitary appliances

5B Services equipment

5C Disposal installations





SPECIFICATION Building: ................................................................................................

Elements Specification included in budget/cost plan

Alternatives Cost + or –

5D Water installations

5E Heat source

5F Space heating and air treatment

5G Ventilating systems

5H Electrical installations

5I Gas installations

5J Lift and conveyor installations

5K Protective installations

5L Communication installations

5M Special installations

5N Builder’s work in connection withservices

5O Builder’s profit and attendance onservices

6A Site work

6B Drainage

6C External services

6D Minor building works





COST TARGETS

Building: .......................................................... Price base: ............................................ 19 ...............

Elements Parameter Rate Target cost Cost per m2



The Surveyors’ Construction Handbook Part 2, Section 1 Effective from 1/6/98 Page 1Appendix C (4/98)

Appendix C: Element Unit Quantities Generation for Hypothetical Buildings

Where very little quantity information is available at the early stages of a project,estimates of elemental quantities can be produced using standard formulae and typicalassumptions. Some of the most common formulae and some worked examples aregiven here.

WALL TO FLOOR RATIO

This is a simple method of expressing the relationship of the external walls to internalfloor area. It is the ratio of the area of external walls (including windows and doors) tothe gross internal floor area.

Formula w = where e = area of external walls includingwindows and doors

A = gross internal floor areaw = wall to floor ratio

SQUARE INDEX

This is an alternative way of expressing the relationship between the floor area and theexternal walls. It describes the degree to which the perimeter length of an actualbuilding exceeds that of a building of the same area which is a perfect square. Anysingle storey building can be described, as can also multi-storey buildings, with aconstant shape on each floor.

Formula s = where p = perimeter length on plan

a = area on plan (not the gross floor area inmulti-storey buildings)s = square index

DENSITY OF VERTICAL DIVISION

This density provides a coarse measure of the amount of partitioning, loadbearingwalls, etc. that a building contains. As the formula includes the perimeter of thebuilding, it takes into account the contribution to the enclosure of spaces that thismakes.

Formula d = where p = sum of the perimeter lengths of abuilding measured on each floorL = total length of partitions, etc. measuredover doorsA = gross internal floor aread = density of vertical division

eA

p

�—4 a

1–2 �p) + L(

A



Example of element quantity generation for a hypothetical building

ASSUMPTIONS

From brief, gross floor area = 1350 m2 (including circulation)Site area dictates a two storey solution = 2 storeysAverage floor to ceiling height: 2.7 m.Assumed floor/roof zone: 0.6 m.Square index*: 1.4Wall to floor ratio*: 0.7Percentage of windows and doors in external walls*: 30%Density of vertical division*: 0.3Area of ground floor = 675 m2

* These parameters can be based on information from typical or similar schemes.

The quantities calculated in this, or similar ways, can then be used with selectedelement unit rates to calculate budgets and cost plans for projects in the earliest stagesof design, or for checking the approximate cost difference of alternative designsolutions.

† A percentage can be used to split ‘wall’ from ‘window’, e.g. window and door area= external walls × w = 945 m2 × 30% = 284 m2.



where A = gross floor arean = number of storeysa = ground floor areas = square indexf = floor to wall ratiod = density of vertical divisionw = percentage of windows and doors in external walls.

PART 2, SECTION 1, APPENDIX D

The Surveyors’ Construction Handbook Part 2, Section 1, Effective from 1/7/03 Page 1Appendix D (05/03)

Appendix D: Further reading

A selection of further reading is given below. Whilst not comprehensive it isconsidered to be appropriate. Copies of articles and older books are available from theRICS Library whilst current books are available from RICS Books(www.ricsbooks.com).

BOOKS

Ahuja, H. N., Successful Construction Cost Control, John Wiley & Sons, New York,1980

Ashworth, A. and Hogg, K., Willis’s Practice and Procedure for the QuantitySurveyor (11th edition), Blackwell Science, Oxford, 2001

Ashworth, A., Building Economics and Cost Control: Worked Solutions,Butterworths, London, 1983

Ashworth, A., Contractual Procedures in the Construction Industry (4th edition),Longman, 2001

Ashworth, A., Cost Studies of Buildings (3rd edition), Longman, Harlow, 1999

Ashworth, A., Pre-Contract Studies: Development, Economics, Tendering andEstimating (2nd edition), Blackwell, Oxford, 2002

Bathurst, P. E. and Butler, D. A., Building Cost Control Techniques and Economics(2nd edition), Heinemann, London, 1980

Brandon, P. (ed.), Building Cost Techniques: New Directions, E & FN Spon, London,1982

Brandon, P. S. (ed.), Building Cost Modelling and Computers, E & FN Spon, London,1987

Buchan, R. D., Fleming, F. W. E. and Grant, F. E. K., Estimating for Builders andSurveyors (2nd edition), Butterworth Heinemann, Oxford, 2003

Building Cost Information Service, Elements for Design and Build, BCIS, Kingstonupon Thames, 1996

Building Cost Information Service, Standard Form of Cost Analysis: Principles,Instructions and Definitions, RICS, 1969 (reprinted August 2001)

Cartlidge, D. P. and Mehrtens, I. N., Practical Cost Planning: A Guide for Surveyorsand Architects, Hutchinson, London, 1982

Chudley, R. and Greeno, R., Building Construction Handbook (4th edition),Butterworth Heinemann, Oxford, 2001

Ferry, D. J., Ferry, J. D. and Brandon, P. S., Cost Planning of Buildings (7th edition),Blackwell Science, 1999

Egan, J. and Construction Task Force, Rethinking Construction, DETR, London, 1998

Gruneberg, S. L. and Weight, D. H., Feasibility Studies in Construction, Mitchell,London, 1990


Page 2 Part 2, Section 1, Effective from 1/7/03 The Surveyors’ Construction HandbookAppendix D (05/03)

Hackett, M. et al., Pre-Contract Practice and Contract Administration for the BuildingTeam (9th edition), Blackwell, Oxford, 2002

Hall, F. and Greeno, R., Building Services Handbook (2nd edition), ButterworthHeinemann, Oxford, 2003

Institution of Civil Engineers, Management of International Construction Projects,Thomas Telford, London, 1985

Jaggar, D. et al., Building Design Cost Management, Blackwell, Oxford, 2002

Jaggar, D. and Morton, R., Design and the Economics of Building, E & FN Spon,London, 1995

Jaggar, D. M. and Liverpool John Moores University, Civil Engineering Cost Analysis(CECA), BCIS, Kingston upon Thames, 1997

Kelly, J. et al., Best Value in Construction, Blackwell, Oxford, 2002

Kharbanda, O. P., Stallworthy, E. A. and Williams, L. F., Project Cost Control inAction (2nd edition), Gower Technical Press, Aldershot, 1987

Latham, M. and Department of the Environment, Constructing the Team: Joint Reviewof Procurement and Contractual Arrangements in the United Kingdom ConstructionIndustry: Final Report July 1994, HMSO, London, 1994

Masterman, J., Introduction to Building Procurement Systems (2nd edition), SponPress, 2001

McCabe, S., Benchmarking in Construction, Blackwell Science, Oxford, 2001

Miller, F., Building and Civil Engineering Cost-Value Comparisons, RuthtrekLimited, Herne Bay, 1992

Neil, J. N., Constructing Cost Estimating for Project Control, Prentice Hall Inc., NewJersey, 1982

Nisbet, J., Estimating and Cost Control, Batsford, London, 1961

Pilcher, R., Project Cost Control in Construction (2nd edition), Blackwell ScientificPublications Ltd, Oxford, 1994

Royal Institution of Chartered Surveyors, Developing an Appropriate BuildingProcurement Strategy (see part 3, section 1 of this handbook)

Seeley, I. H., Building Economics: Appraisal and Control of Building Design Cost andEfficiency (4th edition), Macmillan, Basingstoke, 1996

Stone, P. A., Building Design Evaluation: Costs in Use (3rd edition), Spon, 1980

Stone, P. A., Building Economy, Design Production and Organisation (3rd edition),Pergamon Press, Oxford, 1983

Strategic Forum for Construction, Accelerating Change, Rethinking Construction,2002

Ward, S. A., Cost Engineering for Effective Project Control, John Wiley & Sons, NewYork, 1992



Wilson, R. M. S., Cost Control Handbook (2nd edition), Gower Publishing, Aldershot,1983

ARTICLES AND REPORTS

Abdullah, R. Z. and Tyler, A. H., ‘Meeting the Problems of Cost Control Systems’,Building Technology & Management, 24(4) August/September 1988, 14–16(3)

Baxendale, A. T., Integration of Time and Cost Control, Chartered Institute ofBuilding (Construction Papers 7), Ascot, 1992

Betts, M. and Gunner, J., ‘Consultant Cost Control in The Pacific Rim’, CostEngineering, 34 (1) January 1992, 17–24(8)

Bowen, P. and Edwards, P., ‘Interpersonal Communication in Cost Planning Duringthe Building Design Phase’, Construction Management & Economics, (1996) 14,395–404(10)

Costing Services, Building Services, 14(11) November 1992, 25–31(7)

Farrow, J. J. and Rutter, D. K., Performance Setting and Monitoring on Building Projectsfor Contractors, Chartered Institute of Building (Construction Papers 67), Ascot, 1996

Ferry, D. J. O. and Flanagan, R., Life Cycle Costing: a Radical Approach, CIRIAReport 122, Construction Industry Research and Information Association, London,1991

Gilmour, J. and Skitmore, M., ‘A New Approach to Early Stage Estimating’,Chartered Quantity Surveyor, 11(9) May 1989, 36–38(2)

Kaka, A. P. and Price, A. D. F., ‘Modelling Standard Cost Commitment Curves forContractors’ Cash Flow Forecasting’, Construction Management & Economics, 11(4)July 1993, 271–283(13)

Ministry of Education Building Bulletin No. 4, Cost Study, first edition March 1951,second edition March 1957, third edition 1972

Ministry of Public Building and Works/International Tutor Machines Ltd, ‘CostControl in Building Design’, R and D Building Management Handbook 4, HMSO,London, 1968

Morris, A., ‘A Rational Approach to Cost’, Building, 260(7889) 21 April 1995, 33(1)

Skitmore, M. et al., ‘The Accuracy of Construction Price Forecasts’, University ofSalford, Salford, 1990

Southgate, T., ‘A New Approach’, Chartered Quantity Surveyor, 11(3) November1988, 35–36

Watson, B., ‘Cost Planning Engineering Services Contracts’, Cost Engineer, 28(4)1990, 8–10(3)

Watson, K., ‘Procurement – the Key Area for Cost Control’, Construction Computing,(52) April 1996, 12–13(2)

PART 2, SECTION 2


PART TWO: CONSTRUCTION DESIGN & ECONOMICS

SECTION 2: LIFE CYCLE COSTING

Introduction

It is becoming increasingly important that investment appraisal uses a wholelife approach in a more systematic way than at present. Major constructionclients are now insisting upon an analysis of life cycle costs and not justcapital costs.

The life cycle cost (LCC) of an asset is defined as the present value of the totalcost of that asset over its operating life (including initial capital cost,occupation costs, operating costs and the cost or benefit of the eventualdisposal of the asset at the end of its life).

Life cycle cost techniques can be used, for example, to:

• evaluate design options at the elemental or component level;• evaluate total building options, for example refurbishment versus new

build;• determine optimum maintenance strategies;• analyse relocation strategies; and• determine sinking fund requirements to finance planned maintenance

programmes.

Worked examples for the above are included in 2.2.5.

The objective of this Section is to inform chartered surveyors of the increasingneed to adopt life cycle costing (2.2.1) and to introduce them to the techniquesand their application.

2.2.1 The Client Context

2.2.1.1 Following the recession of the early 1990s construction clients are generallymore streamlined and competitive and some recognise that their ongoingproperty costs may provide them with the business ‘edge’ they need. There istherefore increased attention to life cycle costing. The following Sub-sectionsexpand on this trend by covering recent changes in the industry and theireffect on LCC.


Value engineering involves preparing structured option appraisals during thedesign process so demonstrating value for money for clients. Its use is

I

PART 2, SECTION 2


increasing and with it comes the opportunity and need for LCC to be part ofthe options appraisal criteria.

2.2.1.3 THE LATHAM REPORT

Sir Michael Latham’s report Constructing the Team1, calls for a 30% realreduction in construction costs. This statement includes life cycle costs. Thereport also strongly advocates the need to ‘build right first time’ in whichenvironment life cycle cost calculations (involving assumptions about futuremaintenance) have more credibility.

2.2.1.4 CONSTRUCTION (DESIGN AND MANAGEMENT) REGULATIONS 1994The Construction (Design and Management) Regulations 1994 place aspecific duty upon clients and their designers to consider the potential hazardsassociated with the construction process during design, and furthermore toconsider the health and safety implications of maintaining the structure whencomplete. Such increased focus on maintenance may therefore encouragegreater consideration of maintenance costs. This principle is enshrined inRegulation 13(2)(a)(i) and (ii) which states:

“(2) Every designer shall:

(a) ensure that any design he prepares and which he is aware will beused for the purposes of construction work includes among thedesign considerations adequate regard to the need:

(i) to avoid foreseeable risks to the health and safety of anyperson at work carrying out construction work orcleaning work in or on the structure at any time, or ofany person who may be affected by the work of such aperson at work,

(ii) to combat at source risks to the health and safety of anyperson at work carrying out construction work orcleaning work in or on the structure at any time, or ofany person who may be affected by the work of such aperson at work.”

It follows that the selection of materials for certain elements of a structure thatmay involve maintenance, (particularly where access to those elementsinvolves working at height), complies with the spirit of Regulation 13. Forexample, the selection of PVCu window frames with ‘easy clean’ hingesinvolves limited maintenance and allows cleaning from the inside. Similarlymarble flooring is cheaper than cork tiles over a 60-year period and while thedecision to use marble is economically sound it also removes health hazards

1 Latham, M., Sir, (1994), Constructing the Team: Joint Review of Procurement and ContractualArrangements in the United Kingdom Construction Industry: Final Report, HMSO London

PART 2, SECTION 2


associated with fumes and vapour when cork has to be resealed. In purelycapital cost terms, the selection of the materials referred to above may be moreexpensive than their traditional counterparts.

The use of life cycle costing places initial capital cost in the context of futuremaintenance expenditure, and helps justify decisions which have beneficialhealth and safety implications.

2.2.1.5 THE PRIVATE FINANCE INITIATIVE (PFI)The PFI is driven by a cash flow which is achieved by the private sectorprovider delivering a service to the client. This service will include themanagement of a building which should be heated, cooled, lighted, cleaned,maintained, secured, insured and renovated. This cash flow shouldsufficiently cover all costs and outgoings, leaving the provider with a surplusor profit which should be commensurate with his risk exposure.

It is therefore critical that the provider accurately predicts the cost in use of theservice or the facility over its operational life so that he can calculate the cashflows generated by the assets over the term of the contract. Such data is vitalso as to negotiate the complexities of the contract to both parties’ satisfaction.To assist this process some suppliers give guaranteed long-term costs, e.g. forlifts and kitchen equipment. By reducing costs over this term it should befinancially viable for the private sector to provide a service to the public sectorand to achieve an acceptable return.

Life cycle costs and their accurate prediction, control and reduction are criticalto the successful performance of a PFI deal.

2.2.1. ENERGY EFFICIENCY ISSUES IN RELATION TO BUILDING PROJECTS

Studies by the Building Research Establishment through the BRECSU(Building Research Energy Conservation Support Unit) ‘Best PracticeProgramme’ have found that energy consumed to heat, light and servicebuildings accounts for almost half of the UK’s energy bill, and there isconsiderable scope to reduce it. Office buildings were found to have thehighest energy costs, especially prestigious, air conditioned property(typically £20/m2 per year in 1991 compared to £15/m2 for the same ‘bestpractice’ office).

There is common feeling that property overheads are too large, with energybills contributing significantly to the operating costs. Energy costs arepotentially one of the most controllable items of overheads and life cyclecosting can be used as a tool for predicting the benefits of investment inenergy efficiency. Typical investments for analysis would be economicthickness of insulation, energy efficient services, building energymanagement system installations, intelligent buildings, energy consciousrefurbishment of buildings and passive cooling techniques versus airconditioned design. For example, a manufacturer can supply a light bulb someten times more expensive than a normal one, however, it lasts longer, uses less

PART 2, SECTION 2


electricity and performs better. Similarly, condensing gas boilers can save10–20% of fossil fuel bills with pay back in five years.

It is also worth noting that oil is becoming increasingly harder to extract andenvironmental concerns generally will increase in the very near future.Sainsbury has been the first grocery retailer to produce an environmentalreport and recognises that energy probably accounts for its single biggestdirect environmental impact. Significantly it is also the third largestcontrollable cost in running a typical supermarket.

2.2.1.7 MECHANICAL AND ELECTRICAL BUILDING SERVICES

The increasing capital cost significance and complexity of M & E services hasresulted in greater cost emphasis during the early design stages. Such costingis increasingly carried out by a specialist Quantity Surveyor so bringinggreater opportunity to focus on M & E life cycle costs which are a significantproportion of a building’s cost in use, accounted for by the operation, energyuse and replacement costs associated with the M & E installations.

2.2.1.8 BUILDING SUSTAINABILITY

If there is to be a conscious shift of opinion towards sustainable buildings i.e.those which have a viable life expectancy beyond their initial designed use,then there has to be a simultaneous re-examination of a building’s costs in useor perhaps more correctly costs in uses.

Buildings have not been traditionally designed for anything beyond theirimmediate requirement. However, as more are being converted to alternativeuses it is probably only a matter of time before investors in property call forproperties to be constructed with a view to extending the building’s usablelife, e.g. conversion to house a growing less mobile and aged population. Suchconsideration is more valid the shorter the predicted current building life, e.g.some light industrial units for English Partnerships have been designed for aten-year life. Similarly, Hertfordshire County Council have housing andnursing homes with a 20-year life expectancy.

Such a concept will require building layouts and structures to be more flexiblewith maintenance, re-servicing and conversion to alternative uses beingsimplified and made more economical. A cost in use study at design stage mayjustify larger bay sizes, raised flooring or greater storey heights to demonstratecontinual viability for future generations.

A cost in use study would explore the economics involved of using a buildingfor its notional design life and for its intended use in the usual way. However,supplementary investigations would explore potential alternative uses for thebuilding and the conversion cost (and possibly the cost in use for a furthernotional period). If sufficient consideration were to be given at the initialdesign stage for potential future uses of a building, it could be used todemonstrate the continued asset value of the property and go a considerable

PART 2, SECTION 2


way to minimising the obsolescent properties which currently dominatecertain market sectors.

2.2.2 The Life Cycle Costing Calculation

INTRODUCTION

The calculation generally involves the appraisal of options, each optionhaving different capital and future costs. To determine and analyse the futurecosts it is necessary to establish:

• the building life;• the discount rate (which, expressed simply, is the difference between the

interest and inflation rate and is used to convert future payments topresent values);

• the cost and frequency of future payments (at the component, elementalor total building level as appropriate);

• any tax implications (see 2.2.3).

2.2.2.1 THE BUILDING LIFE

An essential element of life cycle costing is defining the life cycle period to beadopted. An assessment must therefore be made of the life of the investment –‘building life’.

Typically the relevant building life will be the period over which theorganisation, for whom the study is being conducted, will be expected to holdan interest in the building, and would take into account the residual value.

At the end of the life of a building, the building (or component) and the landwill have a residual value. In the case of relatively short life cycles or highvalue land, residual values can be very significant factors in determining theoptimum life cycle cost options. Residual values are briefly discussed inAppendix A (and worked example 2.2.5.3 includes a residual value in thecalculation).

When the building life is assessed to be over 40 years, the precise life is notcritical for the purposes of life cycle costing (as discounting, explained below,minimises the effect of such future payments). In cases where calculations arebased on a relatively short building life, say 20 years or less, the assessment ofthe time horizons must be considered with special care.

Building life is influenced by obsolescence, the causes of which aresummarised in Appendix B.

2.2.2.2 THE DISCOUNT RATE

The life cycle cost technique is concerned with the assessment of the timestream of costs and revenues that will flow throughout the life of aconstruction project option.

PART 2, SECTION 2


As ‘money today’ has a different value from ‘money tomorrow’ or ‘money inten years’ time’, a technique has to be adopted that will express future costs orrevenues in present values. The process of converting ‘future money’ to‘present money’ is called discounting.

Discounting involves establishing the discount rate to be used. In making thedecision on a discount rate for a particular project, some judgement will needto be made about the degree of risk return (interest) and the likely levels offuture inflation rates.

Interest rates are particular to the client and the degree of risk. It is thereforeessential to involve the client (and his accountant if appropriate) in the processand reach agreement on the discount rate to be used.

Economists, accountants and clients will all have different views about futurelevels of inflation and interest rates. Some forecasters may take the view thatas different categories of cost inflate at different rates, these differencesshould be taken into account in setting discount rates. These diversities ofview ‘before the fact’ make it difficult to recommend any firm guidelines forsurveyors to adopt for selecting discount rates.

There are two main approaches to discounting:

(a) use a rate which ‘implies’ inflation of future costs and values (in this casefuture costs and values will be priced at today’s prices);

(b) use a rate which requires an ‘explicit treatment’ of inflation in relation tofuture costs and values, (in this case future costs and values will be priced attoday’s prices and adjusted by a factor to reflect future inflation).

It is suggested that it is easier to deal with the former situation where futurecosts and values are assessed at current prices. Three approaches on theselection of discount rates are given for guidance purposes and in each thefuture costs are priced at current prices.

2.2.2.3 DISCOUNT RATE METHODS

(a) Test Discount Rate

In the absence of better information it is recommended that a test discount rateshould be used.

This recommendation is based on the assumption that when inflation rates arereasonably low, i.e. less than 15%, there is quite a stable relationship betweeninflation and the bank base interest rate, implying a real discount rate ofbetween 4% and 5% (i.e. the interest rate is 4 to 5% greater than inflation). Itis recommended that in the circumstances, where no better information is

PART 2, SECTION 2


available, a test discount rate of 4% is used. This method is often adopted inthe public sector where minimal risk associated with the investment isassumed.

(b) No risk return discount rateInvestment in long-term Treasury Bonds can be assumed as having no risk,and are a good reflection of the return to be expected on other investmentswhere there is no risk. Therefore the discount rate can be taken as the TreasuryBond rate less an allowance for the expected rate of inflation. On this basis thediscount rate would be assessed as:

Treasury Bond rate of return 8%LessInflation 5%

——No risk return discount rate 3%

——

(c) Average risk premium discount rateThe average return on equities reflects the interest required on an average risk.The excess of this rate of return over that expected from the above TreasuryBonds can then be taken as the premium expected for the average risk. On thisbasis the average risk premium could therefore be calculated as:

Average equity rate return 16%LessTreasury Bond rate 8%

——–Average risk premium discount rate 8%

——–

Therefore if construction is deemed to be half as risky as equities, the discountrate for construction investment could be assessed as:

No risk return 3%Construction premium risk (8% × ½) 4%

——–Average construction risk return discount rate 7%

——–

(d) A further approach to establishing a discount rate is to analyse transactionsinvolving the sale of comparable properties, and to utilise the ‘all risks’ yieldas the discount rate.

In the examples of the calculation of discount rates, concurrent interest andinflation rates have been added and subtracted in order to clarify themethodology. This is mathematically imprecise. The actual calculation willneed to be compounded.

PART 2, SECTION 2


In the ‘no risk return discount rate’ method, for example, the calculationshould be as follows:

Treasury Bond rate of return 8%Inflation rate 5%

Discount rate (i.e. Treasury Bond rate net of inflation

= 0.02857

= 2.857%

The same methodology should be adopted for actual calculations using othermethods. As an approximation however this may be ignored.

(e) In summary, the effect of future payments on an LCC calculation is ininverse proportion to the level of discount rates i.e. the higher the discount ratethe less effect future payments have on the LCC calculation. For example, arisk taking client is less likely to spend money on the building to reduce futurecosts since he can use this money to get a higher return elsewhere.

Selection of a suitable discount rate is crucial as it can overwhelm all otherdecisions.

Once the discount rate is established valuation tables can be used to convertfuture payments to present value. For example, the present value of £100 to bepaid in five years’ time at a discount rate of £4% =

£100 × 0.82192 (from valuation tables at 2.2.5.7 ‘present value of £1’) =£82.19

Such conversion of future payments to present value provides a basis forcomparing alternative expenditures.

2.2.2.4 THE COST AND FREQUENCY OF FUTURE PAYMENTS

The costs are generally dealt with using current prices (using the discount rateto allow for inflation), with assumptions made regarding when payments willoccur in the future. 2.2.4 includes possible sources for such data.

Depending upon requirements, some calculations will be relativelystraightforward (see the option appraisal exercise for internal doors as shown

(1 = Treasury Bond rate)= ——————————— – 1

(1 + Inflation rate)

1.08= —— – 1

1.05

PART 2, SECTION 2


in the worked examples). However, all expenditure throughout the life of thebuilding could be included if the total building analysis were required.

The major categories of costs are:

• capital costs• financing costs• operation costs• annual maintenance costs• intermittent maintenance, replacement and alterations costs• occupancy costs• residual values and disposal costs.

An expanded check list of costs is given in Appendix C.

Estimates for these costs will be based upon assumptions about future eventsand should be clearly stated. Indeed an additional advantage of life cyclecosting is that it requires design assumptions to be stated explicitly rather thanimplied.

Although current costs are generally used, it is important that future costassessment should reflect any expected divergence of a specific cost from thelevel of inflation allowed in the discount rate. For example, it would be unwiseto assume that market conditions would remain unchanged for any extendedperiod when tender levels for building work are very depressed. Someallowance should therefore be made to adjust current building prices to morenormal market conditions when pricing future building work.

The level of detail used will be dictated by the availability of information andthe requirements of the client.

The following costs for each category should be considered and wherenecessary established with the client.

(a) Capital costs – include land, building, professional fees, furniture andequipment, or permanent improvements thereto, which form assets for thebusiness to use in its operation, with an intended useful life of more than oneyear. The significance of any tax benefits and grants should be establishedwith the client.

(b) Financing costs – the method of funding the project should include, interalia, the cost effect of alternative sources of funds, the future flexibility offunds in terms of amounts and sources, and gearing. Consideration should alsobe given to

• the accounting effect of capital employed;• construction period finance charges and long-term finance costs; and• the taxation implications of the various options.

PART 2, SECTION 2


(c) Operation costs – include estimates of rent, rates, energy costs, cleaningcosts, building related staffing costs and other staffing costs.

(d) Annual maintenance costs – average maintenance costs are available butonce details of design are completed, a more relevant estimate can beproduced based on information obtained from manufacturers or maintenancemanagers.

(e) Intermittent maintenance, replacement and alteration costs – replacementcosts can be produced using normal cost estimating techniques.

In seeking a realistic assessment of the life of materials and components,reference should be made to manufacturers, maintenance managers and othersources of such data (as discussed in 2.2.4).

(f) Occupancy costs – the cost of performing the function for which thebuilding is intended (e.g. producing motor vehicles). Occupancy costs aredistinguished from operation costs, as they relate to costs attributable to aspecific process undertaken by the client, which may change within the life ofthe building. As an example, a car manufacturer may change to the productionof heavy goods vehicles. This would impact on his occupancy costs, whereashis building related operation costs could be relatively unchanged. Someclients might not require the surveyor to take these costs into account, as notrelating directly to the building.

(g) Residual values and disposal costs – estimate of the resale value and thecost of disposing of the building, plant, land and other assets after the expiryof the life cycle. Many buildings, particularly those with an ‘open marketvalue’ will have a significant residual value. Care should be taken in assessingthis value as it can have a major effect on the life cycle costing calculations(see Appendix A).

2.2.3 Tax Allowances, Incentives and Business Rates

INTRODUCTION

This Sub-section deals with the effect of taxation allowances and incentivesavailable for expenditure upon property and construction applicable in theUnited Kingdom to date, during the life of the asset. A glossary of terms isincluded in Appendix D.

Currently, legislation offers tax relief by allowing expenditure upon certainassets to be depreciated, and to be offset against a private commercialorganisation’s taxable profits.

Tax relief is available on both capital and revenue expenditure. Capital costsreceive this relief by way of capital allowances which are deductible itemsfrom the taxpayer’s taxation liability account. Maintenance costs are a chargeon the profit and loss account, which again reduces the tax payable.

PART 2, SECTION 2


The significance of tax relief depends upon the amount of allowableexpenditure. This varies considerably, being dependent upon the type andfunction of the asset, its design and sophistication (particularly in respect ofservices) and whether or not the project is a new building or a refurbishment.

The impact of tax relief on the life cycle evaluation lessens proportionatelywith the ratio of allowable expenditure to the total expenditure and the timingof relief, which is dependent on the annual rate of taxation allowances. Forexample, a new oil refinery will have a greater proportion of allowance than ashop unit shell. It is also worth noting that capital allowances tend to begreater on plant than on buildings, so making the use of efficient plant moreattractive than increasing the thermal efficiency of the building.

The impact of tax relief should be sensitively tested at the earliest possiblestage. A detailed estimate of the allowable expenditure should only beprepared if tax relief is found to be significant.

2.2.3.1 The following example shows the net discounted cost, after tax relief, of£1,000 spent on differing types of expenditure.

2.2.3.2 TYPES OF ALLOWANCES

The types of allowances and rates of depreciation often change.

Following the Finance Act 1985, capital allowances available that relate toReal Property were as follows:

No relief

Where capital allowances are allowed on 50% of capital expenditure

Where capital allowances are allowed on 100% of capital expenditure

Relief given on maintenance 100%

£ £ £ £

Expenditure 1,000 1,000 1,000 1,000

Tax relief assuming 35%Corporation Tax

1111 222 350

Net discounted cost aftertax relief

1,000 889 778 650

1 i.e. 50% of £1,000 × 25% reducing balance × 35% Corporation Tax with future allowances discounted at 10% per annum (a discounting calculation is required in order to establish the above figures).

PART 2, SECTION 2


Allowable expenditure Timing or percentage per annumPlant and machinery 25% (reducing balancing)Industrial buildings 4% (straight line)Agricultural buildings 4% (straight line)Dredging 4% (straight line)Scientific research 100%Cemeteries and crematoria Ratio based upon grave spaces usedDwelling houses let on assured tenancies –

only expenditure expended prior to1 April 1987 4% (straight line)

Hotels 4% (straight line)Enterprise zone building expenditure 100%Mining and certain related construction works 40% plus a ratio based upon usable life

Subsequent to the Finance Act 1997 first year allowances were changed and atthe time of writing were still being finalised.

In certain circumstances allowances may be at a higher rate i.e. they relate tospecific incentives, certain assisted projects or expenditure relates to atransitional period e.g. terms of the Finance Act 1984 (applicable until 31March 1987).

Different types of allowances, initial, first year and writing down areexplained in the Glossary of Terms (Appendix D).

Straight line allowances are calculated as a percentage of original cost and at4% the allowance is spread evenly over 25 years. A reducing balancecomputation is achieved each year by first deducting all previous allowanceamounts from original cost and then applying the allowable percentage to thebalance, i.e. 25% in the first year, 25% of 75% in the second, and so on. Whilethe building itself may be subject to a 4% straight line allowance the plant andmachinery in the building will receive a 25% reducing balance.

It should be noted that the significant part of capital allowance relief on a 25%reducing balance basis comes in the first five to seven years. This is includedin the above example where the tax relief amount is a product of theincremental annual writing down allowance, discounted.

Regional development grants (or their Northern Ireland equivalent) may alsobe available. These are not treated as taxable and may be disregarded whenassessing the capital cost upon which tax relief is calculated.

Currently the running and maintenance costs of an asset are deductible in full(i.e. 100% allowance) against taxable profits in the year of expenditure.

2.2.3.3 VALUE ADDED TAX (VAT)Capital allowances are given against the net capital cost to the taxpayer.Therefore, as VAT is part of that capital cost, clients will incur differingoverall capital expenditure for the same item depending upon whether theycan or cannot recover, or recover only a proportion of, the VAT.

PART 2, SECTION 2


2.2.3.4 CALCULATION OF THE EFFECT OF CAPITAL AND REVENUE ALLOWANCES

Before calculating the effect of taxation allowances, certain parameters needto be ascertained:

(a) the Corporation Tax and allowances rate that will be current at the date ofconstruction of first use;

(b) the future Corporation Tax and allowance rate at the date of replacement;

(c) the Corporation Tax rate current at dates between date of construction offirst use and the date of replacement, against which revenue running costs canbe charged;

(d) whether the owner will be liable to tax during the period between the dateof construction or first use and the date of replacement, and if the owner willhave sufficient taxable profits to use the allowances generated in any one year.

(e) whether the item’s economic life will be shorter than the tax write downperiod. This will either generate an added write down amount when it isdemolished, or if the item or building is to be sold at the end of its economiclife, its profit or loss on cost. These circumstances will generate a taxableprofit or loss on proceeds above or below the tax write down value and willattract a balancing adjustment;

(f) the value of the balancing allowances, charges or taxable profits needs tobe considered against the relevant Corporation Tax rate;

(g) the impact of these adjustments therefore needs to be taken into account inthe life cycle costing assessment.

Caution is further necessary as there are specific restrictions. The recipient hasto prove to the Inland Revenue that he qualifies for allowances (i.e. theentitlements are aimed at providing incentives for commercial organisationsand therefore expenditure upon residential property is largely excluded.Entitlements are also restricted between connected persons).

2.2.3.5 DYNAMICS

The surveyor should therefore appreciate the variables and frequent changesthat occur in respect to the application of taxation allowances.

These arise because:

(a) the Government uses taxation to impose fiscal policy and influence theeconomy and therefore statutes are introduced amending previous rates ofdepreciation, regulations and entitlements;

(b) the interpretation of entitlement is affected by case law precedents.

PART 2, SECTION 2


(c) the Inland Revenue practices and extra statutory concessions develop toaddress specific issues or vagaries.

2.2.3.6 APPLICATIONS

Taxation allowances provide the opportunity for innovative fundingarrangements whereby the tax relief can be ‘exported’ to a party who canenjoy more benefit from the entitlement.

They also need to be advised during property transfers so the relevantbalancing adjustments can be calculated and the purchasers advised of theirproper entitlements.

2.2.3.7 WORKED EXAMPLES

Worked example 2.2.5.3 summarises the effect of capital and revenueallowances. Worked example 2.2.5.6 includes a detailed calculation of thecapital and revenue allowances.

Business Rates

Large plant and machinery regarded as an integral part of the building canattract additional rates which can be influenced by design niceties (such as howthe plant is covered over). Expert advice should be sought in such a situation.

Further reading for taxation

Tolley’s Capital Allowances, Tolley Publishing Co. Ltd – generally publishedannually.

Butterworths Yellow Tax Handbook, Butterworth & Co. (Publishers) Ltd –abstract of Statutes

Tax Statutes and Statutory Instruments, CCH Editions Ltd – incorporatingextra statutory concessions

2.2.4 Data Sources

Lack of data in a suitable format for maintenance, replacement and energycosts is said to be a significant reason for LCC rarely being carried out atpresent. Notwithstanding this, Building Surveyors and Facility Managers willoften have valuable in-house data. Furthermore, professional judgementshould not be disregarded.

LCC calculations require information regarding the durability ofmaterials/components, and/or energy costs. Lack of such accurate data in asuitable format may affect the credibility of the LCC calculation. However,while historic data is useful, reality is dependent upon individual design,installation and usage as well as technical development.

PART 2, SECTION 2


Whilst the selection of data sources given in Appendix F is notcomprehensive, it gives an indication of the level of information available.Trade literature which is a prime source of detailed information is notincluded.

2.2.5 Worked Examples

INTRODUCTION

Life cycle costing can be used in numerous situations. The intention of thisSub-section is to give the reader an appreciation of its application, as used bysurveyors in practice, and the relative complexities of associated calculations,ranging from a simple elemental option appraisal to complex total buildinganalyses.

The examples follow in order of complexity, worked examples 2.2.5.1 and2.2.5.2 will readily convey the principles of life cycle costing includingdiscounting. The remainder consider more detailed scenarios.

2.2.5.1 DESIGN OPTION: INTERNAL DOORS

This example is kindly provided by Messrs Gardiner & Theobald, CharteredQuantity Surveyors. The objective is to evaluate four comparativespecifications over a building life of 60 years using a discount rate of 4% (7%interest rate less 3% inflation rate). The information is summarised in the tablebelow with an explanation of the calculation for option 1 detailed at (a) to (d)below. Any tax implications are excluded.

(a) The present value for purchasing the doors is obviously the same as thecapital cost: £35,000

(b) For the annual running costs:• £10.89/m2 × 20 m2 = £218• £218 incurred every year for 60 years at 4% discount

= £218 × 22.6* = £4,927 present value

(c) For maintenance the present cost of £6,040 for new ironmongery andrepainting taking place in, say Year 12 at 4% discount

= £6,040 × 0.62459** = £3,773

(d) The replacement cost after 40 years

= £35,000 (present cost) × 0.20828** = £7,290

• The total present value of the capital cost, annual running cost,maintenance and replacement costs

= £57,037 showing option 1 is the most expensive life cycle cost

* from valuation tables at 2.2.5.7 (year’s purchase or present value of £1per period)

**from valuation tables at 2.2.5.7 (present value of £1)

PART 2, SECTION 2


PROJECT: Life Cycle Model SHEET NUMBER: LCCM5ELEMENT: Internal Doors

Unit: 20 m2

PROJECT LIFE 60 YearsDiscount Rate 4.00% per annum

Discount Rate 4.00% per annum(Interest Rate (7%), Inflation (3%))

COSTS

OPTION 1Aluminium Glazed

OPTION 2Hardwood Glazed

Vision Panels

OPTION 3Softwood

OPTION 4Metal

Finish Life40 Years

Finish Life30 Years

Finish Life20 Years

Finish Life30 Years

MaintenancePeriod4 Years




EstimatedCost

PresentValue

EstimatedCost

PresentValue

EstimatedCost

PresentValue

EstimatedCost

PresentValue

Capital CostsAluminium Glazed £ 1750.00 m2 35,000 35,000Hardwood Glazed

Vision Panels £ 1000.00 m2 20,000 20,000Softwood £ 700.00 m2 14,000 14,000Metal £ 850.00 m2 17,000 17,000Contingency – – – –

Total Year 1 Capital Costs 35,000 20,000 14,000 17,000

Annual Running CostsAluminium Glazed £ 10.89 m2 218 4,927Hardwood GlazedVision Panels £ 9.99 m2 200 4,520Softwood £ 5.90 m2 118 2,670Metal £ 17.99 m2 360 8,140

Total Annual Running Costs 13,068 4,927 11,988 4,520 7,080 2,670 21,588 8,140Maintenance Year Present

CostOPTION 1 Repaint 4 340 340 291

Repaint 8 340 340 248New ironmongery

Repaint 12 6,040 6,040 3,773Repaint 16 340 340 182Repaint 20 340 340 155

New ironmongeryRepaint 24 6,040 6,040 2,356Repaint 28 340 340 113Repaint 32 340 340 97


New ironmongeryRepaint 48 6,040 6,040 919Repaint 52 340 340 44Repaint 56 340 340 38

OPTION 2 Repaint 4 300 300 256Repaint 8 300 300 219




PART 2, SECTION 2


PROJECT: Life Cycle Model (continued SHEET NUMBER: LCCM5ELEMENT: Internal Doors

Unit: 20 m2

PROJECT LIFE 60 YearsDiscount Rate 4.00% per annum

Discount Rate 4.00% per annum(Interest Rate (7%), Inflation (3%))

COSTS

OPTION 1Aluminium Glazed

OPTION 2Hardwood Glazed

Vision Panels

OPTION 3Softwood

OPTION 4Metal

Finish Life40 Years

Finish Life30 Years

Finish Life20 Years

Finish Life30 Years





EstimatedCost

PresentValue

EstimatedCost

PresentValue

EstimatedCost

PresentValue

EstimatedCost

PresentValue

Maintenance Year PresentCost


OPTION 3 Repaint 4 320 320 274Repaint 8 320 320 234





OPTION 4 Repaint 4 300 300 256Repaint 8 300 300 219Repaint 12 6,100 6,100 3,810Repaint 16 300 300 160Repaint 20 300 300 137Repaint 24 6,100 6,100 2,380Repaint 28 300 300 100Repaint 32 300 300 86Repaint 36 6,100 6,100 1,486Repaint 40 300 300 62Repaint 44 300 300 53Repaint 48 6,100 6,100 928Repaint 52 300 300 39Repaint 56 300 300 33

Replacement Year PresentCost

6,100 3,810

OPTION 1 40 35,000 35,000 7,290OPTION 2 30 20,000 20,000 6,166OPTION 3 20 14,000 14,000 6,389

40 14,000 14,000 2,916OPTION 4 30 17,000 17,000 5,241

Total Maintenance/Replacement Costs 62,560 17,109 47,000 15,776 46,480 15,917 44,400 14,993

Total Running Costs 75,628 22,037 58,988 20,297 53,560 18,586 65,988 23,132

Total Net Present Value of Life Cycle Costs 57,037 40,297 32,586 40,132

PART 2, SECTION 2


2.2.5.2 BUILDING SERVICES DESIGN OPTION: AIR CONDITIONING AND UNDER FLOOR

TRUNKING VERSUS HOT WATER HEATING AND RING MAIN ELECTRICS

This example is again provided by Messrs Gardiner & Theobald. Theobjective is to evaluate the above options for a building of 3,000 m2 floor area,a life of 60 years and a discount rate of 4% (7% interest less 3% inflation). Theinformation is summarised overleaf with the methodology for the calculationbeing exactly as that for the previous example. Any taxation implications areexcluded.

PART 2, SECTION 2


Element: ServicesUnit: 3,000 m2

PROJECT LIFE 60 YearsDiscount Rate 4% per annum

Discount Rate 4.00% per annum(Interest Rate (7%), Inflation (3%)

COSTS

OPTION 1Air ConditioningU/Floor Trunking

OPTION 2HW Heating &

Ring Main Electrics

OPTION 3 OPTION 4

Finish Life15 Years

Finish Life25 Years

Finish Life Finish Life



MaintenancePeriodYears

MaintenancePeriodYears

EstimatedCost

PresentValue

EstimatedCost

PresentValue

EstimatedCost

PresentValue

EstimatedCost

PresentValue

Capital CostAir Conditioning U/Floor Trunking £ 250 m2 750,000 750,000HW Heating & Ring Main Electric £ 150 m2 450,000 450,000Contingency 5% 37,500 22,500

Total Year 1 Capital Costs 787,500 472,500

Annual Running CostsAir Conditioning U/Floor Trunking £ 25.00 m2 75,000 1,696,762HW Heating & Ring Main Electric £ 5.00 m2 15,000 339,352

Total Annual Costs 4,500,000 1,696,762 900,000 339,352

Maintenance Year PresentCost

OPTION 1 5 5,000 5,000 4,110Overhall Equipment 10 5,000 5,000 3,378Overhall Equipment 15 5,000 5,000 2,776Overhall Equipment 20 5,000 5,000 2,282Overhall Equipment 25 5,000 5,000 1,876Overhall Equipment 30 5,000 5,000 1,542Overhall Equipment 35 5,000 5,000 1,267Overhall Equipment 40 5,000 5,000 1,041Overhall Equipment 45 5,000 5,000 856Overhall Equipment 50 5,000 5,000 704Overhall Equipment 55 5,000 5,000 578

OPTION 2 7 2,000 2,000 1,520Genearl repaint/repair 14 2,000 2,000 1,155Genearl repaint/repair 21 2,000 2,000 878Genearl repaint/repair 28 2,000 2,000 667Genearl repaint/repair 35 2,000 2,000 507Genearl repaint/repair 42 2,000 2,000 385Genearl repaint/repair 49 2,000 2,000 293Genearl repaint/repair 56 2,000 2,000 222

OPTION 3

OPTION 4

Replacement Year Present CostOPTION 1 15 600,000 600,000 333,159

30 600,000 600,000 184,99145 600,000 600,000 102,719

OPTION 2 25 300,000 300,000 112,53550 300,000 300,000 42,214

OPTION 3

OPTION 4

Total Maintenance/Replacement Costs 1,855,000 641,278 616,000 160,375

Total Running Costs 6,355,000 2,338,040 1,516,000 499,728

Total Net Present Value of LifeCycle Cost 3,125,540 972,228

PART 2, SECTION 2


2.2.5.3 MAINTENANCE OPTION: WITH/WITHOUT CLEANING GANTRY

This example is kindly provided by Gerald Hall.

The following figure compares two options, firstly to provide the cleaninggantry and secondly to omit the gantry. The capital cost and costs associatedwith anticipated maintenance were calculated by using normal cost estimatingtechniques.

Assumed criteria:

– Building Life 25 years– VAT assumed to remain at current levels with the client

being an ‘end user’ under VAT rules 17.5%– Gantry capital cost £30,000– The gantry will have a residual value £2,000– Capital cost for opening lights in lieu of gantry £5,000– Discount rate (assuming the interest rate will average 11%

over 25 years and the inflation rate 6%) 5%– Corporation Tax 33%

Taxation Calculation

The capital cost for plant and machinery receives a 25% reducing balance.Maintenance and running costs receive 100% allowance.

Year 1 with gantry calculation:£

Capital £35,250 × 25% × 33% = 2,908Maintenance £881 × 33% = 291

——–3,199

——–Year 2 with gantry calculation:

£Capital £35,250 less 25% × 25% × 33% = 2,181Maintenance £881 × 33% = 291

——–2,472

——–

The methodology applies for the rest of the 25 years as summarised overleaf.

The client initially considered that the gantry would pay for itself due tosavings in maintenance and cleaning cost.

However:

with gantry investment £36,510 present valuewithout gantry investment £26,447 present value

PART 2, SECTION 2


COM

PARA

TIVE

COM

PONE

NT L

IFE

CYCL

E CO

STIN

GCL

IENT

:PR

OJEC

T TI

TLE:

Ret

ail D

evel

opm

ent/S

hopp

ing

Mal

lJO

B NO

:OP

TION

: Cle

anin

g ‘w

ith’ g

antry

– c

urta

in w

allin

g to

new

faca

ce

Year

Cost

sTO

TAL

VAT

17.5

%TO

TAL

inc

VAT

Less

tax

allo

wanc

eNE

T TO

TAL

Pres

ent v

alue

of £1

@ 5

%

PRES

ENT

VALU

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MUL

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ESEN

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Capi

tal

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alue

Annu

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term

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t

030

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––

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––

30,0

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35,2

500

35,2

501.

000

35,2

5035

,250

1–

––

750

––

–75

013

188

13,

199

(2,3

18)

0.95

2(2

,207

)33

,043

2–

––

750

––

–75

013

188

12,

472

(1,5

91)

0.90

7(1

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)31

,600

3–

––

750

250

––

1,00

017

51,

175

2,02

4(8

49)

0.86

4(7

33)

30,8

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4–

––

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––

–75

013

188

11,

518

(637

)0.

823

(524

)30

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5–

––

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––

–75

013

188

11,

211

(330

)0.

784

(258

)30

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6–

––

750

1,75

0–

–2,

500

438

2,93

81,

660

1,27

80.

746

953

31,0

37

7–

––

750

––

–75

013

188

180

873

0.71

152

31,0

89

8–

––

750

––

–75

013

188

167

920

20.

677

137

31,2

26

9–

––

750

250

––

1,00

017

51,

175

679

496

0.64

532

031

,546

10–

––

750

––

–75

013

188

150

937

20.

614

229

31,7

75

11–

––

750

––

–75

013

188

145

442

70.

585

250

32,0

24

12–

––

750

1,75

0–

–2,

500

438

2,93

81,

092

1,84

60.

557

1,02

833

,052

13–

––

750

––

–75

013

188

138

349

80.

530

264

33,3

16

14–

––

750

––

–75

013

188

136

052

10.

505

263

33,5

80

15–

––

750

250

––

1,00

017

51,

175

440

735

0.48

135

433

,933

16–

––

750

––

–75

013

188

133

055

10.

458

253

34,1

86

17–

––

750

––

–75

013

188

132

056

10.

436

245

34,4

31

18–

––

750

1,75

0–

–2,

500

438

2,93

899

11,

947

0.41

680

935

,239

19–

––

750

––

–75

013

188

130

757

40.

396

227

35,4

67

20–

––

750

––

–75

013

188

130

357

80.

377

218

35,6

85

21–

––

750

250

––

1,00

017

51,

175

397

778

0.35

927

935

,964

22–

––

750

––

–75

013

188

129

858

30.

342

199

36,1

63

23–

––

750

––

–75

013

188

129

658

50.

326

191

36,3

54

24–

––

750

1,75

0–

–2,

500

438

2,93

897

31,

965

0.31

060

936

,963

25–

––

750

––

(2,0

00)

(1,2

50)

131

(1,1

19)

311

(1,4

30)

0.29

5(4

22)

36,5

41

TOTA

L PRE

SENT

VALU

E AT

END

OF

INVE

STM

ENT

LIFE

36,5

41

PART 2, SECTION 2


COM

PARA

TIVE

COM

PONE

NT L

IFE

CYCL

E CO

STIN

G(c

ontin

uatio

n of

tabl

e on

pag

e 21

)

FO

RE

CA

ST

ER

’S A

SS

UM

PT

ION

S

1T

he c

apita

l cos

t inc

lude

s al

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ance

s fo

r pr

elim

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ies

and

asso

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ed b

uild

ers

wor

k.

2D

etai

ls o

f the

mai

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ance

req

uire

men

ts a

nd c

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stim

ates

can

be

prov

ided

up

on r

eque

st.

3T

he li

fe c

ycle

cos

ting

is b

ased

on

an a

gree

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vest

men

t life

of 2

5 ye

ars.

4It

is a

ssum

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at V

AT w

ill r

emai

n at

aro

und

17.5

% a

nd th

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is th

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nd

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’ und

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AT r

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.

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here

are

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with

this

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ion.

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plan

t and

mac

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00%

tax

allo

wan

ce –

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908

7M

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unni

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with

100

% a

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ance

– ie

1st

yea

r29

1—

——

tota

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199

8Ta

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ance

s ar

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t to

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d ag

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ent.

9D

isco

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ate:

(i)In

tere

st r

ate

– 11

% a

vera

ge o

ver

25 y

ears

;

(ii)

Infla

tion

rate

– 7

% a

vera

ge o

ver

25 y

ears

;

(1 +

11%

)—

——

——

(1 +

7%

) –

1 ×

100

% =

5%

dis

coun

t rat

e.

COM

PARA

TIVE

COM

PONE

NT L

IFE

CYCL

E CO

STIN

GCL

IENT

:PR

OJEC

T TI

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Ret

ail D

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opm

ent/S

hopp

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Mal

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B NO

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: Cle

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g ‘w

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antry

– c

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in w

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ce

Year

Cost

sTO

TAL

VAT

17.5

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TAL

inc

VAT

Less

tax

allo

wanc

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Pres

ent v

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of £1

@ 5

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PRES

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55,

875

05,

875

1.00

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5,87

5

1–

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1,50

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1,50

026

31,

763

582

1,18

10.

952

1,12

46,

999

2–

––

1,50

0–

––

1,50

026

31,

763

582

1,18

10.

907

1,07

18,

070

3–

––

1,50

0–

––

1,50

026

31,

763

582

1,18

10.

864

1,02

09,

090

4–

––

1,50

0–

––

1,50

026

31,

763

582

1,18

10.

823

971

10,0

61

5–

––

1,50

0–

––

1,50

026

31,

763

582

1,18

10.

784

925

10,9

86

6–

––

1,50

01,

500

––

3,00

026

33,

525

1,16

32,

362

0.74

61,

763

12,7

49

7–

––

1,50

0–

––

1,50

026

31,

763

582

1,18

10.

711

839

13,5

87

8–

––

1,50

0–

––

1,50

026

31,

763

582

1,18

10.

677

799

14,3

86

9–

––

1,50

0–

––

1,50

026

31,

763

582

1,18

10.

645

761

15,1

47

10–

––

1,50

0–

––

1,50

026

31,

763

582

1,18

10.

614

725

15,8

72

11–

––

1,50

0–

––

1,50

026

31,

763

582

1,18

10.

585

690

16,5

62

12–

––

1,50

0–

––

6,50

01,

138

7,63

82,

521

5,11

70.

557

2,84

919

,411

13–

––

1,50

0–

––

1,50

026

31,

763

582

1,18

10.

530

626

20,0

37

14–

––

1,50

0–

––

1,50

026

31,

763

582

1,18

10.

505

596

20,6

34

15–

––

1,50

0–

––

1,50

026

31,

763

582

1,18

10.

481

568

21,2

02

16–

––

1,50

0–

––

1,50

026

31,

763

582

1,18

10.

458

541

21,7

42

17–

––

1,50

0–

––

1,50

026

31,

763

582

1,18

10.

436

515

22,2

57

18–

––

1,50

01,

500

––

3,00

052

53,

525

1,16

32,

362

0.41

698

123

,239

19–

––

1,50

0–

––

1,50

026

31,

763

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1,18

10.

396

467

23,7

06

20–

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0–

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1,50

026

31,

763

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10.

377

445

24,1

51

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1,50

0–

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1,50

026

31,

763

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1,18

10.

359

424

24,5

75

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0–

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1,50

026

31,

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1,18

10.

342

404

24,9

78

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31,

763

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1,18

10.

326

384

25,3

63

24–

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01,

500

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026

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525

1,16

32,

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0.31

073

226

,095

25–

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31,

763

582

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10.

295

349

26,4

44

TOTA

L PRE

SENT

VAL

UE A

T END

OF I

NVES

TMEN

T LIFE

26,4

44

PART 2, SECTION 2


COM

PARA

TIVE

COM

PONE

NT L

IFE

CYCL

E CO

STIN

G(c

ontin

uatio

n of

tabl

e on

pag

e 23

)

FO

RE

CA

ST

ER

’S A

SS

UM

PT

ION

S

1T

he c

apita

l cos

t inc

lude

s al

low

ance

s fo

r op

enin

g lig

hts

now

req

uire

d, w

ithou

t ca

pita

l allo

wan

ces.

2D

etai

ls o

f the

mai

nten

ance

req

uire

men

ts a

nd c

ost e

stim

ates

can

be

prov

ided

up

on r

eque

st.

3T

he li

fe c

ycle

cos

ting

is b

ased

on

an a

gree

d in

vest

men

t life

of 2

5 ye

ars.

4It

is a

ssum

ed th

at V

AT w

ill r

emai

n at

aro

und

17.5

% a

nd th

e cl

ient

is th

e ‘e

nd

user

’ und

er V

AT r

ules

.

5T

here

are

dis

posa

l cos

t adv

anta

ges

with

this

opt

ion.

6C

apita

l cos

t as

plan

t and

mac

hine

ry w

ith 1

00%

tax

allo

wan

ce –

NIL

7M

aint

enan

ce a

nd r

unni

ng c

osts

with

100

% a

llow

ance

.

8Ta

xatio

n al

low

ance

s ar

e su

bjec

t to

nego

tiatio

n an

d ag

reem

ent.

9D

isco

unt r

ate:

(i)In

tere

st r

ate

– 11

% a

vera

ge o

ver

25 y

ears

;

(ii)

Infla

tion

rate

– 7

% a

vera

ge o

ver

25 y

ears

;

(1 +

11%

)—

——

——

(1 +

7%

) –

1 ×

100

% =

5%

dis

coun

t rat

e.

PART 2, SECTION 2


2.2.5.4 HOUSING SINKING FUND (BASED UPON COSTED PLANNED MAINTENANCE)(a) BackgroundThis example is kindly provided by Ian Sloan of Armour ConstructionConsultants.

Housing Associations and Co-operatives in Scotland generally request thattheir investment/sinking fund requirements are prepared in accordance withthe Scottish Federation of Housing Associations’ (SFHA) ‘PlannedMaintenance and Repairs (Revised), Guidance Booklet No 3’ published inJanuary 1997.

There are various ways of presenting the data. One method widely accepted isshown below, on two spreadsheets, a Planned Maintenance Programme, and a‘costed’ Planned Maintenance Programme which establishes in this case thepresent value of future costs.

The spreadsheets can be ‘fine tuned’ to meet specific client requirements. Indue course they can be adapted to allow historical information to be fed intothe programme, which then allows actual costs and maintenance periodsincurred to form the basis of the life cycle costs, thereby providing a moreaccurate projection.

(b) BriefThe client needed to establish the capital to be invested for a new buildhousing project to cover all maintenance and repairs for the next 60 years. Thediscount rate is 6%.

An example of the calculation shown overleaf is:

Year 15, total maintenance and repair expenditure at current prices

= £9,013£9,013 × 0.41726* = £3,761

i.e. £3,761 would have to be invested now for 15 years at 6% compoundinterest in order to meet the costs in Year 15 of £9,013. In summary £24,942would have to be invested now at 6% to cover all maintenance and repairs forthe next 60 years.

The data could also be presented as an annual sinking fund e.g. the amount tobe invested for each of 15 years at 6% compound interest in order to meet thecosts in Year 15 of £9,013 is:

£9,013 × 0.04296** = £387

* from valuation tables at 2.2.5.7 (present value of £1)** from valuation tables at 2.2.5.7 (annual sinking fund)

PART 2, SECTION 2


PLAN

NED

MAI

NTEN

ANCE

PRO

GRAM

ME

KEY

� =

Insp

ect/C

onsid

er�

= In

spec

t and

Rem

edy

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t &

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PLE

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lace

men

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98Cu

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ENT

SUB-

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ENT

COM

PONE

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23

45

67

89

1011

1213

1415

1617

1819

2021

2223

2425

2627

2829

30Co

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PART 2, SECTION 2


PLAN

NED

MAI

NTEN

ANCE

PRO

GRAM

ME

KEY

� =

Insp

ect/C

onsid

er�

= In

spec

t and

Rem

edy

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Test

unt

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= In

spec

t &

EXAM

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(Con

tinue

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= R

enew

al/R

epla

cem

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unt

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lace

men

tre

plac

emen

t�

= D

ecor

ate

Date

Prin

ted

02/1

2/98

Cum

ulat

ive

CODE

ELEM

ENT

SUB-

ELEM

ENT

COM

PONE

NT1

23

45

67

89

1011

1213

1415

1617

1819

2021

2223

2425

2627

2829

30Co

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SER-

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5.8

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PART 2, SECTION 2


PLAN

NED

MAI

NTEN

ANCE

PRO

GRAM

ME

(COS

TED)

EXAM

PLE

Date

Prin

ted

02/1

2/98

Year

sCu

mul

ativ

e

CODE

ELEM

ENT

SUB-

ELEM

ENT

COM

PONE

NT1

23

45

67

89

1011

1213

1415

1617

1819

2021

2223

2425

2627

2829

30Co

st

STRU

C-TU

RE

1.1

Stru

ctur

e1.

1.1.

Roo

fsTim

ber

5050

5050

5050

300

1.1.

2. F

loors

)Tim

ber )

100

100

100

100

100

100

600

1.1.

3. O

peni

ngs

)Co

ncre

te/B

rick )

01.

2St

airs

1.2.

1. S

tairs

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r25

2525

2525

2515

0

1.2.

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andr

ails

etc

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r14

014

00

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FABR

IC

2.1

Roof

2.1.

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7575

7575

7575

7575

7575

7575

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2380

7575

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7575

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4,55

5

2.1.

2. F

lash

ings

Lead

2020

2020

2020

2020

2015

020

2020

2020

2020

2020

150

2020

2020

2020

2020

2015

099

02.

1.3.

Gut

ters

etc

UPVC

2020

2020

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2020

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220

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220

1,00

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inc

inc

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290

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1 Do

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55

55

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55

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145

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6060

6060

6060

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6054

0

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inc

inc

inc

inc

6012

0

INT

FABR

IC

3.1

Inte

rnal

wal

ls3.

1.1.

Wal

ls &

Open

’sBr

ick/p

boar

d10

1010

1010

1060

3.1.

2. W

all T

iling

Cera

mic

inc

inc

275

inc

inc

275

550

3.2

Ceilin

gs3.

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Ceil

ings

Plas

terb

oard

2020

2020

2020

120

3.3

Floor

s3.

3.1.

Floo

ring

Timbe

r/Vin

yl50

5029

050

5029

078

03.

3.2.

Skir

tings

Timbe

rin

cin

cin

cin

cin

cin

c0

3.4

Door

s3.

4.1.

Doo

r Ope

ratio

nTim

ber

8383

8383

8383

8383

8383

8383

8383

8383

8383

8383

8383

8383

8383

8383

8312

003,

607

3.4.

2. Ir

onm

onge

ryin

cin

cin

cin

cin

cin

cin

cin

cin

cin

cin

cin

cin

cin

c48

0in

cin

cin

cin

cin

cin

cin

cin

cin

cin

cin

cin

cin

cin

c48

096

0

FITT

S FU

RN

4.1

Fittin

gs &

Furn

ish4.

1.1.

Kitc

hen

Units

Units

/Wor

ktop

s60

6060

6060

6060

6060

800

6060

6060

6060

6060

6080

060

6060

6060

6060

6060

800

4,02

04.

1.2.

Gra

b ra

ils e

tc10

1010

1010

1010

1010

200

1010

1010

1010

1010

1020

010

1010

1010

1010

1010

200

870

SER-

VICE

S

5.1

Sani

tary

App

lianc

es5.

1.1.

San

itary

war

eW

cs, b

aths

, whb

s5

55

55

55

55

55

55

545

05

55

55

55

55

55

55

545

01,

040

5.2

Serv

ices E

quip

men

t5.

2.1.

Kitc

hen

sinks

Stai

nles

s st

eel

inc

inc

inc

inc

inc

inc

inc

inc

inc

160

inc

inc

inc

inc

5in

cin

cin

cin

c16

0in

cin

cin

cin

cin

cin

cin

cin

cin

c16

048

5

5.3

Wat

er S

uppl

y5.

3.1.

Wat

er st

orag

e12

512

512

512

512

525

087

5

5.3.

2. W

ater

pip

es e

tcin

cin

cin

cin

cin

c12

512

55.

3.3.

Insu

lation

inc

inc

inc

inc

inc

inc

0

5.4.

1In

tern

al d

rain

age

5.4.

2.1.

Pip

es &

Fitt

ns60

6060

6060

6036

05.

4.2

Disp

osal

inst

5.4.

1.1.

Pip

es &

Fitt

nsin

cin

cin

cin

cin

cin

c0

5.5

Heat

sour

ce5.

1.1.

Rad

iato

rs/fi

res

2020

650

2020

650

1,38

05.

6He

at sy

stem

5.6.

1. B

oiler

s/eq

uipm

ent

4040

4040

4040

4040

4075

040

4040

4040

4040

4040

750

4040

4040

4040

4040

4075

03,

330

5.7

Vent

ilatio

n5.

7.1.

Fans

etc

55

55

55

55

520

05

55

55

55

55

200

55

55

55

55

520

073

55.

8El

ectri

cal in

st5.

8.1.

Pow

er a

nd li

ghtin

g10

010

015

0010

010

015

003,

400

PART 2, SECTION 2


PLAN

NED

MAI

NTEN

ANCE

PRO

GRAM

ME

(COS

TED)

(Con

tinue

d)EX

AMPL

EDa

te P

rinte

d02

/12/

98Ye

ars

Cum

ulat

ive

CODE

ELEM

ENT

SUB-

ELEM

ENT

COM

PONE

NT1

23

45

67

89

1011

1213

1415

1617

1819

2021

2223

2425

2627

2829

30Co

st

SER-

VICE

S

5.8.

2. S

witc

hgea

rin

cin

cin

cin

cin

cin

c0

5.8.

3. E

xtern

al Li

ghtin

gCl

ose L

ight

inc

100

inc

100

inc

inc

200

5.9

Gas i

nsta

llatio

n5.

9.1.

Equip

men

t & su

pply

2525

2525

2525

150

5.10

Lift i

nsta

llatio

n–

05.

11Pr

otec

tive

inst

5.11

.1. T

V sy

stem

etc

2515

025

150

2515

052

5

5.11

.2. S

mok

e de

tect

ors

1010

1010

7510

1010

1075

1010

1010

7510

1010

1075

1010

1010

7510

1010

1075

690

5.1.

2Co

mm

unica

tion

5.12

.1. D

oor e

ntry

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

0

5.12

.2. T

eleph

ones

1010

100

1010

100

240

0

EXT

WOR

KS

6.1.

1La

ndsc

apin

g6.

1.1.

1. R

oads

, foo

tpat

hs50

5050

5050

5050

5050

5050

5050

5050

050

5050

5050

5050

5050

5050

5050

5050

02,

400

6.1.

1.2.

Gra

ss/p

lant

ing

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

750

3,65

06.

1.2

Boun

darie

s & E

nclos

ures

6.1.

2.1.

Fen

ces a

nd ga

tes

1010

500

1010

500

1010

500

1010

500

1010

3000

1010

500

1010

500

1010

500

1010

500

1010

3000

10,2

00

6.1.

2.2.

Wal

ls et

c50

5050

5050

5030

06.

1.2.

3. C

lothe

s pole

s40

4040

4020

040

4040

4075

01,

270

6.2

Drai

nage

6.2.

1. P

ipes

& fi

tting

s10

010

010

010

010

050

01,

000

6.2.

2. M

anho

les e

tcin

cin

cin

cin

cin

cin

c0

6.3

Exte

rnal

ser

vices

6.3.

1. D

ucts

& ca

bles

2525

2525

2540

052

56.

4Ou

tbui

ldin

gs6.

4.1.

Bin

stor

es/p

latts

5050

5050

5050

075

0

TOTA

L COS

T PER

YEAR

£51

851

812

0851

814

4812

0851

851

812

0840

6851

812

0851

851

890

1351

851

812

0851

886

7310

4851

851

812

0814

4851

812

0851

851

815

460

57,9

02(Y

rs 1

–30)

PRES

ENT

VALU

E48

946

110

1441

010

8285

234

432

571

522

7227

360

024

322

937

6120

419

242

317

127

0430

814

413

629

833

711

425

110

196

2692

2124

1 Yr

s 1–3

0)(a

t disc

ount

rate

of 6

%)

Repe

at Ye

ars

3132

3334

3536

3738

3940

4142

4344

4546

4748

4950

5152

5354

5556

5758

5960

(Yrs

31–

60)

Curre

nt C

ost p

er yr

518

518

1208

518

1448

1208

518

518

1208

4068

518

1208

518

518

9013

518

518

1208

518

8673

1048

518

518

1208

1448

518

1208

518

518

1546

0£5

7902

£115

804

(Cur

rent

cost

)Pr

esen

t Val

ue85

8017

771

188

148

6057

124

395

4810

542

4065

536

3374

3047

154

2524

5259

2044

1817

469

£370

1£2

4942

(Pre

sent

Valu

e)

PART 2, SECTION 2


2.2.5.5 CENTRALISATION OF OFFICES STUDY

(a) BriefThis example is kindly provided by Gerald Hall.

The client wished to investigate a centralisation (of offices) strategy as ameans to improve business efficiency in an increasingly competitive market.The offices were originally spread out over three main sites.

Three options were identified:

• do nothing, although this would require repair and refurbishment of theexisting offices;

• centralise at location A and construct additional new offices;• centralise at location B and construct additional new offices;

(b) Capital CostsThese were calculated using traditional cost estimating and included cyclicalcapital costs. The distinction between cyclical capital costs and cyclicalmaintenance costs is often vague, those costs in excess of £10,000 areincluded in the capital cost element under the assumption they would be partof the capital cost programme.

Relocation costs (labour and plant required to transport office equipment,stores, machinery, compound materials and stationery items) are includedunder Year 0 on the assumption they would be complete within 12 months anda contingency for new furniture included.

(c) Revenue Costs• fuel: the energy manager provided existing costs which were used as the

basis for the new proposal;• water costs were excluded (the client was a water company);• maintenance costs under £10,000;• rates were not provided by the client by the deadline and are therefore

excluded;• cleaning costs are based on existing cleaning costs and judgement;• security costs are based on existing security costs and judgement;• operation costs for this client included waste removal, water coolers,

sanitary hire, mail collections, fire prevention, telephones, hygiene,insurances. Again this was based on existing client data plus judgement.Even with constant staff numbers these costs reduce with centralisation;

• staffing costs were excluded as they would remain constant.

(d) Capital IncomeOptions 2 and 3 will free up existing space for sale and rent which are includedas a deduction against expenditure.

(e) Discount RatesIn accordance with the client guidelines the investment horizon is 40 years andthe discount rate 8%.

PART 2, SECTION 2


(f) Tax ImplicationsTax allowances have been excluded on the basis that this study is a minor partof the overall company business and assumptions are not appropriate.

However it is worth noting that:

• Value Added Tax on all capital costs would affect the financial benefitsof options 2 and 3 which require considerable capital expenditure;

• Capital Allowances would help support options 2 and 3.

(g) Renewal and Refurbishment CostsGeneral building refurbishment has been allowed in ten-year cycles; electricaland mechanical plant replaced after 20 years with a refurbishment after tenyears or mid-life; felt roofs replaced after 20 years; profiled metal decking,windows and doors after 30 years. All costs are calculated using traditionalcost estimating and included as present costs.

(h) Cost ComparisonThe detailed calculation is summarised over for option 2 which is the mostcost effective over 40 years.

Year 0 Expenditure Year 40 Net Present Value£ £

Option 1 £203,000 £1,960,950Option 2 £1,164,900 £1,607,896Option 3 £1,262,100 £1,843,068

(i) Sensitivity AnalysisAn analysis of different discount rates and time frame confirm option 2 as themost favourable.

Discount Life Cycle Option 1 Option 2 Option 3Rates £ £ £

6% 0 287,900 1,164,900 1,262,1006% 20 1,859,000 1,593,000 1,826,1006% 40 2,444,420 1,762,522 2,047,091

8% 0 287,900 1,164,900 1,262,1008% 20 1,614,000 1,515,000 1,721,1008% 40 1,960,950 1,607,896 1,843,068

10% 0 287,900 1,164,900 1,262,10010% 20 1,423,000 1,451,000 1,638,10010% 40 1,632,562 1,506,721 1,709,146

PART 2, SECTION 2


CLIE

NTW

ATER

COM

PANY

LIM

ITED

JOB

TITL

ECE

NTRA

LISA

TION

OF

AREA

OFF

ICE

STUD

YJO

B NO

3985

DATE

29th

MAR

CH 1

996

YEAR

(SEP

T 199

6)0

12

34

56

78

910

1112

1314

1516

1718

1920

2122

2324

2526

2728

2930

3132

3334

3536

3738

3940

Tota

l Valu

e

£’00

0£0

00

Capit

al Co

sts Bu

ildin

g Wor

ks11

760

00

00

00

00

190

00

00

00

00

030

00

00

00

00

00

393

00

00

00

00

031

02,

369

Reloc

ation

Cos

ts15

.50

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

016

Furn

iture

8.5

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

9

Valu

e12

000

00

00

00

00

190

00

00

00

00

030

00

00

00

00

00

393

00

00

00

00

031

02,

393

Capit

al In

com

e Annu

al Re

ntal

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-7.5

-308

Land

Sal

e-5

50

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

0-5

5

Valu

e-6

2.5

-7.5

-8-8

-8-8

-8-8

-8-8

-8-8

-8-8

-8-8

-8-8

-8-8

-8-8

-8-8

-8-8

-8-8

-8-8

-8-8

-8-8

-8-8

-8-8

-8-8

-8-3

63

Reve

nue C

osts

Fuel

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

57

Wate

r0

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

0

Main

tena

nce

1212

1212

1212

1212

1212

1212

1212

1212

1212

1212

1212

1212

1212

1212

1212

1212

1212

1212

1212

1212

1249

2

Rate

s0

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

0

Clea

ning

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

70

Secu

rity

7.1

7.1

7.1

7.1

7.1

7.1

7.1

7.1

7.1

7.1

7.1

7.1

7.1

7.1

7.1

7.1

7.1

7.1

7.1

7.1

7.1

7.1

7.1

7.1

7.1

7.1

7.1

7.1

7.1

7.1

7.1

7.1

7.1

7.1

7.1

7.1

7.1

7.1

7.1

7.1

7.1

291

Oper

ation

Cos

ts5.

25.

25.

25.

25.

25.

25.

25.

25.

25.

25.

25.

25.

25.

25.

25.

25.

25.

25.

25.

25.

25.

25.

25.

25.

25.

25.

25.

25.

25.

25.

25.

25.

25.

25.

25.

25.

25.

25.

25.

25.

221

3

Staf

f Cos

ts0

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

0

Valu

e27

.427

.427

.427

.427

.427

.427

.427

.427

.427

.427

.427

.427

.427

.427

.427

.427

.427

.427

.427

.427

.427

.427

.427

.427

.427

.427

.427

.427

.427

.427

.427

.427

.427

.427

.427

.427

.427

.427

.427

.427

.41,

123

Net C

ash

Flow

1164

.919

.919

.919

.919

.919

.919

.919

.919

.919

.920

9.9

19.9

19.9

19.9

19.9

19.9

19.9

19.9

19.9

19.9

319.

919

.919

.919

.919

.919

.919

.919

.919

.919

.941

2.9

19.9

19.9

19.9

19.9

19.9

19.9

19.9

19.9

19.9

329.

90

Pres

ent V

alue o

f £1

@ 8

%1

0.93

0.86

0.79

0.74

0.68

0.63

0.58

0.54

0.5

0.46

0.43

0.4

0.37

0.34

0.32

0.29

0.27

0.25

0.23

0.21

0.2

0.18

0.17

0.16

0.15

0.14

0.13

0.12

0.11

0.1

0.09

0.09

0.08

0.07

0.07

0.06

0.06

0.05

0.05

0.05

NET P

RESE

NT V

ALUE

1165

1817

1615

1413

1211

1097

98

77

66

55

569

44

33

33

22

241

22

21

11

11

115

1608

EXPE

NDITU

RENV

P£=

1,60

7,89

6

PART 2, SECTION 2


2.2.5.6 TOTAL BUILDING OPTION: DEMOLISH AND REBUILD VERSUS REFURBISHMENT

(a) BriefThe life cycle cost appraisal is to evaluate the life cycle cost effects of thefollowing options:

• demolish existing building and rebuild to the client’s specificrequirements incorporating ‘all-air’ air conditioning systems;

• refurbish the existing building to meet, as far as practicable, the client’srequirements, re-using existing systems wherever possible.

The appraisal is to include all taxation implications for comparative purposes.

VAT is to be included as the client is VAT-exempt.

The following costs are to be excluded:

– costs associated with the purchase of land;– financing charges associated with the redevelopment;– costs associated with the removal and temporary re-housing of staff

during the construction period;– occupancy costs;– residual values of land or buildings.

(b) Discount RateThe building is in owner-occupation and the client’s accountants have advisedthe use of a long-term government stock interest rate of 7%.

The client has been advised that an inflation rate of 3% is a reasonableassessment.

The discount rate calculation is as follows

[(1.07) – 1]—— × 100 = 3.88%

[(1.03) – 1]

The client has agreed that the discount rate can be rounded to 4%.

(c) Building LifeIt has been agreed with the client to use a 20-year life cycle.

(d) Description of Existing BuildingLate 1950s office block of multi-storey framed construction with curtain wallcladding to front and rear. Solid party walls to both sides. Single-storeyconcrete basement.

(e) Description of Existing Engineering ServicesGas-fired low pressure hot water boiler situated in basement serving perimeterconvector system with warm air ventilation to central parts of the building.Fluorescent luminaires to all office areas and tungsten fittings to circulation.

PART 2, SECTION 2


(f) Condition of the Existing BuildingThe building is structurally sound with few defects; however, it is in a poorstate of decorative repair.

(g) Basic Requirements of the Redevelopment

Gross internal area 1500 m2

Ratio of net to gross internal area 70%Number of occupants 110Ratio of occupants to net internal floor area 9.7 m2

External wall area (excluding party walls) 700 m2

The adjacent buildings will continue to remain in use as offices during andafter the development.

The structural engineers have advised that no work is required to party walls,other than temporary shoring.

(h) Summary

Net Present Value£k

OPTION Ademolish existing building and rebuild to theclient’s specific requirements, incorporating‘all air’ air conditioning systems; 3889

OPTION Brefurbish the existing building to meet as far aspracticable, the client’s requirements, re-usingsystems wherever possible. 2177

———% difference (A extra on B) 79%

———

The net present value is a key factor in the option appraisal. However otherless tangible benefits and disadvantages of each option should be carefullyconsidered in relation to the business objectives. It is also recommended thata sensitivity analysis be carried out, for instance to look at different discountrates and time frames.

The calculation of the above is detailed below.

PART 2, SECTION 2


LIFE

CYC

LE C

OST

SUM

MAR

Y

OPTI

ON A

Year

01

23

45

67

89

1011

1213

1415

1617

1819

20

Cost

s£k

£k£k

£k£k

£k£k

£k£k

£k£k

£k£k

£k£1

£k£k

£k£k

£k£k

Capi

tal

2154

--

--

--

--

--

--

--

--

--

--

Finan

cing

--

--

--

--

--

--

--

--

--

--

-

Oper

ation

-10

410

410

410

410

410

410

410

410

410

410

410

410

410

410

410

410

410

410

410

4

Mai

nten

ance

:

annu

al-

2727

2727

2727

2727

2727

2727

2727

2727

2727

2727

inte

rmitt

ent

--

--

-6

3-

--

623

21-

-22

3-

--

86

Occu

panc

y-

--

--

--

--

--

--

--

--

--

--

Disp

osal

/resid

ual v

alue

--

--

--

--

--

--

--

--

--

--

-

Tota

l21

5413

113

113

113

113

713

413

113

113

119

313

415

213

113

115

313

413

113

113

121

7

VAT

17½

%37

723

2323

2324

2323

2323

3423

2723

2327

2323

2323

40

Tota

l (in

c VAT

)25

3115

415

415

415

416

115

715

415

415

422

715

217

915

415

418

015

715

415

415

425

7

Less

Tax a

llowa

nce

010

288

7870

6761

5755

5374

5255

4848

5649

4848

4880

NET

TOTA

L25

3152

6676

8494

9697

9910

115

310

512

410

610

612

410

810

610

610

617

7

Pres

ent v

alue

of £

1 at

4%

1.9

615

.924

6.8

890

.854

8.8

219

.790

3.7

599

.730

7.7

026

.675

6.6

496

.624

6.6

006

.577

5.5

553

.533

9.5

134

.493

6.4

746

.456

4

Pres

ent v

alue

2531

5061

6872

7776

7472

7110

368

7764

6169

5854

5250

81

TOTA

L NE

T PR

ESEN

T VA

LUE

£388

9k

PART 2, SECTION 2


LIFE

CYC

LE C

OST

SUM

MAR

Y

OPTI

ON B

Year

01

23

45

67

89

1011

1213

1415

1617

1819

20

Cost

s£k

£k£k

£k£k

£k£k

£k£k

£k£k

£k£k

£k£1

£k£k

£k£k

£k£k

Capi

tal

904

--

--

--

--

--

--

--

--

--

--

Finan

cing

--

--

--

--

--

--

--

--

--

--

-

Oper

ation

-89

8989

8989

8989

8989

8989

8989

8989

8989

8989

89

Mai

nten

ance

:

annu

al-

1515

1515

1515

1515

1515

1515

1515

1515

1515

1515

inte

rmitt

ent

--

--

-17

3-

--

453

21-

-32

3-

-69

Occu

panc

y-

--

--

--

--

--

--

--

--

--

--

Disp

osal

/resid

ual v

alue

--

--

--

--

--

--

--

--

--

--

-

Tota

l90

410

410

410

410

412

110

710

410

410

414

910

712

510

410

413

610

710

410

410

417

3

VAT

17.5

%15

818

1818

1821

1918

1818

2619

2218

1824

1918

1818

30

Tota

l (in

c VAT

)10

6212

212

212

212

214

212

612

212

212

217

512

614

712

212

216

012

612

212

212

220

3

Less

Tax a

llowa

nce

075

6659

5456

4844

4342

5741

4638

3850

3938

3838

63

NET

TOTA

L10

6247

5663

6886

7878

7980

118

8510

184

8411

087

8484

8414

0

Pres

ent v

alue

of £

1 at

4%

1.9

615

.924

6.8

890

.854

8.8

219

.790

3.7

599

.730

7.7

026

.675

6.6

496

.624

6.6

006

.577

5.5

553

.533

9.5

134

.493

6.4

746

.456

4

Pres

ent v

alue

1062

4552

5658

7162

5958

5680

5563

5049

6146

4341

4064

TOTA

L NE

T PR

ESEN

T VA

LUE

£217

7k

PART 2, SECTION 2


CAPITAL

OPTION A OPTION B

GFA: 1500 m2

Elemental Cost PlanTotal cost

£k£/m2GFA

£Total cost

£k£/m2GFA

£

Demolition 70.0 47.0 14.0 9.0

Substructure 42.0 28.0 – –

Superstructure 315.0 210.0 17.5 12.0

External walls 490.0 327.0 101.0 67.0

Internal walls 14.5 10.0 54.0 36.0

Internal finishings 84.0 56.0 105.0 70.0

Fittings/fixtures 2.0 1.0 – –

Sanitary appliances 9.5 6.0 9.5 6.0

Public Health services 21.0 14.0 21.0 14.0

Mechanical services 252.0 168.0 94.5 63.0

Electrical services 147.0 98.0 126.0 84.0

Lift installation 77.0 51.0 91.0 60.0

External work 21.0 14.0 7.0 5.0

Drainage 8.5 6.0 3.0 2.0

Sub-total 1553.5 1036.0 643.5 429.0

Preliminaries(% of sub-total)

232.0 15% 96.5 15%

Contingencies(% of sub-total)

46.5 3% 19.5 3%

Total construction cost 1833.0 1222.0 759.5 506.0

Professional fees(% of construction cost)

321.0 17.5% 144.5 19%

Total capital costs tolife cycle cost summary

2154.0 904.0

PART 2, SECTION 2


OPERATION

OPTION A OPTION B

£ per annum £ per annum

Energy see next page 13617 9964

Cleaning

OPTION ABudget allowance £7.00 per m2

10500

OPTION BBudget allowance £9.00 per m2

NB: existing building materials more labour intensive for cleaning

13500

Rates (including water rates)

OPTION ABudget allowance £50.00 per m2

75000

OPTION BBudget allowance £42.00 per m2

63000

NB: air conditioned building attractshigher rates

InsuranceBuilding fabric replacement

OPTION ABudget allowance 0.2% of building cost (£2154)

4308

OPTION B

OPTION BBudget allowance 0.2% of building cost (£904)

1808

Total operation costs 103425 88272

Total £k to life cycle cost summary 104 89

PART 2, SECTION 2


EN

ER

GY

SY

ST

EM

OP

TIO

N A

OP

TIO

N B

Build

ing

usag

eDi

vers

ityUn

it en

ergy

co

st

Area

Ener

gy

rate

Area

Ener

gy

rate

(hrs

per

an

num

) (a)

(%)

(b)

(p/k

wh)

(c)

m2

(d)

w/m

2

(e)

kwh* (f)

£ pe

r an

num

(g)

f × c/

100

m2

(d)

w/m

2

(e)

kwh* (f)

£ pe

r an

num

(g)

f × c/

100

Gas

Heat

ing –

Opt

ion A

2000

501.

076*

*15

0016

024

0,00

025

8215

0019

028

5,00

030

67

Elec

trici

ty

Light

ing22

0080

5.50

1500

2052

,800

2904

1500

2052

,800

2904

Smal

l Pow

er22

0010

05.

5015

0010

33,0

0018

1515

0010

33,0

0018

15

Powe

r for

mec

hani

cal s

ervic

es22

0060

5.50

1500

58**

*11

4,84

063

1615

0020

39,

600

2178

Tota

l ene

rgy c

osts

to op

erat

ion co

sts s

umm

ary

1361

799

64

*NB

: for

mul

a fo

r kw

h =

area

(d)

× e

nerg

y ra

te (

e) ×

uni

t ene

rgy

cost

(c)

× b

uild

ing

usag

e (a

) ×

div

ersi

ty (

b)

1000

**G

as B

oard

rat

e pe

r th

erm

30p

1 th

erm

= 2

7.8

kwh

rate

per

kw

h =

35.

2/27

.8 =

1.0

76

***

Ass

ume

cool

ing

load

120

wat

ts/m

2

Con

vers

ion

rate

ele

ctric

ity to

coo

ling

2.5:

1T

here

fore

w/m

2 fo

r co

olin

g 12

0/2.

5 =

48

+ 1

0 (o

ther

mec

hani

cal p

lant

) =

58

PART 2, SECTION 2


ANNUAL MAINTENANCE

OPTION A OPTION B

£/m2 £ per annum £/m2 £ per annum

General building maintenance 4.00 6000 4.00 6000

Engineering services maintenance 12.00* 18000 4.00 6000

Lifts – service agreement 1.50 2250 1.50 2250

Total annual maintenance costs £26,250 £14,250

Total £k to life cycle cost summary £27k £15k

* NB: full air conditioning maintenance for Option A

PART 2, SECTION 2


INTE

RMIT

TENT

MAI

NTEN

ANCE

OPTI

ON A

Year

01

23

45

67

89

1011

1213

1415

1617

1819

20

Cost

s£k

£k£k

£k£k

£k£k

£k£k

£k£k

£k£k

£k£k

£k£k

£k£k

£k£k

Roof

rene

wal

––

––

––

––

––

––

––

––

––

––

10

Exte

rnal

dec

orat

ion (f

ire e

scap

es on

ly)–

––

––

0.5

––

––

0.5

––

––

0.5

––

––

0.5

Inte

rnal

fini

shin

gs:

carp

ets

––

––

––

3.0

––

––

3.0

21–

––

3.0

––

–14

pain

twor

k, et

c.–

––

––

5.5

––

––

5.5

––

––

5.5

––

––

5.5

Engin

eerin

g ser

vices

:

mec

hani

cal (

equi

pmen

t)–

––

––

––

––

–42

––

––

––

––

–42

elect

rical

(lum

inai

res)

––

––

––

––

––

14–

––

––

––

––

14

lifts

(maj

or ov

erha

ul)

––

––

––

––

––

––

––

–15

.5–

––

––

Tota

ls–

––

––

63

––

–62

3.0

21–

–21

.53.

0–

––

86

Tota

l £k t

o lif

e cyc

le co

st s

umm

ary

––

––

–6

3–

––

623

21–

–22

3–

––

86

OPTI

ON B

Year

01

23

45

67

89

1011

1213

1415

1617

1819

20

Cost

s£k

£k£k

£k£k

£k£k

£k£k

£k£k

£k£k

£k£k

£k£k

£k£k

£k£k

Roof

rene

wal

––

––

––

––

––

––

––

––

––

––

10

Exte

rnal

dec

orat

ion (f

acad

es, e

tc.)

––

––

–11

––

––

11–

––

–11

––

––

11

Inte

rnal

fini

shin

gs:

carp

ets

––

––

––

3.0

––

––

3.0

21–

––

3.0

––

–14

pain

twor

k, et

c.–

––

––

5.5

––

––

5.5

––

––

5.5

––

––

5.5

Engin

eerin

g ser

vices

:

mec

hani

cal (

equi

pmen

t)–

––

––

––

––

–14

––

––

––

––

–14

elect

rical

(lum

inai

res)

––

––

––

––

––

14–

––

––

––

––

14

lifts

(maj

or ov

erha

ul)

––

––

––

––

––

––

––

–15

.5–

––

––

Tota

ls–

––

––

16.5

3.0

––

–44

.53.

021

––

323.

0–

––

68.5

Tota

l £k t

o lif

e cyc

le co

st s

umm

ary

––

––

–17

3.0

––

–45

321

––

323

––

–69

PART 2, SECTION 2


TAX

VAT CHARGEABLE VALUE VAT RATE OPTION A OPTION B

£k % £k £k

OPTION A Capital costsFees

1833321

17½17½

320.856.2

OPTION B Capital costsFees

759.5144.5

17½17½

132.925.3

Total VAT to capital costs

377 158.2

Total £k to life cycle

cost summary

377 158

VAT is chargeable directly on all running costs items and appears on the summary.

Corporation TaxThe client currently pays corporation tax at the rate of 31%.This percentage has been assumed for all calculations.

Tax allowance - running costs100% tax deductible based upon total inclusive of VAT*, e.g. running cost £100VAT £17.50

Total £117.50Tax allowance @ 31% £36.43

Tax allowance - capital costsCertain capital items are classified as plant and machinery (see appendix E) and are tax deductible at a rate of 25% per annum on reducing balance, e.g. capital item £10,000

First year tax allowance 10,000 × 25% × 31%

Second year tax allowance 7,500 × 25% × 31%

Tax allowances can only be allowed one year in arrears.*NB. This is only applicable when the client is an end user and exempt from VAT. If, in the course of his business, the client can claim back VAT he cannot claim tax relief on this portion of his costs.

PART 2, SECTION 2


TAX

ALLO

WAN

CE

01

23

45

67

89

1011

1213

1415

1617

1819

20

£k£k

£k£k

£k£k

£k£k

£k£k

£k£k

£k£k

£k£k

£k£k

£k£k

£k

OPTI

ON A

Capi

tal a

llowa

nces

Tota

l allo

wanc

es s

ee n

ext p

age

£696

k (in

c VAT

) @ 2

5% p

.a.

redu

cing b

alan

ce–

174

131

9873

5541

3123

1713

10–

––

––

––

––

Runn

ing c

ost a

llowa

nces

From

LCC

sum

mar

y (in

c VAT

)15

415

415

415

416

115

715

415

415

422

715

717

915

415

415

015

715

415

415

425

7

Tota

l32

828

525

222

721

619

818

517

717

124

016

717

915

415

418

015

715

415

415

425

7

Appl

y cur

rent

tax r

ate

31%

Tota

l £k t

o LCC

sum

mar

y10

288

7870

6761

5755

5374

5255

4848

5649

4848

4880

OPTI

ON B

Capi

tal a

llowa

nces

Tota

l allo

wanc

es s

ee n

ext p

age

£482

.1k (

inc V

AT) @

25%

p.a

.

redu

cing b

alan

ce–

121

9068

5138

2921

1612

97

––

––

––

––

–

Runn

ing

cost

allo

wanc

es

From

LCC

sum

mar

y (in

c VAT

)12

212

212

212

214

212

612

212

212

217

512

614

712

212

216

012

612

212

212

220

3

Tota

lAp

ply c

urre

nt ta

x rat

e 31

%24

321

219

017

318

015

514

313

813

418

413

314

712

212

216

012

612

212

212

220

3

Tota

l £k t

o LCC

sum

mar

y75

6659

5456

4844

4342

5741

4638

3850

3938

3838

63

PART 2, SECTION 2


CAPITAL ALLOWANCE Proposed capital allowance for taxation purposesSubject to negotiation and agreement with the Inland Revenue on evidence of eventual costs

OPTION A OPTION BGFA: 1500 m2 Total cost

£k% tax allowable

£kTax allowable

£kTotal cost

£k% tax allowable

£kTax

allowable £kRemarks

Elemental cost planDemolition 70 – – 14 – –Substructure 42 – – – – –Superstructure 315 – – 17.5 30 5.3 BWIC allowable on refurbishmentExternal walls 490 – – 101 – –Internal walls 14.5 – – 54 30 16.2 BWIC allowable on refurbishmentInternal finishings 84 – – 105 – –Fittings/fixtures 2.0 20 0.4 – – –Sanitary appliances 9.5 100 9.5 9.5 100 9.5Public Health services 21 – – 21 – –Mechanical services 252 100 252.0 94.5 100 94.5Electrical services 147 60 88.2 126 60 75.6 Office lighting and associated

switchgear not allowableLift installation 77 100 77.0 91 100 91.0External work 21 – – 7 – –Drainage 8.5 – – 3 – –Sub-total 1553.5 27.5 427.1 634.5 45.4 292.1Preliminaries (% of sub-total) 233 27.5 64.1 96.5 45.4 43.8 Taken on proportion of

construction costsContingencies (% of sub-total) 46.5 27.5 12.8 19.5 45.4 8.9Total construction cost 1833 759.5Professional fees 321 27.5 88.3 144.5 45.4 65.6(% of construction cost)VAT 377 27.5 103.7 158 45.4 71.7 Option A – Fees onlyTotal tax-allowable capital costs

to previous page696 482.1

PART 2, SECTION 2


2.2.5.7 A SELECTION FROM PARRY’S VALUATION AND INVESTMENT TABLES

(for full tables rewference is made to Parry’s Valuation and Investment Tables, AW Davidson (1989), (111th Edition) (Estates Gazette)

No Income Tax YEARS’ PURCHASE Single Rate

RATE PER CENT

Years 2 3 4 5 6 7 81 0.9804 0.9709 0.9615 0.9524 0.9434 0.9346 0.92592 1.9416 1.9135 1.8861 1.8594 1.8334 1.8080 1.78333 2.8839 2.8286 2.7751 2.7232 2.6730 2.6243 2.57714 3.8077 3.7171 3.6299 3.5460 3.4651 3.3872 3.31215 4.7135 4.5797 4.4518 4.3295 4.2124 4.1002 3.99276 5.6014 5.4172 5.2421 5.0757 4.9173 4.7665 4.62297 6.4720 6.2303 6.0021 5.7864 5.5824 5.3893 5.20648 7.3255 7.0197 6.7327 6.4632 6.2098 5.9713 5.74669 8.1622 7.7861 7.4353 7.1078 6.8017 6.5152 6.246910 8.9826 8.5302 8.1109 7.7217 7.3601 7.0236 6.710111 9.7868 9.2526 8.7605 8.3064 7.8869 7.4987 7.139012 10.5753 9.9540 9.3851 8.8633 8.3838 7.9427 7.536113 11.3484 10.6350 9.9856 9.3936 8.8527 8.3577 7.903814 12.1062 11.2961 10.5631 9.8986 9.2950 8.7455 8.244215 12.8493 11.9379 11.1184 10.3797 9.7122 9.1079 8.559516 13.5777 12.5611 11.6523 10.8378 10.1059 9.4466 8.851417 14.2919 13.1661 12.1657 11.2741 10.4773 9.7632 9.121618 14.9920 13.7535 12.6593 11.6896 10.8276 10.0591 9.371919 15.6785 14.3238 13.1339 12.0853 11.1581 10.3356 9.603620 16.3514 14.8775 13.5903 12.4622 11.4699 10.5940 9.818121 17.0112 15.4150 14.0292 12.8212 11.7641 10.8355 10.016822 17.6580 15.9369 14.4511 13.1630 12.0416 11.0612 10.200723 18.2922 16.4436 14.8568 13.4886 12.3034 11.2722 10.371124 18.9139 16.9355 15.2470 13.7986 12.5504 11.4693 10.528825 19.5235 17.4131 15.6221 14.0939 12.7834 11.6536 10.674826 20.1210 17.8768 15.9828 14.3752 13.0032 11.8258 10.810027 20.7069 18.3270 16.3296 14.6430 13.2105 11.9867 10.935228 21.2813 18.7641 16.6631 14.8981 13.4062 12.1371 11.051129 21.8444 19.1885 16.9837 15.1411 13.5907 12.2777 11.158430 22.3965 19.6004 17.2920 15.3725 13.7648 12.4090 11.257831 22.9377 20.0004 17.5885 15.5928 13.9291 12.5318 11.349832 23.4683 20.3888 17.8736 15.8027 14.0840 12.6466 11.435033 23.9886 20.7658 18.1476 16.0025 14.2302 12.7538 11.513934 24.4986 21.1318 18.4112 16.1929 14.3681 12.8540 11.586935 24.9986 21.4872 18.6646 16.3742 14.4982 12.9477 11.654636 25.4888 21.8323 18.9083 16.5469 14.6210 13.0352 11.717237 25.9695 22.1672 19.1426 16.7113 14.7368 13.1170 11.775238 26.4406 22.4925 19.3679 16.8679 14.8460 13.1935 11.828939 26.9026 22.8082 19.5845 17.0170 14.9491 13.2649 11.878640 27.3555 23.1148 19.7928 17.1591 15.0463 13.3317 11.924641 27.7995 23.4124 19.9931 17.2944 15.1380 13.3941 11.967242 28.2348 23.7014 20.1856 17.4232 15.2245 13.4524 12.006743 28.6616 23.9819 20.3708 17.5459 15.3062 13.5070 12.043244 29.0800 24.2543 20.5488 17.6628 15.3832 13.5579 12.077145 29.4902 24.5187 20.7200 17.7741 15.4558 13.6055 12.108446 29.8923 24.7754 20.8847 17.8801 15.5244 13.6500 12.137447 30.2866 25.0247 21.0429 17.9810 15.5890 13.6916 12.164348 30.6731 25.2667 21.1951 18.0772 15.6500 13.7305 12.189149 31.0521 25.5017 21.3415 18.1687 15.7076 13.7668 12.212250 31.4236 25.7298 21.4822 18.2559 15.7619 13.8007 12.233560 34.7609 27.6756 22.6235 18.9293 16.1614 14.0392 12.3766

PART 2, SECTION 2


No Income Tax PRESENT VALUE OF £1

RATE PER CENT

Years 2 3 4 5 6 7 81 .9803922 .9708738 .9615385 .9523810 .9433962 .9345794 .92592592 .9611688 .9425959 .9245562 .9070295 .8899964 .8734387 .85733883 .9423223 .9151417 .8889964 .8638376 .8396193 .8162979 .79383224 .9238454 .8884870 .8548042 .8227025 .7920937 .7628952 .73502995 .9057308 .8626088 .8219271 .7835262 .7472582 .7129862 .68058326 .8879714 .8374843 .7903145 .7462154 .7049605 .6663422 .63016967 .8705602 .8130915 .7599178 .7106813 .6650571 .6227497 .58349048 .8534904 .7894092 .7306902 .6768394 .6274124 .5820091 .54026899 .8367553 .7664167 .7025867 .6446089 .5918985 .5439337 .500249010 .8203483 .7440939 .6755642 .6139133 .5583948 .5083493 .463193511 .8042630 .7224213 .6495809 .5846793 .5267875 .4750928 .428882912 .7884932 .7013799 .6245970 .5568374 .4969694 .4440120 .397113813 .7730325 .6809513 .6005741 .5303214 .4688390 .4149644 .367697914 .7578750 .6611178 .5774751 .5050680 .4423010 .3878172 .340461015 .7430147 .6418619 .5552645 .4810171 .4172651 .3624460 .315241716 .7284458 .6231669 .5339082 .4581115 .3936463 .3387346 .291890517 .7141626 .6050164 .5133732 .4362967 .3713644 .3165744 .270269018 .7001594 .5873946 .4936281 .41552-7 .3503438 .2958639 .250249019 .6864308 .5702860 .4746424 .3957340 .3305130 .2765083 .231712120 .6729713 .5536758 .4563869 .3768895 .3118047 .2584190 .214548221 .6597758 .5375493 .4388336 .3589424 .2941554 .2415131 .198655722 .6468390 .5218925 .4219554 .3418499 .2775051 .2257132 .183940523 .6341559 .5066917 .4057263 .3255713 .2617973 .2109469 .170315324 .6217215 .4919337 .3901215 .3100679 .2469785 .1971466 .157699325 6095309 .4776056 .3751168 .2953028 .2329986 .1842492 .146017926 .5975793 .4636947 .3606892 .2812407 .2198100 .1721955 .135201827 .5858620 .4501891 .3468166 .2678483 .2073680 .1609304 .125186828 .5743746 .4370768 .3334775 .2550936 .1956301 .1504022 .115913729 .5631123 .4243464 .3206514 .2429463 .1845567 .1405628 .107327530 .5520709 .4119868 .3083187 .2313774 .1741101 .1313671 .099377331 .5412460 .3999871 .2964603 .2203595 .1642548 .1227730 .092016032 .5306333 .3883370 .2850579 .2098662 .1549574 .1147411 .085200033 .5202287 .3770262 .2740942 .1998725 .1461862 .1072347 .078888934 .5100282 .3660449 .2635521 .1903548 .1379115 .1002193 .073045335 .5000276 .3553834 .2534155 .1812903 .1301052 .0936629 .067634536 .4902232 .3450324 .2436687 .1726574 .1227408 .0875355 .062624637 .4806109 .3349829 .2342968 .1644356 .1157932 .0818088 .057985738 .4711872 .3252262 .2252854 .1566054 .1092389 .0764569 .053690539 .4619482 .3157535 .2166206 .1491480 .1030555 .0714550 .049713440 .4528904 .3065568 .2082890 .1420457 .0972222 .0667804 .046030941 .4440102 .2976280 .2002779 .1352816 .0917190 .0624116 .042621242 .4353041 .2889592 .1925749 .1288396 .0865274 .0583286 .039464143 .4267688 .2805429 .1851682 .1227044 .0816296 .0545127 .036540844 .4184007 .2723718 .1780463 .1168613 .0770091 .0509464 .033834145 .4101968 .2644386 .1711984 .1112965 .0726501 .0476135 .031327946 .4021537 .2567365 .1646139 .1059967 .0685378 .0444986 .029007347 .3942684 .2492588 .1582826 .1009492 .0646583 .0415875 .026858648 .3865376 .2419988 .1521948 .0961421 .0609984 .0388668 .024869149 .3789584 .2349503 .1463411 .0915639 .0575457 .0363241 .023026950 .3715279 .2281071 .1407126 .0872037 .0542884 .0339478 .021321260 .3047823 .1697331 .0950604 .0535355 .0303143 .0172573 .0098759

PART 2, SECTION 2


No Income Tax ANNUAL SINKING FUND FOR THE REDEMPTION OF £1 CAPITAL INVESTED

RATE PER CENT

Years 2 3 4 5 6 7 81 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.00000002 .4950495 .4926108 .4901961 .4878049 .4854369 .4830918 .48076923 .3267547 .3235304 .3203485 .3172086 .3141098 .3110517 .30803354 .2426238 .2390270 .2354900 .2320118 .2285915 .2252281 .22192085 .1921584 .1883546 .1846271 .1809748 .1773964 .1738907 .17045656 .1585258 .1545975 .1507619 .1470175 .1433626 .1397958 .13631547 .1345120 .1305064 .1266096 .1228198 .1191350 .1155532 .11207248 .1165098 .1124564 .1085278 .1047218 .1010359 .0974678 .09401489 .1025154 .0984339 .0944930 .0906901 .0870222 .0834865 .080079710 .0913265 .0872305 .0832909 .0795046 .0758680 .0723775 .069029511 .0821779 .0780774 .0741490 .0703889 .0667929 .0633569 .060076312 .0745596 .0704621 .0665522 .0628254 .0592770 .0559020 .052695013 .0681184 .0640295 .0601437 .0564558 .0529601 .0496508 .046521814 .0622020 .0585263 .0546690 .0510240 .0475849 .0443449 .041296915 .0578255 .0537666 .0499411 .0463423 .0429628 .0397946 .036829516 .0536501 .0496108 .0458200 .0422699 .0389521 .0358576 .032976917 .0499698 .0459525 .0421985 .0386991 .0354448 .0324252 .029629418 .0467021 .0427087 .0389933 .0355462 .0323565 .0294126 .026702119 .0437818 .0398139 .0361386 .0327450 .0296209 .0267530 .024127620 .0411567 .0372157 .0335818 .0302426 .0271846 .0243929 .021852221 .0387848 .0348718 .0312801 .0279961 .0250045 .0222890 .019832322 .0366314 .0327474 .0291988 .0259705 .0230456 .0204058 .018032123 .0346681 .0308139 .0273091 .0241368 .0212785 .0187139 .016422224 .0328711 .0290474 .0255868 .0224709 .0196790 .0171890 .014978025 .0312204 .0274279 .0240120 .0209525 .0182267 .0158105 .013678826 .0296992 .0259383 .0225674 .0195643 .0169043 .0145610 .012507127 .0282931 .0245642 .0212385 .0182919 .0156972 .0134257 .011448128 .0269897 .0232932 .0200130 .0171225 .0145926 .0123919 .010488929 .0257784 .0221147 .0188799 .0160455 .0135796 .0114487 .009618530 .0246499 .0210193 .0178301 .0150514 .0126489 .0105864 .008827431 .0235963 .0199989 .0168554 .0141321 .0117922 .0097969 .008107332 .0226106 .0190466 .0159486 .0132804 .0110023 .0090729 .007450833 .0216865 .0181561 .0151036 .0124900 .0102729 .0084081 .006851634 .0208187 .0173220 .0143148 .0117554 .0095984 .0077967 .006304135 .0200022 .0165393 .0135773 .0110717 .0089739 .0072340 .005803336 .0192329 .0158038 .0128869 .0104345 .0083948 .0067153 .005344737 .0185068 .0151116 .0122396 .0098398 .0078574 .0062368 .004924438 .0178206 .0144593 .0116319 .0092842 .0073581 .0057951 .004538939 .0171711 .0138439 .0110608 .0087646 .0068938 .0053868 .004185140 .0165557 .0132824 .0105235 .0082782 .0064615 .0050091 .003860241 .0159719 .0127124 .0100174 .0078223 .0060589 .0046596 .003561542 .0154173 .0121917 .0095402 .0073947 .0056834 .0043359 .003286843 .0148899 .0116981 .0090899 .0069933 .0053331 .0040359 .003034144 .0143879 .0112298 .0086645 .0066163 .0050061 .0037577 .002801545 .0139096 .0107852 .0082625 .0062617 .0047005 .0034996 .002587346 .0134534 .0103625 .0078820 .0059282 .0044149 .0032600 .002389947 .0130179 .0099605 .0075219 .0056142 .0041477 .0030374 .002208048 .0126018 .0095778 .0071806 .0053184 .0038977 .0028307 .002040349 .0122040 .0092131 .0068571 .0050396 .0036636 .0026385 .001885650 .0118232 .0088655 .0065502 .0047767 .0034443 .0024598 .001742960 .0087680 .0061330 .0042018 .0028282

Extracts from Parry’s Valuation and Investment Tables, A W Davidson (1989), (11th Edition) (Estates Gazette) reproduced by permission of the College of Estate Management which owns the copyright.


The Surveyors’ Construction Handbook Part 2, Section 2, Effective from 1/6/99 Page 1Appendix A (4/99)

Appendix A: Residual Values

A1 At the end of the life of a building, the component/building and the land willhave a residual value.

A2 There will be one of two situations. Either the building will have reached theend of its life, with no alternative use, or the building will have reached theend of the life for its planned purpose, but does have an alternative use.

A3 In either situation the residual value of the building and/or the land may besignificant and will need to be carefully assessed as it may have a substantialeffect on life cycle costing calculations. Residual values will be of particularsignificance if the time horizon used for life cycle costing calculations isrelatively short.

A4 In considering residual values, an allowance should be made for the cost ofdisposing of plant and equipment and for the demolition of buildings, ifappropriate. In assessing demolition costs, allowance should be made for thevalue of any re-usable materials.

A5 Owners also need to be cognisant of taxation issues and whether these affecttheir property/building decisions.

A6 There are strict guidelines for taxation adjustments that arise at disposal. If theplant and machinery is ‘scrapped’ the remaining value is written off and abalancing allowance brought into account. Alternatively if the building (andthe plant and machinery contained therein) is sold, the vendor should declarewhether allowances have been claimed. An adjustment to their after tax costwill arise depending upon whether the disposal value is greater or less than thewritten down value remaining on the vendor’s accounts.

A7 This area of tax advice is experiencing increased scrutiny from the InlandRevenue and the District Valuer’s Department, as parties to propertytransactions sometimes select/contract disposal values of tax relievablecomponents with specific tax planning objectives.

I



Appendix B: Obsolescence

B1 Building life is influenced by obsolescence. Almost all its forms relate toeconomic considerations. However, six different forms of obsolescence canbe categorised as:

• physical• economic• functional• technological• social• legal.

B2 Buildings usually end their ‘life’ before the end of their physical life. The mostcommon reasons for buildings becoming obsolete are probably economic andfunctional considerations. Buildings designed for a specific specialised use,with little or no flexibility for changing their use, are therefore likely to haveshorter lives than buildings offering flexibility for the change of function ofthe building.

B3 The table below gives definitions and examples of each form of obsolescence:

Types of obsolescence

Definition of type of obsolescence

Basis for assessment of building life

Examples of factors leading to obsolescence

Physical Life of the building to when physical collapse is possible.

How long will the building stand up?

Deterioration of external brick walls affecting their structural stability.

Deterioration of suspended concrete floors, containing high alumina cement, in multi-storey buildings, affecting structural stability.

Economic Life of the building to when occupation is not considered to be the least cost alternative of meeting a particular objective.

How long will the building be economic for the client to own or operate?

The value of the land on which the building stands is more than the capitalised full rental value that could be derived from letting the building.

The asset would achieve a better rate of return in the possession of another, or in the redevelopment or refurbishment scheme.

I



B4 Notwithstanding the difficulty of the task, the surveyor, in consultation withthe client, should make an informed assessment of the building life to be usedin any particular study. In making that assessment the surveyor will need totake account of a number of factors which may influence the final assessmentof building life in any particular case.

B5 While the above examples relate to the whole building, obsolescence ofelements or components is also relevant, for example major refurbishment ofretail buildings at say 15-year intervals to remain attractive.

Types of obsolescence

Definition of type of obsolescence

Basis for assessment of building life

Examples offactors leading to obsolescence

Functional Life of the building to when the building ceases to function for the same purpose as that for which it was built.

How long will the building be used for the purpose for which it was built?

Cinemas converted into bingo halls, village railway stations converted into private houses.

Technological Life of the building until the building is no longer technologically superior to alternatives.

How long will the building be technologically superior to alternatives?

Prestige office unable to accommodate introduction of high level of computing facilities.

Storage warehouse unable to accommodate the introduction of robotics for goods handling.

Social and Legal

The life of a building until the time when human desire or legal requirement dictates replacement for reasons other than economic considerations.

How long will the building meet human desires, (with the exclusion of economic considerations).

Timber football stand replaced (following Bradford Football Club fire disaster).

Multi-storey flats in inner city demolished (following social and community problems).


The Surveyors’ Construction Handbook Part 2, Section 2, Effective from 1/6/99 Page 1Appendix C (4/99)

Appendix C: Costs And Values

The following checklist provides suggestions for cost and value categories to beconsidered. This list is not exhaustive and items may need to be added or othersdisregarded as applicable to any particular project.

C1 CAPITAL COSTS

C1.1 LandC1.2 Fees on acquisitionC1.3 Design team professional feesC1.4 Demolition and site clearanceC1.5 Construction price for building workC1.6 Cost of statutory consentsC1.7 Development Land TaxC1.8 Capital Gains TaxC1.9 Value Added TaxC1.10 FurnishingsC1.11 Other capital costsC1.12 Commissioning expensesC1.13 Decanting charges

C2 FINANCING COSTS

C2.1 Finance for land purchase and during constructionC2.2 Finance during period of intended occupationC2.3 Loan charges (public sector)

C3 OPERATION COSTS

C3.1 EnergyC3.2 CleaningC3.3 RatesC3.4 InsurancesC3.5 Security and HealthC3.6 Staff (related to the building)C3.7 Management and administration of the buildingC3.8 Land chargesC3.9 Energy conservation measuresC3.10 Internal plantingC3.11 Equipment associated with occupier’s occupation

C4 ANNUAL MAINTENANCE COSTS, INTERMITTENT MAINTENANCE, REPLACEMENT AND

ALTERATION COSTS

C4.1 Main structureC4.2 External decorationsC4.3 Internal decorationsC4.4 Finishes, fixtures and fittingsC4.5 Plumbing and sanitary servicesC4.6 Heat source

I


Page 2 Part 2, Section 2, Effective from 1/6/99 The Surveyors’ Construction HandbookAppendix C (4/99)

C4.7 Space heating and air treatmentC4.8 Ventilating systemsC4.9 Electrical installationsC4.10 Gas installationsC4.11 Life and conveyor installationC4.12 Communications installationC4.13 Special and protective installationsC4.14 External worksC4.15 Gardening

C5 OCCUPANCY COSTS

C5.1 Client’s occupancy costs

C6 RESIDUAL VALUES

C6.1 Resale value – building, land and plant and equipmentC6.2 Related costs – demolition and site clearance and disposal of fees and chargesC6.3 Capital Gains Tax and balancing charges



Appendix D: Glossary of Terms for Taxation

D1 CAPITAL EXPENDITURE

Money expended in acquiring long life assets which includes land, buildings,permanent improvements or additions/extensions to existing assets includingassociated professional fees, furniture and equipment thereto, which areintended for use in the carrying out of business operations. These assetsshould have a useful life of more than one year.

D2 REVENUE EXPENDITURE

Expenditure incurred as a trading expense e.g. salaries, consumables,occupancy and regular maintenance costs.

D3 TAXATION ‘DEPRECIATION’ ALLOWANCES (FOR TAXATION PURPOSES)This is a collective term for taxation relief afforded to commercial (taxpaying) organisations to offset the cost of capital expenditure incurred uponassets used for the purposes of their trade.

As explained in 2.2.3 there are various types of taxation allowances and theproportion of initial expenditure which attracts tax relief is often varied bysuccessive Finance Acts.

This should be differentiated from the rate of depreciation adopted byaccountants/auditors when preparing company management accounts to allowprovision for replacement of assets. This is because the depreciationallowance for taxation purposes is fixed by legislation.

When an asset is disposed of a review of the allowances received is requiredand an adjustment may be necessary.

D4 INDUSTRIAL BUILDING

Industrial buildings or structures which qualify for capital allowances aredefined in the statutes CAA 1968 S7 and CAA 1990 S18. These includefactories, manufacturing, storage, docks, tunnels and mines. There are specificrules which apply where part of the building is used for a non-qualifyingpurpose.

D5 PLANT AND MACHINERY

This type of tax relief was introduced after the second world war to provide anincentive to industry to replace equipment used in industry and commerce.

The precise definition of plant and machinery is frequently contested in thecourts. To assist clarification examples of items likely to attract taxation reliefare illustrated in Appendix E.

D6 INITIAL ALLOWANCES/FIRST YEAR ALLOWANCES

These were introduced to provide an acceleration to the standard rate ofannual tax relief (depreciation allowance) being a proportion of the originalcapital expenditure.

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Page 2 Part 2, Section 2, Effective from 1/6/99 The Surveyors’ Construction HandbookAppendix D (4/99)

Governments use successive Finance Acts to vary the proportion awarded toincrease or reduce this incentive as a method of influencing or stimulatingcapital investment within the commercial sector of the economy.

D7 ANNUAL ‘WRITING DOWN’ ALLOWANCE

This is the annual depreciation allowance awarded in respect to ‘qualifyingexpenditure’ as a proportion of the residual balance of the initial expenditurei.e. original cost less the amounts already calculated and benefiting from taxrelief.

D8 BALANCING ALLOWANCE

Upon disposal of an asset a comparison between its value and the writtendown amount remaining on the owner’s accounts is required.

If the asset is sold for a sum in excess of the vendor’s after tax relief cost, thena ‘profit’ has arisen which is subject to an adjustment to the depreciationallowance (i.e. reduction of tax relief), termed a ‘balancing charge’.Alternatively, if the asset is ‘scrapped’ or disposed of at low value (comparedwith the residual amount) then an additional tax relief is awarded, termed a‘balancing allowance’.

PART 2, SECTION 2, APPENDIX E

The Surveyors’ Construction Handbook Part 2, Section 2, Effective from 1/6/99 Page 1Appendix E (4/99)

Appendix E: Examples of items of Expenditure Likely to Attract Taxation Allowances

Item Plant and equipment

Finishes/fixtures/fittings

1. Wall finishes where they can be removed from the building, e.g. curtains, curtain track, battens for fixing

2. Floor finishes such as carpets and any floor finishing that can be removed from the building

3. Door mats and matwell frames4. Suspended ceilings which are airtight and can be used as an

extract system or any ceiling which is an integral part of the heating, ventilating or air conditioning system

5. Any movable fixtures and fittings6. Demountable partitions7. Curtains, blinds and furnishing8. Cupboards, lockers, shelves, display counters, chalkboards,

dustbins, cloakroom fittings, telephone booths

Plumbing and sanitary services

1. Sanitary fittings (not the pipework)2. Vanity units3. Soap dispensers4. Mirrors5. Demountable toilet partitions6. Coat hooks and racks7. Towel rails and cabinets8. Toilet roll holders9. Tanks

Heat source 1. Boilers and equipment, fuel pumps, water pumps, flue, etc. (not the pipework from the boiler)

2. Boiler bases and foundations3. Oil storage tanks and foundations4. Fuel hoppers, ash removal plant5. Control equipment to the heating system6. Builder’s work in connection with the heat source7. Part cost of boiler room

Space heating and air treatment

1. Equipment in connection with heating, air conditioning and hot water installation (not the pipework or ducting)

2. Builder’s work in connection with the equipment3. Plant room4. Electrical and mechanical control system5. Solar heating systems6. Insulation to pipework

Ventilation systems 1. Dust and fume extraction equipment including ductwork and builder’s work in connection

2. Extract fans and builder’s work3. Ventilators4. Instrumentation controls

Electrical installations 1. Electrical installation to all plant and equipment (excludes conduit and wiring to power and lighting for the building generally)

2. Light fittings3. Emergency lighting4. Switchgear and transformers5. Control gear and distribution boards6. Plant rooms7. Builder’s work in connection with the electrical installation

Gas installations 1. Gas fires, cookers and equipment including flues and builder’s work in connection

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Page 2 Part 2, Section 2, Effective from 1/6/99 The Surveyors’ Construction HandbookAppendix E (4/99)

Item Plant and equipment

Lift and conveyor installations

1. Lift installation complete including builder’s work in connection with lift motors, lift guides and plant room

2. Escalators and hoists are as for lifts

Communications installations

1. Clocks2. Sound distribution, bells, signals and the like3. Fire alarms4. Burglar alarms5. Telephone installation6. Builder’s work in connection with communication installations

Special installations/protective installations

1. Sprinkler system2. Dry riser system3. Hosereel system4. CO2 system5. Fire extinguishers6. Refrigeration equipment7. Kitchen equipment8. Laundry equipment9. Health equipment

10. Laboratory equipment11. Manufacturing equipment12. Incinerators and flues13. Water heaters14. Hand dryers15. Window cleaning hoists and equipment including track, motors

and ancillary builder’s work16. Refuse disposal equipment including ancillary builder’s work17. Lighting conductors and earthing systems18. Occupational equipment associated with the building user19. Computer equipment and all ancillary work20. Crane gantries21. All builder’s work in connection with items 1 to 20 above

Special items within a building (the items shown are only given as indicative of the types of item)

1. Removable fire escapes2. Shelving3. Safes and strong rooms4. Roller shutters5. Ladders6. Dock levellers7. Signs/notice boards8. Interior planting

External works 1. External signs2. Traffic signs, crash barriers3. Drainage where it is specifically required for plant and equipment4. Cycle racks

PART 2, SECTION 2, APPENDIX F

The Surveyors’ Construction Handbook Part 2, Section 2, Effective from 1/6/99 Page 1Appendix F (4/99)

Appendix F: Further Reading

Ferry, D.J.O., Flanagan, R., Life Cycle Costing: A Radical Approach, ConstructionIndustry Research and Information Association (CIRIA Report 122), London, 1991

Flanagan, Roger, Norman, George, Furbur, J. David & Townsend, Geoffrey M., LifeCycle Costing For Construction, Surveyors Publications, London, 1983

Flanagan, Roger, Norman, George Meadows, Justin Robinson, Graham, Life CycleCosting: Theory and Practice, BSP Professional Books, Oxford, 1989

HM Treasury. Guidance Note No. 35: Life Cycle Costing, Central Unit on Procurement,HM Treasury, London, 1992

Data Sources

Bernard Williams Associates, Facilities Economics. Bernard Williams Associates,Building Economics Bureau Ltd, Kent. Tel: 0181 460 1111, 1995. A comprehensivestudy including hard costs.

BMI. Energy Consumption Study, Building Maintenance Information, 12 Great GeorgeStreet, London, SW1P 3AD, Tel: 0171 222 7000, 1996. Covers typical energy costs fordifferent building types.

BMI. Occupancy Cost Planning, Building Maintenance Information, contact details asabove, 1992. Includes addresses of numerous trade and professional organisations aspossible data sources.

BMI. Review of Maintenance and Occupancy Costs, Building MaintenanceInformation, contact details as above, 1994

British Standard 7543: 1992 Guide to Durability of Buildings and Building Elements,Products and Components, British Standards Institution, London, 1992

Building Research Energy Conservation Support Unit. Energy Efficiency Best PracticeProgramme. Building Research Energy Conservation Support Unit, Watford, WD27JR. Tel: 01923 664 258. Includes numerous good practice case studies, good practiceguides and energy consumption guides for different building types including costings.

CIB. CIB W80 report 96: Prediction of Service Life of Building Materials andComponents

CIBSE. CIBSE Guide, Section B18, Owning and Operating Costs. Chartered Institute ofBuilding Services Engineers, London. Gives indicative details of energy consumption,maintenance costs and rough life spans for plant (currently being updated in moredetail).

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Page 2 Part 2, Section 2, Effective from 1/6/99 The Surveyors’ Construction HandbookAppendix F (4/99)

HAPM Component Life Manual. E & FN Spon. Tel: 0171 204 2481, 1985.Comprehensive life-span assessment for over 500 housing components based oninsured life assessments.

ISO Guide to Service Life Planning of Buildings (under preparation at the time ofwriting but it will include a method of estimating the durability of individual buildingcomponents).

Jones Lang Wootton. Office Service Charges Analysis 1995, Jones Lang Wootton,London, 1995. A review of 300 buildings including unit costs.

Kirk, Stephen J., Dell’isola, Alphonse J., Life Cycle Costing For Design Professionals,(2nd Edition), McGraw-Hill Inc, New York, 1995. Includes 45 pages of maintenanceand replacement data (in dollars) covering all elements.

NBA Construction Consultants. Maintenance Cycles and Life Expectancies of BuildingComponents and Elements: a guide to data and sources. NBA Construction Consultants

PSA Cost in Use Tables, 3rd Edition, London HMSO 1991. Includes elemental analysisof cleaning, maintenance and repair costs.

RICS. Life Expectancies of Building Components. RICS Research Paper Series No 11,1992. Preliminary results from a survey of Building Surveyors’ views.

PART 2, SECTION 3



SECTION 3: ELEMENTS FOR BUILDINGS

Introduction

The Building Cost Information Service (BCIS) elements were originallyproduced for use in cost planning, i.e., the development of a design with a pre-set budget and were published in the BCIS document, Standard Form of CostAnalysis: Principles, Instructions and Definitions. However, since theirintroduction elements have become widely used for structuring buildinginformation in value engineering, specifications, contract drafting and tenderevaluation as well as for cost planning/cost analysis.

This section discusses some of the uses for elemental information and gives acomplete definition for each element. The elements are also referred to inother sections of the handbook.

2.3.1 Elements

2.3.1.1 An element is a part of a building which fulfils a specific function orfunctions irrespective of its design, specification or construction, forexample, the element ‘external walls’ provides the external vertical envelopeto a building, separating the internal and external environment, irrespective ofhow it may be constructed.

2.3.1.2 Elements relate to the design process. Therefore, budget estimates arenormally prepared in elemental form and developing the designs are normallydescribed and costed in this manner.

2.3.2 Elemental Cost Analysis

2.3.2.1 An elemental cost analysis is prepared following the receipt and acceptanceof a tender for building work.

2.3.2.2 The tender cost is broken down into the standard BCIS elements (seeAppendix A) using the definitions to determine which items should beincluded in any particular element.

2.3.2.3 The elemental cost analysis can then be used to estimate future projects of asimilar type.

2.3.2.4 For further information on the preparation of an elemental cost analysis usingthe BCIS elements, please refer to the BCIS publication, Standard Form ofCost Analysis: Principles, Instructions and Definitions.

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PART 2, SECTION 3

2.3.3 Other Uses

The standard elements can be used successfully for other purposes, as detailedin the following subsections.

2.3.3.1 DESIGN AND BUILD

In the procurement of design and build projects there has been an increase inthe use of elements to structure both employer’s requirements and the contractsum analysis. However, the use of non-standard elements and definitions canbe confusing. Standard elements, on the other hand, encourage a structuredthought process and produce more coherent employer’s requirements. Thishelps to avoid some conflicting statements that may arise in contractdocuments if standard elements are not used.

(a) Employer’s RequirementsThe Joint Contracts Tribunal (JCT) practice note on the Standard Form ofBuilding Contract With Contractor’s Design, CD/1A states that the employer’srequirements may be little more than a description of accommodationrequired, or may be anything up to full ‘scheme design’ or further, preparedfor the employer by his own consultants or other professional advisers:

•Any design input from the employer must be embodied in theemployer’s requirements as there is no provision for design inputfrom the employer during the course of the contract.

•There is no set format for the employer’s requirements, but ifanything beyond basic accommodation requirements is being given,particularly where an outline specification is being prepared, settingit out in design elements will be helpful to both the employer and thecontractor.

•Using the element headings to structure the requirements will act as achecklist for the employer and his representatives in producing anydesign requirements they may have. It also means that therequirements are presented to the contractor in a form that will assisthim in developing his design proposal.

•Elements are the most helpful form for structuring specifications tobe included in the employer’s requirements. Performancespecifications and outline specifications naturally fit into anelemental format. Where a more detailed specification is required itmay be more helpful to give performance requirements in elementalform, with the more detailed specification in trade (work sections)form, where necessary.


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PART 2, SECTION 3

(b) Contractor’s ProposalsThe contractor’s proposals should follow the format of the employer’srequirements. The preparation of the specification for materials andworkmanship in elemental form facilitates the development of thespecification alongside the design and tendering process. It also highlightsany amendments to the employer’s requirements either proposed by thecontractor or requested by the client.

(c) Contract Sum AnalysisDesign and build contracts are for a lump sum price, but the standard formsof contract provide for a contract sum analysis for assisting the employer inassessing tenders, for checking interim payments and for valuation ofchanges in the employer’s requirements. The use of standard elements toformat the contract sum analysis makes the foregoing procedures simpler(see Section 2.3.3.1 (e)).

(d) Evaluation of Tender ProposalsOn client-led design projects where tenders are based on a detailed set ofemployer’s requirements and a highly developed design, the employer shouldin theory be able to accept the lowest tender. Comparison of the tender withthe cost plan element by element helps in assessing the contractor’scompliance with the employer’s design. Where alternative solutions have beenput forward for particular elements, the existence of an elemental cost planand an elemental contract sum analysis prove invaluable in assessing thetender value.

Contractor’s proposals on contractor-led design projects should besystematically checked to ensure that they meet the employer’s requirements.The structuring of the requirements, the proposal and the contract sumanalysis in consistent elemental form greatly assists in this process. Indeed, itis difficult to imagine any successful detailed technical check of a tender thatdid not follow a design elemental form. If the contractor’s proposals were notstructured in this way, the process would be much more difficult.

Contract sum analyses presented in consistent elemental form allowcomparison both with the client’s quantity surveyor’s original cost plan andbetween the competing tenders. This identifies where individual tenders haveproposed any elemental solutions with a significantly different cost.

(e) Interim PaymentsThe JCT Standard Form of Building Contract With Contractor’s Design 1998(CD98) provides for the use of one of two methods for interim payments.Alternative A is by stage payments and Alternative B is by periodic payments.

If the contract sum analysis has been set out elementally it lends itself toAlternative A, as elements and sub-elements provide easily definable stages.


PART 2, SECTION 3

With Alternative B - periodic payments - an elemental breakdown of thecontract sum analysis makes valuations relatively easy, particularly if differentdesign solutions within a single element are identified separately. Forexample, a periodic payment for the external walls would be a simple task ofproportioning the amount of external wall completed to the total. Thisovercomes some of the problems that arise in checking interim valuationswhere the contract sum analysis has been prepared in trade format but no billof quantities or quantified schedule of rates has been provided.

2.3.3.2 ACTIVITY SCHEDULES

The JCT Standard Form of Building Contract 1998 (JCT98) contains anoption for the contractor to include an activity schedule for use in interimpayments. The activity schedule is defined as ‘the schedule of activities asattached to the Appendix with each activity priced and with the sum of thoseprices being the contract sum excluding provisional sums, prime cost sumsand any contractor’s profit thereon’. If the contractor does include an activityschedule, it must be by agreement with the employer.

There is no standard format stipulated for the activity schedule. However,using a BCIS standard list of elements (Appendix A) to provide an activityschedule eliminates any problems with definitions. Furthermore, an elementalbreakdown makes valuation for interim payments simple (see Section 2.3.3.1(e)) and overcomes some of the problems that may arise if activity scheduleshave been broken down into trades.

The use of an activity schedule broken down into BCIS standard elementswould also allow an elemental cost analysis to be completed relatively easilyand would be particularly useful if projects have been procured without billsof quantities.



Appendix A: BCIS Standard Elements

(Please also refer to the notes which follow the definitions)

1 SUBSTRUCTURE

All work below underside of screed or where no screed exists to underside oflowest floor finish including damp-proof membrane, together with relevantexcavations and foundations.

2 SUPERSTRUCTURE

2A Frame

Loadbearing framework of concrete, steel or timber. Main floor and roofbeams, ties and roof trusses of framed buildings. Casing to stanchions andbeams for structural or protective purposes.

2B Upper floors

Upper floors, balconies and structural screeds, suspended floors over or inbasements.

2C Roof

2C1 Roof structureConstruction, including eaves and verges, plates and ceiling joists,trusses, gable ends, internal walls and chimneys above plate level,parapet walls and balustrades.

2C2 Roof coveringsRoof screeds and finishings. Battening, felt, slating, tiling and the like.Flashings and trims. Insulation. Eaves and verge treatment.

2C3 Roof drainageGutters where not integral with roof structure, rainwater heads and roofoutlets. (Rainwater downpipes to be included in ‘Internal drainage’(5C1).)

2C4 Roof lightsRoof lights, opening gear, frame, kerb and glazing. Pavement lights.



2D Stairs

2D1 Stair structureConstruction of ramps, stairs and landings other than at floor levels.Ladders. Escape staircases.

2D2 Stair finishesFinishes to treads, risers, landings (other than at floor levels), rampsurfaces, strings and soffits.

2D3 Stair balustrades and handrailsBalustrades and handrails to stairs, landings and stairwells.

2E External walls

External enclosing walls including that to basements but excluding itemsincluded with ‘Roof structure’ (2C1). Chimneys forming part of externalwalls up to plate level. Curtain walling, sheeting rails and cladding. Verticaltanking. Insulation. Applied external finishes.

2F Windows and external doors

2F1 WindowsSashes, frames, linings and trims. Ironmongery and glazing. Shopfronts. Lintels, sills, cavity damp-proof courses and work to reveals ofopenings.

2F2 External doorsDoors, fanlights and sidelights. Frames, linings and trims.Ironmongery and glazing. Lintels, thresholds, cavity damp-proofcourses and work to reveals of openings.

2G Internal walls and partitions

Internal walls, partitions and insulation. Chimneys forming part of internalwalls up to plate level. Screens, borrowed lights and glazing. Moveable space-dividing partitions. Internal balustrades excluding items included with ‘Stairbalustrades and handrails’ (2D3).

2H Internal doors

Doors, fanlights and sidelights. Sliding and folding doors. Hatches. Frames,linings and trims. Ironmongery and glazing. Lintels, thresholds and work toreveals of openings.

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3 INTERNAL FINISHES

3A Wall finishes

Preparatory work and finishes to surfaces of walls internally. Picture, dadoand similar rails.

3B Floor finishes

Preparatory work, screeds, skirtings and finishes to floor surfaces excludingitems included with ‘Stair finishes’ (2D2) and structural screeds includedwith ‘Upper floors’ (2B)

3C Ceiling finishes

3C1 Finishes to ceilingsPreparatory work and finishes to surfaces of soffits excluding itemsincluded with ‘Stair finishes’ (2D2) but including sides and soffits ofbeams not forming part of a wall surface. Cornices, coves.

3C2 Suspended ceilingsConstruction and finishes of suspended ceilings.

4 FITTINGS AND FURNISHINGS

4A Fittings and furnishings

4A1 Fittings, fixtures and furnitureFixed and loose fittings and furniture including shelving, cupboards,wardrobes, benches, seating, counters and the like. Blinds, blindboxes, curtain tracks and pelmets. Blackboards, pin-up boards, noticeboards, signs, lettering, mirrors and the like. Ironmongery, other thanto doors and windows.

4A2 Soft furnishingsCurtains, loose carpets or similar soft furnishing materials.

4A3 Works of artWorks of art if not included in a finishes element or elsewhere.

4A4 EquipmentNon-mechanical and non-electrical equipment related to the functionor need of the building (e.g. gymnasia equipment).



5 SERVICES

5A Sanitary appliances

Baths, basins, sinks, etc. WC’s, slop sinks, urinals and the like. Toilet-rollholders, towel rails, etc. Traps, waste fittings, overflows and taps as appropriate.

5B Services equipment

Kitchen, laundry, hospital and dental equipment and other specialistmechanical and electrical equipment related to the function of the building.

5C Disposal installations

5C1 Internal drainageWaste pipes to ‘Sanitary appliances’ (5A) and ‘Services equipment’ (5B).Soil, anti-syphonage and ventilation pipes. Rainwater downpipes. Floorchannels and gratings and drains in ground within buildings up to externalface of external walls.

5C2 Refuse disposalRefuse ducts, waste disposal (grinding) units, chutes and bins. Localincinerators and flues thereto. Paper shredders and incinerators.

5D Water installations

5D1 Water – mains supplyIncoming water main from external face of external wall at point ofentry into building including valves, water meters, rising main to (butexcluding) storage tanks and main taps. Insulation.

5D2 Cold water servicesStorage tanks, pumps, pressure boosters, distribution pipework tosanitary appliances and to services equipment. Valves and taps notincluded with ‘Sanitary appliances’ (5A) and/or ‘Services equipment’(5B). Insulation.

5D3 Hot water servicesHot water and/or mixed water services. Storage cylinders, pumps,calorifiers, instantaneous water heaters, distribution pipework tosanitary appliances and services equipment. Valves and taps notincluded with ‘Sanitary appliances’ (5A) and/or ‘Services equipment’(5B). Insulation.

5D4 Steam and condensateSteam distribution and condensate return pipework to and from servicesequipment within the building including all valves, fittings, etc.Insulation.



5E Heat source

Boilers, mounting, firing equipment, pressurising equipment, instrumentationand control, ID and FD fans, gantries, flues and chimneys, fuel conveyors andcalorifiers. Cold and treated water supplies and tanks, fuel oil and/or gassupplies, storage tanks, etc., pipework, (water or steam mains) pumps, valves andother equipment. Insulation.

5F Space heating and air treatment

5F1 Water and/or steam (heating only)Heat emission units (radiators, pipe coils, etc.) valves and fittings,instrumentation and control and distribution pipework from ‘Heatsource’ (5E).

5F2 Ducted warm air (heating only)Ductwork, grilles, fans, filters, etc., instrumentation and control.

5F3 Electricity (heating only)Cable heating systems, off-peak heating system, including storageradiators.

5F4 Local heating (heating only)Fireplaces (except flues), radiant heaters, small electrical or gasappliances, etc.

5F5 Other heating systems (heating only)

5F6 Heating with ventilation (air treated locally)Distribution pipework ducting, grilles, heat emission units includingheating calorifiers, except those which are part of ‘Heat source’ (5E)instrumentation and control.

5F7 Heating with ventilation (air treated centrally)All works as detailed under 5F6 for system where air treated centrally.

5F8 Heating with cooling (air treated locally)All work as detailed under 5F6 including chilled water systems and/orcold or treated water feeds. The whole of the costs of the cooling plantand distribution pipework to local cooling units shall be shownseparately.

5F9 Heating with cooling (air treated centrally)All work detailed under 5F8 for system where air treated centrally.



5G Ventilating systems

Mechanical ventilating system not incorporating heating or coolinginstallations including dust and fume extraction and fresh air injection, unitextract fans, rotating ventilators and instrumentation and controls.

5H Electrical installations

5H1 Electric source and mainsAll work from external face of building up to and including localdistribution boards including main switchgear, main and sub-maincables, control gear, power factor correction equipment, stand-byequipment, earthing, etc.

5H2 Electric power suppliesAll wiring, cables, conduits, switches from local distribution boards,etc., to and including outlet points for individual installations.

5H3 Electric lightingAll wiring, cables, conduits, switches, etc. from local distributionboards and fittings to and including outlet points.

5H4 Electric lighting fittingsLighting fittings including fixing.

5I Gas installations

Town and natural gas services from meter or from point of entry where thereis no individual meter: distribution pipework to appliances and equipment.

5J Lift and conveyor installations

5J1 Lifts and hoistsThe complete installation including gantries, trolleys, blocks, hooks andropes, downshop leads, pendant controls and electrical work from andincluding isolator.

5J2 EscalatorsAs detailed under 5J1.

5J3 ConveyorsAs detailed under 5J1.

5K Protective installations

5K1 Sprinkler installationsThe complete sprinkler, installation and CO2 extinguishing system.Including tanks, control mechanism, etc.



5K2 Fire-fighting installationsHose reels, hand extinguishers, asbestos blankets, water and sandbuckets, foam inlets, dry risers (and wet risers where only serving fire-fighting equipment).

5K3 Lightning protectionThe complete lightning protection installation from finials conductortapes, to and including earthing.

5L Communication installation

Warning installations (fire and theft)

Burglar and security alarmsFire alarms

Visual and audio installations

Door signalsTimed signalsCall signalsClocksTelephonesPublic addressRadioTelevisionPneumatic message systems

5M Special installations

All other mechanical and/or electrical installations (separately identifiable) whichhave not been included elsewhere, e.g. chemical gases; medical gases; vacuumcleaning; window cleaning equipment and cradles; compressed air; treated water;refrigerated stores.

5N Builder’s work in connection with services

Builder’s work in connection with mechanical and electrical services.

5O Builder’s profit and attendance on services

Builder’s profit and attendance in connection with mechanical and electricalservices.



6 EXTERNAL WORKS

6A Site works

6A1 Site preparationsClearance and demolitions. Preparatory earth works to form newcontours.

6A2 Surface treatmentsRoads and associated footwaysVehicle parksPaths and paved areasPlaying fieldsPlaygroundsGames courtsRetaining wallsLand drainageLandscape work

6A3 Site enclosure and divisionGates and entrances. Fencing, walling and hedges.

6A4 Fittings and furnitureNotice boards, flag poles, seats, signs.

6B Drainage

Surface water drainage. Foul drainage. Sewage treatment.

6C External services

6C1 Water mainsMain from existing supply up to external face of building.

6C2 Fire mainsMain from existing supply up to external face of building; firehydrants.

6C3 Heating mainsMain from existing supply or heat source up to external face ofbuilding.

6C4 Gas mainsMain from existing supply up to external face of building.

6C5 Electric mainsMain from existing supply up to external face of building.

6C6 Site lightingDistribution, fittings and equipment.



6C7 Other mains and servicesMains relating to other service installations (each shown separately).

6C8 Builder’s work in connection with external servicesBuilder’s work in connection with external mechanical and electricalservices: e.g. pits, trenches, ducts, etc.

6C9 Builder’s profit and attendance on external mechanical and electricalservices.

6D Minor building work

6D1 Ancillary buildingsSeparate minor buildings such as sub-stations, bicycle stores,horticultural buildings and the like, inclusive of local engineeringservices.

6D2 Alterations to existing buildingsAlterations and minor additions, shoring, repair and maintenance toexisting buildings.

7 PRELIMINARIES

Priced items in preliminaries bill and summary but excluding contractors’price adjustments. This is not classed as an element but is included forallocation of costs.

8 EMPLOYERS CONTINGENCIES

This is not classed as an element but is included for allocation of costs.

Notes

1 Substructure(a) Where lowest floor construction does not otherwise provide a platform, theflooring surface shall be included with this element (e.g. if joisted floor, floorboarding would be included here).(b) Stanchions and columns (with relevant castings) shall be included with‘Frame’ (2A).(c) External enclosing walls to basements shall be included with ‘Externalwalls’ (2E).

2A Frame(a) Structural walls which form an integral part of the loadbearing frameworkshall be included either with ‘External walls’ (2E) or ‘Internal walls andpartitions’ (2G) as appropriate.(b) Beams which form an integral part of a floor or roof which cannot besegregated therefrom shall be included in the appropriate element.



(c) In unframed buildings roof beams and trusses and floor beams shall beincluded with ‘Upper floors’ (2B) or ‘Roof structure’ (2C1) as appropriate.(d) If the ‘Stair structure’ (2D1) has had to be included in this element itshould be noted.

2B Upper floors(a) Where floor construction does not otherwise provide a platform theflooring surface shall be included with this element (e.g. if joisted floor, floorboardings would be included here).(b) Beams which form an integral part of a floor slab shall be included withthis element.(c) If the ‘Stair structure’ (2D1) has had to be included in this element itshould be noted.

2C1 Roof structure(a) Trusses which form part of a whole building framework shall be includedin ‘Frame’ (2A).(b) Beams which form an integral part of a roof shall be included with thiselement.(c) Roof housings (e.g. lift motor and plant rooms) shall be broken down intothe appropriate constituent elements.

2D1 Stair structure(a) The cost of external escape staircases shall be shown separately.(b) If the stair structure has had to be included in the elements ‘Frame’ (2A)or ‘Upper floors’ (2B) this should be stated.

2E External walls(a) If walls are self-finished on internal face, this shall be stated.

3A Wall finishes(a) Surfaces which are self-finished (e.g. self-finished partitions, fair-facedwork) shall be included in the appropriate element.(b) Insulation which is a wall finishing shall be included here.

3B Floor finishes(a) Where the floor construction does not otherwise provide a platform theflooring surface will be included either in ‘Substructure’ (1A) or ‘Upperfloors’ (2B) as appropriate. Access floors.

3C Ceiling finishes(a) Where ceilings principally provide a source of heat, artificial lighting orventilation, they shall be included with the appropriate ‘Services’ element.

4A1 Fittings, fixtures and furniture(a) Ironmongery to ‘Windows and external doors’ and ‘Internal doors’ shouldbe included in (2F) and (2H) respectively.



4A3 Works of art(a) Where items in this element have a significant effect on other elements anote should be included in the appropriate element.

5B Services equipment(a) Local incinerators shall be included with ‘Refuse disposal’ (5C2).

5C1 Internal drainage(a) Rainwater gutters are included in ‘Roof drainage’ (2C3).

5D2 Cold water services(a) Header tanks, cold water supplies, etc. for heating systems should beincluded in ‘Heat source’ (5E).

5D4 Steam and condensate(a) Steam and condensate pipework installed in connection with spaceheating, or the like, shall be included as appropriate with ‘Heat source’ (5E)or ‘Space heating and air treatment’ (5F).

5E Heat source(a) Chimneys and flues which are an integral part of the structure shall beincluded with the appropriate structural element.(b) Local heat source shall be included with ‘Local heating’ (5F4).

5F Space heating and air treatmentSystem described as having:(a) ‘Air treated locally’ shall be deemed to include all systems where airtreatment (heating or cooling) is performed either in or adjacent to the spaceto be treated.(b) ‘Air treated centrally’ shall be deemed to include all systems where airtreatment (heating or cooling) is performed at a central point and ducted to thespace being treated.

5F3 Space heating and air treatment - Electricity (heating only)(a) Electrically-operated heat emission units other than storage radiatorsshould be included under ‘Local heating’ (5F4).

5H1 Electric source and mains(a) Installation for electric heating (‘built-in’ systems) shall be included with‘Space heating and air treatment’ (5F3).

5J1 Lifts and hoists(a) Special structural work, e.g. lift walls, lift motor rooms, etc., shall beincluded in the appropriate structural elements.(b) Remaining electrical work shall be included with ‘Electrical power supplies’(5H2).(c) Each type of lift or hoist shall be stated separately where appropriate.



5K1 Sprinkler installations(a) Electrical work shall be included with ‘Electrical power supplies’ (5H2).

5L Communication installations(a) Each installation shall be stated separately where appropriate.(b) The cost of the work in connection with electrical supply shall be includedwith ‘Electrical power supplies’ (5H2).

5M Special installations(a) The cost of each installation shall, where appropriate, be shown separately.(b) Items deemed to be included under ‘Refrigerated stores’ comprises allplant required to provide refrigerated conditions (i.e. cooling towers,compressors, instrumentation and controls, cold room thermal insulation andvapour sealing, cold room doors, etc.) for cold rooms, refrigerated stores andthe like other than that required for ‘Space heating and air treatment’ (5F8 and5F9).

5N Builder’s work in connection with services(a) Builder’s work in connection with each of the services elements shall,where possible, be shown separately.(b) Where tank rooms, housings and the like are included in the gross floorarea, their component parts shall be included under the appropriate elements.Where this is not the case the items shall be included here.

5O Builder’s profit and attendance on services(a) The profit and attendance in connection with each of the services elementsshall, where possible, be shown separately.

6B Drainage(a) To include all drainage works (other than land drainage included with‘Surface treatment’ (6A2)) outside the building, to and including disposalpoint, connection to sewer or to treatment plants.

6C8 Builder’s work in connection with external services(a) Builder’s work shall be stated separately for each installation whereappropriate.

6C9 Builder’s profit and attendance on external mechanical and electrical services(a) Profit and attendances shall be stated separately for each installationwhere appropriate.


PART 2, SECTION 4



SECTION 4: DESIGN AND BUILD – GUIDANCE FOR EMPLOYERS’ AGENTS

Introduction

This section describes some of the tasks and responsibilities that a surveyormay be asked to undertake when appointed as an employer’s agent on a designand build contract.

(Note: The organisation or person commissioning a building is referred to inthis section as both the client and the employer. Generally, the term ‘client’ isused in relationship to the employer’s agent and ‘employer’ to denote therelationship to the contractor.)

At its most basic, the role of the employer’s agent is to act on behalf of theclient in the matters specified in the contract. However, in practice there are awide range of tasks that a client may ask an employer’s agent to undertake.

This section is not about procurement options; it assumes that all optionalprocurement strategies have been carefully considered by clients and theiradvisors and that the decision has been made to adopt design and build. Withregard to procurement strategies, reference should be made to part 3, section 1of this handbook (‘Developing an Appropriate Building ProcurementStrategy’) which provides extensive guidance on selection of the mostappropriate option for the procurement of buildings.

‘Design and build’ describes contracts whereby the contractor assumesresponsibility both for completing the design for the works and for carryingout the construction in return for a fixed lump sum.

There are a number of ‘standard’ forms of design and build contracts, butwhere specific reference is made in this section, it is to the current edition ofthe Joint Contracts Tribunal (JCT) Standard Form of Building Contract WithContractor’s Design 1998 (CD 98). This form of contract makes no provisionfor a contract administrator (CA) and all matters which would have beencertified by the CA are ascribed to either the client or the contractor.

It should be noted that the prescribed duties of the employer’s agent arerestricted to ‘access to documents on site’ and ‘access to works, workshops,etc.’. Importantly however, the contract also allows the client to delegate hisor her responsibilities under the contract and in practice this is usually whathappens.

PART 2, SECTION 4


The services of an employer’s agent can be provided by any one of theconstruction professionals (determined by the nature of the project) but oftenit is a chartered surveyor. On more complex projects the role of employer’sagent may sometimes be provided by a team comprising the ‘lead’ consultant,with other consultants advising on matters relative to their respectivedisciplines. In such circumstances, the function of the lead consultant may notbe dissimilar to that of a project manager.

In appendix A the services which may be requested from an employer’s agentare set out. However, the scope of the role can vary considerably dependingupon the particular circumstances of the commission. It would be unusual forany client to require all the services listed in appendix A but they serve toindicate the extent to which this role can be developed.

2.4.1 Background

2.4.1.1 Design and build is not a new concept. Many historic buildings have beenprocured in this way and the technique has been used for simple industrialshell buildings. However, in recent years the use of design and build hasextended to cover a significant number of building projects of all types.

2.4.1.2 It is thought that design and build has become more popular because clientsbelieved that in some circumstances the traditional route failed to deliver theirprojects on time and to budget.

2.4.1.3 Proponents of design and build claim that it can deliver coordinated planning,reduced professional fees, improved lead-in times, shorter constructionprogrammes and cost savings, as well as providing greater cost certainty forclients through a single point of contact.

2.4.1.4 Responsibility for the development of the design, as well as the constructionof a project, is firmly placed with the contractor. This is perceived to clarifyany litigation or dispute between the parties to the contract.

2.4.1.5 Proponents of design and build also claim that it can allow tenderers to bringtheir skills to the design which, through the competitive process, can deliverbenefits to the client in terms of buildability. Furthermore, tenderers can takeaccount of current availability of labour, materials and plant in their designand pricing considerations.

2.4.2 Contract documentation

2.4.2.1 The JCT Standard Form of Building Contract With Contractor’s Design wasfirst introduced in response to demand for a form of contract which allowedthe contractor to carry out a complete contract (including design development)for a lump sum.

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PART 2, SECTION 4


2.4.2.2 Throughout its life the JCT Standard Form of Building Contract WithContractor’s Design has been subject to many amendments to account forchanges in the law, regulations affecting building development and increasingexpectations and involvement of clients.

2.4.2.3 In England and Wales the contract documents under this form are:• the employer’s requirements;• the contractor’s proposals;• the contract sum analysis; and• the articles and conditions set out in the form including optional

supplementary provisions and appendices.

2.4.3 Additional services

2.4.3.1 The list in appendix A is intentionally comprehensive and involves someduties which may be beyond a surveyor’s normal skills. Great care should beexercised by the employer’s agent in advising on which duties to incorporatewithin the commissioning contract. An inability to deliver a service couldexpose the employer’s agent to claims for negligence from both the client andthe contractor.

2.4.3.2 The employer’s agent will normally be involved from the outset and will beinstrumental in producing the contract documentation, including theemployer’s requirements based on the brief developed with the client.Thereafter, the agent can arrange or assist with the selection of tenderers andarrange the formal tendering process. Subsequently he or she can review thecontractor’s proposals (including the developed design and the contract sumanalysis) to ensure that all aspects of the employer’s requirements have beenmet with particular reference to quality, time and cost issues.

2.4.3.3 Where the employer’s agent has been delegated the authority by the client, heor she is responsible for ensuring that the project is carried out in accordancewith the conditions of contract, employer’s requirements, contractor’sproposals and contract sum analysis. The role will usually include monitoringthe construction process to ensure best practice, controlling expenditure andoverseeing contractor compliance with all current regulations. Typically, itwill also involve the administration of the project in terms of design and costby sanctioning all design issues and by instructing any changes. Theemployer’s agent will be responsible for checking the contractor’s valuationsand confirming interim and final payment amounts to the client in accordancewith the contract conditions.

2.4.3.4 If a day-to-day inspection is required this should be carried out by a clerk ofworks, resident engineer or quality control inspector and should be the subjectof a separate agreement outside the employer’s agent commission.

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PART 2, SECTION 4


2.4.3.5 The role of employer’s agent is not just one of monitoring the contractor’sperformance; good practice requires an active approach to ensure that thecontractor undertakes all of his or her responsibilities under the contract.However, the employer’s agent should not hinder or prevent the contractorfrom fulfilling his or her duties.

2.4.3.6 The employer’s agent should advise the employer on those roles that arewithin his or her competency, which attract a duty of care similar to that undertraditional procurement methods and advise the employer on the appointmentof any other consultants required to fulfil any additional roles.

2.4.3.7 It has been held that an employer’s agent was responsible for failure tocomment on high risk design elements of the contractor’s proposals and anongoing failure to approve the contractor’s design development proposals. Itwould be an unusual project arrangement if these essential tasks were notdelegated by the client to the employer’s agent. On the other hand, the duty toapprove the contractor’s design development and drawing should be includedexpressly or by implication in the contract between the client and theemployer’s agent.

2.4.3.8 Design and build is fundamentally about the allocation of risk andresponsibility. Therefore, it is strongly recommended that the agent’scontractual responsibilities as delegated by the client, together with anyadditional duties the agent has agreed to undertake on behalf of the client, areclearly defined and recorded, and that the client understands the position.

2.4.4 Employer’s requirements and contractor’s proposals (including contract sum analysis)

2.4.4.1 The contractor’s proposals and the employer’s requirements taken together setout the scope of the works, so it is important that the proposals are examinedin detail and that they match the requirements. Any areas of conflict should beresolved since the contract assumes they are compatible when it is signed. Ifthe employer’s requirements and the contractor’s proposals are long and/orcomplicated, concern about the possibility of a conflict between the twodocuments may well remain, even after thorough checks have been carriedout. In this case it may be worth consdering inserting an additional clause asto how conflicts between the two are to be resolved.

2.4.4.2 The appointed employer’s agent has an obligation to guide the client, providetechnical and professional advice and draft the employer’s requirements inorder to protect the client and to ensure the project is completed.

2.4.4.3 The employer’s requirements can be by way of performance specification, oron a prescriptive basis where a great deal of design may have been producedinitially.

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PART 2, SECTION 4


2.4.4.4 The employer’s agent and the employer should agree between them thestandard of performance and the requirements of the building. The employer’sagent should offer guidance on the effect that this might have on thecontractor’s flexibility in design and construction. Some clients may require adetailed level of specification. However, if the employer’s requirementsbecome unnecessarily prescriptive as to the contractor’s basic constructionmethods, the contractor may lose sight of the client’s real requirements. Therequirements should always be sufficiently detailed to ensure the clientobtains the building he or she needs. Therefore, great care should be exercisedby the employer’s agent in advising the client on the appropriate level of detailto be provided in the employer’s requirements and that requested in thecontractor’s proposal.

2.4.4.5 The employer’s agent should try to encourage the client to concentrate on thepurpose, performance and desired end requirements of the project and to avoidinvolvement in the construction method.

2.4.4.6 It is, however, most important that the client’s input is sufficiently detailed toenable the production of clear and concise ‘employer’s requirements’ toachieve the client’s objectives. The requirements should also becomprehensive enough to avoid amendments during the construction processas these can be very costly.

2.4.4.7 All relevant parts of the client’s brief should be given in the employer’srequirements. Additional requirements arising from meetings during thetender process should be incorporated into the requirements by amendment.There should be no misunderstanding as to what comprises the employer’srequirements. Similarly, any amendments to the contractor’s proposals afterthey have been submitted should be incorporated. Any ambiguity betweenthese two documents could give rise to conflict at a later date.

2.4.4.8 Contractors are only responsible for that which they design or specify; in turnemployers or their consultants are responsible for all that they design and/orspecify, unless there has been a pre-agreed limitation to the contract. Thus, inorder for the employer to maximise the benefit from design and build, theextent of any designing and specifying by prescription in the employer’srequirements should be limited to those elements in which the employerrequires such control.

2.4.4.9 The Building Cost Information Service (BCIS) publication, Elements forDesign and Build offers guidance to employer’s agents on the use of buildingelements for structuring the employer’s requirements and the contractor’sproposals/contract sum analysis. Elements for Design and Build is consideredto be important supplementary reading. The list of elements, and theirdefinition, is also given in section 2.3 of this handbook.

PART 2, SECTION 4


Note should also be made of the Code of Procedure for Selective Tenderingfor Design and Build published by the National Joint Consultative Committeefor Building (NJCC) in 1995 and as amended from time to time.

Appendix B is a checklist of matters which surveyors are advised to considerwhen compiling employer’s requirements and checking contractor’sproposals. The list covers the major matters and the elements that relate tobuildings in general. It cannot be exhaustive when applied to any particularbuildings. Any chartered surveyors acting as employer’s agents are advised tomake themselves aware of all matters which are relevant to the client and theclient’s business so as to ensure that the employer’s requirements/contractor’sproposal reflects the client’s needs.

2.4.5 Design and build variants

2.4.5.1 The forms of design and build contract allow for the production of variation tothe conventional design and build contract, for example:

• package deal;• turnkey;• develop and construct;• two-stage tender;• joint venture/negotiated; and• design build fund and operate.

2.4.5.2 PACKAGE DEAL AND TURNKEY

Package deal and turnkey are both expressions used to describe traditionaldesign and build, but with the absolute minimum of client involvement in thedesign development (or the building operations). A turnkey contractadditionally requires that the building is fully fitted out to enable immediateoperation by the end user.

2.4.5.3 DEVELOP AND CONSTRUCT

Develop and construct is the name given to the ‘variant’ where the client, aspart of the employer’s requirements, imposes a design and/or specificationdeveloped to a greater degree than most (for example, listing specificmanufacturers’ products). The contractor is obliged to adopt this data andshould reflect this developed design information in the contractor’s proposals.

A fully developed preliminary design may negate many of the advantagesassociated with conventional design and build. However, the client may behappy to forego these advantages and to impose his or her own particulardesign or specification in return for other benefits perceived to derive from adesign and build procurement strategy.

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PART 2, SECTION 4


2.4.5.4 TWO-STAGE TENDER

Two-stage tender requests seek to obtain proposals from a number oftenderers from which one is selected. That tenderer then works up thepreferred submission in greater detail.

2.4.5.5 JOINT VENTURE/NEGOTIATED

Joint venture/negotiated projects arise when a client is approached by acontractor or developer with a proposal which broadly aligns with the client’sneeds. Many successful projects have been carried out using this route withconsiderable benefit to the client. Clearly, the earlier the employer’s agent canbe introduced the better, since his or her involvement should help limit anyabortive design.

2.4.5.6 DESIGN BUILD FUND AND OPERATE

Design build fund and operate (DBFO) contracts have been created as a resultof the private finance initiative. Although this form of procurement has beenlisted as a design and build variant it should be remembered that the end usernever actually owns the building (unless otherwise provided). CD 98 is nottherefore appropriate as part of the primary agreement, although it couldfeature in a subcontract. In most instances, the client will appoint a shadowdesign team to ensure that user’s requirements are properly established andcommunicated to the bidders. The shadow team checks the offers received toensure that the user’s requirements have been addressed and continues tomonitor design and development with the preferred bidder. Thereafter theshadow team ensures that the building incorporates the specified userrequirements.

Irrespective of the design and build variant employed, the service of theemployer’s agent does not alter radically and can still be developed from theitems of service listed in appendix A.

2.4.6 Novation

2.4.6.1 Novation can be employed on any of the design and build variants andinvolves the transfer of the client’s contract with his or her designer (ordesigners) to the successful contractor, this arrangement having been includedin the tender documents. The contractor assumes the responsibility for thepayment of fees and associated value added tax (VAT), and receives thebenefit of continuity of design. Often when novation is implemented, it is notapplied to the quantity surveyor who remains with the client acting as theemployer’s agent during the design development and construction phase.Novation is not defined in CD 98, although it is widely practised.

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PART 2, SECTION 4


2.4.6.2 Where designers are novated it is important for clients to understand that theirdesigners’ allegiance transfers from the client to the contractor. This transferof allegiance should be properly explained to the client prior to a decision toimplement novation. It is also important that the employer’s agent advises onselecting appropriate designers and contractors and that the transfer of rolesoccurs and is maintained.



Appendix A: Potential services associated with the role of employer’s agent

The services to be provided should follow the NJCC’s Code of Procedure for SelectiveTendering for Design and Build (1995).

Reference should also be made to the BCIS publication Elements for Design and Buildwhich provides guidance on how to structure documents for design and build contracts.

The scope of services should be fully agreed between the employer’s agent and theclient at the outset of the commission and all interested parties should be informed as tothe extent of delegated authority.

A1 INITIAL DESIGN INPUT

• Advising on the need for specialist appointments where necessaryincluding appointments under CDM (Regulations) 1994 (alsocompetency and resource check).

• Agreeing with the client the scope of the employer’s requirements(including the need for preliminary design, if any) and ensuring thatthese are ‘signed off’.

• Examining land transfer documents to clarify boundary positionsincluding an assessment of the likely impact of existing easements(including rights of light, rights of way, restrictive covenants, etc.).

• Initiating measured survey with levels.• Preparing or procuring preliminary design for the development.• Establishing with the client the programme to suit funding availability.• Assessing suitability and cost effectiveness of general and structural

design.• Reviewing scheme under Town and Country Planning Acts including

consultations with local planning authority leading to initial outlinetown planning application. (Note: submission of formal full town andcountry planning application is normally at a later stage (see A2) andsometimes this application is by the contractor.)

• On projects involving the refurbishment of existing buildings theprovision of design, cost assessment and submission of formal town andcountry planning applications.

• Investigating/establishing location of existing services to site with localand statutory authorities.

• Initiating and reviewing subsoil reports.• Consulting as appropriate with relevant agencies, for example, English

Nature and English Heritage.• Advising on the implementation of the Construction Act and any other

relevant legislation.



A2 PRE-CONTRACT

• Advising on the need for further specialist appointments wherenecessary.

• Preparing cost estimate/structured cost plan.• Advising on need for risk analysis to include market research to

underpin financial viability.• Advising on any possible archaeological implications for the site.• Reviewing subsoil reports and commenting on foundation design and

contamination considerations.• Assessing environmental impact and advising generally on

environmental issues.• Conducting local public investigations as related to town planning,

including consultation with building occupiers prior to submitting a fulltown and country planning application.

• Arranging drawings and performance specification for mechanical andelectrical services.

• Arranging design/cost audit at appropriate work stages if appropriate.• Advising on the need for provision of Party Wall Act or Access to

Neighbouring Land Act Agreements.• Developing project brief with client and reflecting same in the

employer’s requirements.• Establishing with client the format of the contract sum analysis.• Assisting with completion of formal applications in connection with

approvals relating to funding, necessary consents and otherrequirements.

• Advising level of contingencies and preparing appropriate dayworkclause.

• Advising on tendering options including single- or two-stage tendering,develop and construct or joint venture.

• Advising on optional clauses in standard forms of contract, in particularCD 98 supplementary provisions which provide both parties with timeand cost certainty.

• Advising on dispute resolution.• In consultation with client finalising the employer’s requirements

document and arranging for this to be formally ‘signed off’ by the client.• Where applicable, advising (after interview if required) on the selection

of suitable tenderers including their capacity, resources, financial andtax exemption status.

• Reviewing and reporting on tenders received for the project includingcomparison with cost plan and comment on programme proposed byeach.

• Advising on all aspects of future maintenance of the completeddevelopment.

• Advising on services installation and future maintenance to theseservices including checking and commenting upon working drawingsproduced by tenderers.



• Advising on energy ratings, for example, National Housing EnergyRating and Standard Assessment Procedure.

• Ensuring access audit is executed (to meet the requirements of theDisability Discrimination Act).

• Auditing contractor’s proposals (including design and detaileddrawings) to ensure compliance with employer’s requirements, townand country planning, building regulations and any further criteriaimposed upon the project by external organisations.

• Preparing cash flow forecasts.• Advising on necessity for and wording of performance bonds and,

where applicable, parent company guarantees.• In conjunction with the client’s broker reviewing contractor’s and

client’s insurances (including professional indemnity insurance ofdesigners).

• Preparing and agreeing a schedule of rates for valuation or negotiationpurposes.

• Advising both client and tenderer on any agreed amendments to theemployer’s requirements following receipt of contractor’s proposals andother relevant inputs.

• Providing information to client in connection with post-tenderdocumentation for lender/funder.

• Agreeing with contractor cash flow based on stage or periodicpayments.

• Arranging for all necessary collateral warranties to be prepared andcompleted by contractor, subcontractors and consultants.

• Arranging for the appointment of a clerk of works.• Advising on assignment and subcontracting (including design).• Advising on novation of designers’ contracts, if appropriate.• Preparing contract documentation, agreeing documentation with both

parties and arranging execution.• Visiting the site with the contractor and agreeing by schedule and

photographic records the existing condition of any buildings to beretained, also, roads, footpaths, trees, shrubs and other similar itemsliable to be damaged.

• Attending site with contractor and assisting in arranging closure of roadsand footpaths.

A3 CONTRACT DURATION

• Issuing letters of intent where appropriate.• Distributing contract documents in accordance with the contract.• Approving/monitoring/commenting, as appropriate, on contractor’s

design development.• Visiting the construction site. (The number of site visits depends on the

stage of construction (or as agreed with client) and may be weeklyduring initial stages until all superstructure is erected and complete.)

• Ensuring that there are regular properly conducted site meetings with achairman operating to a prescribed agenda and formal minutes.



• Attending all site meetings.• Generally monitoring the works in terms of quality and progress.• Assessing compliance with contract conditions by contractor.• Assessing compliance of service installations.• Regularly reporting to client, in a format agreed with the client, matters

of interest, for example, quality, progress against programme, siteorganisation and labour employed. Also, defects and weather stoppages,etc.

• Monitoring spend rate against cash flow forecasts including earnedvalue analysis.

• Ensuring that there is no adjustment to the contract sum other than asprovided in the contract.

• Issuing instructions on behalf of the client to instigate changes to thedesign quality or quantity of the works or on any other matter asrequired by the contract.

• Measuring for and agreeing with contractor any variations resultingfrom changes to the employer’s requirements during construction aswell as the expenditure of any provisional sums.

• Agreeing valuation of fluctuations in the cost of labour, plant andmaterials.

• Addressing requests from contractors for payment for off-site material.• Receiving requests, assessing, preparing, granting and issuing any

notice of extension of time.• Negotiating and agreeing any loss and expense claims submitted in

writing by the contractor.• Checking contractor’s valuations for stage or periodic payments and

notifying the client.• Preparing and issuing financial statements as may be required by the

client.• Ensuring that appropriate VAT is levied in accordance with current

legislation.• Ensuring compliance with all reserved matters contained within Town

and Country Planning Certificate.• Ensuring that adoption procedure is put in hand at appropriate stage and

following through to achieve adoption prior to handover and to includefor drainage installation.

• Issuing, where applicable, non-completion certificate and advising onthe implications of imposition as well as the amount of liquidated andascertained damages which may be deducted by the client from anypayment certified.

• Ensuring that all required tests are carried out by the contractor anddocumented proof provided prior to practical completion.

• Issuing certificate of practical completion.• Checking contractor’s final account and issuing final statements.• Issuing all other final statements relating to the final accounts that may

be required by the client.• Preparing snagging lists.• Arranging and attending pre-handover inspections.



• Ensuring that all snagging items are rectified before inviting client toreceive handover.

• Ensuring the provision of ‘as built’ information compiled in manualform and supplied to the client at completion of construction process –user’s manual and/or computer disk.

• Ensuring that all service installations are completed in accordance withoriginal approved design, attending final commissioning and procuringtest certificates.

• Arranging and attending handover sessions.

A4 POST-CONTRACT

• Receiving health and safety file from planning supervisor and deliveringto client.

• On partial possession and/or sectional completion, agreeing valuethereof.

• Ensuring compliance with any insurance requirements.• Advising on values for building insurance purposes.• Reviewing means of escape as built and ensuring procurement of fire

certificate by the contractor.• Issuing notices of practical completion on client satisfaction or

beneficial occupation, if appropriate.• Obtaining final clearance certificates from local authority in connection

with compliance with building regulations.• Preparing post-contract schedules of defects after occupation and

arranging for rectification by contractor and on completion notifyingclient.

• Issuing notices on making good defects at end of defects liability period,examining the rectified works and certifying completion of makinggood defects, where applicable.

A5 GENERAL ADDITIONAL SERVICES

• Dealing with essential items of defect that arise during maintenanceperiods.

• Resolving any issues concerning latent defects.• Advising on alternative means of remedying defects.• Advising on insolvency of any party involved with the contract.• Advising on obtaining statutory approvals such as registration for food

preparation.• Advising on provision of post-handover service relating to ongoing

maintenance.• Preparing capital allowances and revenue schedules.• Advising on special design requirements, for example, Feng Shui, if

applicable.• Advising on contingency planning and business recovery for select

buildings, for example, terrorist insurance, bomb threats andconstruction of communication rooms.



Appendix B: Employer’s Requirement/Contractor’s Proposal Checklist

B1 CONTRACT DOCUMENTATION

The contract documentation will include:• the employer’s requirements• the contractor’s proposal• the contract sum analysis• the article conditions, optional supplementary provisions and

appendices set out in the form of contract.

The employer’s requirements can be a brief statement of the client’saccommodation requirements, an outline design or a fully worked updesign. The contractor’s proposals should be in sufficient detail to allowthe client to judge between the tenders on design as well as price.

The required level of detail will vary from client to client and contract tocontract but it is suggested that information on this checklist would be theminimum requirement.

Where little design work has been carried out before tenders and proposalsare invited, a performance specification would be normally required.However, where a great deal of design work has taken place a prescriptivespecification would be needed.

B2 CHECKLIST

(Note that this list is not intended to be exhaustive in total or in any section)

B2.1 General Information• Project title• Employer• Employer’s agent• List of drawings and other information accompanying documents• Location, including a narrative on the proposed use/user of the building.

An indication of the employer’s business and overall objectives (toprovide a feel for the eventual product)

• Access to site• Site boundary defined• Form of contract• Permissible modification to standard form of contract• Details of appendices to the conditions of contract• Form of contract sum analysis

B2.2 Building and Accommodation OutlineOutline description of the building

Accommodation schedule• schedule of net usable areas (including definition of occupancy)• schedule of occupancy numbers and duration of occupancy• circulation requirements



Basis of design

Conceptual design statement and drawings• site layout• plans• elevations• sections• relevant working details• site works and landscaping layouts• sketch perspectives• structural design• services design

Design standards• legislation or standards• details of standards which apply (for example codes of practice)• statement of workmanship• tolerances• CDM regulations

Aesthetics• specific aesthetic needs (other than planning requirements)

Integration of components• relationship with each other• methods of dealing with interfaces• method of dealing with services installations. For example, level of

concealment of services and architectural treatments to exposedsurfaces

B2.3 Form of Detailed Specification(Note: The detailed employer’s requirements can be drafted in performancespecification terms, or in prescriptive terms (contractor delivery) by includingdetailed specification and drawings, or a combination of performance andprescriptive specification.)

The scope of work (see Section B2.4) assumes an employer’s requirementdrafted in performance specification terms and the contractor’s proposals shouldconvert these performance specifications into clearly defined design proposals.

The specifications and design checklist (see Section B2.5) can be used inpreparing employer’s requirements or a specification for a contractor’sproposal.

A performance specification should be checked to ascertain that it isfeasible to design a structure with the requirements given and that there isno conflict between performance and other prescriptive requirements given.



B2.4 Scope of Work (Performance Requirements)Performance specification may relate to the whole building or includeelements or both. The following are some matter which may be addressed.

Image/description of key areas• drawings• sketches• statements

Flexibility• flexibility of accommodation• flexibility of design

Energy• energy conservation and heat measures• insulation values• Building research establishment environmental assessment method

(BREEAM) certification rating • plant room layouts

Loading requirements

Details of dead and imposed loadings

Facilities for disabled• provision statement to comply with building regulations and current

disability legislation• specific needs of disabled

Building configuration• written statement and/or drawing• relationship of accommodation• size of accommodation• purpose• layout• dimensional constraints including clear heights under slabs and beams• natural lighting - lux levels and method of measurement• natural ventilation• column grid arrangement including projections from walls, etc.• clear ceilings/soffit heights• tolerances• vehicle access door heights and widths• toilet/bathroom/locker room requirements• kitchen/catering requirements• restaurant/vending requirements• plant room configuration• noise breakout between rooms



• storage space, cleaners, cupboards, maintenance facilities• access for cleaning and maintenance• security

Means of escape

Plantrooms

External works• car parking• leisure facilities• environmental considerations• visual effects• waste disposal• emergency vehicle access• water features• loading bays• existing site features and treatments• function buildings within externals• site survey

B2.5 Specifications and DesignSpecification of performance, or the form of construction, kind and qualitymay be given in elemental or other format. The standard elements are listedbelow. (Please see Section 2.3 of this handbook or the BCIS publication,Standard Form of Cost Analysis for definition of elements.)

1 Substructure2 Superstructure

2A Frame2B Upper floors2C Roof

2C1 Roof structure2C2 Roof coverings2C3 Roof drainage2C4 Roof lights

2D Stairs2D1 Stair structure2D2 Stair finishes2D3 Stair balustrades and handrails

2E External walls2F Windows and external doors

2F1 Windows2F2 External Doors

2G Internal walls and partitions2G1 WC cubicles

2H Internal doors3 Internal finishes



3A Wall finishes3B Floor finishes3C Ceiling finishes

3C1 Finishes to ceilings3C2 Suspended ceilings

4 Fittings and furnishings4A Fittings and furnishings

4A1 Fittings, fixtures and furniture4A2 Soft furnishings4A3 Works of art4A4 Equipment

5 Services5A Sanitary appliances5B Services equipment5C Disposal installations

5C1 Internal drainage5C2 Refuse disposal

5D Water installations5D1 Water mains supply5D2 Cold water service5D3 Hot water service5D4 Steam and condensate

5E Heat source5F Space heating and air treatment

5F1 Water and/or steam (heating only)5F2 Ducted warm air (heating only)5F3 Electricity (heating only)5F4 Local heating (heating only)5F5 Other heating systems (heating only)5F6 Heating with ventilation (air heated locally)5F7 Heating with ventilation (air heated centrally)5F8 Heating with cooling (air heated locally)5F9 Heating with cooling (air heated centrally)

5G Ventilating systems5H Electrical installations

5H1 Electric source and mains5H2 Electric power supplies5H3 Electric lighting5H4 Electric lighting fittings

5I Gas installation5J Lift and conveyor installations

5J1 Lifts and hoists5J2 Escalators5J3 Conveyors

5K Protective installations5K1 Sprinkler installation5K2 Fire-fighting installations



5K3 Lightning protection5L Communication installations5M Special installations

Details of each installation5N Builder’s work in connection with services5O Builder’s profit and attendance on services

6 External works6A Site works

6A1 Site preparation6A2 Surface treatment6A3 Site enclosure and division6A4 Fittings and furniture

6B Drainage6C External Services

6C1 Water mains6C2 Fire mains6C3 Heating mains6C4 Gas mains6C5 Electric mains6C6 Site lighting6C7 Other mains and services6C8 Builder’s work in conjunction with external services6C9 Builder’s profit and attendance on external mechanical andelectrical services6D Minor building work6D1 Ancillary buildings6D2 Alterations to existing buildings

B2.6 Particular RequirementsAdditional ResponsibilitiesThe employer’s requirements should state who is responsible for all mattersthat affect the construction of the building including such matters as:

Site investigations• soil survey• ground conditions• topographical surveys• existing services• hazardous waste• archaeological features

Development controls or other controls• planning permission (including reserved matters)• building regulations• Water Authority • Licensing Authority (liqour)• Licensing Authority (entertainments)• fire officer requirements


• factory inspector• environmental health officer• employer’s building insurers (if appropriate)• Traffic Planning Authority• utilities• National Rivers Authority• Any other authority or statutory undertaker which has jurisdiction

with regard to the works

Establish responsibility for fees payable in connection with above

Other legislation or provisions

Adjoining premises• rights of access to adjoining premises

Trespass, nuisance• contractor to acquire rights as required and absolve the employer of

responsibility

Use and maintenance of existing:• roads• sewers• services

If the responsibility for any of these matters is to be with the contractor theclient should include disclaimers in any information which is provided tothe contractor.

Information requirementsThe employer’s requirements should give details of all records, drawings,etc., required to be handed over on completion including:

• record drawings• maintenance manuals• CAD data disks• design calculations• staff training requirements• warranties and guarantees

ExclusionsGive details of items not to be designed and/or constructed by thecontractor and the requirements and responsibilities for integrating theseinto the works

Future developmentsProvide details of any provisions required for future developments

The Surveyors’ Construction Handbook Part 2, Section 4 (10/99) Effective from 1/11/99 Page 7Appendix B (10/99)

PART 2, SECTION 5


PART TWO: CONSTRUCTION DESIGN AND ECONOMICS

SECTION 5: THE CHARTERED SURVEYOR AS LEADCONSULTANT

Introduction

Over recent years many property and construction professionals havediversified into areas outside their core discipline. Some have becomebarristers; many have become planning supervisors; but the most commonand obvious diversification has been to take on the role of lead consultant orproject manager.

In the past, this role has largely been the domain of the architect. However, inrecent years many clients have increasingly used the services of the charteredsurveyor to carry out these duties.

For those embarking on this route care must be taken to ensure that theadditional duties required by the role of lead consultant are fully understoodand considered when undertaking the project, together with the associatedprofessional liabilities.

This section highlights some of the issues which the chartered surveyorshould consider before undertaking this role. It also identifies some of thebenefits for both clients and projects when appointing a chartered surveyor aslead consultant. A schedule of the additional duties that are likely to berequired in excess of the main professional duties defined in appointmentdocuments (such as those for building and quantity surveying) is included atthe end of the section.

2.5.1 Definitions: The Difference between a Project Manager and LeadConsultant

2.5.1.1 The role of project manager is to directly manage and coordinate all otherconsultants involved with a project on behalf of the client. Ultimately thedelivery of the project is the direct responsibility of the project manager. Onsome projects consultants are appointed by the project manager assubconsultants, or are managed and paid by the project manager (although theclient directly appoints them). This arrangement is most beneficial to clientswho, through desire or inexperience, do not wish to have a pro-activeinvolvement with the project.

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PART 2, SECTION 5

Figure 1: Project Structure using a Project Manager

2.5.1.2 The position of lead consultant is more of a coordinating role, ensuring thatother parties in the design, procurement and construction process of a projectprovide the right input at the right time, and to take an overall view to ensurecoordination of all aspects of the project. However, the management of theother consultants is ultimately down to the client and, therefore, is bettersuited to more informed clients who may have their own in-house projectmanagers undertaking an overall management role.

Figure 2: Project Structure using a Lead Consultant

2.5.2 Benefits of Appointing a Chartered Surveyor as Lead Consultant

2.5.2.1 In many circumstances a chartered surveyor can provide a greater breadth ofknowledge and understanding of the complete process of a constructionproject. By utilising this awareness, the chartered surveyor can provide addedvalue to the management of a construction project. Chartered buildingsurveyors are not only involved in design, but also in the peripheral activitiessuch as wayleaves, right to light, party wall and boundary disputes. Charteredquantity surveyors have an inherent knowledge of the complete designpackage through their cost control role, and often clients will appreciate thisfinancial control being extended to a project liaison function.


Project Manager

Arch. Eng. QS Plann. Sup. etc..

Managing &coordination

Client

Arch. Eng. QS Plann. Sup. etc..

Advising &coordination

Client’s Representative

Client

Lead Consultant

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2.5.2.2 As well as simply the design of the buildings, many other skills are requiredto provide a functional space for a client and the chartered surveyor is oftenmore conversant with these additional activities.

2.5.2.3 The chartered surveyor is frequently called upon in matters associated withland purchase, valuation, condition survey, development potential andbuilding cost. This front-end advice provides the opportunity to advise clientsand add value before the appointment of the architect, or in parallel with theconcept designs. This early involvement opens the door of opportunity for thechartered surveyor to take up the reins as lead consultant.

2.5.2.4 Other benefits to a client can be derived where the ‘project’ requires a distinctspecialism and the design process is only part of a more specialised activity,for example farms management.

2.5.3 Issues to Consider before Undertaking the Role

2.5.3.1 Before taking on the role of lead consultant, careful consideration must betaken to ensure that there is sufficient competency to undertake the additionalduties involved in the role. This level of competency will impact directly onprofessional liability insurance policies and ‘competency’ under theConstruction (Design and Management) (CDM) Regulations.

2.5.3.2 Fees for these additional activities must be at the discretion of the provider.They should take into account the level of additional time and resourcesrequired in excess of the core professional services provided. It may be thatsome of the lead consultant duties overlap with existing duties and thateconomies may be obtained. However, the converse may equally apply and itis essential that the chartered surveyor thoroughly reviews the actualadditional duties required before providing fee quotations.

2.5.3.3 With the constant changes in the way that buildings are procured anddesigned, the chartered surveyor is in a prime position for providing realadded value to the process. For those individuals or practices who do not wishto undertake the more encompassing role of project manager, but feel thatthey can make a positive contribution by directing a particular project, thenthe role of lead consultant fits the bill. However, care must be taken to ensurethat the necessary additional skills exist to be certain that the increasedresponsibility can be taken on comfortably and to the ultimate benefit to theclient.

2.5.4 Schedule of Lead Consultant Duties

2.5.4.1 The schedule of duties of a lead consultant is not exhaustive. The RoyalInstitution of Chartered Surveyors provides a range of publications whichdescribe in more detail individual professional services such as quantity and


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building surveying and it is recommended that, wherever possible, thesurveyor refers to these when confirming the scope of service to be providedas lead consultant.

2.5.4.2 PURPOSE

During a construction project many issues can arise on which the client mayrequire professional advice from his or her consultants. The lead consultant’srole is to provide the client with comprehensive professional support to ensurethat the client’s requirements are met with regard to legislation, standards,cost and programme.

The client nominates a lead consultant for each capital project undertaken.The lead consultant, who may or may not be an active design member of theproject team, will liaise with the client representative and will be responsiblefor the following activities.

2.5.4.3 GENERALLY

(a) Establish the client’s brief and ensure that it is agreed with the clientand communicated to all designers.

(b) Monitor the service provided by all consultants to ensure that they arecarrying out their duties to the standard required at each work stage.Submit all reports, plans and proposals to the client with the request forapproval to proceed to the next work stage.

(c) Deal with all queries and solve problems as they arise. Seek advicefrom the client where necessary, but be aware that professionalresponsibility for the proper management of all aspects of the projectlies solely with the lead consultant and project team members.

(d) Ensure that all drawn and specification material is forwarded to allother consultants in accordance with the previously agreed project teamprogramme. Review, coordinate and confirm design drawings of allproject team members.

(e) Regularly review the design with the client and designers and formallyminute any agreed amendments. Inform the client of the impact ofthese amendments on time, cost and design.

2.5.4.4 STAGES A AND B: INCEPTION, FEASABILITY AND BRIEFING

AB/1 Establish the scope of the project and ensure that all other members ofthe project team have the same understanding.

AB/2 Advise on the need for site investigations.

AB/3 Investigate planning constraints.


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AB/4 Direct the activities of any supporting consultants such that the optionappraisal/feasibility study is fully investigated. Collate and prepare areport for submission to the client. Attend presentation meetings asrequired.

AB/5 Assist the client with the preparation of detailed briefing documentswith special input on technical, legal, statutory, financial andprogramming requirements.

AB/6 Advise on procurement methods.

AB/7 Advise the client with regard to the general application of the CDMRegulations and comply with Regulation 13(1).

AB/8 Agree fee with the client.

AB/9 Obtain further instructions from the client.

2.5.4.5 STAGE C: OUTLINE PROPOSALS

C1 Arrange dates and venues. Chair and minute all regular design teammeetings (at least monthly up to tender stage).

C2 Arrange to circulate a list of specific duties of each consultant toestablish roles and responsibilities. Discuss and agree a detailed designand general construction programme with all members of the designteam.

C3 Arrange dates and venues with the architect and client representativefor brief development and presentation meetings.

C4 Arrange for surveys, investigations and consultations with statutorybodies.

C5 Ensure compliance with Regulation 13(2) of the CDM Regulations andliaise with the planning supervisor.

C6 Compile and submit Stage C report to the client.

C7 Request approval to proceed to Stage D.

2.5.4.6 STAGE D: SCHEME DESIGN

D1 Arrange for any site investigations and consultations which are stillnecessary.

D2 Review progress, brief and the client’s decisions. With the projectteam’s assistance prepare and agree a detailed design programme ofwork and flow of information.


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D3 Prepare the initial health and safety plan (if acting as the planningsupervisor).

D4 Ensure compliance with Regulation 13(2) of the CDM Regulations andliaise with the planning supervisor.

D5 Clarify items of fixed furniture and equipment required by the client.

D6 Compile the Stage D report from work undertaken and coordinated byall project team members.

D7 With the architect, undertake a formal presentation (or presentations) tothe client.

D8 Request approval to proceed to Stage E.

2.5.4.7 STAGE E: DETAILED DESIGN

E1 Review the outcome of planning submission.

E2 Consider the need for pre-ordering of materials or equipment.

E3 Compile and submit the Stage E report to the client which, in additionto the usual reports and cost plans, should comprise:• furniture and layout drawings;• sample boards and recommendations for selection of materials and

finishes;• reports from advising authorities;• phasing and site management drawing showing the effects of

disruption on the operation of the establishment; and• schedule of areas showing the direct relation to the areas in the

brief.

E4 Ensure compliance with Regulation 13(2) of the CDM Regulations andliaise with the planning supervisor.

E5 Advise on the form of contract.

E6 Request approval to proceed to Stage F.

2.5.4.8 STAGE F: PRODUCTION OF INFORMATION

F1 Ensure appropriate applications for approval under other applicablestatutory requirements (including negotiating waivers or relaxations).

F2 Ensure appropriate applications for approval under the buildingregulations or other applicable statutory requirements (includingnegotiating waivers or relaxations).


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F3 Discuss any aspects of the design, construction methods or sitemanagement that could be of concern under health and safetylegislation. Update the health and safety plan.

F4 Ensure that a list of tenderers from approved register of contractors isobtained. Contact each contractor giving outline details of the schemeand request that they confirm their interest in submitting a bona fidetender.

F5 Confirm all requirements from the planning authority, fire officer,crime prevention officer and highway authority will be incorporated inthe contract documents.

F6 Report to the client at monthly intervals on progress and cost planchecks.

2.5.4.9 STAGE G: BILLS OF QUANTITIES

G1 Discuss with the client and project team suitable amendments tostandard contract preliminary clauses, the completion of the appendixto the contract, performance bonds, changes to standard contractconditions, methods of appointing subcontractors and suppliers andinsurance liabilities.

G2 Ensure that planning and building regulation approval has been achieved.

G3 Obtain pre-tender estimate from quantity surveyors. Inform the clientof readiness.

G4 On instructions to proceed to tender, instruct the quantity surveyor (ifappointed) to issue tender documents. Follow all the client’s standardprocedures for this activity.

2.5.4.10 STAGE H: TENDER ACTION

H1 Ensure that all arrangements for temporary works and client sitepreparation have been undertaken. Liaise with the propertymanager/client for all temporary site management and services issues.

H2 Be available to assist tenderers in the clarification or correction of datawithin the tender documents.

H3 Carry out tender appraisal in conjunction with other consultants andsubmit a formal tender report to the client recommending (orotherwise) the acceptance of a single tender.

H4 If necessary, undertake redesign, and/or negotiation with tenderer(s)and client, on reductions in tendered contract sum to meet the client’sbudget.


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2.5.4.11 STAGE J: PROJECT PLANNING

J1 Prepare the building contract and arrange for it to be forwarded to theclient or his or her solicitor, and signed by the contractor.

J2 Notify the client’s insurers.

J3 Arrange a pre-contract meeting with the contractor, subcontractors,consultants, clerk of works, client and head of establishment. Advise onarrangements for access to the site and deal with queries and concernson works.

J4 Ensure that all temporary and enabling works are complete.

2.5.4.12 STAGE K: OPERATIONS ON SITE

K1 Ensure that the contract is administered in accordance with its terms.Ensure that cost control of the project is maintained.

K2 Visit the site as appropriate to inspect the progress and quality of work.

K3 Liaise and coordinate the work of all design consultants during the post-contract period ensuring solutions are found to issues that may arise andthat the schedules for issue of later design information are met.

K4 Hold regular meetings on site with the head of establishment, client andclerk of works to appraise them of progress and to establish and resolveany concerns that may be arising.

K5 Attend regular site meetings with the contractor, other consultants andclerk of works.

K6 Give a short general report at appropriate intervals during the course ofthe contract on progress, site relationships, quality of workmanship andany other pertinent matter. Monitor contractor’s health and safety planand records.

K7 Ensure that certificates are issued for interim payments on the RIBAstandard form to the client. Produce short financial reports on acumulative basis (cash flow predictions are required to be attached toeach valuation certificate). Produce a detailed financial report showingthe value of all actual and expected variations to be issued at threemonthly intervals throughout the construction process.

K8 Ensure that all the client’s handover procedures have been followedbefore accepting the building from the contractor.

K9 Notify the client’s insurers that work is complete and arrange forrelease of bonds.


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2.5.4.13 STAGE L: COMPLETION

L1 Check making good of all outstanding patent defects. Resolve anyissues relating to emergency latent defects over the defects period. Oncompletion of all making good, agreed with the head of establishmentin writing, issue certificate of making good defects.

L2 Ensure that the terms of the contract, in relation to completion of theworks, are administered.

L3 Continue to produce a financial report at three monthly intervals.

L4 Ensure that the quantity surveyor completes the final account to anauditable standard. Send to the client with the request for approval toissue final certificate.

L5 Ensure that the issue of final certificate is made and that all consultantscomplete construction certificate.

L6 Complete quality assurance questionnaire on performance of the client,contractor and other consultants.

L7 Resolve any issues relating to emergency latent defects after the patentdefects period.

L8 Resolve contractual claims and provide any necessary reports to theclient.

L9 Ensure that the health and safety file is completed and handed to theclient.

L10 Ensure that all fire safety certificates, building control certificates,licenses, etc. are obtained and handed to the client.

L11 Review the project from start to finish and report findings to the client,complete with observations on successes and failures. Ensure that allparties involved are sent a copy of the report.


PART 2, SECTION 6



SECTION 6: DEFINING SUSTAINABLE CONSTRUCTION

Introduction

The term ‘sustainable’ was first used in the construction industry when it wasapplied to sources of timber. At that time timber was declared to come from‘sustainable sources’. Today, timber from ‘sustainable sources’ has beenreplaced with the expression ‘well managed’ or even ‘managed’ sourcesimplying that there is a difference between being sustainable and being wellmanaged.

But what is this difference?

The definition of sustainability that seems to have achieved almost universalacceptance is that put forward by the World Commission on Environment andDevelopment in 1987, often referred to as the Brundtland definition:

‘Humanity has the ability to make development sustainable – to ensure that itmeets the needs of the present without compromising the ability of futuregenerations to meet their own needs.’

This definition appears quite clear in its meaning: we are charged with theresponsibility of ensuring that our activities do not damage the legacy whichwe are passing on to our successors. Development can be taken in any context,from the economic development of a nation to the construction of a simplebuilding. It confers upon us the responsibility to consider the impact of ouractivity now and the legacy that we are leaving behind us. This can beregarded as the principal of ‘common inheritance’ or, alternatively, ‘inter-generational equity’.

The time frame element is therefore the difference between something whichis well managed and something which is sustainable. A source of supply fortimber may be well managed, but may only be so for 20, 30, 40 or 50 years.Something which is sustainable has, theoretically, an infinite timescale andtherefore has inter-generational equity (where the term equity can mean aresource stock, capital stock or a stock of technologies).

In the construction industry a resource stock can either be land, theavailability of raw materials or the buildings from which the raw materialshave been constructed. Unless purely organic materials, which are capable ofself-regeneration, are used, then in-organic materials are used such as stone,clay and minerals which are deposits available in finite quantities and cannotbe regenerated.

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The mineral resources that are used are therefore not sustainable inthemselves, and in order to demonstrate a sustainable, or at least a ‘more’sustainable construction industry it is the industry’s responsibility, under thedefinition, to ensure that the buildings being constructed from the finite rawmaterial resources are capable of inter-generation usage.

To summarize, the construction industry cannot be considered to besustainable in terms of resource usage because raw materials, which are onlyavailable in finite quantities, are being extracted and processed into buildingproducts for incorporation into a building where the building itself is onlydesigned for a finite life. For the industry to be seen to act in a sustainablemanner it needs to provide a building stock that demonstrates appropriateinvestment of these raw materials such that the swap is an equitable one. Toensure that this takes place, the industry has a responsibility to consider thedesign, detailing and construction methods as well as the cost in use to showthat a valuable legacy has been left to future generations.

2.6.1 Technology Swaps

Sustainability can be demonstrated, and the consumption of finite rawmaterials justified, if a technology is produced that is a substitute for theoriginal raw material resource once this is exhausted. The best demonstrationof this, and probably the first major challenge that will face humankind, is theexhaustion of fossil fuels.

Today, development, economic and political stability depend entirely upon theavailability of oil as a fuel and a raw materials source. Although estimates ofavailable economic oil reserves continually extend, and we are likely to enjoythe benefits of it for at least another 100 years or so, it is universally agreedthat human activity will have to change and the reliance upon oil will have todecline as the availability diminishes and it becomes more costly to extract.The development of an alternative renewable, sustainable, pollution-freeenergy source is therefore vital to the sustainability of human development.

Oil provides a very good example of non-sustainability in practice. However,if the revenues generated from the use of oil were diverted to the research anddevelopment of alternative, sustainable energy sources, this would be anexample of sustainability in practice in the form of a technology swap. In thisinstance, the result of using one resource has been the production of analternative technology which is a direct substitute for the resource that hasbeen exhausted. The definition of sustainability has therefore been satisfiedin that the activities of one generation in achieving their goals has notprevented future generations from achieving their goals.

The inter-generational equity principal is therefore a mechanism by which thetotal available resource to future generations is maintained at a constant level.

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This resource, which is available for their use, can either be in the form of rawmaterials, capital wealth or alternative technologies. The important factor isthat the overall equity stock must not be diminished.

2.6.2 How Can the Environment and Sustainability be Valued?

At present the only method that has been developed for assessing the impactof human activities has been to put a financial value on everything. In thefullness of time it is to be hoped that we will devise different methods ofquantifying value.

An example of a technology advance resulting in huge potentialenvironmental damage is the CFC gases that have been identified as beinglargely responsible for the depletion of the ozone layer. But how do we valuethe environmental damage and possibly attempt to justify it in terms that areeconomically acceptable? It has been suggested that the only way that ozonelayer depletion could be argued and justified as economically acceptable is ifthere was a way of reinstating it at an acceptable cost. In other words, atechnology advance has been made for economic gain but at an environmentalcost. This environmental cost cannot be quantified in economic terms becauseno cost yardstick has been devised for attributing economic value to ourenvironmental stock. This could, however, be quantified if there was atechnology to replace the ozone layer which would itself carry the missingcost element within the equation.

This leads to the conclusion that acts which damage the environment do carrya penalty for future generations and therefore to ignore them is a risk. This riskmay not necessarily be a risk for the present generation, but one that is beingimposed on future generations. Under a philosophy of sustainability it is theresponsibility of the present generation to hand on to the next generation thesame total stock as it itself inherited so as to ensure the same overall balanceof advantages for future development as originally inherited. Providing thateach generation adheres to these principals, the element of timescalejudgement is removed as each successive generation looks after the next.

Under these criteria, knowledge and technical advances will still be made andfuture generations will still be at least as well off as the present generations;but the likely loser will be the industrialized economy which will have to alterthe way in which the indicators of economic development are measured. Atpresent, industrialized nations generally consider economic development tomean an increase in Gross National Product (GNP) per capita. However, GNPassumes all matters relating to the environment have zero value. If economicvalues are attributed to environmental functions in relation to economicdevelopment, the national economic balance sheets would take on aconsiderably different complexion.

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2.6.3 How Does This Affect the Construction Industry?

2.6.3.1 MATERIALS

Most construction materials are a finite resource and will eventually beexhausted. Many already are. Local British sources of Portland stone, whichhas been used as a cladding material for many years, have been exhausted orthe quarries closed and it now has to be obtained from the Continent. Certaincolours of terrazzo marble, once popular in the 1960s, are no longer availableas entire mountains in Italy have been levelled. The use of terrazzo has nowbeen superseded by the increased use in solid marble and granite although itwill only be a matter of time before these sources are similarly exhausted.

Even organic materials are not immune. Brazilian Rio Rosewood, which wasvery popular for making high-quality furniture in the 1960s, is now soendangered that it appears on the Control in Trade of Endangered Species(CITES) list as being illegal for fear of extinction. Mahogany is also on thefringes of being listed and it is widely reported that there are no longer anylegal sources for the supply of the true Swietenia mahogany.

An example closer to home is the UK’s reliance upon imported timber havingused up its own supply. The history of timber production in the UK is aninteresting one which has seen the rapid depletion of forests fromapproximately 90 per cent forest coverage at the time the Romans arrived to alow point of less than 5 per cent of land coverage at the early part of thiscentury. Timber was first imported after the Great Fire of London and in 1668it became necessary for Acts of Parliament to be passed to create forestreserves like the New Forest in Hampshire to try to arrest the situation. WorldWar I saw timber in short supply again and resulted in the birth of the ForestryCommission as a Government Agency in 1919. World War II resulted intimber shortages again and the emergency created the major post-warplantation of quick-growing conifers.

Humankind has a history of failing to adequately consider the impact that itsactivities are having on the resource base and examples are easy to find.

2.6.3.2 BENCH MARKING ENVIRONMENTAL IMPACTS

In order to be able to assess the effect that we are having upon the environmentas a result of our activities a scientifically rigorous and consistent method ofanalysis and bench marking is required. Such a method would have toattribute units of measurement to each environmental impact and in turn torelate these back to a datum to render the results meaningful on a human scale.

The Building Research Establishment (BRE) has undertaken more work thanmost in this area. It has developed Envest, an environmental estimatingsoftware tool which attributes Ecopoints to environmental impacts, with 100Ecopoints being equivalent to the environmental impact of the average UKcitizen. Using a variety of comparison models and mathematical techniquesEcopoint values have been attributed to building materials and systems, and it

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is now possible, via the software package, to calculate the total Ecopointsscore for building types, building operations, refurbishment and custom use.From this data one form of construction can be analysed against another. It isalso possible to quantify the decision-making process using environmentalcriteria, not only by building type and the method of construction that shouldbe used but also the decision whether to build new or to refurbish.

Environmental Impacts

In undertaking the assessment of environmental impacts and attributingEcopoints values to various activities and products, the following must beconsidered carefully:

• climate change;

• fossil fuel depletion;

• ozone depletion;

• human toxicity to air and water;

• waste disposal;

• water extraction;

• acid deposition;

• eutrophication (or over enrichment of water courses);

• ecotoxicity;

• low-level ozone creation (summer smog); and

• mineral extraction.

All these factors have been considered, quantified, compared and weighted inrelation to the impact associated with a typical UK citizen and are shown intable 1.

Table 1: Environmental Impact of UK Citizens

Issue % weighting Characterized impact associated with a typical UK citizen

Climate change 37.8 12300 kg CO2 eq. (100yr)

Fossil fuel depletion 12.0 4.09 tonnes oil eq.

Ozone depletion 8.2 0.286 kg CFC11 eq.

Human toxicity to air 7.0 90.7 kg toxicity

Waste disposal 6.1 7.19 tonnes

Water extraction 5.4 418000 litres

Acid deposition 5.1 58.9 kg SO2 eq.

Eutrophication 4.3 8.01 kg PO4 eq

Ecotoxicity 4.3 178000 m3 toxicity

Photochemical ozone creation 3.8 32.2 kg ethene eq.

Mineral extraction 3.5 5.04 tonnes

Human toxicity to water 2.6 0.0275 kg toxicity

% may not add up to 100% due to rounding

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So for example, to calculate the Ecopoints for 1 tonne of mineral extraction:

Characterized impact = 1 tonne mineral extractionCharacterized impact for 1 typical UK citizen = 5.04 tonnes mineral extractionNormalized impact = 1 divided by 5.04 = 0.198Weighting = 3.5%Ecopoints = 0.198 multipled by 3.5 = 0.693 Ecopoints

2.6.3.3 EMBODIED ENERGY

As materials can be extracted in any part of the world and either processed intobuilding components locally or transported as raw materials, it is virtuallyimpossible to examine all of the possible environmental impacts that thevarious activities are likely to have because the variables are just so great.Perhaps the only constant method there may be in the winning and working ofmaterials, their transportation and processing into building components up tothe point when they are assembled into completed buildings is the energyrequirements of the various processes. The actual monetary value of energycan also be different from country to country, therefore it is not possible to usemonetary value of energy as a unit of measure. However, the unit of energyinput itself can be used.

As energy is required to be consumed at every stage of the production process,from extraction of the raw material to its incorporation into a construction, andeventually to demolition and possible reprocessing, the sum total of theseenergy inputs can be termed as the embodied energy of that product. It shouldtherefore be scientifically possible to establish a method of calculating thequantity of embodied energy that is required to make a building component,be it a cubic metre of concrete, a single brick, a square metre of glass or a sheetof plasterboard.

Appendix A shows a comparison of embodied energy values for somecommon materials. From this it can be appreciated just how energy intensivesome processes are and therefore how relatively good and bad somecomponents are. If materials have to be imported or are chosen to be importedon the grounds of economic cost these will, by definition, carry a largerembodied energy by virtue of the cost of global transportation. Conversely,economies may be derived by local energy consumption and waste disposalwhich can also be incorporated into the equation.

Embodied energy impacts associated with materials have also been assessedquantitively by the BRE using Envest (see 2.6.3.2) which can also takeaccount of the building form and fabric typical replacement intervals andother data held by the Centre for Sustainable Construction. The resultsgenerated are quoted in Ecopoints per m² of element and factors such asreplacement intervals can also be factored in as part of a full cost and usestudy.

A fundamental difference in environmental terms between refurbishment andredevelopment is the saving of embodied environmental impact and energy ifrefurbishment is undertaken in preference to demolition and redevelopment.

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2.6.3.4 LEGISLATIVE CHANGES

Armed with bench-marking data it would be possible for systems ofregulation to be built into the existing regulations. With the increasingemphasis on energy conservation within the building regulations (whichcurrently concentrate on energy consumed in use) it would be a simpleextension of these regulations to lay down embodied energy maxima persquare metre for various building types.

A major criticism that could be levelled at such a system is that it would starvethe construction industry of design flexibility. However, this could beovercome by introducing a scale of energy taxation. This would enable thosethat wish to exceed the design criteria of the regulations to do so, but theywould have to pay for the privilege. Conversely, those who produce buildingsand achieve significant savings beneath the bench mark could receive aid inthe form of grants as recognition for their efforts and ingenuity.

2.6.4 Green Building Materials

Timber is undoubtedly the material most favoured by green designers. As wellas having a relatively low embodied energy content, it absorbs and storescarbon from CO2 when growing, and is strong, insulating and easy to work.Ideally, timber should be sourced in the UK but the supply is severely limited.When sourcing imported timbers designers should ensure that the materialoriginates from a suitable source. The Forest Stewardship Council and theTimber Trades Federation both supply lists of suppliers of timber from goodUK sources (see Appendix B).

Some species of timber are better than others at resisting rot and decay. Inparticular, Western Red Cedar and Douglas Fir, which are again beingconsidered as a viable alternative to PVC-u or aluminium.

Note: specifiers should exercise care with regards to the source of timber as allis not always as it seems.

Masonry construction can be considered green, especially if lime mortars arespecified, because this enables the bricks to be used again in the future. Brickmanufacturers are now keen to promote their products which use low energykilns.

Another form of construction finding favour is a solid block or concrete wallwith insulation and render externally. Dense concrete blocks are preferred tolightweight aerated blocks which use more energy in production. Pulverizedfuel ash blocks contain over 50 per cent fuel ash which is a waste product frompower stations.

It is also now possible to obtain plaster and plasterboard made from wastegypsum which is a by-product from fuel gas de-sulphurization.

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Insulation boards made from polyurethane, extruded polystyrene and phenolicfoams have given way to mineral wool, glass fibre, expanded polystyrene, andin some cases foam glass or cork. Recycled cellulose fibre (newspaper print)is now being specified more for loft insulation and wall insulation in timberframe construction. One such product is known as ‘warm cell’ and is availablefrom Excel Industries (see Appendix B).

These are just a few examples of alternative material resources now available.It is of course interesting to consider that as these materials gain popularityand become specified as a matter of course, this will cause problems insourcing adequate quantities to satisfy demands.

There is a logic to the use of recycled materials (where the embodied energycan be utilized again) as being perhaps the greenest contribution to be made.Second-hand bricks, timber, roofing materials and assorted ironwork arealready available, unfortunately at premium prices.

2.6.5 Whole Building Sustainability

The matters discussed above help us to use resources and raw materials wiselyand to produce better buildings in terms of energy consumed in constructionand use. However, this in itself is not sustainable construction, although it iscertainly a vital component in the process. Sustainable construction wouldonly be achieved when the finished product can demonstrate usefulness andserviceability on an inter-generation basis, rather than being constructed for asingle use and then rendered redundant when there is no longer a requirementfor the original purpose.

An example of such practice is the current trend for the conversion ofredundant 1960s office buildings into residential accommodation, as well aswarehouses and barns, which have for many years been seen as suitableresidential conversion opportunities. The uses to which these buildings arenow being put were never originally envisaged at the time of their planning,design and construction, but suitable alternative uses have been found.

One of the key issues in building sustainability is to ensure that what isoriginally constructed from the resources becomes a similar resource for thefuture generations. In order to achieve this, attention must be turned to wisematerial usage and reduction of waste as well as to producing a building of thehighest possible quality and with maximum adaptability. The building createdmust continue to serve future generations well for whatever purpose they wishto put it to, with the minimum of additional cost in terms of energy and rawmaterial resource input in order to convert and use it for their own purposes.

There are many buildings of over 200 years of age that have found suitablealternative purposes beyond that for which they were originally designed. It istherefore possible to establish with a reasonable degree of certainty what thevital component parts are in ensuring the success of a building for say a 200,or even a 300 year design life.

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The methods of funding and, in particular, the timescale over which a buildingis considered a viable proposition would need to be reviewed and analternative method of valuing the asset would need to be established. Thiswould reflect not just the economic value, but also the environmental resourcevalue invested in the construction, and the social impact and benefits that theconstruction is likely to have for future generations.

The planning process could be slightly extended such that alternative uses areidentified and documented and form an integral part of the planning process.This would require the procurers and designers of the building to demonstratehow it could be used for identified alternative purposes and to ensure that thedesign, as proposed, is sufficiently flexible for the alternative uses to beachieved with minimal additional input.

The other components to ensure that a building is suitable for inter-generationuse is to get the detailing, product selection and construction quality right suchthat the building does not wear out before the inter-generation uses can berealised.

Whilst some technologies have changed very significantly the base skills havenot and nor have the materials. It may be necessary for us to re-learn some oldskills in order to produce buildings of a long life expectancy but it is nownecessary for us to change from being a disposal society to a considerate andconserving one.

2.6.6 The Government Line

In May 1999 the Department of Environment, Transport and the Regions(DETR) published A Better Quality of Life – A Strategy for SustainableDevelopment for the United Kingdom. This document endeavoured to set outa framework and priorities for achieving sustainable development whichincluded:

• more investment in people and equipment for a competitive economy;

• achieving higher growth whilst reducing pollution and reuse ofresources;

• sharing the benefits of growth more widely and more fairly;

• improving towns and cities and protecting the quality of the countryside;and

• contributing to sustainable development internationally.

The Government also felt that the construction industry can contribute toachieving the sustainable development aims by:

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• being more profitable and more competitive;

• delivering buildings and structures that provide greater satisfaction,well-being and value to customers and users;

• respecting and treating its stakeholders more fairly;

• enhancing and better protecting the natural environment; and

• minimizing its impact on the consumption of energy (especiallycarbon-based energy) and natural resources.

In April 2000 the DETR published Building a Better Quality of Life – AStrategy for More Sustainable Construction. (It should be noted that theinclusion of the word ‘more’ is now associated with a sustainabledevelopment strategy which perhaps indicates a slight rethink of absolutes.)This document shows that the Government now feels that the main themes foraction in achieving ‘more’ sustainable construction can best be served byadopting the following action points:

• reuse existing built assets – meeting functional requirements may notrequire new buildings and refurbishment and renovation may workbetter;

• design for minimum waste – specify materials with care, think aboutusing recycled materials, design out waste at all phases in theconstruction and occupation process and involve the supply chain;

• aim for lean construction – aim for continuous improvement, wasteelimination, customer focus, value for money, high quality managementof the projects and supply chain and good communication;

• minimize energy in construction – be aware of embodied energies andtransportation of construction projects. Adopt ‘green’ travel policies;

• minimize energy in use – consider more energy efficient solutions andenergy production from renewable sources;

• do not pollute – understand environmental impacts;

• preserve and enhance bio-diversity – look for opportunities throughoutthe construction process to provide and protect habitats;

• conserve water resources – design for increased water efficiency inbuilding services and within the built environment;

• respect people and their local environment – be responsive to thecommunity and consider your workforce; and

• set targets – measure and compare your performance with others and settargets for continuous improvement.

PART 2, SECTION 6


2.6.7 What Might the Future Hold

If sustainability is going to be the way forward in the next millennium manyexisting conceptions of development have to be reviewed and overhauled. Theway the environment and resources are valued, and how they are used, have tobe re-examined and justified against a policy of sustainability. The materialsand resources that are used in construction activities and the buildings that arecreated will require fresh justification against sustainability objectives.

This will require an overhaul of the planning process and regulatoryframeworks within which the construction industry operates, requiringfunders, building users, material technologists, material manufacturers andsuppliers to re-examine and justify their methods.

The sourcing of the materials and the methods employed in conversion andproduction of building products must be the first priority in making progresstowards sustainable constructions. The way in which raw materials areextracted and processed at source can have the most direct impact upon theenvironment and must be closely examined as well as the actual materialmanufacturers themselves.

The second area for examination would have to be the philosophy behindprocuring buildings and meeting user requirements, the method by whichbuildings are funded, the method of valuation and justification, together withthe demands for greater longevity and flexibility.

Thirdly, the professions responsible for the design and construction ofbuildings to meet the requirements of funders and users must respond to thechallenge of sustainability in order to deliver the required product. This wouldrequire new demands and disciplines in relation to the construction form andthe standard of construction itself. New materials and techniques would needto be developed and adapted into sustainable construction. The professionalswould have to put new demands upon the material producers in the productionof more sustainable materials, but above all they must build for longevity andflexibility with minimum re-investment by way of adaptation andmaintenance if the goals and targets are to be met.

Finally, the contribution that those actually constructing the building have tomake would need to be considered. The sustainable building should be a pieceof procession engineering, simply constructed but to the very highest of qualitystandards with good detailing and nothing left to chance. The finished productwould have to be a monument to sustainable construction and inter-generationalequity making the optimum use of the energy and materials invested.

In other words the principles of sustainability must be fully embraced by everyparticipant from the supplier of the raw material, through the materialmanufacturing process, the procurement and design functions right up to theoccupation of the completed building where the responsibility passes to theoccupiers, the facilities managers and the future owners, occupiers andmanagers of the building to each play their part in making the most of what wehave.

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The Surveyors’ Construction Handbook Part 2, Section 6 Effective from 1/12/01 Page 1Appendix B (revised 10/01)

Appendix B: Useful Addresses

Timber Trade FederationClareville House22/27 Oxenden StreetLondon SW1Y 4EL

Centre for Sustainable ConstructionBuilding Research EstablishmentGarstonWatford WD2 7JR

Department of Transport, Local Government and Regions(formerly Department of Environment, Transport and Regions)Sustainable Construction TeamEland HouseBressenden PlaceLondon SW1E 5DU

The Forest Stewardship CouncilUnit DStation BuildingLlanidloesPowys SY18 6EB

Excel Industries13 Rassau Industrial EstateEbbw ValeMonmouthshire NP3 5SD

Construction Resources16 Great Guildford StreetLondon SE1 0HS

The Building Centre26 Store StreetLondon WC1

The Environment Information ServicePO Box 197CawstonNorwich NR10 4BH

PART 3, SECTION 1


PART THREE: CONSTRUCTION PLANNING AND PROCUREMENT

SECTION 1: DEVELOPING AN APPROPRIATEBUILDING PROCUREMENT STRATEGY

Introduction

This section is intended to provide both clients and their advisers withprocedures which will assist them in the selection of an appropriateprocurement strategy for a building project.

The strategy developed for the purpose of project procurement should resultfrom an objective assessment of client needs and project characteristics, sinceit is considered that there will be no single procurement strategy suitable forall projects and all clients. Choice of an inappropriate strategy can, however,result in a failure to meet client objectives, disappointment and potentiallitigation.

The selection process should, therefore, provide a best-fit solution based ongood judgement and which is acceptable in terms of the identified criteria andthe acceptable distribution of risk.

The selection of an appropriate procurement strategy is identified as a keydecision in terms of achieving client objectives. Conversely, an inappropriatechoice can be a key factor in performance failure, resulting in cost and timeoverruns and poor building performance. This section looks at the client’srole (3.1.1), the development of procurement strategies (3.1.2), the selectionof the most appropriate procurement route (3.1.3), and the implementationprocess (3.1.4).

3.1.1 informs clients as to their involvement as it relates to key stages in theprocess. It also stresses the importance of appropriate professional advice.

In 3.1.2–3, the key issues are addressed together with the characteristics of avariety of procurement strategies: the aim is to match client needs, theparticular project’s criteria and the chosen strategy.

The implementation of strategies is considered in 3.1.4 where reference is alsomade to standard contracts for the designer, consultant or constructorappointment.

Appendix A outlines procurement options.

PART 3, SECTION 1


EFFECT OF CLIENT TYPE ON SATISFACTION CRITERIA

The type of client will affect the criteria which must be met if the client is tobe satisfied with the project.

Owner-occupiers are usually primarily concerned with building performancein terms of functionality and costs in use. They may also be concerned withimage and building style. In this sense, value for money is a key criterion.

Developers, on the other hand, may be driven by market conditions whichenable the project to be let or sold at maximum advantage. They may bepredominantly concerned with speed rather than performance.

This is not to say that owner-occupiers are unconcerned about time. Indeed,certainty of completion date may be a key issue. Nor is it fair to suggest thatdevelopers are unconcerned about building performance or cost. There aremarket conditions where both of these issues may become important.

Attempts to categorise clients in various ways may be helpful in the earlystages of developing procurement strategy. However, each client is uniqueand will be more or less experienced in the process of building procurementdepending on company size and stage of development.

It is important to consider those factors which will affect client satisfaction aswell as the level of knowledge and experience of the client in the process ofbuilding procurement. These factors should have a major influence onprocurement strategy and whether the client should take an active role in theprocurement process.

This Section addresses these issues and provides, through the form of achecklist, a process to aid selection.

SCOPE

The section and the processes included should be used as a prompt and a focusfor the issues to be addressed during the development of procurement strategy.It is not intended that the section will be used as a substitute for judgement.

3.1.1 The Client’s Role

(It is recommended that this be read in conjunction with Part 1, Section 1)

3.1.1.1 INTRODUCTION

3.1.1.1 This subsection explains the client’s responsibilities through the life of aproject. Although it is written for building projects, much of the advice isapplicable to other types of project. In carrying out their role, clients,depending on their knowledge and expertise, will need help from their

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PART 3, SECTION 1


consultants, project managers and other advisers, whose roles are alsoexplained in this section. It is advisable, wherever possible, that clients obtainadvice from an objective and independent adviser who will then not beinvolved as a consultant on the project.

This subsection aims to assist both current and future clients in setting policyand formulating strategy. It outlines their task and explains how it should becarried out. It has been written with the lay client in mind, but will also assistexperienced clients and their advisers.

The success of any project will depend on the motivation given by the client.Experienced clients may take a leading role in the procurement process; lessexperienced clients will need to seek advice or to appoint an adviser to assistthem. Where projects are of a large or complex nature it may be advisable toconsider the appointment of a project manager, who will manage the wholeproject on behalf of the client.

3.1.1.2 A building project represents a discrete piece of work with clear start andfinish dates, providing specified benefits at accepted cost. It is unlike anyother manufactured product because it has:

• a unique demand – the client’s specific need for accommodation (butfuture adaptability and possible disposal must not be ignored);

• a unique location – the site available for the building;• unique constraints – the cost and time parameters for the project; and• a unique end product – the finished building.

3.1.1.3 It has three other particular characteristics:

• the final product, although itself unique, is built up of many standard partsassembled in accordance with a series of standard rules and practices;

• its construction involves major expenditure over a comparatively shortperiod of time; and

• the construction of a new building requires a large team of individuals andfirms with particular expertise to work together to complete the projectsatisfactorily. This team will normally only be formed for this uniqueproject and then be disassembled. It is unlikely that the same team willwork together again, and if it does, the project is likely to be different.Each project is, therefore, a prototype and involves a learning curve.Project testing is rare.

3.1.1.4 (a) Effective management is vital in any construction project. The client’sprime role is to define the project and to establish a structure for themanagement of the project to make sure that it works.

(b) A crucial part of any effective management structure is effectivecommunication. To perform effectively all parties should have timely accessto all information relevant to their tasks and the project’s objectives and status.

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PART 3, SECTION 1


(c) The client can have substantial influence on the design of the project inrespect of both functional efficiency and of overall appearance, and, therefore,has to take particular care to:

• develop a business case for the project identifying primary needs andanalysing costs and benefits

• understand fully the purpose of the building; ensure that therequirements of the users are accommodated; and communicate thoserequirements to the designers;

• appoint architects and engineers with the proven ability of designingbuildings which satisfy users’ requirements and harmonise with andcontribute to the quality of the built environment. The selection of theright people is emphasised as a key to success.

(d) This subsection sets out the role and responsibilities of the client throughall stages of the project.

(e) The diagram on the next page indicates the primary activities in theprocurement process and when activities are performed. As can be seen theclient’s role is significant with a wide range of activities to perform andimplement before both the design and the construction processes. In theperformance of these activities clients can expect to be supported and advisedby their advisers or (if appointed) the project manager.

PART 3, SECTION 1


3.1.

1.5

PRIM

AR

YA

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INT

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PRO

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Pre

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3.1.

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Cos

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3.1.

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velo

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esou

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3–5)

(C

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Con

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arr

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men

ts*

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ms

and

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* (3

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men

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ms

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Sys

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PART 3, SECTION 1


3.1.1.6 INDEPENDENT CLIENT ADVICE

(a) With the potential for the involvement of many consultants and/orconstructors in a project, and the range of contracts associated with theiremployment, all but the most experienced client may need advice. The adviceoffered should be informed and unbiased and it should be based upon a logicalanalysis of the needs of the client, the type and character of the project and therange of appropriate strategies available.

(b) This advice can be offered by a member of the client’s design team or canbe a separate function. It may be more difficult for a design team member toremain impartial in carrying out this process and it is recommended that anyexpertise retained should be retained solely for this purpose. This functionmay encompass:

• Assistance in preparing the business case (the business case)underpinning the project

• Identifying the needs and requirements of the (briefing)client

• Defining the project (project definition)• Matching needs and project characteristics (procurement strategy)

with appropriate procurement strategy• Facilitating the associated selection and (implementation)

contractual processes and policies

(c) The decision as to which procurement strategy to select should be basedupon information from the client and information about the project.

(d) A best practice guide is available to assist in this process1.

(e) Possible sources for independent client advice include a suitablyqualified and experienced construction professional such as a charteredsurveyor.

3.1.1.7 CLIENT’S RESPONSIBILITIES

(a) The client should set policy and outline strategy including:• setting and prioritising the project objectives;• clarifying client attitude to project risk;• establishing procurement strategy;• arbitrating between conflicting demands; and• evaluating the completed project against the objectives.

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PART 3, SECTION 1


(b) The client also has a threefold management function:• to provide financial resources and land for the project;• to manage the client input; to co-ordinate functional and administrative

needs; to make decisions when needed; to resolve conflicts; to act as theformal point of contract for the project; and

• to supply the technical expertise, to assess, procure, monitor andcontrol the external resources need to implement the project(throughout the procurement process).

(c) In particular the client should be satisfied, as far as possible, that:• the project brief is clearly defined as far as possible and linked back to

the client’s business case for the project;• the project brief is comprehensive and clear and has the full support of

the users;• any constraints demanded by the project funder(s) are known and their

impact understood;• the critical assumptions made in preparing the initial estimates and

programmes are valid, realistic and achievable;• advisers have developed cost estimates which are comprehensive and

include all capital and resources costs;• allowances made in the feasibility and viability assessments to cover

possible risks are sufficient (contingency allowance);• an adequate risk analysis has been completed;• substantial sensitivity analysis and ‘what if’ studies have been carried

out to assess the effect of possible changed criteria on the viability ofthe project;

• plans are in place for adequate project management including systemsfor cost, time and change control, and that health and safety has beenadequately addressed;

• land will be purchased and available for the commencement of thework.

(d) The client should also co-ordinate and resolve conflicts between allinterested sections of the client organisation including:

• user groups – who will work in the building;• specialist groups – responsible for technical systems within the

building, e.g. communications, computers;• facilities management – who will manage the completed building

including maintenance and security;• finance and accounts – who will plan and control expenditure and pay

bills as they arise;• legal advisers – who will advise on and monitor the client’s formal

relationships with outside parties.

PART 3, SECTION 1


(e) The client is responsible for ensuring that all necessary decisions are madeon time. Timely decisions are necessary to avoid delays and increased costs;the decision-making process requires as much planning and management asany other activity. This will include:

• scheduling the key decisions to be made;• identifying the decision makers and their required procedures;• ascertaining the time required for making decisions;• establishing a formal programme for decisions;• pre-warning decision makers of forthcoming submissions – making

sure ‘items are on the agenda’;• preparing on time fully detailed submissions and/or presentations in

full compliance with procedural requirements;• following up submissions throughout the decision making process; and• promptly communicating decisions made to the parties affected by

them.

3.1.1.8 KEY CLIENT ACTIVITIES

Notwithstanding overall responsibility for the whole of the project, the clientwill have an active personal involvement in the key activities explained in thefollowing subsections.

3.1.1.9 DEVELOPING THE BUSINESS CASE FOR THE PROJECT

(a) The client’s purpose in initiating a building project may be driven by theneed for the project as a functional unit or long-term investment.

(b) The client will need to review project feasibility in terms of time and costagainst benefits which will stem from the proposed project. In doing so he/shewill have to consider the returns expected, the value (in use) of the projectedasset against projected land costs, construction costs, cost of fees, fitting outand commissioning costs, operating and maintenance costs and theopportunity cost of money.

(c) The importance of each of these issues will be relative to the objectives ofthe client and to the extent to which the client is able to cope with risk.

(d) Further influences in the case of a development project may include likelyannual rental, period between rent reviews, and growth of rental value. Interms of the project development, total development time and taxation issuesmay also be influential on the decision process.

(e) It is important that the client seeks advice in terms of investment appraisalof the planned project and that any appraisal considers ‘what if’ questions toensure that the impact of changes of key components in the appraisal areclearly understood. A chartered surveyor will be able to assist the client inthese matters.

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3.1.1.10 PROJECT DEFINITION

The importance of a clear project definition to the successful completion of theproject and in ensuring appropriate performance of the project cannot be overemphasised. The inexperienced client will need professional help from theadvisers or design team in the preparation of the definition. The project definitionis a comprehensive statement of the client’s objectives and parameters for theproject based on close consultation between the client and users covering:

• project description;• function of building;• equipment and special services/requirements;• target programme; and• site.

3.1.1.11 ESTABLISHING PRIMARY OBJECTIVES

(a) In establishing the primary objectives for the project it is necessary toprioritise these objectives to ensure that when developing a procurementstrategy appropriate emphasis is given to the most important objectives.

(b) Since there can be a tension between the long-term objectives set for theproject in the business plan and the short-term objectives set for the project bythe project team, the identification of priorities is very important.

(c) One way to achieve this is to consider ‘what if’ scenarios to establish theimportance of key factors:

• what if the project does not meet its functional requirements?• what if the project is delivered late?• what if the cost of the project exceeds the budget?

(d) By carrying out an analysis in this way relative importance can be given toeach aspect by weighting that aspect against a total.

(e) This is the initial control document for the early planning of the project;without it little constructive work can be done. If all the information requiredfor the project definition is not readily available, it is better to issue it in anincomplete form and progressively update it.

3.1.1.12 BRIEFING

(a) Once the project definition has been completed the briefing process will becarried out. This is when the design team and cost consultants are able to flesh out

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For example:%

Function 50 Each of these can be subdivided to produce clarity, e.g.cost can be divided into capital and running costs, timeinto speed or reliability of delivery date and function intolayout, environmental quality and specification.

Completion 20Cost 30

100

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PART 3, SECTION 1


the project prior to extensive design work. The process commences with conceptdesign building upon project definition and progresses through to a project briefwhich should encompass the client’s aesthetic, spatial and service requirements.

(b) While it may be difficult for inexperienced construction clients tovisualise the descriptions outlined during the briefing process it is worthspending time seeking consensus on its content to avoid waste in the laterdesign process.

(c) The Construction Industry Board (1997) have produced an excellent guidecalled Briefing the Team which summarises the processes involved.1

(d) Following the development of the brief for the project the design processwill commence (see 3.1.4 – Implementation).

3.1.1.13 DEVELOPMENT OF PROCUREMENT STRATEGY

The client is responsible for selecting the procurement strategy most suited tothe project and deciding how it is to be administered. The client may need totake consultant advice on which strategy is most appropriate considering theprioritised objectives and attitude to risk. This is a three-stage process whichmay be key to project success:

• selecting the strategy;• implementing the strategy; and• planning the administration of the contracts underpinning the

implementation of the strategy.

The processes of procurement strategy selection and implementation are dealtwith in 3.1.3 and 3.1.4.

3.1.1.14 (a) Strategies may include:• traditional – design by consultants completed before lump sum tenders

are obtained;• design and build – detailed design and construction by the contractor

for lump sum; design and construction may overlap. Where a conceptdesign is produced by the consultants before the contractor isappointed, the strategy is called develop and construct;

• management contract – design by consultants; managementcontractor appointed early and work package contracts letprogressively in the contractor’s name; design and constructionoverlap;

• design and manage – outline design by the consultants; as‘management contract’ but detailed design by the managementcontractor; design and construction overlap; and

• construction management – design by consultants; constructionmanager appointed early to produce and manage trade package contractsmade directly with the client; design and construction overlap.

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PART 3, SECTION 1


3.1.1.15 (a) The extent of collaboration possible between those who design the projectand those responsible for delivery will vary with the strategy adopted.

(b) Selection strategies may include selection by competition for price; on thebasis of the quality of the bid as well as price alone; or by negotiation. In somecases a high level of collaboration is possible enabling those responsible fordelivery to adopt a ‘Partnering’ approach to project delivery.

(c) Partnering is not so much a contract strategy as a way by which the projectteam can be drawn together for their mutual benefit. Partnering is usually mostadvantageous where the client has a range of projects to procure but can beadopted for single projects.

(d) The principles associated with Partnering are based on inclusiveness anddepend upon a trust being established within the team. There is also a focus onachieving the best outcome for the client as well as a satisfactory outcome foreach participant. The primary principles include developing mutualobjectives, simple approaches to dealing with disputes and a focus oncontinuous improvement which can be measured.

(e) This approach represents a change in the culture traditionally adopted bythe UK construction industry which has previously been based on price-bidapproaches and will need to be carefully managed. However, evidence isbeginning to emerge of real all-round benefits being achieved particularly byregular and experienced construction clients.

(f) The Construction Industry Board have published a most useful guide topartnering1.

(g) The number and style of contract documents will depend on the contractstrategy selected.

3.1.1.16 (a) Where direct consultant appointments are made each will be subject to aseparate form of contract, but where a design and build strategy is selected,designers may be appointed by the contractor. In the case of constructionmanagement, the client will be required to enter into many individual tradecontracts.

(b) Contract implementation can be complex and may encompass theadditional appointment of consultant advisers or the novation of designersfrom the client to the contractor. In addition, forms of warranty and collateralcontracts may be involved. The consultant advisers can assist the client in theselection of appropriate contracts and the documentation associated withthem.

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1 Construction Industry Board, Partnering in the Team, Thomas Telford Publishing, London, 1997.

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PART 3, SECTION 1


(c) The responsibility for contract administration will depend upon theprocurement strategy selected, and may fall upon the design team, the projectmanager, a contract administrator, or the client him/herself. The client shouldseek advice to ensure that the administration process is appropriately plannedand delegated.

(d) Guidance on the appointment of consultants and contractors is included in3.1.4 (Implementation).

3.1.1.17 COMMISSIONING

(a) Once the building work is complete the systems which will support comfortmust be commissioned to ensure they are working effectively and reliably.

(b) In relatively simple buildings the client can insist that this is a functionwhich the contractor must perform. Where buildings have sophisticatedsystems controlling the internal environment or facilitating staff movement orsafety, commissioning can be established as an independent activity carriedout by specialists.

(c) However commissioning is facilitated, it must be achieved before anybuilding can function effectively.

3.1.1.18 OCCUPATION AND TAKE-OVER

(a) The client is responsible for addressing the issues of occupation, staffingand subsequent operation and maintenance of the building. This activity isseparate from the design and construction process, although it will affect it,and will have its own time, resource and cost implications which should beincorporated into the overall project plan.

(b) For large projects, the client may wish to arrange for the nomination of amember of the department to act as occupation manager to manage thisactivity or may appoint a facilities manager. Occupation plans should beestablished during the design stages of the project and should cover:

• the operation of the building on a regular on-going basis;• the hand-over and acceptance of the building from the contractor(s);• the progressive final fitting-out (if any) and physical occupation of the

building with minimum disruption to the client’s operations.

3.1.2 Procurement Strategy

3.1.2.1 Designing and constructing a new building is rarely straightforward. It issubject to a series of risks and uncertainties and involves a number oforganisations especially assembled for the project. The way in which theclient and the various designers, contractors and suppliers work together as ateam is determined by the procurement strategy and forms of contract entered

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into between the project participants and the client. The procurement strategyshould be consistent with the objectives of the project and should enable therisks to be controlled to achieve a successful outcome.

3.1.2.2 Procurement strategy is the outcome of a series of decisions which are madeduring the early stages of a project. It is one of the most important decisionsfacing the client. The chosen strategy influences the allocation of risk, thedesign strategy and the method of employment of consultants andcontractors. Risks are also allocated by means of the associated contracts.Procurement strategy has a major impact on the timescale and ultimate costof the project.

3.1.2.3 Generally, clients can choose from several different strategies. A successfulstrategy is one which leads to a completed building which meets the client’sobjectives. The preferred aim is for contributing parties to work together for aquality result rather than competing against each other.

3.1.2.4 Where the development of design does not maintain the pace anticipated, orthe programme is otherwise affected by unexpected occurrences, the selectedstrategy must be reviewed. It is most important that the strategy isreconsidered at key times in the progress of the project such as when planningapproval is given, before contract strategy is decided and before constructioncontracts are let.

3.1.2.5 DEFINITION OF TERMS

Different procurement strategies provide different ways of allocating risk andresponsibility to the organisation contributing to the project. They can eitherintegrate the design and construction processes or segregate them.Approaches to the selection of processes enabling collaboration are referred toin 3.1.4 (Implementation).

The main types of procurement strategy are summarised below (they arecovered in more detail in Appendix A).

• traditional: design by consultants is completed before contractors tenderfor, then carry out, construction;

• construction management: design by the client’s consultants andconstruction overlap. A fee-earning construction manager defines andmanages the work packages. All contracts are between the client and thetrade contractors. The final cost of the project may only be accuratelyforecast when all packages have been let;

• management contracting: design by the client’s consultant andconstruction overlap. A management contractor is appointed early to letelements of work progressively by trade or package contracts (called‘works packages’). The contracts are between the management contractorand the works contractors. As with construction management, the finalcost can only be accurately forecast when the last package has been let;

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• design and manage: similar to the management contract, with thecontractor also being responsible either for detailed design or formanaging the detailed design process; and

• design and build: detailed design and construction are both undertaken bya single contractor is return for a lump sum price. Where a concept designis prepared before the contractor is appointed, the strategy is calleddevelop and construct.

3.1.2.6 On some projects it may be necessary to use more than one strategy to meetthe project’s objectives. For example, a traditional approach may be used forcompleting the building structurally with main services installed. This isknown as a shell and core contract. A separate strategy, for example,construction management, may be used to fit out the building with ceilings,raised floors, carpets, partitions and electrical fittings. The use of twostrategies allows the client more time to finalise the user’s detailedrequirements, without delaying the start of construction.

3.1.2.7 When the choice of procurement strategy has been made, the resultantcontract strategy and forms of contract should be chosen (i.e. the terms andconditions of the contract). To avoid the need for fresh legal drafting eachtime, various standard forms of contract are available, both for theappointment of consultants and contractors. Construction professionals reusually experienced in understanding these contracts and can advise on theimplications of their adoption. The range of contracts available is referred toin 3.1.4 (Implementation).

3.1.2.8 PROJECT OBJECTIVES

(a) Construction (and refurbishment) projects are often complex with potentialfor cost and time overruns or the finished building performing less well thanplanned. To minimise such risks the client should select the procurementstrategy which matches the objectives of the project. These must be clearlyestablished and prioritised before any design or other work begins (see3.1.1.10–11 – Project Definition, Establishing Primary Objectives).

(b) The client must decide the relative importance of the three main types ofcriteria – time, cost and performance:

• time: earlier completion can be achieved if construction is startedbefore design is finished. The greater the overlap between the two, theless time will be required to complete the project;

• cost: with the exception of simple ‘standard’ buildings and certain‘design and build’ strategies, a final construction contract sum cannotbe established until the design is complete. Any overlap between designand construction means that construction starts before the cost is fixed.This increases the importance of accurate cost forecasting and the riskto the client; and

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• performance (design): the quality and performance characteristicsrequired from the completed building determine both the project timeand cost. Some strategies reduce the client’s ability to control and makechanges to the detailed building specification after the contracts havebeen let.

(c) Performance includes the function of the building, its quality andappearance and other factors such as durability, cost in use and flexibility. Therelative importance of each objective must be given careful considerationbecause decisions throughout the project will be based on balances betweenthe other objectives (see Figure 1).

In any project these three criteria will be interdependent and decisionsaffecting one will affect one or both of the other criteria. The appropriateprocurement strategy will recognise this interrelationship and reflect theclient’s objectives and the characteristics of the project. It is uncommon for aproject simply to emphasise one criterion alone and most projects wouldemphasise time and cost, time and performance or cost and performance. Theproject strategies most commonly adopted reflect this characteristic.

The strategy should also reflect the client’s technical ability and resources andthe amount of control over the process which he/she wishes to exert directlyor through the project manager (if appointed).

FIGURE 1THE RELATIONSHIP BETWEEN PRIMARY CRITERIA

Time aspects (speed to completion,

As the emphasis on oneor two of these criteria increases

the other(s) will be affected

(level of price, certainty of price)Performance Issues

(quality, functionality, design)Cost Issues

Time aspectsprogramme certainty)

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3.1.2.9 RISK AND RESPONSIBILITY

(a) There is a finite amount of risk and responsibility associated with anyproject and this should be an influencing factor on the selection of theprocurement strategy. The uncertainties of time, cost and performance are thethree main risks that are present in every project. Risks are usually consideredas uncertain future events, which may have significant effects, e.g. extra cost,delay or damage to the performance of the finished project. Having set thepriorities for the project’s objectives, the client should consider the effect ofthose objectives not being met and the resulting risks to which he/she could beexposed.

Although the project is subject to a wide variety of risks, it is important to notethat only a few have a major effect. This is a powerful argument forconcentrating attention during cost estimating and managementdecision-making on the few largest sources of uncertainty and risk and fordeveloping strategies for managing out risk and for setting up contracts insuch a way that the allocation of the major risks is clear.

(b) The risks which are considered to have potentially the greatest impact onconstruction projects include:

• a project which will not function in accordance with the client’sneeds;

• a project which is of inadequate quality;• a project which is completed later than required deadlines; and• a project which costs more than the client’s budget or ability to pay.

In each case, the strategy can be to transfer the whole risk to another throughthe medium of contract. This is possible but will attract high price premiumsor will expose the transferee to risks which they may not be able to ‘own’ orinsure and therefore the party transferring the risk will remain exposed.

Risk may alternatively be retained in part by the client, or reduced by adequatepre-design or pre-price investigation.

(c) As has been already suggested, an adequate brief will reduce risk andensure functionality and quality standards. Equally, adequacy of programmewill reduce the risk of overrun and adequacy of cost estimates should ensure aresultant cost which is within budget. Both construction time and constructioncost estimates depend upon sufficient design development, which itself willdepend upon an adequate brief and parallel investigation of ground conditionsand the particular requirements of statutory controls. In ensuring that the briefis adequate, and that design is appropriately developed, the client cansuccessfully reduce some risk in a way that will not result in high pricepremiums.

(d) Ideally, risk and responsibility should go together, so that the partyresponsible for performing a task is accountable. Each risk should be allocated

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to the party with the greatest ability to own the risk and to manage its effects.If, for example, the client considers it critical that the price for the building isfixed before construction commences, the risk of meeting that objective couldbe passed to contractors, making them contractually responsible forcompletion to an agreed design and specification for a lump sum price.

3.1.2.10 PASSING ON RISK

(a) Responsibility for risk and the ability to control a project interact. Themore the client chooses to allocate risk to other parties, the less control theclient has over the way in which the project is executed. In the example above,if the contractor has to meet the agreed specification within the budget andtime, the client has little influence over the way in which these objectives aremet. In practice, risk allocation is determined by the chosen strategy andallocated by means of contracts between the client and those responsible formanaging, designing or constructing the project. The way in which risk andresponsibility are allocated by different contract strategies is indicated belowand shown in Appendix A.

(b) In all cases where risks are transferred in contractual terms, it is necessaryto ensure the ability of the transferee to own the risk. In the case of designfailure, for example, this is usually passed to the design team including thearchitect and engineering consultants. Because of the nature of theirprofessions they should have insurances of sufficient capacity to meet themaximum possible cost of correcting the design failure. The client shouldensure that such insurances are in place, adequate and paid for; where a projectmanager or consultant adviser has been appointed, this is a role that may beperformed by him/her.

(c) Some design work may be carried out by subcontractors who may or maynot continue to pay design liability insurance premiums and usually will havelimited liability status. Liability for their design work is commonly passed bywarranties but these are less secure.

Equally, where time risks are passed to contractors their attempts to transferthem to small subcontractors may fail where the capacity to own or accept therisk is limited.

In situations such as these it may be possible to pass risks contractually but thelack of security associated with the transfer may result in the risk being borneby the party attempting to pass it. It is difficult to allocate blame in teamsituations. The client should be aware of this weakness in terms of riskallocation.

(d) While the transfer of risk provides an incentive for the receiving party tominimise its impact, the client should avoid transferring risks when thereceiving party has no control over them or no capacity to absorb them.Generally, the more the risk of cost and time slippage is allocated to other

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parties, the higher the tendered cost. In pricing the project, tenderers mayover-estimate the size of the risk or add a high safety margin to an accurateestimate and thereby increase the project’s costs unnecessarily.

3.1.2.11 RISK AND PROCUREMENT STRATEGY

(a) Risks are inherent in the data used by the client in the preparation of thebrief, they are inherent in the characteristics of the project, and they areinherent in the procurement strategy which is selected.

The identification of primary risks and an analysis of the client’s ability to bea risk taker, or need to be risk averse, should affect procurement strategy.

With this information in mind steps should be taken:

• to inform the client of the extent of the risks involved; and• to prepare a strategy for managing risk.

Since the latter will have a cost the client should also be advised of theexpense of managing risk.

(b) Appendix A refers to the characteristics of each procurement strategy andindicates the levels of risk associated with time, cost and performance in eachcase on the assumption that the procurement strategy is properly utilised andin no way abused. (Thus, for example, in relation to the traditional system ithas been assumed that design completion is achieved before measurement anddocumentation is carried out.)

These primary risks are summarised (by simple examples in Figure 2) byprocurement method in the categories time, cost and performance.

Where design is by the client’s consultant, design risk is placed by theappointment agreement. Where design is by the contractor, design risk isplaced by the building contract agreement.

Where lump sum price is fixed by the contract the responsibility rests with thecontractor. Where a contract sets standards of specification, meeting thesestandards is the contractor’s responsibility (risk).

Thus by contractual agreement primary risks can be distributed betweenclient, designer and constructor. It is impossible to dispose of all risk inherentin construction projects and some will inevitably remain with the client. Forexample, the risks listed here tend to be client risks and although they may beof varying likelihood they should be understood.

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(c) This short list segregates residual risk by procurement method. The extentto which risk remains with the client can be established by a detailed analysisof contractual agreements.

• Traditional– building suitability– risk of contractor insolvency– risk of delay by consultant or the causes allowed by contract

• Design and Build– building suitability– design functionality and usability– design insurance if contractor moves away from this type of business,

goes out of business or fails to pay premium• Management Contracting/Construction Management

– as traditional procurement plus:risk of cost overrunrisk of time overrun

3.1.2.12 SUMMARY (RISK)

Risk can be reduced, retained, transferred or distributed. To transfer risksuccessfully the risk taker should have the capacity to take the full extent of therisk or the risk placer will have failed. Where there are so many relatively smallfirms, as in the UK construction industry, this can be problematic because manycontracts place risks with risk takers without sufficient capacity. They may belimited liability companies or may be unable or unwilling to insure.

FIGURE 2SUMMARISING THE PRIMARY RISKS, BY EXAMPLE

Time Cost Performance

Traditional Fixed but extensionof time possible dueto client anddesigner initiatedchanges

Fixed but subject tochange wheredesign changes aremade, where inflationoccurs or wherecontractor is allegedto have grounds forcontractual claims

Designed by client’s consultant. Qualityset by contractdocuments

Design and Build Contractor

As traditional As traditional Design by contractorbut with varyinglevels of input byclient – quality set in same way

Separatemanagementfunction

Time not fixed bycontract

Cost not fixed beforecommencement

As traditional

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Thus, for example, attempting to enforce large scale liquidated damages forlate completion on a small-sized domestic subcontractor may fail for lack offinancial capacity within the small company.

Procurement strategy should therefore reflect the ability to place risk, andwhere possible risk should be managed out.

3.1.2.13 PROCUREMENT STRATEGY AND THE PROJECT CYCLE

The development of procurement strategy follows the stages in the life of aproject. Initially, a preliminary strategy is determined. It is based on a broaddefinition of objectives and is an essential step in establishing the way forwardfor the project. It encourages the client to consider strategy early. Thepreliminary procurement strategy is usually developed with help from theclient’s adviser and possibly other consultants.

Procurement strategy development has three components:

• analysis – assessing and setting the priorities of the project objectives andrequirements;

• choice – considering possible options, evaluating them and selecting themost appropriate; and

• implementation – putting the chosen strategy into effect.

During strategy preparation, it may be necessary to seek specialist advice fromother consultants, for example, in relation to expected costs for the project.The adviser should advise the client on this. Specialist advice should besought when developing the strategy for novel or especially difficult projects.

Until construction contracts are let, the client, with help from his adviser, mustsystematically ensure that the strategy is on course to meet the project’sestablished objectives. This is important because objectives sometimeschange.

3.1.2.14 IMPORTANT CONSIDERATIONS

The factors listed below should be considered in analysing project objectives,requirements and their relative priorities (each is then considered in detail)and may have an effect on the choice of procurement strategy:

• factors outside the control of the project team;• client resources;• project characteristics;• ability to make changes;• risk management;• cost issues;• timing; and• quality and performance.

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Inevitably, some of these requirements will be in conflict and priorities needto be decided. The choice of strategy should ensure that control is maintainedover those factors which are of most importance to the client. The way inwhich this choice can be made is covered below and in 3.1.4.

(a) Factors outside the control of the project team

Consideration should be given to economic, technological, social, political andlegal factors which influence the client and the project team or are likely to doso during the lifetime of the project. These may include forecast and actual:

• interest rates;• inflation;• changes in output of construction industry affecting tender price levels and

the availability of skilled labour; and• legislation, particularly legislation affecting the design and construction of

projects. In many cases the client will have responsibility for legalcompliance, particularly in relation to health and safety matters and shouldseek the advice of his/her advisers (including the design team) on suchissues as a matter of importance.

(b) Client resources

The client’s knowledge and experience of the company’s organisation and theenvironment in which it operates are vital in assessing the appropriateprocurement strategy. Project objectives are influenced by the nature andculture of the company, external influences and the expectations ofindividuals affected by the project. The extent to which the client is preparedto take a full and active role is a major consideration.

(c) Project characteristics

The size, complexity and location of the project should be carefullyconsidered and particular attention given to projects with novel elements. Forexample, if the building is especially large or complex there may be a biggerrisk of cost or time overrun. Novel projects present special risks. The noveltypotential factor means that estimates of time, cost and performance are allsubject to greater error with an increased probability of one or more of theproject’s objectives failing.

(d) Ability to make changes

It is preferable to identify the total needs of the project during the early stagesbut this is not always possible. Rapidly changing technology often means latechanges. Changes in the scope of the project very often result in increasedcosts, especially if they arise during construction. Changes introduced after thedesign is well advanced or construction has commenced often have adisproportionate effect on the project, in terms of cost, delay and disruption,compared with the change itself. The design process goes through a progressive

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series of ‘freezes’ as it develops but the client should set a final design freezedate after which no significant changes to requirements or design are allowed.

Some procurement strategies such as construction management are better thanothers at handling the introduction of changes later in the project withouthaving to pay some form of specific premium.

(e) Cost issues

Price certainty – influences the project timing and the procurement strategywhich should be used. Generally, design should be complete if price certaintyis required before construction commences.

Cost of changes – if cost certainty is to be maintained during the course ofconstruction changes should be avoided. Changes often have cost and timeimplications on the project well in excess of the change itself. It is thereforeimportant for the client to fix a date after which no significant changes shouldbe introduced.

(f) Timing

The programme of the project is influenced by many of the above factors. Aparticularly large and/or complex project is likely to require more time fordesign, specification and construction than would be required for a simplesmall building.

It is of vital importance to allow for adequate design time in terms of the totalproject. If design is required to be complete before construction commences(where perhaps cost certainty is required) this is particularly the case.

In the process of the appointment of the design team assurances should beobtained about resource levels and the ability to meet key dates orprogrammes. It is not usual to impose contractual dates upon designers,although their progress is probably the key to the overall completion date.

Decisions to progress with a project may be influenced by the gaining ofplanning approval, by the successful operation of compulsory purchase order,by land purchase or by some other non-specific but critical factor (such asobtaining funding approval). Depending on whether these factors occur earlieror later, they may be an influence upon the planned or desired time availablefor design.

Procurement strategies such as management contracting, constructionmanagement, and design and build provide an overlap between the design andconstruction stages, so construction can start earlier than sequential strategiesand offer the potential for earlier completion.

It may be necessary to review planned procurement strategy in the light ofdesign progress at the point where restraints to constructions are removed,bearing in mind the stage of design and the consequence in terms of risk.

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(g) Construction times

Total construction time is a consequence of design. Insufficient timeallowance can result in apparent delay when in fact the targets wereunachievable. Design is a time-consuming process and often will take as longas construction itself (sometimes longer). More complex structures will takelonger given the same cost or size, and may require more resources. Althoughit is possible to work on site for extensive hours or to increase resources, it isnot always possible to achieve directly resulting productivity. The law ofdiminishing returns will have an influence because of the limited space andthe nature of traditional construction methods (such as concreting andbricklaying).

Indications of construction times are shown in Figure 3. These are only ageneral guide and should not be relied on without careful review. The data onwhich these are based was available only for commercial and industrialprojects. This data was used to confirm, enhance and update that published byNEDO (1988), Faster Building for Commerce and the construction costs havebeen updated by index to the year 2002. If possible (as in the case of

FIGURE 3CONSTRUCTION TIMES

The following times are based upon historical data and are only a guide. Projects of relatively simple design may be constructed more quickly and more complex designs may take longer.

New purpose builtcost (£millions)

Retail facilities weeks

New speculativecost (£millions)

Retail facilities weeks

30 90 30 100

25 80 25 95

20 75 20 90

15 70 15 85

10 65 10 80

5 55 5 70

New purpose builtcost (£millions)

Office facilitiesweeks

New speculativecost (£millions)

Office facilitiesweeks

30 120 30 135

25 110 25 130

20 100 20 120

15 90 15 110

10 85 10 100

5 70 5 85

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management contracting and construction management) those who will beinvolved in the construction process should also be involved in the planningprocess, as they are more likely to be aware of the logistical consequences ofparticular designs. Other projects are likely, in most cases, to be morecomplex and may therefore take longer.

(h) Design times

There is no reliable data available to indicate the time to be allowed for design.As a general rule it will take between two thirds of construction time to oneand a half times construction time to design a building. The impact that thiswill have on the overall programme will depend upon the choice ofprocurement strategy and whether any overlap of design and construction isallowed.

(i) Performance

The required performance of the project measured both in terms of itsresponse to the needs of the client and the quality of individual elements mustbe clearly identified. If performance is over-specified, a premium will be paidfor exceeding actual requirements, thereby affecting the cost objective.Over-specification will also lead to time overruns. Conversely, failure torecognise the true performance objective leads to an unsatisfactory product.

If quality and performance are particularly important the client will probablywant to keep direct control over the development of the design. This can beachieved by employing the design team directly.

3.1.2.15 PROCUREMENT OPTIONS

When all the factors influencing the project have been identified and theproject requirements analysed, the final strategy for the project must bedeveloped.

It is likely that there will be more than one way to achieve the requirements ofthe project. It is important to consider carefully each option, as each willaddress the various influencing factors to a different extent. In developingstrategies, a potential danger is that only the most obvious course of actionmay be considered – this is not necessarily the best in the longer term.

3.1.2.16 Common strategies differ from each other in relation to:

• the financial risk that the client is exposed to;• the degree of control that the client has over the design and construction

processes;• the information required at the time construction contracts are let;• the extent of involvement of the contractor in the design stage when the

contractor may be able to influence the ‘buildability’ of the project;

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• the organisational arrangements which distribute responsibility andaccountability; and

• the sequential nature of the process.

3.1.2.17 In Appendix A each of the most commonly used procurement strategies isdescribed and is also illustrated by diagram. Each diagram has a consistentformat to indicate:

• the contractual relationships (showing administrative responsibility inmost cases);

• the advantages and disadvantages;• the sequential nature of the process; and• the dominant risks categorised broadly (as high, medium or low).

3.1.3 Selection of Most Appropriate Procurement Strategy

3.1.3.1 The ultimate responsibility for selection of appropriate procurement strategywill rest with the client, based upon advice from the project team and principaladviser.

The selected strategy should be:

• suitable in the light of the client’s needs, the project type and the client’sexposure to risk; and

• feasible in the light of the client’s expertise, internal managementstructure, resource and funding facility.

Professional judgement is a reliable way of selecting an appropriateprocurement strategy although some procurement strategies can beinappropriately adopted because of individual preference.

A procurement selection checklist is provided here to assist the client andadvisers in the identification of an appropriate strategy.

3.1.3.2 PROCUREMENT SELECTION CHECKLIST

This process has been designed to establish a range of information about clientneeds and about the particular project being considered, and to develop thisinformation in parallel with the characteristics of procurement strategies andassociated risk.

It is intended to inform judgement, not to replace judgement.

The relative importance of time, cost and performance (design) forms a keycriterion in the selection mechanism as does inherent risk and itsapportionment.

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3.1.3.3 METHOD

Checklists 1, 2 and 3 should be carefully completed in consultation with theclient.

The resultant information should then be transferred to Checklist 4 which willenable the information to be analysed and evaluated. The analysis can then becompared with the characteristics of each procurement method, and theassociated risk so that an informed decision can finally be made.

CHECKLIST 1: TIME

The following should be considered:

1.1 Is completion needed by a specific date?1.2 Is completion needed in the shortest possible time?1.3 Is the client prepared to pay more for earlier completion?

2. Does the answer to question 1.1 suggest a faster than ‘normal’ total projecttime in the judgement of the adviser?

3. How long is it in months from the date of completion of this protocol untilthe desired ‘move in’ date?

4. Define the reason for the identified completion or ‘move in’ date:4.1 end of lease4.2 sale of premises4.3 new business opportunities4.4 unsuitability of present premises4.5 company restructuring4.6 other.

5.1 Is the need for completion by a specific date or within a specific time moreimportant than certainty of construction cost before work starts?

5.2 Is the need for completion by a specific date or within a specific time moreimportant than spending an extended time on design?

6. What is the approximate value, in sterling, to the client of the building orfacility in terms of contribution, rental or cost savings per month?

7. If the building is completed later than the specified or desired time will theclient:7.1 stay in existing premises?7.2 find temporary accommodation?7.3 close down?7.4 don’t know.

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Upon the completion of this part, the following information should have beenestablished and should be transferred to Checklist 4:

1(a) specified completion time;1(b) reason for completion time;1(c) whether required completion time is relatively fast;1(d) whether time is seen as the predominant client need;1(e) the potential financial implication of earlier or later completion; and1(f) what action the client may take if the dates are not achieved.

CHECKLIST 2: DESIGN/PERFORMANCE

1. Has the client clear ideas about building functionality and its desireddesign?

2. Does the site (if selected) pose any particular problems for the designer inrespect of:2.1 shape or topography?2.2 access?2.3 storage space?

3. Does the building type suggest relative design complexity?

4. Does the building type suggest emphasis upon functionality?

5. Does the building type suggest highly complex mechanical, electrical orengineering installations?

6. Is it anticipated that extensive changes to design may be required during theconstruction phase?

7. Does the client wish to particularly emphasise low running costs?

8. Does the client wish to particularly emphasise low maintenance costs?

9. Does the client wish to particularly emphasise product quality at a higherpotential cost?

Upon the completion of this part of the process, the following informationshould have been established and should be transferred to Checklist 4:

2(a) whether the client has clear ideas about his/her needs;2(b) whether the site poses complex design problems;2(c) whether the building design is complex;2(d) whether functionality is particularly important; and2(e) whether the client has a long-term view about the cost of the building.

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CHECKLIST 3: COST

1. What is the client’s maximum budget?

2. Can the budget be allocated as below?2.1 land purchase and fees2.2 construction, including fees2.3 fittings and plant2.4 contingencies2.5 other (define).

3. Will the client need to have a fixed contract price for the constructionelement of his budget or will a reasonably accurate budget be adequate?

Upon the completion of this part of the process, the following informationshould have been established and should be transferred to Checklist 4:

3(a) total maximum spending capacity;3(b) total construction spending capacity; and3(c) need for pre-construction cost certainty.

CHECKLIST 4: ANALYSIS

• As an overview, is the project feasible in terms of time and viable in termsof cost on the basis of the information in 1a, 2a, 2b, 2c, 3a, 3b, 3c?

If yes, proceed.If no, advise client and seek other solutions.

• Is the reason given as to why it should be completed by the specified datevital to the project’s success in terms of client needs, or can slippage becoped with if cost is considered?

See 1b, 1d, 2a, 2b, 2c, 3c.If vital, the project has to be carefully planned from a reasonablyadvanced design. Design and construction should be planned. Wheredesign is completed, the completion date can be contractually fixed.Where design cannot be completed, fast-track systems can achieverelative speed by overlapping design and construction.

If relative speed is required can the client accept less cost certainty?See 1c, 3c.If yes, this may mean that fast-track approaches may be suitable.If no, a method of achieving cost certainty relatively quickly may bethrough negotiation.

• Does the information provided indicate that the project is complex interms of design or in terms of site-related problems?

See 2b, 2c, 2d.If so, adequate time should be allowed for a design process to occurwhich will provide the client with an acceptable design solution.

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Some fast-track solutions will enable the design process to be extendedinto the construction phase where pre-construction time is notavailable. This will reduce cost certainty.

• Is the need to ensure that the project can be built within a budget a priority?See 3c.In this event, design should be complete before construction iscommenced or a sufficiently large contingency should be allowed.The latter will not give cost certainty and may result in a less balancedproject in financial terms.

3.1.3.4 CHECKLIST SUMMARY

Having established whether the project is both feasible and viable, theimportance of time, cost and design has now been reviewed.

There is always an interrelationship between these three primary criteria andprocurement systems selected should reflect this.

Projects can probably be broadly categorised into those which will bedesign-led and those which will be production-led. Design-led projectsusually reflect the characteristics of procurement systems where the clientappoints his/her own design team; whereas production-led projects enable theconstructor to take on some or all of the design function.

Design-led projects have the greater capacity for cost and time overrun,whereas the potential capacity for design shortcomings may rest withproduction-led systems.

System selection should consider whether the project is design orproduction-led but should also consider the client’s need to manage and/ordistribute risk.

3.1.4 Implementation

3.1.4.1 Having selected a procurement strategy for a project, the strategy should besuccessfully implemented. The client should implement the strategy but maydo this with the advice of consultants or a project manager. In many cases theywill carry out most or all of the necessary functions in achievingimplementation and the client’s role will be to formally approve their actions.

Notwithstanding the role of consultants or a project manager, the client shouldensure that he/she puts in place the necessary resources, organisationalstructure, contractual arrangements, systems and controls necessary for asuccessful project outcome.

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3.1.4.2 IMPLEMENTATION POLICY

Implementation of procurement strategy is a key role for the team andwarrants sufficient thought and review. The policy developed to ensureappropriate implementation should be clearly communicated to all the keyplayers. By ensuring that implementation policy is maintained, the client hasa greater chance of obtaining the right project at the right time at the right costwith the minimum of conflict.

3.1.4.3 FINANCIAL RESOURCES

(a) In this section, the funding function has been assumed to be a matter for theclient. It is a vital function and by the time the procurement strategy is set,sufficient funding should be available at appropriate times in thepre-construction and construction process.

(b) Funding requirements are usually a consequence of contractualagreements, whether they be agreements to purchase land, to design or toconstruct. It is possible to take account of each contractual agreement and toplan expenditure in the form of a cash flow. Useful advice in this context canbe provided by the project manager or the project cost consultant. Both ofthese team members should be in place at an appropriate time to ensure thatfunding arrangements are appropriate.

3.1.4.4 HUMAN RESOURCES

In terms of client organisation, the client should be prepared to allocateappropriate in-house personnel to the project or should be prepared to appointconsultants for this purpose. In most cases, consultants are appointed to designand cost a project, but a client will have his/her own staff member who willprovide liaison and a focus for decisions. Where this is not possible theappointment of a project manager is desirable. Only one individual shouldhave the authority to instruct those carrying out the design or construction onbehalf of the client.

3.1.4.5 PHYSICAL RESOURCES

(a) Where physical resources such as land, plant and machinery have to beprovided by the client, it is self-evident that the client should ensure theiravailability in a suitable form at the right time. Where alternativeaccommodation is required, or where specific arrangements for decanting arenecessary, this is a matter for the client and/or the client’s organisationalthough these are matters which can be handled by a project manager.

(b) Design and construction resources must also be appropriately selected andin place at the right time.

(c) The criteria for the selection of the design team are outlined below and arebased upon the factors of capability, competence, staff and cost, with value formoney, rather than cost being the major influence in selection.

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(d) The criteria for the selection of contractors are referred to below and arebroadly the same, but this tends to be a much more complex process and thecriteria are dependent upon the procurement strategy selected.

The basis for selection of constructors can be price competition, based upon afixed design and specification or can, in the case of design and build options,be based upon competition for design solutions too. Selection can also be bynegotiation with one or two constructors, or can be based upon a two-stageprocess. Suitable documentation for the selection process must be preparedand the client should seek the advice of consultants or the project managerwho may also be required to manage the process.

(e) A number of Codes of Procedure for the selection process are available andare referred to in sections 3.1.4.8 and 3.1.4.9.

3.1.4.6 ORGANISATIONAL STRUCTURE

(a) The client has a dual management role, part of which is to manage theclient input; to co-ordinate functional and administrative needs; to resolveconflicts; as well as to act as the formal point of contact for the project.

(b) This will require the creation of an organisational structure for the life ofthe project to enable communication to occur and to facilitate effectivedecision-making.

(c) The organisational structure created may be headed by a key member ofthe client organisation or may be headed by an imported project manager.Whichever choice is made, the designated member must have sole authorityto communicate decisions to the project design and/or construction team.Where more than one individual is empowered to instruct, or to requirechanges, extreme confusion can take place.

(d) Building users, specialists, facilities managers, maintenance staff, financeand accounts personnel, legal advisers and security personnel can all haveinput to the project through the created organisational structure by invitation,or right, and, as appropriate, can meet with designers or constructors to ensureeffective communication; but decisions are reserved to the in-house executiveor the project manager.

3.1.4.7 APPOINTMENT OF A PROJECT MANAGER (WHERE APPROPRIATE)

(a) Due to the complexity of modern building and the potentially large numberof parties involved in the process the client may wish to appoint a singleperson to draw the process together and manage it to ensure that the overallperformance, time and cost requirements are achieved. The project managermay be a member of the client organisation who is given sole, or predominant,responsibility for the project. Project management practices also exist toenable appointments to be made on a consultancy basis. In this case, selection

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should be based upon resources, reputation and price, and duties should beclearly identified.

(b) It should be emphasised that the role of the project manager should be toact as part of the client organisation.

(c) The client’s role upon the appointment of a project manager shouldinclude:

• explaining the project objectives and their priorities, defining theproject and outlining parameters associated with time, cost,performance and risk;

• defining the criteria for control and management of the project;• managing the project manager’s performance of delegated

responsibilities;• monitoring the implementation by the project manager of control and

management systems;• ensuring that the project manager receives decisions on time;• assisting the project manager in the resolution of problems;• receiving and reviewing detailed reports on the project from the project

manager;• establishing with the project manager a common approach to major

issues which arise; and• maintaining with the project manager at all times an overview of the

project status in relation to the established objectives.

(d) The client’s relationship with a project manager will be crucial to thesuccess of the project and will require careful development and nurturingwithin the following guidelines:

• the client, though taking the project manager’s advice should lead, notfollow;

• no matter how much responsibility is delegated to the project manager,the client will retain ultimate authority and therefore must haveadequate knowledge and information about the project to be able toexercise the authority properly;

• the client should agree with the project manager the precise extent ofany delegated authority together with those decisions reserved for theclient;

• where a project manager has been appointed the client should notformally communicate directly with consultants and contractorsemployed on the project – such communications will always be routedthrough the project manager, although the contracts will be direct withthe client;

• no matter what may be said in private, the client should publiclysupport the project manager and avoid any actions which couldundermine that manager’s authority over the consultants andcontractors.

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3.1.4.8 APPOINTMENT OF CONSULTANTS

(a) The process of selecting and appointing the design team and the costconsultant is carried out by the client but he/she may seek the advice of his/heradviser. The terms and conditions of these appointments are governed by theprocurement strategy adopted for the project. (The client is also requiredunder the Construction (Design and Management) Regulations 1994 toappoint a competent planning supervisor to ensure that the design team havemet their responsibilities under these regulations and to advise the client andthe constructors how they can comply.)

(b) The following alternatives exist in selecting the design team:• single appointment – either of a multi-discipline firm which can itself

provide the full range of architectural and engineering design servicesrequired, or of a lead consultant, normally the architect on buildingprojects, who will subcontract design of other disciplines toindependent professional firms and be responsible for their work and itsco-ordination; or

• separate appointments – for each of the design disciplines required,one firm being appointed design team leader with the responsibility forco-ordinating the work carried out by the others.

The former has the benefit of administrative simplicity and of single sourceresponsibility for design. The latter offers the chance of selecting the best firmin each discipline but makes communication more difficult. The finalselection will depend on the particular features of the project.

(c) The selection of the design team and the cost consultant (and otherconsultants as appropriate) will require the client to make a balancedjudgement on the following factors:

• capability – the experience of the firm in projects of similar size andfunction and the availability within the firm of sufficient uncommittedresources for it to meet the demands of the project; the demands of theproject programme may be particularly important;

• competence – the performance of the firm on past projects, to beascertained by detailed, confidential references from past clients;efficient performance by design consultants cannot be taken forgranted;

• staff – the personal capability and experience of the key staff whom thefirm proposes to employ on the project; and

• the cost – quoted by the firm, unless large differences exist betweenoffers from competing firms this should not be critical.

(d) Value for money, not lowest price, should be the aim in the selection ofdesign team members.

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(e) Guidelines for the value assessment of competitive tenders in theprocurement of professional services are available1.

(f) Fees payable to professional consultants may be expressed in one of thefollowing ways:

• as a percentage of the construction cost of the project;• as a lump sum;• on a time charge basis; or• a permutation of all three.

(g) Percentage fees based on the out-turn construction cost are not generallyrecommended as they increase when cost overruns occur.

(h) Lump sum fees may be the most satisfactory form of remunerationprovided only that the scope, value and timescale of the project can beestablished with reasonable accuracy before the appointments are madeand that the services to be provided by the consultants can be accuratelydefined. Where lump sum fees are to be paid, the client will need toestablish systems for monitoring the consultants’ performance to ensurethat they provide the full, specified service and do not skimp their servicesto save money.

(i) Where time charge fees are to be paid, the final amount of fees payable isnot fixed and there is a substantial risk that this amount may exceed initialestimates.

3.1.4.9 APPOINTMENT OF CONSTRUCTORS

(a) The client is responsible under the Construction (Design andManagement) Regulations 1994 to be reasonably satisfied that theconstructors appointed are competent and have adequate resources.

(b) The timing of the need to appoint constructors (whether contractors ortrade contractors) will be dependent upon the procurement strategy which isselected, but the client will have a formal role in this process. The client’s rolewill include selecting those constructors with whom he will negotiate or whowill be invited to tender. In the case of the latter, it will be the client whoformally selects the constructor(s) to carry out the work and then contractswith this company.

(c) Assistance with the selection, documentation for tender and advice inrelation to contract issues can be obtained by the client from professionaladvisers and particularly the principal adviser. There are a number of codes ofprocedure to assist in this process, of particular assistance is the Code ofPractice for the Selection of Main Contractors2 which has been approved bythe National Audit Office. In broad terms, the factors which affect the

1 Construction Industry Board, Selecting Consultants for the Team: balancing quality and price, Thomas TelfordPublishing, London, 1996.2 Construction Industry Board, Code of Practice for the Selection of Main Contractors, Thomas Telford Publishing,London, 1997.

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selection of design and cost consultants shown above (capability, competence,staffing and cost) will affect the choice of constructors, but the documents onwhich selection is made (particularly for cost) can be extensive and verycomplex.

(d) European Union legislation has an effect on the procurement of publicworks and the supply of services in the public sector. Usually this relates toprojects over about �5 million and requires appropriate tender advertising andselection. Clients from the public sector must be aware of the existence of andthe procedures demanded by such regulations.

(e) As with the selection of design and cost consultants, value for money,rather than lowest price should be the aim in the selection of constructors.Where clients regularly build, there may be a case for considering a specialarrangement with a construction firm as indicated in 3.1.1.15.

3.1.4.10 CONTRACTUAL ARRANGEMENTS

(a) Having selected an appropriate procurement strategy and methods ofconsultant and constructor selection, this strategy should be implemented by arange of contractual arrangements.

Many of these arrangements will be based upon standard forms of agreementin common use in the construction industry. The distribution of major projectrisks results from the wording of the contract selected. Most clients will needspecialist advice on contract selection. This is outside the remit of thishandbook.

3.1.4.11 SYSTEMS AND CONTROLS

(a) Once resources, organisational and contractual arrangements are in place,the client should see that systems are put in place to ensure that theprocurement process can be implemented in fact.

(b) These systems should include:• financial systems to ensure that payments are made in accordance with

contract agreements;• decision systems to ensure that decisions made are communicated at

the appropriate time and with appropriate authority;• design change systems to implement and monitor change as it becomes

necessary; and• cost and time monitoring systems to inform the client of the current

position at any point in time.This may mean delegating elements of the process to the project manager (ifappointed) or ensuring that existing company systems are specificallyadapted.

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(c) Controls are also important to ensure that cost is controlled within budget,pace is controlled within programme, quality is controlled within standardsset, and systems are properly employed.

(d) Cost control can be achieved by ensuring appropriate pre-construction costplanning and an adequate system of regular cost reporting. These services canbe provided by the cost consultant.

(e) Pace can be monitored against a programme or time plan and can becontrolled by the imposition of contract completion dates. Programming canbe provided by a project manager or developed with the advice of the principaladviser.

(f) Quality can be controlled through the provision of a sound contractualspecification. It may be appropriate to appoint a clerk of works to inspect theworks during progress and to ensure that work is satisfactory and matches thespecification.

(g) Controlling the client systems to ensure that they are appropriately appliedand not abused is a matter for the client’s management team – perhaps this isthe key management input from the client.

3.1.4.12 DESIGN OVERVIEW

(a) While responsibility for achieving a successful design solution to theclient’s requirements lies chiefly with the designer, the responsibility restswith the client both for ensuring that his/her needs are met and for the impactof such development on the local environment. The blame for a poor buildingis likely to be ascribed to the client as well as to the designer. Equally, awell-designed building reflects credit on those who commissioned it as well ason the designers who conceived it.

(b) Design is an important factor in ensuring good working conditions for staffand convenience for members of the public who need to visit the building. Awell-designed building is a good investment. Good design can contribute toeconomy and efficiency – by efficient layout and economical use of space, byenergy efficiency (in heating, insulation, mechanical services, etc.) by lowmaintenance costs, and by ensuring flexibility to meet changing requirements.

(c) No one person has all the design skills for any but the very simplest projectand therefore the collaboration of many designers will be necessary. This isparticularly the case in specialist buildings or buildings which havesophisticated mechanical and/or electrical installations.

(d) The formulation of an accurate design brief and the development of designin strict accordance with that brief are key processes for the client (or theproject manager) to oversee. In practical terms, the client will require:

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• close collaboration between users and the design team in thedevelopment of the design;

• formal checking that the developed design meets, but does not exceed,the requirements of the design brief; and

• formal presentation of developed designs to the users and formalsign-off by the client.

(e) It will also prove valuable for the client to indicate clearly his/herintentions in respect of the programme and for the design team to respond interms of their strategy for meeting this programme. Methods for updatingprogress should also be sought by the client.

(f) As the majority of users, and indeed the client, are likely to find the readingand interpretation of design drawings a difficult task, it is important to ensurethat the design team present their proposals in a form that can be readilyunderstood. (Computer aided design [CAD] may enable three dimensionalpresentation.) The setting of the design and not just the design in isolationshould be taken into account. The client should feel able to say ‘no’ and ‘tryagain’ and to expect alternatives within the fee.

3.1.4.13 COST CONTROL OVERVIEW

(It is recommended that this be read in conjunction with Part 1, Section 1.)

(a) It is essential that the client understands the difference between:• estimating – giving an informed opinion at a particular time of what

the final cost of the project is likely to be; and• cost control – managing the consequences of the design and

construction processes so as to achieve value for money and ensure thatthe final cost does not exceed the budget.

Estimates cannot be expected to be proved accurate unless they are basedupon reliable data and cost control is exercised.

(b) The techniques used to produce estimates vary according to the type andlevel of data available when they are prepared. The general level of estimatingaccuracy improves as the design of a project develops. Notwithstanding thisprogressive improvement in accuracy, provided that cost control is beingexercised, the general level of accuracy of early estimates can be stated withsufficient precision for them to be valid parameters for decision making andfor the management of the project.

(c) For estimates to be effective, the client should require that all estimates aresupported by:

• a risk analysis – an assessment of the potential risks, their probabilityand the associated time and cost consequences if they should occur; and

• a sensitivity analysis – a statement of the comparative effects on thetotal estimate of changes to principal data and assumptions on whichthe estimate is based.

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(d) The amount included in estimates to cover the uncertain cost of risks basedon the analyses described above is known as the contingency. It is importantthat contingencies are sufficient to cover risks and are not eroded to facilitateany lack of cost control.

(e) A primary concern may be the cost of running and maintaining thebuilding. The term ‘cost-in-use’ is used to describe how these costs can beestimated, enabling the client to take these matters into account whenconsidering total project costs and building design. In some cases higherinitial costs will result in lower running or maintenance costs during the life ofthe building.

(f) The earlier cost control procedures are instituted, the more effective theywill be. By way of simplistic illustration:

• cost varies with (but not in direct proportion to) size: once the size of abuilding is fixed, so is the general level of cost;

• the selection of the most economical design for basic elements such asfoundations, structural frame, external cladding and roofing, is of fargreater cost significance than the types of finishings; and

• the overall cost of mechanical and electrical systems and theeffectiveness of the cost control procedures which can be applied tothem is largely governed by early decisions as to the type of systemselected.

(g) The methods used for cost control differ radically between thepre-construction and construction stages of a project. Cost control during theformer depends partly on formulating an appropriate procurement strategy butmore on controlling the design process within that strategy; during the latter itis a function of effective management and avoidance of change aftercommitment.

(h) Pre-construction cost control, in simple terms, comprises:• preparing a cost plan – an allocation of the control budget into cost

centres which match readily identifiable elements of expenditure, withallowances for contingencies, reserves for changes in market prices andthe like; and

• cost checking each element as it is designed against its allowance in thecost plan.

If the cost of an element as designed exceeds its allowance in the cost plan, theexcess can only be corrected by:

• redesigning the element to reduce its cost; or• transferring money into that element from contingencies or from

another element yet to be designed.

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If neither is done, the control budget will be exceeded.

(i) Successful cost control during the construction stage depends on:• ensuring that all design work is completed and fully co-ordinated

before any commitment to construct is made (this applies in aprogressive way when design and construction overlap);

• administering the contract efficiently and promptly in strict accordancewith its terms and conditions; and

• minimising changes to the design, for any reason, after construction hasstarted.

(j) Regular cost reports can be produced throughout the construction stagefrom which potential overspending can be identified before it occurs with theintent that corrective action should be possible. The client should, however,recognise that such corrective action is not always beneficial, since:

• cost savings can be made only by reductions in standards or byomissions of part of the work remaining to be finalised, that is largelyin the visible finishings and fittings, with the resultant possibility thatthe requirements of the brief will not be met; and

• late cost savings are inefficient as any amount saved will be reduced ormay be negated by the costs of disruption inherent in making thechanges needed to generate the savings.

(k) All estimates and cost control procedures should take account of inflation,i.e. the increase in construction cost from the date when the estimate isprepared to the date when the work will be carried out. It is essential foreffective cost control that:

• allowances should be made for inflation in all estimates and that theassumptions on which such allowances were calculated be stated;

• these allowances for inflation should be clearly identified within theestimates and not be allowed to be used to correct other overspending;

• the assumptions on which inflation allowances are calculated bereviewed as each new estimate is prepared and the allowancescorrected in accordance with such reviews; and

• a clear policy and method for drawing down inflation reserves beestablished and observed.

(l) The client should distinguish between inflation and the effect onconstruction prices of market conditions at the time of tender. In simple terms,contractors adjust their tender prices by reducing or increasing their targetprofit margins in accordance with their need to obtain new work. It is unwiseto base early estimates on an assumption of favourable market conditions atthe time of tender as the construction industry is subject to wide,comparatively swift, changes in workload in accordance with economicconditions.

(m) Things will go wrong on the project. The unexpected will happen. Suchunforeseen happenings are covered in the cost control system by the

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contingency. The client should develop a policy for management ofcontingency funds to ensure that, at all times in the project, the remainingcontingencies match the remaining risks. The client may also establish andcontrol a client reserve, not disclosed to the consultants or the contractors, tocover late changes in user requirements and unforeseeable third partyevents.

3.1.4.14 TIME CONTROL OVERVIEW

(a) The overall programme of activities which will constitute the projectshould be developed at a very early stage in the procurement cycle. Thisprogramme will form the time framework within which the designers and theconstructors should complete their activities, and within which other keystages, such as land purchase, funding and planning permission should becompleted.

(b) The programme of activities should be feasible and realistic. Insufficientdesign time will have an effect upon client risk as will insufficient timeallowed for construction.

(c) The client should be aware of those tasks which are vital to completion ontime and those tasks where some flexibility may be available. Time for theapproval processes should be included as specific activities in the time planfor the project. These are invariably vital as the need to obtain approval islikely to be a prerequisite to further work on the project proceeding.

(d) The process of time control is in many ways analogous to that of costcontrol. Thus a time control system can embrace:

• time budget – the overall project duration as fixed either by specificconstraints or by the selected procurement strategy; the period which,once fixed, becomes a key parameter for management of the project;

• time plan – the division of total time into inter-linked time allowancesfor readily identifiable activities with definable start and finish points;the overall project programme; and

• time checking – monitoring closely actual time spent on each activityagainst the allowance in the time plan; reporting divergence as soon asit is observed.

(e) If the time taken for an activity exceeds its time allowance there areessentially only two forms of corrective action available:

• the re-sequencing of later activities, which may involve abandoninglow priority restraints and/or phased transitions from earlier activitiesto later activities logically following them; or

• shortening the time allowance for future activities by increasing theresources to be made available for them.

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If neither is done, the overall time budget will be exceeded and the project willfinish late.

(f) The client should recognise that time control is as important during thedesign stages of the project as the construction stage. Designers should workto a series of deadlines at which different elements of the design should beagreed (i.e. frozen) if costs and the overall programme are to be kept undercontrol.

(g) The client should consider developing (with the help of the projectmanager if appointed) a time contingency (reserve), with strict procedures forallocating the reserve to specific events. This concept is essential on projectswhich are subject to external time constraints, for example, where a buildinghas to be available for occupation before the lease on another building expires.

(h) The client should take account at all times of fundamental relationshipsbetween time, quality and cost:

• any extension of the overall timescale for a project always generatesadditional costs to either constructor or client; every project containstime-related costs whether these are openly stated or not. Who carriessuch additional costs depends on the detailed contractual arrangementsbetween the parties; it is likely that some of them will be borne by theclient; and

• making up lost time by re-sequencing later activities may be achievablebut often only at the risk of compromising quality or cost control.

3.1.4.15 WHOLE-LIFE COSTS

(a) In addition to considering project cost purely in terms of initial capitalcosts the client may wish to consider costs over the projected life of thebuilding. Such considerations may review higher initial costs against lowerrunning costs or longer life to replacement or maintenance. This may be ofparticular impact where shorter-life inherent assets, such as mechanical orelectrical equipment, or where planned maintenance or energy consumption,are being considered.

(b) The techniques associated with whole-life costing are often complex andpredictive. The project manager or project cost consultant will be able toadvise the client of the availability of their application in each case.

3.1.4.16 VALUE MANAGEMENT

(a) Value management is usually reserved for relatively complex projectswhere value for money is important and concerned with defining what ‘value’means to the client in meeting a particular need. In general, any project seeksto satisfy the differing requirements of several parties. Value managementprovides a structured framework for the examination and discussion of theserequirements to reach a consensus before the project brief is finalised. It is

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used to ensure that the need for and scope of any construction is thoroughlyanalysed before any further commitment to proceed is made. The aim is toestablish a clear statement of a project’s objectives matched to their relativevalues.

(b) Value management is usually carried out at the concept and feasibilitystages of a project. The aim is to ensure that:

• a project is commissioned in response to a careful analysis of balanceof needs;

• a wide range of options and alternatives to meet that need is considered;and

• the project objectives are made explicit and are commonly understoodby all parties.

(c) The client may wish to appoint a professional adviser experienced in thesetechniques and who will provide support in writing the objectives andsubsequent brief.


(a) This occurs later in the development of the project and is concerned withhow value is achieved rather than what the relative values are as defined in theproject brief and objectives.

(b) Value engineering studies are pre-planned, formal reviews of the designphilosophy and the detailed solutions at one or more stages of the designdevelopment. They are sometimes carried out by firms or individuals notconnected with or employed on the project and are short exercises intended toreview the detailed design solutions against the objectives and to establishwhether they can be achieved in a more cost effective manner.

3.1.4.18 QUALITY CONTROL OVERVIEW

(a) The final quality of the project is governed, progressively, by:• the project brief – a clear statement of the standards of quality

required; great care is needed to ensure that this standard isunambiguous, such phrases as ‘the highest quality attainable within thecontrol budget’ should be avoided;

• the original design – the adequacy of the components selected for thebuilding; the interface between related components and systems; theintegration of mechanical and electrical systems into the overall design;the completeness of design before construction starts;

• specification – the conversion of the quality standard demanded by theproject brief into precise requirements for both the supply and theinstallation of materials, components and systems; the setting out ofcriteria against which the standard of the finished work will be judged,e.g. by reference to standards, codes of practice or the like;

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• quality control – setting up control mechanisms to apply to theexecution of the work on site; the detailed, on-going supervision by thecontractor; the programmes for testing; the procedures for rectifyingany defective work; and

• inspection – the independent inspection and verification of thecontractor’s work by the design team; procedures for witnessing tests,for commissioning plant and systems, for pre-completion inspection fordefects lists and defect rectification and for final hand over.

(b) The client may choose to appoint a clerk of works whose function is to actas an inspector of work done to ensure quality, but who should recognise thatinspection and verification is the last line of defence. The key to qualitycontrol on site is to specify clearly, and to monitor closely, the quality controlactivities carried out by the contractor while work is being done.

(c) Many construction companies and firms of consultants within the buildingindustry have adopted, or are in the process of adopting, formal qualityassurance systems for their own work or services in accordance with ISO 9000or equivalent standard.

3.1.4.19 CHANGE CONTROL OVERVIEW

(a) Clients should aim to make no changes once a particular design feature hasbeen decided because these are one of the more significant causes of cost andtime overruns in construction projects. The avoidance of change should be aprime objective of the project strategy. If changes are unavoidable, theyshould be dealt with as described in the paragraphs below.

(b) Client changes (as distinct from design development) are changes whichare made either by:

• the design team, with the approval of the client, to a design featurewhich, it has been decided, should be frozen, or ‘improved’, or alteredto overcome design errors and inconsistencies; or

• the client after the design brief has been agreed. The most significant ofthese are changes to the scope of the works.

(c) Client changes can be relatively minor, such as adding a few extra powerpoints, or can have major cost implications, such as the addition of an extrastorey.

(d) The cost of client changes depends on when they are made:• before the construction contract has been let, the cost can be contained

to that of the changed feature itself, and perhaps some relatively smallresource cost; and

• after the construction contract has been let, the cost will bedisproportionate to the value of the change, it can disrupt thecontractor’s work and invariably gives rise to a higher cost than if thechange had been included in the contract as let. Many minor changes

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can have a cumulative and serious effect. Disruption claims caused bya large number of small changes are common.

(e) Some client changes are unavoidable. Examples of such changes are:• compliance with changes in legislation;• requirements of the health and safety or fire prevention authorities;• those required by unforeseen ground conditions; and• previously unforeseen users’ requirements.

(f) The contingency in the project budget should be sufficient to take accountof the likelihood of such changes based on risk assessments.

(g) Changes proposed prior to construction may either be unavoidable oroptional. If they are unavoidable, the client, if satisfied that they are, shouldauthorise a transfer from the contingency in the budget to cover them. If theyare optional they should be approved if it can be demonstrated that they offergood value for money (or a saving) and that there are sufficient fundsavailable to pay for them.

(h) Changes proposed after the construction contract has been let can havemajor time and cost implications and should be avoided if at all possible. Ifthey are not essential they should be deferred until the project is complete andthen reviewed to see if they are necessary and economically justified.

(i) The need for changes should be minimised by:• ensuring, with the assistance of an experienced project team and

designers, that the project brief is as comprehensive as possible and theusers have ‘signed it off’;

• taking into account any proposed new legislation;• having early discussions with outside authorities so as to anticipate

their requirements;• undertaking adequate site investigation or condition surveys1 if

existing buildings are to be renovated;• ensuring that designs are fully developed and co-ordinated before

construction contracts are committed; and• imposing discipline on users to finalise and sign off their requirements

in strict accordance with the project programme.

(j) When changes do occur, the client should call for:• the reasons for the change;• the source of the change;• the full cost and time consequence of the change;• proposals for avoiding or mitigating time overrun; and• source of funding of any cost overrun, e.g. contingencies, client cost

reserves, compensating savings elsewhere.

1 Stock Condition Surveys, RICS Guidance Note, RICS Books, Coventry, 1997.



Appendix A: Procurement Options

A1 TRADITIONAL (SEQUENTIAL)

(a) Under a traditional procurement strategy, design should be completedbefore tenders are invited and before the main construction contract is let.As a result, and assuming no changes are introduced, construction costs can bedetermined with reasonable certainty before construction starts and acompletion date can be fixed. In most cases the price is established on thebasis of tender documentation, often including a bill of quantities whichdescribes the extent of work to be done.

(b) The contractor assumes responsibility and financial risks for the buildingworks as described whilst the client takes the responsibility and risk for designteam performance. Therefore, if the contractor’s works are delayed by thefailure of the design team to meet their obligations, the contractor may claimagainst the client for additional costs and/or time to complete the project. Inturn, the client could possibly seek to recover these costs from the design teammembers responsible, if negligence can be proven.

(c) Clients are able to influence the development of the design to meet theirrequirements because they have direct contractual relationships with thedesign team. When construction begins, they usually have a single contractualrelationship with a main contractor and are therefore able to influence (but notcontrol) the construction process through a single point of contact.

(d) The strategy is unfortunately open to a level of abuse if any attempt ismade to let the work before the design is complete. Such action may result inmany post-contract changes which could delay the progress of the works andincrease the costs. Where a traditional strategy is chosen because of itsparticular advantages, the temptation to let the work begin before the design iscomplete should be strongly resisted.

(e) It is possible to have an accelerated traditional procurement strategy wheresome design overlaps construction. This can be achieved by letting a separate,advance works contract, for example, by allowing ground works (site clearance,piling and foundations) to proceed to construction whilst the design for the restof the building is completed, and the construction tendered separately. Thisreduces the total time to complete the project at the risk of losing certainty ofcost before construction starts. More importantly, a substantial risk is created inthat the contractor who builds the superstructure will take no responsibility forthe foundation works carried out by another contractor.

(f) Another alternative is to let the work by a two-stage process or bynegotiation thus reducing the pre-construction time involved and enabling thecontractor to have some (limited) involvement in the design and planningstage.



(g) The organisational structure of a traditional strategy is shown in Figure A1.Standard forms of contract are available.

(h) The main advantages of a traditional contract strategy are:• competitive fairness;• design-led, facilitating high level of quality in design;• reasonable price certainty at contract award based upon market forces;• the strategy is satisfactory in terms of public accountability;• the procedure is well known; and• changes are reasonably easy to arrange and value.

FIGURE A1PROCUREMENT ARRANGEMENT – TRADITIONAL

CONTRACTUAL RELATIONSHIP

CLIENT

MAIN CONTRACTOR

(standard lump sum contract)

SUBCONTRACTORS

(standard lump sum)

CONSULTANTS

(fee contracts)

SUPPLIERS

(various contracts)

ARCHITECT

ADVANTAGES

competitive fairness

satisfactory public accountability

procedures well known

changes reasonably easily arranged

and valued

administrative responsibility on behalf of the client

DISADVANTAGES

slow to start on site (no parallel working)

open to abuse where design incomplete

(resulting in less certainty)

contractor not involved in design or planning

(no buildability)

adversarial potential

SEQUENCE

brief competitiondesign construction

Low cost risk due to lump sum contractRisk

Medium time risk due to fixed contract date (but contractor has right to claim extensions)

Low quality/design risk where the majority of the work is designed by insured consultants

working directly for the client

(fee contract)



(i) The main disadvantages are:• the strategy is open to abuse, resulting in less certainty;• the overall programme may be longer than for other strategies as there

is no parallel working;• no ‘buildability’ input by contractor; and• the strategy often results in adversarial relationships developing.

A2 MEASUREMENT CONTRACTS

Measurement contracts are used when the work required cannot be accuratelymeasured for the tender bill of quantities. The contract sum is only establishedwith certainty on completion of construction, when re-measurement of thequantities of work actually carried out takes place and is then valued on anagreed basis. Measurement contracts are sometimes referred to asre-measurement contracts and are based upon the prices tendered by thecontractor. The most effective use of a measurement contract is where thework has been substantially designed but final detail has not been completed.Here, a tender based on drawings and a bill of approximate quantities will besatisfactory. Measurement contracts allow a client to shorten the overallprogramme for design, tendering and construction but usually with the resultof some lack of price certainty at contract stage because the approximatequantities reflect the lack of information on exactly what is to be built attender stage. The scope of the work, the approximate price and a programmeshould be clear at contract stage. Measurement contracts provide more riskthan lump sum contracts for the client but probably with programmeadvantages. They are typically used with civil engineering works where therecan be significant uncertainty about ground conditions.

(b) The organisational structure of a measurement contract strategy is shownin Figure A2. Standard forms of contract are available for this strategy.

(c) The main advantages of the measurement contract strategy include:• pre-construction time-saving potential;• competitive prices;• average public accountability;• the procedure is well known;• the strategy enables changes to be made easily; and• there is some parallel working possible.

(d) The main disadvantages of the strategy are:• the strategy offers poor certainty of price;• there is no contractor involvement in the planning or design stage; and• there is a potential for adversarial relationships to develop.



A3 CONSTRUCTION MANAGEMENT

(a) Under a construction management strategy, the client does not allocate riskand responsibility to a single main contractor. Instead, the client employs thedesign team and a construction manager is engaged as a fee-earningprofessional to programme and co-ordinate the design and constructionactivities and to improve the buildability of the design. Construction work iscarried out by trade contractors through direct contracts with the client fordistinct trade or work packages. The construction manager supervises theconstruction management process and co-ordinates the design team on behalfof the client. The construction manager, who has no contractual links with the

FIGURE A2PROCUREMENT ARRANGEMENT – MEASUREMENT

CLIENT

MAIN CONTRACTOR

SUBCONTRACTORS

CONSULTANTS

(fee contracts)

SUPPLIERS

(various contracts)

ARCHITECT

ADVANTAGES

administrative responsibility on behalf of the client

DISADVANTAGES

SEQUENCE

brief

competition

design

construction

Risk

CONTRACTUAL ARRANGEMENT

(standard contracts)

(standard measurement contract)

pre-construction time saving potential

competitive prices

average public accountability

procedures well known

easy to arrange changes

some parallel working

low certainty of price potential

no contractor involvement in planning

or design

potentially adversarial

Medium time risk as the extent of work will vary and contractors can claim extensions to the period for construction

Medium quality/design risk in the sense that design may not be complete at the outset

Variable cost risk as the final figure will be uncertain until the design and often construction is complete



design team or the trade contractors, provides professional constructionmanagement expertise without assuming financial risk, and is liable only fornegligence by failing to perform the role with reasonable skill and care, unlesssome greater liability is incorporated into the contract.

(b) On appointment, the construction manager will take over any preliminaryschedule and costing information already prepared and draw up a detailedprogramme of pre-construction activities. Key dates are normally inserted atwhich client decisions will be required. In adopting the constructionmanagement system, the client will be closely involved in each stage of designand construction. The client should have administrative or projectmanagement staff with the time and ability to assess the recommendations ofthe construction manager and take the necessary action. The client needs tomaintain a strong presence through a project management team that istechnically and commercially astute. This strategy is not, therefore, suitablefor the inexpert or inexperienced client.

(c) With this contract strategy, design and construction can overlap. As thisspeeds up the project, construction management is known as a ‘fast track’strategy. Although the time for completion can be reduced, price certainty isnot achieved until the design and construction have advanced to the extent thatall the construction work (trade) packages have been let. Also, designdevelopment of later packages can affect construction work already completed.The construction manager should therefore have a good track record in costforecasting and cost management. A package is made up of work for which oneof the trade contractors is responsible, e.g. foundations, concrete, electricalinstallation or decorating. These packages are tendered individually, for a lumpsum price, usually on the basis of drawings and specification.

(d) The Latham Review1 recognised that construction management has beenused predominantly for large and/or complex projects, but suggested thatthere is no intrinsic reason for this. Indeed, it is particularly recommended forprojects where there is a high degree of design innovation, where the clientwants ‘hands on’ involvement.

(e) The organisational structure of a construction management strategy isshown in Figure A3.

(f) The main advantages of a construction management strategy are:• the strategy offers time-saving potential for overall project time due to

the overlapping of procedures;• buildability potential is inherent;• the breakdown of traditional adversarial barriers;• parallel working is an inherent feature;• clarity of roles, risks, and relationships for all participants;

1 Latham, M., Sir, Constructing the Team: Joint Review of Procurement and Contractual Arrangements in the UnitedKingdom Construction Industry: Final Report, HMSO, London, 1994.



• changes in design can be accommodated later than some otherstrategies, without paying a premium, provided the relevant tradepackages have not been let and earlier awarded packages are not tooadversely affected; and

• the client has direct contracts with trade contractors and pays themdirectly. (There is some evidence that this results in lower pricesbecause of improved cash flow certainty.)

FIGURE A3PROCUREMENT ARRANGEMENT – CONSTRUCTION MANAGEMENT

ADVANTAGES DISADVANTAGES

SEQUENCE

brief design

construction

Risk


CLIENT

Lump sum contracts

WORK or TRADE

CONTRACTORS

including

CONSTRUCTION MANAGER

CONSULTANTS

Fee contracts

time saving potential for overall project time

trade packages let competitively

buildability potential

breaks down traditional adversarial barriers

parallel working inherent

clarity of roles, risks and relationships for

all participants

late changes easily accommodated

no cost certainty at outset

needs informed client, able to take an

active part

needs a good quality brief

relies on a good quality team

needs time and information control

Medium cost risk since the actual cost is unknown until the last package is let

Medium time risk since no one organisation carries the risk for timed completion

Low quality/design risk because there is a close link between client, designers and constructors



(g) The disadvantages are:• price certainty is not achieved until the last trade packages have been let;• an informed, proactive client is required in order to operate such a

strategy;• the client must provide a good quality brief;• the strategy relies upon the client having a good quality team; and• time and information control is required.

A4 MANAGEMENT CONTRACTING

(a) With this contract strategy, a management contractor is engaged by theclient to manage the building process and is paid a fee. The managementcontractor is responsible for all the construction works and has directcontractual links with all the works contractors. The management contractortherefore bears the responsibility for the construction works without actuallycarrying out any of that work. The management contractor may provide someof the common services on site, such as office accommodation, tower cranes,hoists and security, which are shared by the works contractors. The clientemploys the design team and therefore bears the risk of the design teamdelaying construction for reasons other than negligence.

(b) Management contracting is a ‘fast track’ strategy. All design work will notbe complete before the first works contractors start work although the designnecessary for those packages must be complete. As design is completedsubsequent packages of work are tendered and let. Cost certainty is thus notachieved until all works contractors have been appointed. A high level of costmanagement is therefore required.

(c) With the agreement of the client, the management contractor selects workscontractors by competitive tender to undertake sections of the constructionwork. The client reimburses the cost of these work packages to themanagement contractor who, in turn, pays the works contractors. Themanagement contractor co-ordinates the release of information from thedesign team to the works contractors.

(d) Where the management construction team is not of the highest quality, orwhere this fee is inadequate, the management contractor can be less thanproactive and the system can become a reactive ‘postbox’ approach. It istherefore vital to select the management contractor carefully and to ensure thatthe fee is appropriate bearing in mind market conditions. Similarly, resistanceto works contractors’ claims can be affected by the same circumstances.

(e) The organisational structure of a management contract is shown inFigure A4.

(f) The main advantages of a management contracting strategy are:• time-saving potential for overall project time;• buildability potential;



• breaks down traditional adversarial barriers;• parallel working is inherent;• changes can be accommodated provided packages affected have not

been let and there is little or no impact on those already let; and• works packages are let competitively.

(g) The disadvantages are:• need for a good quality brief;• poor certainty of price is offered;

FIGURE A4PROCUREMENT ARRANGEMENT – MANAGEMENT CONTRACTING


SEQUENCE

brief design

construction

Risk


time saving potential for overall project time

buildability potential

breaks down traditional adversarial barriers

parallel working inherent

late changes easily accommodated

Medium cost risk since the actual cost is unknown until the last package is let

Low quality/design risk because there is a close link between client, designers and constructors

CLIENT

MAIN CONTRACTOR

CONSULTANTS

(fee contracts)

(standard fee contract)

WORKS CONTRACTORS

(standard lump sum contracts)

work packages let competitively

need for good quality brief

poor certainty of price

relies on a good quality team

may become no more than a ‘postbox’

system in certain circumstances

removes resistance to works contractors’

claims

Medium time risk since total construction time is a consequence of package selection



• relies on a good quality team;• it may become no more than a ‘postbox’ system in certain

circumstances; and• removes resistance to works contractors’ claims.

A5 DESIGN AND MANAGE

(a) A design and manage strategy is similar to management contracting. Under adesign and manage contract, the contractor is paid a fee to manage and assumeresponsibility, not only for the works contractors, but also for the design team.

(b) The main advantages of a design and manage strategy are:• early completion is possible because of overlapping activities;• the client deals with one firm only;• it can be applied to a complex building; and• the contractor assumes the risk and responsibility for the integration of

the design with construction.

(c) The disadvantages are:• price certainty is not achieved until the last work package has been let;• the client loses direct control over the design quality; and• the client has no direct contractual relationship with the works

contractors or the design team and it is therefore difficult for the clientto recover costs if they fail to meet their obligations.

A6 DESIGN AND BUILD

(a) Under a design and build strategy, a single contractor assumes the risk andresponsibility for designing and building the project, in return for a fixed-pricelump sum.

(b) A variant, known as ‘develop and construct’, describes the strategy whenthe client appoints designers to prepare the concept design before thecontractor assumes responsibility for completing the detailed design andconstructing the works. Often this strategy is associated with a process wherethe contractor takes over the client’s designer (architect) contract in a form of‘contract switch’ or novation. The designer is then employed for the rest of thecontract by the contractor who is usually responsible for all of the designincluding that done prior to the switch.

(c) Design and build is a fast-track strategy. Construction can start before allthe detailed design is completed, but at the contractor’s risk.

(d) As explained in 3.1.1, by transferring risk to the contractor, the client losessome control over the project. Any client requirement which is not directlyspecified in the tender documents will constitute a change or variation to thecontract. Changes are usually more expensive to introduce after the contracthas been let, compared with other types of strategy.



(e) It is very important, therefore, that the brief and performance/qualityspecifications for important requirements in the project are fully andunambiguously defined before entering into this type of contract. Ifrequirements are not specific, the client should provide contractors with aperformance specification at tender stage.

(f) The contractor develops the design from the specification submittingdetailed proposals to the client to establish that they are in accordance with therequirements of the specification. Clients are, therefore, in a strong position toensure that their interpretation of the specification takes preference over thecontractor’s.

(g) Specification is a dangerous area for inexperienced clients:over-specification can cut out useful specialist experience; under-specificationcan be exploited.

(h) The client will often employ a design team to carry out some preliminarydesign and prepare the project brief and other tender documents. Sometimesthe successful contractor will assume responsibility for this design team anduse them to produce the detailed design. If a design and build strategy isidentified as a possibility at an early stage, then the basis of the appointmentof the design team should reflect this possibility. If it does not, the client mayhave to pay a termination fee to the design team. The client may wish to retainthe independent services of a cost consultant throughout the contract for earlycost advice involvement in the bidding process and cost reporting duringconstruction.

(i) Consideration may need to be given to the inclusion of a special clause indesign, or design and build, type contracts to ensure that the responsibilityfor design performance is properly shared. Such a clause should identifyspecific obligations that are absolute, that do not require the designer to bean expert in the client’s business and, as a consequence, are reasonablyinsurable.

(j) Current forms of contract for design and build vary their treatment of designliability.

(k) To be effective, the client’s requirements will need to be stated clearly andaccurately and delivered on time.

(l) The imposition on contractors of fitness for purpose in design is usuallyexpressly excluded in standard forms of contract and it is a matter ofjudgement for clients and their professional advisers, even though tenderers inrecessionary markets are likely to agree to undertake such risks.

(m) Non-availability of insurance to cover a higher than normal risk shouldbe weighed against the financial ability of contractors to meet designdefault claims. It will normally be preferable and represent better value for



money to impose a lesser, yet insurable, liability, which will be the subjectof an insurance payout in the event of a design fault, rather than aninsurance fitness for purpose requirement on a contractor of limitedfinancial assets.

Most importantly the client should ensure that adequate design liabilityinsurance is in place and maintained for the period of liability.

(n) Increasingly, collateral warranties are being used to place additionalresponsibility on designers or subcontractors. In addition, the client may takeout insurance to cover post-construction liability, but this will be at a cost.This is a matter for specialist advice.

(o) A range of options is available as illustrated in Figure A5. These rangefrom a package deal or turnkey where the client has little involvement in thedesign development or building procurement process (effectively, acomplete hands off approach), to develop and construct where the clientappoints designers to develop the brief to a level of sophistication which willleave the design and build contractor to develop detail or specialist designelements.

FIGURE A5PROCUREMENT ARRANGEMENT – DESIGN AND BUILD

Some options available, showing proportional involvement in the design proces by client andcontractor between package deal, and develop and construct.

Turnkey

Package deal

Design and build(competitive)

Design and build(negotiated)

Develop and construct

The range of options enables the procurement arrangement to be used for a wide range ofclient types, and for clients to be involved to a greater or lesser extent.

Client involvement

Contractor involvement



(p) The project organisation structure for design and build is shown inFigure A6. Contractors may use their own firms’ resources for undertakingthe design (in-house design and build), or may more usually subcontractthese to one or more professional firms whilst retaining control.

(q) The main advantages of a design and build strategy are:• the client has only to deal with one firm;• inherent buildability is achievable;

FIGURE A6PROCUREMENT ARRANGEMENT – DESIGN AND BUILD


SEQUENCE

brief design

construction

Risk


CLIENT

(standard lump sum contracts)

DESIGN AND BUILD CONTRACTOR

(standard lump sum contract)

SUBCONTRACTORS

(various contracts)

SUPPLIERS

single point contact and responsibility

inherent buildability

early firm price possible

reduced total project time

client needs to contract before design

no design overview unless consultants appointed

difficult for clients to prepare adequate brief

bids difficult to compare

design liability limited by standard contract

client driven changes can be expensive

is complete

competition

Low cost risk since most contracts will be let on a lump sum basis

Low time risk since the contractor will usually fix the time and be committed to it

High design/quality risk where the contractor controls design there are risks related to

both design suitability and to the capacity of the design-build firm to own such risks



• price certainty can be obtained before construction starts provided thatthe client’s requirements are adequately specified and changes are notintroduced; and

• reduced total project time due to early completion is possible becauseof overlapping activities.

(r) The disadvantages are:• the client is required to contract before the detailed designs are

completed;• there is no design overview unless separate consultants are appointed

by the client for this purpose;• difficulties can be experienced by clients in preparing an adequate

brief;• bids are difficult to compare since each design, programme and cost

will vary;• design liability is limited by the standard contract; and• client changes to project scope can be expensive.

PART 3, SECTION 2


PART THREE: CONSTRUCTION PLANNING AND PROCUREMENT

SECTION 2: BUILDING SERVICES PROCUREMENT

3.2 Introduction

The guidance in this section is intended to improve the way in which theprocurement of building services is handled by all building professionalsactive in this field.

It is aimed at clients, project managers, quantity surveyors and commercialmanagers who are involved in the procurement of building services. It isintended to provide guidance to clients on the production of clear appointmentcriteria and the benefits that will manifest through the whole procurementprocess. It is also intended for use by project managers advising on theprocurement strategy for both consultant services and construction work, andfor quantity surveyors/commercial managers involved in the selection of aprocurement route, production of tender documentation and the managementof the tender process.

The value of building services can represent anything up to 50 per cent of aproject’s total cost (see table 1) and a considerable proportion of theconstruction risk. It is therefore important that guidance is given to allprofessionals who provide advice in this field. It is hoped that this guide willlead to a more consistent approach throughout the construction industry.

This guide should be read in conjunction with ‘The Procurement Guide’ (seeSection 3.1). ‘The Procurement Guide’ provides both clients and theiradvisers with a code of procedure to assist them in the selection of anappropriate procurement strategy for a building project.

Table 1: Elemental Breakdown as a Percentage of Total Construction Cost

Group element

Data source: BCIS

Highly-serviced factories

Air conditioned offices

General hospitals

1. Substructure 19 8 6

2. Superstructure 62 44 33

3. Finishes 4 11 8

4. Fittings – 2 4

5. Services 15 35 49

Total 100 100 100

PART 3, SECTION 2


The fundamental difference between these sections is that this sectionexamines in greater detail the key aspects of building services procurement.Consideration should be given to the guidance provided here, as it will havean influence on the selection of the principal procurement strategy.

It is common for clients and their advisers to put enormous effort intodeveloping overall procurement solutions and the role of the principalcontractor within these solutions and yet, very often, they do not take an activerole in procurement further down the contractual chain. This may be historicin that principal contractors would traditionally be held responsible forprocurement of sub-contractors. However, this approach cannot alwaysensure that the client’s requirements in terms of cost, quality and time arealways as high on the principal contractor’s agenda as they are on the clients.This often leads to inappropriate procurement methods manifesting in poorquality, claim-ridden projects.

The report of the Construction Task Force, entitled ‘RethinkingConstruction’,1 calls for radical changes to the process through which theconstruction industry delivers its projects. Supply-chain partnering is one suchchange, and one that is increasingly more evident within industry today. Withthis move towards partnering, and more specifically partnering through thesupply chain, it will be incumbent on both clients and their advisers to take amore pro-active approach in the procurement of every element of a building,and not just the principal contractor.

It is not the intention within the framework of this guide to cover everyprocurement option, and therefore the guide is written with the mostcommonly used procurement strategies in mind. This guide is intended toprovide a framework to supplement the reader’s own skill and judgementwhen advising and implementing the procurement of building services, ratherthan definitive guidance for any one of the many routes available.

HISTORICAL DEVELOPMENT

Cost and procurement advice for building services has historically beenprovided by building services consulting engineers and the provision stillexists within the Association of Consulting Engineers (ACE) standardconditions of engagement to provide such a service. However, with theincreased complexity and cost sensitivity of this element, the role is now morecommonly placed in the hands of a specialist quantity surveyor.

Without a technical background quantity surveyors have struggled to providesuch cost and procurement advice. This, together with the demand fromclients for a more pro-active approach to cost and value management at everystage of a project, has led to an increase in the demand for specialists. It is nowgenerally accepted throughout the industry that building services cost andprocurement advice requires input and guidance from technically trainedspecialist quantity surveyors.

With many more specialist quantity surveyors practising in this field,guidance on good practice is essential if consistent standards are to be

PART 3, SECTION 2


maintained. Good practice in procurement necessitates a consistent andlogical approach, irrespective of the procurement route. It is hoped that byfollowing this guide clients and their advisers will be better placed to avoid themany pitfalls that have historically been associated with building services, andin doing so obtain greater value for money.

3.2.1 Appointing the Building Services Designer


Most construction projects contain building services. In order to incorporatethese services successfully, design advice is required. The process ofdesigning the building services elements within a construction project iscomplex, with detailed design often being undertaken by specialistmanufacturers and/or installers. This process usually begins with theappointment of a building services engineer or a building servicesdesigner/contractor. The question surrounding this appointment is, ‘who isbest placed to provide design advice and at what stage should it be sought?’Before answering this question the meaning of the word ‘design’ needs to beexplored.

3.2.1.2 THE MEANING OF DESIGN

Once the client’s brief on a construction project is clearly established theprocess of design proceeds. This includes the calculation of loads for heating,cooling, ventilation power, and so on; sizing and selecting pipes, ducts andplant and equipment; and consideration of spatial, architectural and structuralrequirements. It is unusual for a single party to do all the design work and,therefore, it is important to know who is responsible for what within thevarious elements and stages of design.

Design is the exercise of providing a solution to a particular problem orrequirement, or set of problems or requirements. In practice it means differentthings to different people. A common denominator would be a useful guide. Agood word to represent that common denominator and the essence of design is‘choice’. Choice is exercised as to the way in which a problem is to be solvedor requirements are to be met. Design is a series of choices and decisions, bothin terms of who is required to make the choices and decisions and acceptingresponsibility for them. As a starting point for investigating where designliability rests asking the question, ‘who made the choice?’ is a good one.2

3.2.1.3 THE IDENTITY OF THE BUILDING SERVICES DESIGNER

The building services designer is a member of the client’s design team (whichalso includes the architect, structural engineer and other specialist designers).The designer can be:

(i) An independent design-only consulting engineer engaged by the client;

G

PART 3, SECTION 2


(ii) A general contractor or building services contractor who either engagesa consulting engineer or employs an in-house design engineer; or

(iii) A hybrid of (i) and (ii) above, with each being responsible for theirrespective elements or stages of design.

The decision on which option to use should be based on important factors suchas:

• clarity and certainty of the client’s brief;

• size, complexity or specialist nature of the project;

• time available to deliver the project;

• required standard of the product; and

• financial constraints.

3.2.1.4 ALLOCATION OF DESIGN RESPONSIBILITIES

The concept of single-point responsibility makes it easier to establish whereliability lies. However, the best engineering expertise for different parts of adesign may not rest, in practice, with a single party. Unless a client workssolely with a design and build contractor from the outset, it is almostinevitable that design responsibility will be split between the client’sdesign-only consultant and the building services contractor(s). If conflict atlater stages of the project is to be avoided, great care must be taken to clearlydescribe the allocation of different parts of design to different parties in thebuilding contract.

The Building Services Research Information Association’s (BSRIA) technicalnote TN21/97, Allocation of Design Responsibilities for Building EngineeringServices provides practical guidance on the issues involved in the assignmentof design responsibility to the various parties to a contract.

The use of a table clearly stating the design activity and the assignment of thatactivity to the party with contractual responsibility is likely to be the mostefficient way of avoiding conflict.

Table 2 is an example of how the pro formas for allocating responsibilityproduced by BSRIA in their technical note can be configured. In this exampleonly one sub-system is considered and other consultants are included. Inpractice, it would be necessary to create a single table for each sub-system ofthe complete building services installation, as design responsibility may varyfrom sub-system to sub-system.

Using a table in this way is infinitely flexible and should be configured on aproject-by-project basis to suit the particular demands of a particular project.

PART 3, SECTION 2


Tab

le 2

: A

lloca

tio

n o

f D

esig

n R

esp

on

sib

ilite

s

Are

a ty

pe:

Mai

n bu

ildin

gS

ervi

ce:

Chi

lled

wat

er in

stal

latio

nA

lloca

tio

n o

f d

esig

n r

esp

on

sib

iliti

esT

his

exam

ple

is b

ased

on

the

cont

ract

or b

eing

app

oint

ed a

s pa

rt o

f the

des

ign

team

Act

ivit

yE

mp

loye

rP

roje

ct

man

ager

Bu

ildin

g

serv

ices

en

gin

eer

Str

uct

ura

l co

nsu

ltan

tC

on

trac

tor

Oth

er(s

tate

d)

Co

mm

ents

1.0

Su

rvey

s:

1.1

– E

xist

ing

syst

em✔

1.2

– S

yste

m w

ide

✔

2.0

Fea

sib

ility

rep

ort

✔✔

Pre

pare

d in

con

junc

tion

with

th

e co

ntra

ctor

3.0

Co

nfi

rmat

ion

of

clie

nt

bri

ef✔

✔B

rief t

o be

issu

ed b

y pr

ojec

t m

anag

er

4.0

Des

ign

:

4.1

– S

ketc

h dr

awin

gs✔

4.2

– S

chem

atic

s✔

4.3

– In

stal

latio

n dr

awin

gs✔

4.4

– S

peci

ficat

ion

✔

4.5

– B

uild

ers

wor

k in

form

atio

n✔

Arc

hite

ct

4.6

– M

anuf

actu

rers

’ dra

win

gs✔

4.7

– R

ecor

d dr

awin

gs✔

5.0

Pla

nt

sele

ctio

n:

5.1

– S

peci

fy p

lant

per

form

ance

✔

PART 3, SECTION 2


Tab

le 2

: C

on

tin

ued

Are

a ty

pe:

Mai

n bu

ildin

gS

ervi

ce:

Chi

lled

wat

er in

stal

latio

nA

lloca

tio

n o

f d

esig

n r

esp

on

sib

iliti

esT

his

exam

ple

is b

ased

on

the

cont

ract

or b

eing

app

oint

ed a

s pa

rt o

f the

des

ign

team

Act

ivit

yE

mp

loye

rP

roje

ct

man

ager

Bu

ildin

g

serv

ices

en

gin

eer

Str

uct

ura

l co

nsu

ltan

tC

on

trac

tor

Oth

er(s

tate

d)

Co

mm

ents

5.2

–P

ropo

se p

rocu

rem

ent

rout

e✔

✔Q

S

5.3

–A

gree

pla

nt m

anuf

actu

rers

✔✔

5.4

–P

re-t

ende

r pl

ant

(if r

equi

red)

✔Q

STo

be

done

in c

onju

nctio

n w

ith

the

QS

6.0

O&

M m

anu

als:

6.1

–Fo

rmat

✔

6.2

–P

rodu

ctio

n✔

6.3

–S

ign

off

✔✔

7.0

Sp

atia

l co

ord

inat

ion

:

7.1

–C

oord

inat

e al

l ser

vice

s an

d ro

utes

✔

7.2

–R

evie

w in

stal

latio

n pr

opos

als

and

amen

d sc

hem

atic

s

✔

7.3

–R

e-se

lect

pla

nt

acco

rdin

gly,

incl

udin

g an

y re

vise

d ca

lcul

atio

ns

✔

PART 3, SECTION 2


Tab

le 2

: C

on

tin

ued

Are

a ty

pe:

Mai

n bu

ildin

gS

ervi

ce:

Chi

lled

wat

er in

stal

latio

nA

lloca

tio

n o

f d

esig

n r

esp

on

sib

iliti

esT

his

exam

ple

is b

ased

on

the

cont

ract

or b

eing

app

oint

ed a

s pa

rt o

f the

des

ign

team

Act

ivit

yE

mp

loye

rP

roje

ct

man

ager

Bu

ildin

g

serv

ices

en

gin

eer

Str

uct

ura

l co

nsu

ltan

tC

on

trac

tor

Oth

er(s

tate

d)

Co

mm

ents

8.0

Mo

nit

or

the

spec

ialis

t d

esig

n fo

r co

mp

lian

ce

wit

h t

he

des

ign

inte

nt

✔

9.0

Test

an

d c

om

mis

sio

n t

he

wo

rks:

9.1

–C

omm

issi

onin

g sp

ecifi

catio

n✔

9.2

–C

arry

out

test

ing,

co

mm

issi

onin

g an

d pr

ovid

e ce

rtifi

catio

n

✔

9.3

–A

ccep

t/witn

ess

com

mis

sion

ing

✔

10.0

Co

st a

dvi

ce a

nd

m

on

ito

rin

gQ

S

11.0

Des

ign

tea

m

coo

rdin

ato

r/co

ntr

act

adm

inis

trat

or

✔

12.0

Lea

d d

esig

ner

✔

PART 3, SECTION 2


The tables should be compiled at the outset of a project by the employer or hisor her project manager and should be included as a contract document. Inpractice, the completion of the tables in terms of timing will be dependent onthe procurement route chosen. For example, a pre-designed single stagecompetitive tender would require the tables to be created as a basis forappointing the building services engineer, as undoubtedly the level of designresponsibility will affect his or her fee. The tables should then be included aspart of the tender documents and included as a contract document in both theemployer’s contract with the principal contractor and its contract with thebuilding services engineer.

Alternatively, under a ‘partnering’ situation the tables could be compiledjointly between the parties, with responsibility being allocated to the personwithin the team best suited to manage the risk. Again, the completed tablesshould be included as a contract document in all contracts between theemployer and his or her design team, which would include the principalcontractor.

3.2.1.5 APPOINTMENT OF AN INDEPENDENT DESIGN-ONLY ENGINEER

The first allocation of design responsibilities usually concerns theappointment by the client of an independent design-only consulting engineer.The ACE conditions of engagement, produced by the Association ofConsulting Engineers, are widely used to make this appointment. The 1981conditions have been replaced by the 1995 conditions (2nd edition, 1988).However, the 1981 conditions are still in use on some projects and thereforeneed to be considered here.

(a) 1981 ACE conditions of engagement

The 1981 conditions include agreement 4A which offers a choice of thefollowing forms:

(i) full duties;

(ii) abridged duties; or

(iii) performance duties.

All three forms require the consultant (building services engineer) to exerciseall reasonable skill, care and diligence in the discharge of his or her duties. Theconsultant does not warrant that his or her design will be fit for the intendedpurpose.

The responsibilities of the consultant under full duties and performance dutiesare easier to understand than abridged duties. The responsibilities underabridged duties rest between the relative extremes of full duties andperformance duties.

PART 3, SECTION 2


One very important difference between full duties and abridged duties is thatthe latter do not require the building services engineer to produce coordinationdrawings. His or her duties under abridge duties are intended to harmonizewith those of the architect up to a certain point and this would require someelement of design coordination by the building services engineer. However,the extent of this is unlikely to be clear.

Abridged duties have been the source of argument and dispute betweenbuilding services contractors and design-only consultants for many years.Therefore, when it comes to engaging a design-only consultant, it is veryimportant that the extent to which the consultant will produce coordinationdocumentation is clear, particularly to the building services contractor whowill rely on the information. This is especially important where abridgedduties are used. Although the consultant is not required to producecoordination drawings (as defined in the 1981 ACE conditions) underabridged duties, he or she will almost certainly coordinate design to someextent in conjunction with the other members of the design team. BSRIAtechnical note TN21/97 provides practical guidance on deliverables.

(b) 1995 ACE conditions of engagement

The 1995 conditions comprise a range of forms, one of which is calledagreement B(2). The forms are not formatted into full, abridged andperformance duties. Agreement B(2) divides the duties into normal servicesand additional services.

The 1995 conditions include the following guidance, ‘In connection with theduties of building services engineers it should be noted that agreements A(2)and B(2) list as normal services a level of services which corresponds roughlyto the abridged duties in the 1981 agreements 4A(ii) and 4B(ii). It is open tothe client and building services engineer to agree an equivalent of full dutiesby importing some of the additional services into the normal services.Similarly, an equivalent of performance duties may be agreed by listing inA19 those services which are not to be included as normal services.’

It is important to note that coordination drawings are not part of normalservices. From this point of view, normal services are significantly less thanfull duties under the 1981 conditions. If the client or the project manager wantthe designer to produce coordination drawings under the 1995 conditions,they must request the inclusion of these drawings.

Under normal services, the designer is required to prepare ‘detailed designdrawings’ from which, ‘it should be possible to produce coordinationdrawings and installation drawings without a major re-routing of thoseservices’. In practice, the meaning of the words ‘major re-routing’ should bediscussed with the designer so that the implications of what they might meancould be risk assessed at an early stage and clearly communicated through thecontract documentation.

Additional services is a list of services from which the client must choose andadd on to the normal services.

PART 3, SECTION 2


The main differences between the 1981 and 1995 ACE conditions ofengagement are outlined in table 3.

Independent of who the designer is and how the appointment is made, it isequally important to appoint him or her at the same time as appointing thearchitect and the structural engineer. This is because the architectural andstructural design will impact on the building services design and vice versa.Bringing the building services designer into a project at a later stage will meanthat the building services design is less advanced than the main structural andarchitectural elements leading to possible conflicts as the design processcatches up. It will also mean that at a time when the client needs an accurateestimate of the project cost, the engineering services element will be lessdetailed.

3.2.1.6 SUMMARY

• The designer is the party who is required to make the choice. Completedesign expertise rarely lies with a single party.

• If allocation of design responsibility between the parties is not clearlydescribed in tender documentation, this can lead to disputes.

• The use of abridged duties from the 1981 ACE conditions agreement 4Aor their current equivalent needs very careful consideration. Whenengaging a design-only building services engineer under abridgedduties, it is very important to have a clear definition of deliverablesexpected from him or her.

• It is important to appoint the building services engineer at the same timeas the architect and the structural engineer.

Table 3: Main Differences Between Appointments in the 1981 and 1995 ACE Conditions of Engagement

1981 ACE Conditions 1995 ACE Conditions

Performance dutiesAs agreements A(2) and B(2)Least detailed design services

List in A19 what is to be excluded from normal duties to equate to performance duties

Abridged dutiesNo requirement to produce coordination drawingsLess detailed design duties(How is coordination of design to be achieved?)

Normal dutiesRoughly equivalent(Coordination to be addressed separately)

Full dutiesIncludes coordination drawingsMost detailed design duties

Additional servicesList of additional services to be agreed with the consulting engineerShould facilitate coordination drawing ‘without major re-routing’

PART 3, SECTION 2


Having established where the responsibility for design can lie, the next part ofthis section deals more specifically with the coordination of design, itspotential impact on a project and the importance of recognizing appropriateprocurement strategies to deal with this impact.

3.2.2 Design Coordination


This section deals with design coordination. It is important to recognize thedistinction between ‘design coordination’ and ‘coordination of theinstallation’. Whilst coordination of the installation (which is concerned withthe planning and sequencing of the works on site) is extremely important, it isgenerally considered to be the principal contractor’s responsibility and istherefore not covered here.

3.2.2.2 THE IMPORTANCE OF DESIGN COORDINATION

Disputes involving design coordination and installation responsibilities are amajor cause of conflict in the building services industry and, as such, are oneof the main reasons for delay and disruption on construction projects. Theroles of the various parties, and the extent of their design responsibilities, mayappear to be fairly straightforward for many elements of a building. However,this is rarely the case when procuring buildings where the building serviceselement is of significant value and complexity.

Failure in the coordination of the building services design can create problemswith the building services installation and may have a serious impact on thefollowing areas.

(a) Installation time

Design coordination problems, which are not recognized during the drawingprocess, may only become evident when the installation of the works is beingcarried out. For example, if the ductwork was found to clash with a structuralelement of the building, time may be needed for a design solution to be foundand implemented. The solution may require:

• preparation of revised calculations;

• preparation of a drawing/sketch;

• approval by others of the re-design;

• re-ordering of materials;

• re-installation of the ductwork; and

• re-programming.

G

PART 3, SECTION 2


(b) Installation cost

Remedying a design coordination problem often involves working out ofsequence and can give rise to additional costs, including those arising out of:

• engineering time;

• drawing time – if the works are done out of sequence;

• incidental items such as retaining the scaffolding in place for a longerperiod; and

• the costs associated with a variation to the works which mayadditionally involve loss of productivity and prolongation costs.

(c) Effect on other trades

The time needed to resolve the design coordination problem might cause acritical delay to other trades or activities. For example, a ductwork problemmay prevent the ceiling installation from being completed to programme.

(d) Cooperation between the parties

Invariably, coordination problems arise as a result of incomplete design orpoorly-defined design duties which result in gaps in the design. In thissituation it is unlikely that any party will accept liability for the problem sincethe consequences, and their associated costs, are unclear. This can give rise toparties defending their positions, inevitably leading to conflict and delay.

Furthermore, even when duties and responsibilities are defined in the contract,misunderstanding can still arise if reliance is placed on custom and practicerather than liabilities under the contract.

(e) Standard of workmanship

When a building services contractor experiences a problem due to lack ofdesign coordination, the solution can necessitate a compromise of the qualityof the installation.

3.2.2.3 OBJECTIVE OF DESIGN COORDINATION

The process of design coordination should have a clear goal: to ensure that themany different elements of construction fit together effectively to provide aworkable and economic solution.

It must be recognized that design coordination is an inherent part of the overalldesign process and, as such, whoever is responsible for design should ensureit is undertaken. Design coordination should be an objective and measurableprocess that is transparent to all concerned.

PART 3, SECTION 2


This may appear to be self-evident. However, the functions of design anddesign coordination are not always clearly defined, or there could, effectively,be two stages associated with it for the reasons outlined in 3.2.1. This mayleave the contractor with a substantial amount of design coordination tocomplete after the building services design engineer has fulfilled his or herdesign obligation.

On projects containing a significant amount of building services, designcoordination takes on particular importance because of the large number oftrades involved, the complexity of their work and the likelihood that these tradesmay have different design responsibilities. For example, there could be anumber of specialists responsible for the design of their own systems. Therefore,a fully coordinated design would not be achieved until these designs arecomplete. In these circumstances it is beneficial to select the relevant specialistsearly in the procurement process to enable them to commence their designs andadvance the completion of a fully coordinated design.

Therefore, when drafting appointment and contract documents, a number ofkey issues need to be addressed. These are:

• The documents should contain a clear and unambiguous definition ofdesign coordination and define the coordination responsibilities of thevarious parties;

• The production of documents associated with coordination should beclearly allocated to the various parties to the contract. The contractshould also specify the type and number of documents/drawings, thelevel of detail, the number of copies and the scale to be used;

• Coordination of design should be included as a key activity in theplanning stage of the project and should be a measurable activity withachievable milestones on the programme(s); and

• Recognition should be given to the impact which specialists have ondesign coordination and the importance of appointing early enough inthe procurement process.

3.2.2.4 RESPONSIBILITY FOR DESIGN COORDINATION

It is essential, before contracts are entered into, to establish responsibility forcoordination of design. This could be scheduled into a simple table with tickboxes indicating the various parties’ responsibilities, the results of whichwould be transferred into the contract (see table 2).

Whatever method is used the contract should address the duties of the partiesas follows.

(a) Terms of appointment for the designer

Special care must be taken to understand the terms of appointment of thedesigner. It should be clear if the designer is responsible for producing

PART 3, SECTION 2


coordination drawings during the design and construction stage of the project(see 3.2.1).

Whatever form of agreement is used, design responsibilities should be clearand unambiguous. An express definition of the quality and quantity ofinformation to be provided by the designer should be included.

(b) Building services contractor’s contract

It should be clear if the building services contractor has a duty to coordinateits work and/or the work of others into the overall design. Also, it should beclear if the building services contractor is the lead coordinator. Ambiguity canlead to a dispute. The contract should state whether the building servicescontractor has any design responsibility (see 3.2.1).

If the building services engineer has design coordination liability and he or sheintends to delegate to the building services contractor(s), the following factorsneed to be clear:

(c) Delegation under the contract

The designer needs to be sure that the terms of appointment allow this or thatthe client is in agreement with them.

(d) Tender/contract documentation

Documents need to be clear on the extent of coordination to be undertaken bythe building services contractor and sufficient time must be allowed in theprogramme to perform the task.

Figure 1: Design Coordination

PART 3, SECTION 2


(e) Ability

Checks should be made to ensure that the building services contractor hassufficient experience and resources to undertake coordination duties. Amethod statement should also be obtained, detailing how the building servicescontractor will undertake the process of design coordination.

(f) Computer Aided Design (CAD)

Where the scheme is designed on a CAD system, the building servicescontractor should have a compatible system.

(g) Programme

There should be sufficient time within the overall programme of the works forthe building services contractor to properly undertake coordination of thedesign.

(h) Establishment of the lead coordination contractor

Where possible, a lead coordination contractor should be appointed. It isunwise to have a fragmented contractual arrangement with several contractorsundertaking design coordination work, none of whom are liable for the overalldesign coordination.

3.2.2.5 PROCESS FOR IMPLEMENTING DESIGN COORDINATION

Once the responsibilities of the parties involved in the project are identified, aprocess should be established to ensure that design coordination is beingcarried out.

An example of good practice is detailed below:

(i) The client appoints a member of the project team as ‘designcoordinator’. The design coordinator’s duty is to manage the designcoordination process. Ideally this should be a project team memberwho has no design responsibility in order to avoid a potential conflictof interest. This appointment should be made as early as is practical inthe design process.

(ii) The design coordinator must establish a clear understanding of eachparty’s responsibility for coordinating the design and should ensurethat they have the capability to perform their obligations.

(iii) The design coordinator is responsible for the programme and methodof implementation of design coordination. This should be preparedwith the input of all parties to ensure that it is in harmony with theoverall construction programme.

PART 3, SECTION 2


(iv) The design coordinator should review the coordination process on aregular basis to ensure compliance. Reports should be issued to theclient and, if necessary, the contract administrator should issueinstructions to overcome any problems.

3.2.2.6 SPECIFIC PROBLEMS RELATING TO BUILDING SERVICES INSTALLATIONS

The following examples are typical problems that can give rise tocoordination difficulties.

(a) Selection of plant and equipment

Where the building services engineer is responsible for the selection of plantand equipment, a provisional selection of certain equipment is often made.This is in order to plan layouts and to provide information on spacerequirements/loadings to the architect/structural engineer. The provisionalselection of plant is also necessary for information in preparation of costadvice.

In tendering for the works, the building services contractor may propose analternative manufacturer for equipment to that chosen by the building servicesengineer. The reasons for this can be varied, but usually it is because thebuilding services contractor receives more favourable commercial terms fromcertain suppliers than others. The client may be in favour of this alternative ifthe selected equipment achieves cost savings and/or improved delivery timeswithout the quality of equipment being reduced.

Questions often arise over design liability for the proposed equipment‘meeting the design requirements’. Does it lie with the building servicescontractor who proposes it or the building services engineer who approves it?The answer in law appears to be that the person on whom the client relies tomake the decision must ultimately be responsible (see 3.2.1).

Changes in size, shape and manufacturer may not only lead to coordinationproblems. It can also result in problems with functionality if the equipmentdoes not meet the specification.

On a practical level it is often better for the building services engineer toundertake a re-evaluation of the design to ensure that the equipment compliesboth in terms of specification parameters and coordination of the services.However, this work is often not included as a duty in the terms of appointmentfor the building services engineer or in the building services contractor’scontract. Under the 1981 and 1995 ACE conditions of engagement, thebuilding services engineer is not responsible for re-evaluation, unless it isagreed as an additional service. Therefore, the building services engineershould be paid an additional fee to undertake this work.

In the event that the building services engineer does not undertake there-evaluation process, because either it is not in the terms of appointment orthe client is not willing to pay additional fees, the building services contractor

PART 3, SECTION 2


should be responsible for the design and coordination associated with thechange. The client should be advised that the disadvantage with this option isthat there is no independent check that the equipment complies with thespecification. If the building services contractor suddenly takes on this designresponsibility it must be reflected in its terms of contract. The associatedchanges to warranty agreements must also be made. However, the cost ofthese changes may prohibit the proposed change of equipment.

(b) Appointment of specialist installers

Depending on the type of project, a large element of the building servicesworks may consist of many specialist installations. Examples of suchinstallations include medical gases, lifts, BMS, refrigeration and sprinklers. Itis usual for the specialist companies to provide design information and thisinformation must be incorporated into the works to ensure a properlycoordinated design is achieved. One of the problems with this, however, isthat the amount of coordination required may vary substantially fromspecialist to specialist.

Ideally, where the specialist company’s input is significant to the project, theyshould be appointed at a stage which avoids assumptions being maderegarding the specialist’s requirements. Such assumptions can often turn outto be incorrect.

If a specialist cannot be appointed at an early stage, allowance should be madewithin the programme for the specialist to develop its design, and for this to becoordinated with the overall design.

(c) Variations/changes to the works

Variations and changes to the works can have a significant impact on thedesign coordination depending on their scope and timing. Such alterationsshould be carefully considered.

3.2.2.7 LEGAL POSITION

The legal position with regard to design coordination cannot be considered inany depth within this section. However, the law related to coordination isconsidered briefly below.

(a) Express terms of the contract

The appointment of the building services engineer should clearly establishwhether there is a responsibility for design coordination. It is recommendedthat the appointment of the building services engineer should be under theappropriate ACE form of agreement.

Many of the standard forms of building contract deal adequately withmaterials and workmanship requirements but fail to address, in sufficient

PART 3, SECTION 2


detail, design coordination issues. It is essential that when a building servicescontractor is not specifically responsible for design (as, for example, in designand build contracts), express terms are included to cover design coordinationduties and responsibilities.

(b) Implied terms of the contract

Where the contract is silent on an issue, terms may be implied by the courts,common law, statute or by custom, irrespective of the parties’ intentions.

The application of implied terms is limited and uncertain. Therefore it isimportant to insert clear express terms in contracts.

Where a building services contractor has no express design liability, the courtsare still likely to imply an obligation on to the building services contractor towarn the client of any problems known to it.

(c) Tort

There is much less likelihood of an action in tort for coordination problemsthan there is for more general design errors. This is because latent defects donot generally originate from coordination problems. Most coordinationdisputes arise during the course of the works and are dealt with under thecontract. The disputes usually relate to payment for additional work ratherthan damages for defective work. Therefore, the application of tort is limitedbut should not be ignored. In fact, the law of tort can increase the liability ofthe building services contractor in terms of its duties, the number of parties itis liable to and the length of time it has a liability for.

(d) Criminal implications

Negligent work and breach of statutory duty are normally considered as torts.However, they can also have criminal penalties, particularly where injury iscaused to others. For example, the CDM (Construction (Design &Management)) regulations 1994 do not differentiate between buildingservices engineers and building services contractors who undertake anydesign duties, even if only restricted to design coordination.

Consequently, a clear understanding of liability for design is essential forthose taking on coordination work.

3.2.2.8 SUMMARY

• Recognize the importance of design coordination within theprocurement strategy.

• Documentation should clearly identify design coordinationresponsibilities.

PART 3, SECTION 2


• Ensure there is a clear process and adequate time for designcoordination.

• Appoint specialists early where design input is key to coordination.

Having established an appropriate procurement strategy and terms ofappointment, the appointment of the building services contractor in the correctmanner is crucial to the success of a project. Section 3.2.3 deals withappointing a building services contractor and examines the commonapproaches and the pitfalls.

3.2.3 Appointing a Building Services Contractor


There are many criteria to be considered in the appointment of a buildingservices contractor, and different clients will put different emphasis on eachcriterion. The lowest tenderer may not always provide the client with the bestvalue for money and there may be more important priorities to consider thansimply the initial build cost. The client may prefer to appoint a buildingservices contractor who can:

• build to the quality and standard required;

• provide the resources to condense the contract programme;

• take the lead in design coordination;

• provide a design service; or

• provide a lower whole-life cost.

The prioritization of the criteria to suit the client’s overall objectivesultimately influences how the appointment of the building services contractoris conducted.

3.2.3.2 TIMING OF THE APPOINTMENT

The timing of the appointment of the building services contractor depends onthe selected procurement strategy and/or the cost effectiveness of introducingthe building services contractor to the design process at an early stage. It alsodepends on the size and complexity of the project. The more complex theproject, the longer the lead-in period prior to instruction will need to be.

The earlier the building services contractor is appointed, the greater theinfluence it can have on:

• design;

• coordination;

G

PART 3, SECTION 2


• plant and equipment selection and procurement;

• buildability;

• programming;

• value engineering;

• commissioning advice;

• safety – in terms of maintenance and accessibility;

• the cost plan; and

• maintenance – post completion.

These influences should however be balanced with the disadvantages of earlyappointment:

• limited price competition;

• limited pool of building services contractors able to develop and finalizethe design; and

• difficulty comparing tenders effectively.

There are several key considerations relative to appointment at the variousstages of design. These are as follows.

(a) Inception and feasibility stage

The building services contractor should only be appointed at this very earlystage if one or more of the following criteria is satisfied:

• the project is predominantly building services;

• very early design or design coordination input is required due to thecomplexity of the project;

• the building services contractor’s work is of a very specialist nature; or

• advice on the programme is required due to long lead-in times forequipment.

(b) Outline and scheme design stage

Appointment at this stage usually leads to a lump sum or a guaranteedmaximum price. The appointment would generally take place at outline andscheme design stage when the building services contractor would be requiredto develop the initial design into a full design.

At this stage an outline design, together with an accompanying preliminaryoutline specification, may have been produced by the client’s appointedbuilding services engineer.

PART 3, SECTION 2


Alternatively, the building services contractor’s expertise can be utilized byappointing it, for a fee, to work alongside the client’s design consultants in a‘concurrent engineering approach’. In this approach the building servicesengineer and the building services contractor work alongside each other toproduce the design and coordinated working drawings. For example, thebuilding services engineer could produce performance criteria and schematicswhich are worked up into fully detailed working drawings with any surveywork and the coordination being done by the contractor. In this example, onelevel of drawings is deleted from the process and the responsibility of designcoordination rests with the contractor.

(c) Full design stage

Appointment at this stage of the project usually follows a lead-in periodallowing design to be virtually completed by the client’s building servicesengineer prior to appointment. It generally leads to a lump sum tender beingsought based on the client’s consultant’s design drawings and comprehensivespecification.

The building services contractor is appointed at this stage if it has little or nodesign input. Some contractor design may still be required at this stage forspecialist systems.

In addition to these key considerations there are various minor advantages anddisadvantages. However, some clients may consider these to be ofimportance. Tables 3 and 4 summarize these advantages and disadvantages.

3.2.3.3 PROCUREMENT OPTIONS

This section reviews how the building services contractor’s appointment fitswithin the various project procurement strategies. A comprehensive review ofthe overall project procurement options can be found in section 3.1 (‘TheProcurement Guide’).

The timing and contractual basis of the building services contractor’sappointment largely depends on the overall project procurement route. Theclient’s and team’s view on the benefits of the various appointments discussedearlier will also influence this.

The building services contractor is generally appointed under a domesticsub-contract or package arrangement under a principal contractor. The projectteam should try to ensure that the terms of the appointment are no moreonerous than those of the main contract. The appointment of the buildingservices contractor under the main contract procurement routes is consideredbelow.

(a) Traditional procurement: where the building design is complete beforethe principal contractor is appointed

The most commonly used procurement route is the traditional route of completedesign prior to tender with either bill of quantities or pricing schedules tendered

PART 3, SECTION 2


Table 4: Advantages of Appointment at Design Stage

Design stage

Advantage

Inception and feasibility stage

Outline and scheme design stage

Full design stage

The client would have complete access to the building services contractor’s specialist knowledge.

✔

The overall project programme could be shortened due to the time saving in the pre-tender period.

✔

Simplification of the tender documentation. ✔

Early appointment generates a good understanding of the client’s objectives and an accurate brief.

✔

The client will benefit from the building services contractor’s expertise in the selection of the most competitive equipment and systems.

✔ ✔

A variety of solutions may be provided allowing the client and his or her project team to assess the best solution for the project.

✔ ✔

A shorter tendering period compared to the traditional route.

✔ ✔

Bills of quantities (BQs) or detailed pricing schedules can be readily produced by the quantity surveyor with the inherent advantage of tender cost comparisons, cost control and use in the valuation of variations. The advantage is limited however as the BQs may not reflect the way the contractor prices the work involving additional work for the contractor. Also, and very obviously, unless the design is fully coordinated a BQ reflecting the final design cannot be produced.

✔

The measurement process will also provide a check against the adequacy of the design information.

✔

The quality control of the installation can be monitored by the consultant against the original design.

✔

Optimum competition, provided the design is practically complete and the bills are correctly described and accurately measured.

✔

Tender period shorter together with reduced tendering costs and risk for the building services contractor.

✔

PART 3, SECTION 2


Table 5: Disadvantages of Appointment at Design Stage

Design stage

Disadvantage

Inception and feasibility stage

Outline and scheme design stage

Full design stage

Limited number of building services contractors with the required design expertise to develop and finalize the design.

✔ ✔

Clear tender proposals are not always possible due to variations in the tender design proposals.

✔

Extensive tender preparation time and costs for the building services contractor.

✔ ✔

The client and the client’s design team have less control over final design

✔ ✔

The client may be forced to make compromises between price and quality depending on how comprehensive the initial enquiry document was. The building services contractor will tend to view the capital cost as the priority rather than the quality and through life costs of the building.

✔ ✔

The pre-contract stage will tend to be longer due to the time taken to produce the design and the tender documentation.

✔

The cost of the building services consultant’s fee may be more than the contractor’s cost for developing the design. No use made of the contractor’s expertise in terms of buildability, programming, costing, equipment and building services contractor selections during the pre-contract stage.

✔

Incorrect allocation of coordination responsibilities may lead to cost escalation.

✔

Delay in appointment may affect the coordination of the services and delay builders work details.

✔

Late tendered cost information may cause budget problems.

✔

Limited use made of the contractor’s expertise in terms of buildability programming, equipment and building services contractor selections, and so on during design process.

✔

PART 3, SECTION 2


on a lump sum basis through a main contractor. However, appointing a buildingservices contractor can be achieved in a number of ways:

(i) The principal contractor selects the building services contractorThis traditional domestic sub-contracting arrangement is usually mostappropriate when the project is small or the building services elements arenot complex, and the building services contractor is not required to haveany design input. However, the principal contractor’s choice is usuallyprice led and this method can lead to ‘Dutch auctioning’ by the principalcontractor. The employer has little control over the building servicescontractor’s appointment.

This does not necessarily result in an inappropriate appointment,particularly if the main contractor follows appointment proceduressimilar to those set down in the Code of Practice for the Selection ofSub-Contractors.3

(ii) Naming a number of alternative building services sub-contractorsThis arrangement avoids some of the problems associated with domesticsub-contracting. It provides some competition with a degree of controlmaintained by the employer. It also reduces the overall cost of tenderingby restricting the number of building services tenderers. However, thecriterion used by the principal contractor to appraise tenders is likely to beprice. This method has the disadvantage of higher costs when comparedto traditional domestic arrangements. It also prevents the principalcontractor from working with sub-contractors with whom it has a goodrelationship or partnering arrangements that may reduce conflict. Thismethod would be used where the employer wishes to maintain an elementof control.

(iii) Naming a single building services sub-contractor as sub-contractor inthe main contractThis method allows the employer to appraise building services tendersand select a building services contractor using his of her own criteria. Toachieve this the building services sub-contract will either be negotiated ortendered by the employer. This is done prior to letting the main contractand inserting a name into the main contract. Alternatively, it can be doneafter letting the main contract, in which case, a prime-cost sum is insertedinto the main contract.

(iv) NominationThis arrangement allows even greater control by the employer andusually provides a degree of comfort to the building services contractor.However, part of the burden of risk is shifted to the employer. It isextremely rare to see this method in use today. It would only be utilized ifthe employer is the most appropriate person to shift risk too.

(v) Two-stage selective tenderingIf early appointment is required, where for example the building servicescontractor is required to assist the building services engineer with designand coordination, a two-stage selective tendering method is appropriate.

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At stage one a schedule of rates and preliminary costs is agreed. These arethen used at stage two to build up the contract sum. However, problemsoccur when a sum at stage two cannot be agreed. This method usuallyresults in a higher contract sum than other methods. The building servicescontractor is then required to enter into a domestic sub-contract with theprincipal contractor.

To summarize, the choice depends on the amount of control the employerwishes to maintain, balanced with the cost. The employer’s choice usuallydepends on the amount of input and the size of the building services contract.Personal preference for a particular building services contractor may also be afactor.

If the building services element is very large, it may be more appropriate toappoint the building services contractor as the principal contractor where ithas the necessary management skills to undertake this role.

If the employer wants to retain control over the tendering process and selectsthe building services contractor, a number of options should be considered inrelation to the number of sub-contracts required and the timing of theappointment, in relation to the principal contractor’s appointment.

(i) Number of sub-contracts: tender mechanical and electrical works asseparate sub-contractsIn order to tender the mechanical and electrical sub-contracts (or evensub-divisions of these) the contract must be of sufficient size to negate theefficiencies that would be gained by having a single sub-contract.

(ii) Timing in relation to the principal contractor appointmentPre-tender the building services sub-contract(s)This allows selection to be made prior to the appointment of the principalcontractor. It is particularly useful when the building services contractoris required to take on design liabilities and its early input is required.

Tender the building services packages after the principal/main contractThis allows the principal contractor to comment and, if necessary, objectto the design team’s proposed tender list prior to the works beingtendered. However, the principal contractor must be prepared to enterinto a domestic sub-contract arrangement with the successful buildingservices tenderer. A prime-cost sum could be included in the contractdocuments for the building services installer at tender stage to provide theprincipal contractor with the opportunity to price its overheads and profitand preliminaries.

This method allows the principal contractor to be appointed ahead of thebuilding services element. It is particularly useful to allow time for thebuilding services engineer to complete work on the building servicesdesign prior to tendering where this is not as advanced as the main worksdesign.

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However, the delay in appointment may adversely affect the coordinationof the services and delay builders work details. Also, there is thepossibility of a less competitive overall cost as the principal contractor isincorporating the works after being awarded the building contract ratherthan it forming part of its tendering strategy.

(b) Design and build

When the principal contractor is under a design and build contract it is moreusual, particularly on larger contracts, for the principal contractor to select itsown building services contractor. This is because a higher degree ofcooperation and integration is required between them. Joint ventures are oftenused where the building services element is significant. However, namedbuilding services contractors can be used if the employer has a particularpreference.

When the main contract is traditional and the building services element is tobe designed by the building services contractor, the criteria in section3.2.3.3(a) should be applied. It is recommended that the employer maintainsan element of control over the building services element where complex orprestigious building services design is involved.

If the building services contractor is to design, a performance specification,and possibly outline drawings, will be produced by the building servicesengineer. The building services tenderer is then required to complete thedesign. The pricing document produced by the quantity surveyor is veryimportant in this situation. The quantity surveyor must have an understandingof the final design in order to provide appropriate headings within the pricingdocument. This will enable a meaningful analysis of the tender return to beachieved. The tenderers under consideration would be required to submit aquantified schedule of rates to allow post-contract cost management. Thisshould be done prior to the contract being awarded to them.

Performance specification or design and build may involve novation of thedesign team to the chosen building services contractor.

(c) Management contracting or construction management route

This route involves the building services being subdivided into workspackages. This could consist of two packages, i.e. mechanical and electrical,or it could be further subdivided into pipework, ductwork, plant, plumbing,and so on. It is usually only beneficial to package the work when the project islarge and complex and/or dependent on current market forces. If this methodis chosen it is vital that the coordinating contractor has the requisiteexperience in coordinating the various trades involved and fully understandsthe project. The design coordination responsibilities discussed earlier in 3.2.2take on even greater significance with an increasing number of interfaces.

There are three main reasons for introducing packages into a constructionproject:

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(i) It allows the management contractor/construction manager to retaingreater control of the project. When one package contractor becomestoo dominant on any project the site management can lose its hold onthe project;

(ii) By tendering the project in packages additional competition may beintroduced dependent on market conditions; and

(iii) It allows design development to proceed in parallel with construction.

To balance these points the following issues should be considered:

• Does the project easily divide itself into the separate work package? Ifnot, additional interfaces are being introduced which must be balancedwith any potential loss of control.

• Could cost savings be obtained by reducing the number of workpackages? Fewer packages result in lower cost due to less tendering,better communications and lower preliminary costs for the project.

• If the number of packages any one contractor is allowed to win is limitedthen competition on the final packages may be limited as the number ofcompetent tenderers is reduced as the tendering progresses.

• Design coordination responsibilities become more difficult to control asthe number of individual interfaces increases.

• If risk is not evenly distributed between packages this may lead todifficulties in obtaining tenders for some packages.

3.2.3.4 SUMMARY OF PROCUREMENT ROUTES

When deciding on the appropriate procurement route the most important pointto remember is that the more prestigious and complex the project, the greaterthe cooperation required between the design team and the building servicescontractor. Under these circumstances there is a greater need for the client tocontrol the appointment of the building services contractor.

Each of the possible procurement routes must be objectively considered inconjunction with the project as a whole. Every route has its own distinctadvantages and disadvantages and its inherent risks which have to be relatedto the client’s objectives and the project characteristics.

Partnering or new strategies such as ‘supply-chain management’ and‘concurrent engineering’ which lead to closer relationships between thevarious construction parties can also benefit the project by reducing, oreliminating, the amount of confrontation and allowing the parties toconcentrate their efforts on the needs of the project instead.

The selection of the principal contractor on complex projects should also beconsidered carefully to ensure that it provides the necessary building services

PART 3, SECTION 2


experience and input to ensure that the installations are properly controlled,coordinated and programmed.

3.2.3.5 TENDERING

The main objective of any tendering process is quite simply ‘to employ acontractor’. However, this is not the only objective. If it were, the client wouldonly have to invite the first contractor professing to have the required skills tostart work as and when it was convenient to proceed.

The aims of the tendering procedure can therefore be summarized as follows:

• to assess the skills of the contractor;

• to translate to the contractor through the tender documentation all theproject information, including the client’s objectives, required to formthe contract; and

• to obtain a competitive quote.

The selection of building services contractors for interview, tender ornegotiation is often made by committee. The ability of the quantity surveyorto have a positive input into this process so that an appropriate selection ismade is very important. It is also important to ensure that the contractorsconsidered at an early stage are financially sound; are of appropriate size andstatus; have the work capacity to undertake the project; and are sufficientlycommitted to offer a competitive price.

(a) Short listing building services contractors

The following options can be considered when drawing up the short list oftenderers:

Figure 2: Appointing a Contractor: Impact of Procurement on Design Responsbilities

PART 3, SECTION 2


(i) Client preferenceAn experienced client may have stated preferences for building servicescontractors of whom they have knowledge or who have performed wellon previous comparable projects. The client may also have preferencesfor approaches such as partnering.

(ii) Project team recommendationsRecommendations can be based on the past experience of buildingservices contractor’s performance on similar projects.

The design team evaluation of approved contractor application forms canbe used to assess references from other design teams.

(iii) Open advertising arrangementsAdvertisements in the European Journal or similar recognizedpublications can be arranged.

(b) Interviewing

Once a tender list has been drawn up, formal interviews should be undertakenwith the proposed potential tenderers. Interviewing can be costly and timeconsuming for both the building services contractor and the design team.Therefore, the length of interviews and the number of contractors interviewedshould be related to the size and complexity of the project.

It is important to understand the capabilities of the particular building servicescontractor and whether there is a bias towards any one specialism, i.e.mechanical or electrical. On larger contracts, where coordination with othertrades is a major priority, letting all the services to one contractor may proveto be an advantage.

Small contracts may allow subdivision of particular trades, but theirintegration into the overall services installation can lead to difficulties in thelater stages of a contract, particularly commissioning and the incorporationof life safety testing and linking with final commissioning of mechanicalplant.

(c) Pre-qualifying

In some cases it may be desirable to investigate the companies underconsideration prior to including them on the project tender list. This is acommon activity in organizations that keep preferred or selected lists ofcontracting companies for regular construction activities. However, it is alsoincreasingly frequent for large and/or complex projects. Companies whoqualify in this way may then be invited to tender for the works.

(d) Selection criteria

In all cases the following list represents the minimum information that shouldbe collected about prospective tenderers:

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• quality of work;

• previous experience;

• size of company (a company’s turnover should be scrutinized in relationto the proposed contract value and programme);

• insurance cover;

• health and safety experience/record;

• previous record of performance – preferably supported with a clientrecommendation;

• financial stability;

• size of previous projects and the outcomes;

• CVs of the key personnel;

• company location;

• necessary specialist skills – e.g. planning, commissioning; and

• what trades the building services contractor has in-house and which willbe sublet.

(e) Preliminary enquiry

Once a preliminary list has been collated, the individual tenderers should beissued with a scope of work and project programme. They should then beasked if they are willing to tender. This should establish the current workload,who is likely to carry out the work and the likely enthusiasm of the qualifiedtenderers. It is wise to have a pre-tender meeting with the selected tenderers atthis stage. This gives the whole team a final chance to assess the buildingservices contractors prior to the tender documents being sent out.

(f ) Length of tender list

The number of building services contractors finally asked to submit a tendershould relate to the type of project, the complexity of the project and thecontractors’ responsibilities under the proposed contract. Guidance onselecting a building services contractor can be found in the Code of Practicefor the Selection of Sub-Contractors. Generally, the more complex thecontract, the fewer tenderers are required. The complexity does not cover justthe construction work but also any design and/or design coordinationresponsibilities which are devolved to the building services contractor.

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(g) Tender period

Regardless of the procurement route chosen, an appropriate tender periodmust be allowed so that the building services contractor can return a fullyconsidered tender. The tender period will mainly be dependent on threefactors:

(i) the procurement route;

(ii) the complexity of the project; and

(iii) the size of the project.

Tender periods can range between three weeks for a design-only contract toten weeks for a design and build project. Building services contracts shouldhave a tender period of four to eight weeks, depending on the parametersmentioned above. If the design and build route is chosen, an appropriatedesign period should be allowed for within the project programme tominimize potential site problems.

3.2.3.6 AVOIDING THE PITFALLS

(a) Control of the appointment

The control of the building services contractor’s appointment can be retainedby the design team or it can be passed on to the principal contractor. At whatstage the principal contractor takes control of the appointment should becarefully considered by the design team and may depend on a number offactors (see section 3.2.3.3).

The amount of influence the design team has on the selection of the buildingservices contractor will increase the longer the project team retains control ofthe tendering process. As long as the appointment is controlled by the designteam it is also vital that this is managed by a professional who understands thecommercial and contractual process. This would normally be undertaken by aquantity surveyor.

Once the principal contractor takes control of the process, it is important tohave a single point of contact within the design team through which theinformation flow to the building services contractor can be monitored.

The control of the building services contractor’s appointment is a key role inthe procurement strategy and one that must balance technical servicesknowledge with commercial and contractual acumen.

(b) Tender documentation

The tender documentation should be clear, comprehensive and unambiguous.This enables the building services contractor to fully understand theobligations under the contract and to price for these within its tender.

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Tender documentation which does not fulfil these criteria can lead toconfusion and to a proliferation of claims once the contract is awarded.

Section 3.2.4 explores tender documentation more fully.

(c) Coordination brief

A coordination brief, including a definition of terms from the project team tothe building services contractor, must be included in the building servicescontractor’s contract. An example of a method of identifying and allocatingdesign and coordination responsibilities is illustrated in table 2 (see section3.2.1.4). This type of table should be included as part of the contractdocuments and professional appointments.

The design team must plan the interface of the building services contractorwith the other building trades, starting at the initial design stage. The earlierthe building services contractor is introduced into the design process, the morelikely it is that problems related to coordination of services and the physicallimitations of the structure can be avoided.

It is far cheaper to resolve these problems during the design period than runthe risk of escalating variations and claims for delay and disruption. Inaddition, if the building services contractor is appointed early, it can advise onservices loadings, space planning, alternative schemes, coordination, interfacewith the building trades, programming and value engineering (for guidance onearly appointment see section 3.2.3.2).

(d) Duties and responsibilities

The building services contractor’s responsibility for design, coordination,commissioning, drawing requirements, etc. should be clearly defined in orderto avoid disputes occurring later in the contract.

The production of working drawings should not be confused with completingthe design (see 3.2.2).

It is also important that an appropriate response is obtained from the buildingservices contractor to ensure that it fully understands its role andresponsibilities.

The use of detailed method statements and a signed-off coordination brief attender stage on a service-by-service basis can often avoid many problems.Those managing the project require an understanding of coordination. Theyneed to know which elements of which particular services are critical to theother building trades.

In more complex installations, where the use of building management systemsform a major element of the services, it should be understood at the outset asto how the building services contractor is intending to install/commission anddemonstrate its work.

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The commissioning of the building services installation should only beundertaken when all the other trades are complete, with the exception of thefinal finishing trades. A contract that is late will rarely have an adequatecommissioning period. Therefore, the design team should insist that theprogrammed commissioning period is maintained and that commissioningdoes not start until the site is ready. Failure to do so will often result inabortive costs or lead to a dissatisfied client when the building provides anunsatisfactory environment.

(e) Track record

The track record of the building services contractor should be closelyscrutinized and an understanding gained of the type of contracts undertaken inthe past. In order to assess this it is useful to liaise with design teams withwhom the building services contractor has worked on similar projects in orderto assess its capability to undertake the work.

It is extremely important to ensure that the building services contractors beingconsidered for selection are of a size, and have the expertise, to undertake theproject. Mismatching of contractors will lead to uncompetitive bidding or acomplete lack of interest.

(f ) Design role

It is often advantageous to pass specialist design responsibility over to thebuilding services contractor. An example of such an area would be life safetysystems (sprinklers, fire alarms, etc.). There are often services wheredifficulties arise with the interface between the building services engineer’sdesign and the building services contractor’s design and where liaison withthird parties may have an influence on the final design.

(g) Programming

The lead-in period for the building services contractor must be sufficient toallow adequate time for the design, working drawing production andprocurement of specialist plant. Far too often this period becomes compressedand results in an increase in coordination mistakes or design errors becausethere has been insufficient time to check the drawings properly.

In addition, the pressure placed on a building services contractor to commencework on site too early creates the risk of cost escalation through potentialabortive work on site or an inability to adequately pre-plan work areas.

It is naive to cover up design delays and force the building services contractorto try to achieve impossible end dates. Such behaviour can result in anadversarial situation and a ‘raised claims’ consciousness from an early pointin the contract.

Good management of the project requires good programming techniques. Thisis vital for successful services installations.

PART 3, SECTION 2


3.2.3.7 SUMMARY

• Assess the principal contractor’s ability to manage the building servicesinstallation.

• Ensure selection is made in a methodical way and that the buildingservices contractor is of an appropriate size and ability in relation to theproject requirements.

• Only allow appropriate number of building services contractors totender.

• All tenderers should confirm their willingness to tender.

• The chosen procurement route should reflect the complexity of theproject.

• Determine at a very early stage the timing of the contractor appointmentto suit the client’s procurement objectives.

• Decide at an early stage who will control the appointment of thebuilding services contractor.

• Ensure adequate consideration is given to the scope of the buildingservices contractor’s appointment, including the design andcoordination role. The importance of design responsibility, size,complexity and the degree of control required by the design team shouldbe recognized.

• Consider the elements of risk and consider who is best suited to takethese (using recognized risk-management techniques). It may bedesirable to keep the decision-making process with the design team.

3.2.4 Tender Documents


The aim of this section is to identify the problems associated with theproduction of tender documents for the procurement of building services andto develop potential solutions. When inadequate tender documents areproduced it is evident that the tender submissions will be of an equivalent,poor standard. As a result, the tender returns are likely to be heavily quantifiedtechnically, commercially and contractually. Poor tender documentation willalso give rise to inconsistencies between individual tender returns whichmakes initial comparison of the bids on a like-for-like basis virtuallyimpossible. The ability to retain control over post-tender variations will alsobe lost if the provision for such control is not adequately covered in the tenderprocess and defined within the contract.

G

PART 3, SECTION 2


This section provides a practical approach to document production. It can beadapted to whichever procurement route is chosen. For more information onthe various procurement routes available, please see section 3.1 (‘TheProcurement Guide’).

Due to the various forms of procurement available and the wide range ofsituations, it is not possible to refer to specific circumstances here. This isintended to be a general introduction.

3.2.4.2 OBJECTIVES OF THE TENDER DOCUMENTATION

The aims of the tender documentation can be summarized as follows:

• obtain a competitive quote;

• define the conditions under which the contract will be administered;

• set out the required programme;

• define the scope and standard of work;

• set out the procedures for making payments to the contractors andvaluing variations, i.e. post-contract cost management procedures;

• establish the degree of proof required for any claims made and therequired procedures;

• identify the roles and responsibilities of the building services contractorin terms of design and design coordination;

• identify the risks under the contract and the works which the buildingservices contractor is expected to include within the tender; and

• inform the building services contractor if a clerk of works will beemployed and what his or her duties will be.

It is important to understand that it is not only the ability of the buildingservices contractor that requires assessment, it is also the principalcontractor’s ability to coordinate and manage the building servicesinstallation. On all large projects it is advisable that the principal contractoremploys an individual (or organization) to be directly responsible for themanagement of the building services contractor(s). This person should havethe authority to make decisions and influence the overall management of theproject rather than be informed of the management’s decision. This individualis the ‘linchpin’ of the construction process as far as the building servicesinstallation is concerned and perhaps the project as a whole. The buildingservices contractor cannot be considered as simply another trade contractorbecause they interface with almost every other trade on a project. For thisreason the appointment of the building services contractor takes on addedimportance. The ability to resolve interface problems and to successfully

PART 3, SECTION 2


coordinate the building services works with other trades is central to achievinga trouble-free contract.

The design team’s responsibilities must be clearly identified within the tenderdocuments. If the project is fully designed, the building services contractormay have no design responsibility. However, detailed design is generally stillrequired. This switch in design lead usually occurs with specialistsub-packages such as the BMS, fire alarms, and so on which require furtherdesign input. The other extreme occurs when only a performance specificationis produced by the client-appointed building services engineer and thebuilding services contractor is responsible for the design.

As the building services packages can provide the main arena forconfrontation throughout the project’s life, it is important that the tenders areanalyzed in a professional manner. Once all technical queries are satisfactorilyresolved by the design team, the quantity surveyor is the most suited teammember to undertake a complete commercial appraisal of the submittedtenders and provide a clear recommendation to the client as to the successfultenderer. The pros and cons of this approach are discussed in section 3.2.4.5.

3.2.4.3 TENDER DOCUMENT FORMAT

The contents of every contract varies depending on the procurement routechosen. However, the principal headings generally remain the same:

• PreliminariesThe preliminaries section of the tender documents contain similarinformation to that of the principal contractor in a traditionalprocurement strategy. This allows the contractor an opportunity to priceitems such as contract insurance, employer’s requirements, contractualissues and the contractor’s own general items, i.e. hutting, site staff,on-site equipment that cannot be allocated to a specific item, and so on.

• PreamblesPreambles deal primarily with workmanship, materials, specialattendances required and any assumptions made while taking off thequantities, and so on. If bills of quantities are not being produced thissection may be incorporated into the specification.

• SpecificationThe specification produced by the design engineer relates directly to thetender pricing document.

• ScopeThe scope should not only cover the construction work but also designand who carries the responsibility.

• DrawingsAlways list out the drawings the contract is based on.

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• Conditions of contractThe type of contract, for example JCT 98, incorporating any requiredamendments. Where the sub-contract conditions are to be negotiatedbetween the principal contractor and sub-contractor these can have asignificant effect on price. This is difficult for the employer to control.

• Precedence of documentsSomewhere within the tender documents the hierarchy of the documentsshould be stated. This will help relieve some contractual conflict.

• WarrantiesThe wording of the preferred warranty should be provided within thecontract documents. If a standard wording is to be used, this should bestated, e.g. COWA/F, COWA/P&T, MCWA/F or MCWA/P&T. Adesign warranty may be required between the client and thesub-contractor.

COWA/F, P&T = Collateral warranty for funder, purchaser and tenantMCWA/F, P&T = Main contractors collateral warranty/funder,purchaser and tenant

• Bond/parent company guarantee (PCG)The preferred wording of any bonds/PCGs should be contained withinthe contract documents.

• Form of tenderThe form of tender.

• PI insurance requirementsPI insurance is only required if design responsibility lies with thebuilding services contractor. With packages such as lifts, productliability insurance may be acceptable.

• ProgrammeThe overall project programme should be included within the tenderdocuments to provide the building services contractor with an idea ofhow its works will be integrated with the other trades. Along with theprogramme a key date schedule should be included. The tenderer shouldbe asked to produce an outline programme to be submitted with thetender.

• AttendancesIf the building services contractor is to provide any attendances on othertrades this should be quantified and described within the tenderdocuments. Likewise, it should be checked that any attendancesrequired by the building services contractors from other trades aredetailed in the appropriate documentation.

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3.2.4.4 PRICING DOCUMENTS

(a) Pricing schedules

Historically, the building services contractor has a close relationship with thebuilding services engineer, with the building services engineer producing allthe tender documents inclusive of a pricing document. This can still occur andso each consultant’s scope must be analyzed to assess who is to provide thepricing documents. This avoids the risk that two different pricing documents(or worse none) could be contained within the tender documents. It is goodpractice for the quantity surveyor to get an early draft of the specification andedit out the contradictions between the building services engineer’sspecification and the pricing documents/project preliminaries. Once this hashappened, a draft pricing document can be produced and agreed with thebuilding services engineer. By discussing the format of the pricing documentopenly with the building services engineer confidence is generated betweenthe parties that everything will be covered.

The pricing schedule splits the specification into various headings undertrades or elements. The tenderers should, therefore, submit a fully completedpricing schedule which breaks down their lump sum tender into variousheadings that should correspond to the sections of the specification. Bycreating the pricing schedule in this format everyone knows and agrees thescope of work which is included within each heading. The pricing scheduleshould also contain a statement of the contractors rates used within the tenderinclusive of overheads and profit. If this is not clear, a breakdown should berequested. This breakdown must show the build up to the contract priceincluding all tender adjustments.

When the analysis of the submitted pricing schedules has identified thetenderers who are likely to be considered further, a fully quantified scheduleof rates should be requested from each of the tenderers under consideration. Itshould be detailed within the pricing document how long the tenderer willhave to provide the fully quantified schedule of rates. This will depend on theprogramme available and is usually two to seven days from a request beingmade by the quantity surveyor.

It is critical that any recommendation takes proper recognition of the tenderersschedule of rates (see section 3.2.4.9).

Mechanical contractors usually sub-contract a larger proportion of theirworks than electrical contractors and therefore more lump sums can beexpected within the pricing schedule. If the project is packaged, a fullyquantified schedule should be available since the number of sub-contractorswill be minimal. The schedule of rates should always add up to the headingsin the pricing document in order to avoid doubt at a later date if disputesarise.

It is imperative that each contractor being considered achieves parity of tenderto enable a clear and unambiguous recommendation to be made to the client.This occurs when all engineering aspects have been verified by the building

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services engineer and the quantity surveyor is satisfied with the pricing and allother commercial aspects of the tender. If, through the negotiations, anythinghas changed from the tender documents, each tenderer must be made aware ofthis change to maintain parity of tender. Once all this has occurred, the clientcan be made aware of the final decision through a combined report from thefull design team. If this procedure is not followed there is the potential forpost-tender problems regarding supply and performance under the contract.

A section dealing with the tenderers overheads and profit and daywork rates isrequired in the schedule. There are so many different rates that could be usedwithin the building services trades that it is recommended the quantitysurveyor asks the contractor to submit the latest trade rates that will beemployed on the contract.

In situations where there are complex interfaces in existing structures it isbeneficial to request a schedule that only identifies quantified material costs,with labour rates and a labour histogram provided separately. This enablespost-contract costs to be controlled in an alternative manner while alsoproviding a management tool to monitor on-site resources.

An example of a typical pricing document is given in appendix A.

(b) Bills of quantities

Bills of quantities should only be used when a fully coordinated design andspecification has been prepared by the designers and a fixed lump sum cost forthe works is required. Bills of quantities are the traditional method ofprocuring construction work within the UK where time permits. The specificproblems associated with the procurement of building services does notexclude the use of bills of quantities, but the following are some of the issuesthat should be reviewed to ascertain the benefit of producing bills:

• The package may only be partially designed to allow the buildingservices contractors to be responsible for the detailed design. In this casebills of quantities should not be considered.

• Design development may still be in progress when the bills are started,necessitating variations as soon as the tender process starts. The costcertainty intended by the use of bills is immediately lost when variationsstart. If the design varies greatly during the contract period the buildingservices contractor could have a case for a re-rate or claim.

• The production of bills introduces the need for detailed designcoordination between the various consultants and, consequently, thepotential for errors and omissions. Assumptions may often be forced ona quantity surveyor producing the bills to a deadline where this is notclear. This would again require variations to be issued.

• It should be considered whether the building services contractor actuallybenefits from the production of bills. A bill description can contain somuch detail that the price is developed separately in the contractor’s

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own estimating system. This results in the descriptions being priced in anumber of sections then drawn together for the bill. This could well beas time consuming as doing all the measurement. For example, lightfittings may be described within the bill as ‘to include for all necessaryconduit and cabling for the light fitting’. The building servicescontractor must measure and price the electrical circuit inclusive ofconduit and apportion the cost to each light fitting.

• The use of bills results in the risk being retained by the client as far asquantities are concerned. This may result in more competitive pricesbeing obtained as risk is more evenly distributed with the client taking agreater burden or the building services contractor may exploit errorswithin the document.

• As each tenderer has the same document to price the tender analysisshould be easier. The tenderers do however have discretion as far as ratebuild up is concerned.

• As discussed in section 3.2.4.4(a), building services contractors andsuppliers have traditionally had a closer relationship with the buildingservices engineer than the quantity surveyor. This relationship hasdeveloped because the building services engineer may rely on theexpertise of the building services contractor or its suppliers to designsome individual systems. This can result in areas of the design beingdescribed only in terms of its performance, i.e. the building servicescontractor will need to offer a design solution to meet the performancecriteria established in the specification. This is inappropriateinformation for quantity surveyors to prepare bills of quantities from.

To briefly conclude this section, the building services contractor generally hasresponsibility for detailed design work such as final cable routes, bracketdetails, and so on which limits the information available for billing. Also,history has dictated that the building services design is not far enoughadvanced within the procurement timetable to provide the quantity surveyorwith sufficient information to produce bills of quantities. A summary of theadvantages and disadvantages of bills is given in table 6.

3.2.4.5 PRICING OPTIONS

When dealing with pricing options there are two basic possibilities that canoccur:

(i) Options that are included in the tenderThis often takes the form of a different finish to an exposed part of theservices installation. In the body of the pricing document the diffuserscould be priced as powder-coated steel but as an option, the extraover-costs for a stainless steel finish can be provided.

(ii) Options that the tenderer may put forwardDirections should be given at tender stage as to whether or not contractorsoptions are required. If so, the tenderer can identify these options within

PART 3, SECTION 2


the document which may take the form of alternative suppliers, reducedprogramme or variations on the contract clauses. This can be a cheapersupply or where the after-sales support services in an area is betterprovided for by an alternative supplier. It is for the building servicesengineer to ascertain if the alternative achieves the specification. Anyoption must include the full cost of ensuring design compliance. Thiscould be in the form of additional fees or additional coordination costs.

Both of these must be catered for in any tender document while stillmaintaining a like-for-like comparison for tender analysis purposes. Theeasiest method of obtaining this is by assuring that each tenderer prices whatwill be called the base option. Each alternative can then be given as anadjustment to the base scheme.

Clear direction should be provided within the tender document on how andwhere options should be priced.

3.2.4.6 HOW TO TACKLE ADDENDUMS

The most obvious way to deal with tender addendums is not to have any.However, since design can often progress during the tender period, this is anunlikely occurrence. If addendums are required they can be either sent outduring the tender period or provided to the two lowest tenderers to price aftertenders have been returned.

Table 6: Advantages and Disadvantages of Bills of Quantities

Advantages Disadvantages

Provides a fixed price lump sum Time consuming

Conformity of tender returns The measurement risk is retained by the client

The design is checked while the measurement is being carried out

Fully coordinated design is required prior to building

More even spread of the risk Specific items of plant may have to be uniquely specified which will reduce competition

A design freeze is required which increases the tendering period

The tenderer’s design skills are ignored

Specialist systems will be either provisional or prime-cost sums, reducing cost certainty. Integration of these systems can be a problem

A small skill base exists within the quantity surveying profession for measuring mechanical and electrical services

PART 3, SECTION 2


If the design changes occur during the tendering period, addendums to thedocuments should be sent out to each tenderer. The addendum should state ifthe tender period is extended and each tenderer must acknowledge receipt ofthe addendum. If mid-tender interviews have been arranged, the addendumcan be handed over and explained at this time. The addendum must still be aprecise document, clearly identifying the changes and scope, as it will formpart of the contract.

Each addendum should be individually referenced, regardless of when theyare issued, so an audit trail is apparent. If the quantity surveyor believes thataddendums provide non-essential design changes, these should be pricedseparately. By providing a separate price for non-essential alterations, theclient and design team have the option of whether to accept the addendum.

3.2.4.7 TENDER CLARIFICATIONS

Tender clarifications can result in additional information being supplied to thebuilding services contractor. Each question from the building servicescontractor should be sent to the quantity surveyor for distribution to the designteam. The response from the relevant consultant should be returned to thequantity surveyor who distributes to the tendering companies. All tenderersshould receive all the tender questions so that each is tendering on the sameinformation. A single point for receiving, answering and managing the queriesis advisable. As the manager of the tender documentation, the quantitysurveyor is best placed to manage queries.

On receipt of a query, the name of the organization asking the query should beremoved and the question given a reference. Queries can then be forwarded onto the appropriate consultant for comment. The quantity surveyor should readeach query and assess if another tenderer has asked it previously. A masterrecord of whom asked what question should be kept in order to provide anaudit trail for later reference.

3.2.4.8 ADDITIONAL INFORMATION REQUIRED FROM THE TENDERERS

The following information should be provided by all tenderers regardless oftheir contractual status. This allows proper comparison and demonstrates anunderstanding of the project and tendered scope:

• completed pricing schedule;

• quantified schedule of rates;

• health and safety information;

• programme and agreement to the tender programme;

• agreement to all the documents – i.e. warranties, bonds, and so on;

• list of main suppliers used – where choice is with the building servicescontractor;

PART 3, SECTION 2


• list of any sub-contractors;

• acceptance of the conditions of contract – the tenderers, prior to tenderreturn, should forward a full list of any contractual qualifications. Thisenables the client to take legal advice and minimize the potential delayto the tender period;

• details of membership of trade bodies;

• corresponding reference numbers of the local standards when offeringoptions of products from a foreign standard;

• method statements;

• management histogram – this illustrates the resources the buildingservices contractor has allowed for managing the project and shouldrelate to their preliminaries section of the pricing document;

• labour histogram – the total labour resources required to complete theproject. This shows both the building services contractor’sunderstanding of the project and provides for a monitor once on site; and

• cash flow – the cash flow translates the project programme into theclient’s anticipated financial commitment. If this can be agreed with thesuccessful tenderer early on in the project, there is an opportunity to usethis as a valuation tool provided the programme is adhered to. An agreedcash flow can be invaluable when the client’s project funds are similarlytime related.

3.2.4.9 EVALUATION OF TENDERS

To ensure parity of tender, the specification should be priced in its originalform, with alternatives given separately. A comparison of the pricingschedules supplied by each tenderer must be completed in conjunction withthe tender’s technical information, including all addendums and clarifications.The building services engineer should check each submission to establish thetenderers compliance with the specification while the quantity surveyorshould establish their compliance from a commercial viewpoint.

Evaluation should not be completed without reference to the building servicescontractor’s schedules of rates. The quantity surveyor must take a view on thecompetitiveness (or otherwise) of the submitted schedules as they may notbear comparison with the competitiveness of the tenderers’ lump sum. This isparticularly relevant if there are large value provisional sums that will bemeasured and valued using the schedules. Detailed analysis prior to award isalso essential if the schedules are to be bound into the contract as a contractdocument.

During the review process it will probably be necessary to clarify points withthe tenderers. This should be done through the quantity surveyor, as before.

PART 3, SECTION 2


Post-tender interviews are to be encouraged so that the tenderers’ grasp of theproject can be established.

Once all the information has been gathered it will be necessary to establish acomparable price. The final appointment decision should be made, not solelyon price but also considering the tenderers’ understanding of the project andtheir ability to complete in time and to budget.

In this final analysis it is recommended that the tenderers’ procedures for costcontrol and reporting are also examined. An up-front pro-active attitude on thebuilding services contractor’s part will result in potential problems beingidentified early providing the design team with an opportunity to find abeneficial resolution.

3.2.4.10 SUMMARY

• Make sure there is only one pricing document which directly relates tothe specification.

• Ensure the pricing schedule covers all the information required such as:• overheads and profit;• an all-in man hour rate;• daywork rates inclusive of percentage uplifts;• a fully quantified schedule of rates; and• opportunity to price for alternatives.

• Ensure documentation is clear as to the method for managing tenderqueries, identifying a single point of responsibility.

• A clear procedure for managing addendums should be agreed by thedesign team.

• Careful analysis of the return tenders to obtain a clean unqualified bid onwhich a clear recommendation can be made.

PART 3, SECTION 2


Notes

1) Department of Environment, Transport and the Regions (1998).Rethinking Construction. London: DETR.

2) Clinton, M. (1995). Legal Liabilities. (Paper for seminar: ‘The Answer toyour Problems – Design & Build’).

3) Construction Industry Board (1999). Code of Practice for the Selection ofSub-Contractors. London: Thomas Telford Publishing.


The Surveyors’ Construction Handbook Part 3, Section 2 Effective from 1/9/01 Page 1Appendix A ( 07/01)

Appendix A: Typical Example

Preliminary Items

In the following typical example all general and preliminary items would normally bedetailed in the main preliminary documentation. The following clauses are suggested inrelation to the inclusion of a pricing schedule and can appear either in the mainpreliminaries or as part of the sub-contract tender documents.

General Items

a) It is a pre-requisite that the following pricing summary is completed in full with everyitem priced. Failure to do so will invalidate the tender submission.

b) The following descriptions are not necessarily complete. The building servicescontractor is referred to the tender drawings, specification and accompanyingdocuments for a full scope of work.

c) The building services contractor is to include in its rates for any temporary worksconsidered necessary.

d) The building services contractor is to include in its rates for all necessary fixings,connections, fittings, bolts, etc. unless otherwise stated in this document.

e) The building services contractor is deemed to have included in its tender for all itemsof materials, plant, equipment and labour whether or not specifically mentioned orshown in order to carry out the necessary works in accordance with good practice andprocedures.

f) No extra payments will be considered through the building services contractor/quotesfailure in this respect.

g) The building services contractor is to take into account all the requirements of thecontract documents and should price accordingly within the relevant section of thetender summary.

h) For details of the scope of works refer to the specification.

Calculations of Preliminaries

j) The contractor shall detail below, or provide a separate document, detailing the buildup to all the preliminaries items priced in the pricing document.

k) The calculations shall show weekly rates, areas, periods of time, quotations and allother details.


Page 2 Effective from 1/9/01 Part 3, Section 2 The Surveyors’ Construction HandbookAppendix A (07/01)

Schedule of Rates

a) The contractor shall within 3 days of being requested, submit a fully priced scheduleof all items and quantities involved in the make-up of its tender. The sum total of theschedule shall equal the price of the form of tender.

b) All prices included in respect of equipment and building services contractors must besupported by the appropriate quotations.

c) The contractor is to detail its rates and percentages required for the following:

Percentage for overheads and profit on building services contractors _____ %

Percentage for overheads and profit on plant and equipmentif different from a) above _____ %

Percentage for overheads and profit on general materials,if different from b) above _____ %

All-in man-hour rates inclusive of overheads, and profit £ ___(Expand to include all trades)

Extra over the above rate for any non-productive overtime work £ _____(Expand to include all trades)

d) The percentages and labour rates entered above will be deemed to include for allcontractor’s overheads, expenses, establishment costs, administration, off-siteservices and all items of expenditure related to off-site management and profit.

e) The percentages and labour rates above will be the same as used in the preparation ofthe tender sum and schedule of rates.

f) The schedule of rates shall be used for the purposes of pricing any future variationsand assisting in the calculation of interim valuation payments.

g) If the contractor does not complete any of the above percentages or rates, they will bedeemed to be priced at NIL.



Pricing Schedule

The following is a typical example of a pricing summary for a commercial officedevelopment. It is intended to depict the detail required in the pricing summary and willrequire amendment so as to be project particular.

ELECTRICAL SERVICES INSTALLATION

Electrical Incoming £ p

Provide electric incoming supply, switchroom andmetering (supplied and installed by utility) Item

11KV supply cable and switchgear terminating inthe 11KV switchgear to the transformer room Item

Lighting and small power installation associated withHV switchroom Item

Include for obtaining design and constructioninformation coordination and necessary meetingsassociated with the utility provider Item

Utility switchroom, transformer room and generatorearthing, supply and install necessary earth rods,cabling and earth bars Item

Low voltage switchboard, supply and installpackaged sub-station comprising two main sectionsas specified Item

Allow for adjusting all protective device settings andcarrying out discrimination study Item

Switchboard reference Item

Standby Power

Life safety generator installation incorporating skidmounted heat exchanger installation and fuelsystem, including all necessary hoisting/craneage Item

Generator flue installation, including acoustictreatment, future tenants generator flue and allnecessary silencers Item _________

To Collection £



ELECTRICAL SERVICES INSTALLATION(Continued) £ p

Test generator at full load inclusive of inductiveloads at manufacturers works Item

Test and commission generator installation on sitecomplete with resistive and inductive load banks Item

LV Distribution

Sub-mains power distribution cables Item

Rising bus bar installation Riser A Item

Rising bus bar installation Riser B Item

Rising bus bar installation Riser C Item

Automatic transfer switches to all life safety MCCSand fire fighting controllers and fire service plant Item

Earthing and bonding Item

Lighting Installation

Lighting installations, including luminaires, lamps,louvres, final circuit wiring and cable containmentsystem as necessary to the following:

Office area lighting Item

Lift lobbies Item

Entrance hall, including dimming Item

Toilets and shower rooms Item

Staircase lighting Item

Lift shaft lighting Item

Plantroom and circulation space Item

External lighting Item

Emergency lighting installation Item _________

To Collection £




Small power installation Item

Small power distribution Item

Electrical Power for Mechanical

Electrical work associated with mechanical services Item

Protection

Fully automatic addressable analogue fire detectionand alarm system Item

Generator room fire protection system Item

Security installation comprising the following:

Door entry control system Item

Alarm system Item

Closed circuit television system Item

Lightning protection system Item

Ancillary equipment installations:

Fix only free issue warm air hand dryers Item

Fix only free issue hair dryers Item

Disabled persons assistance call system Item

Shaver outlets Item _________

To Collection £




Electrical heating installations:

Lift plantroom installation Item

Utility switchroom Item

Temporary electrical heating installation Item

Data Installation

Telecommunications and data communications incomingducts and cable tray systems Item

General:

Buildings work drawing Item

Electrical sub-contractor’s design and installationdrawings, including any necessary manufacturer’sshop drawings Item

Testing and commissioning the complete electricalinstallation, including compliance with thecommissioning manager’s requirements Item

As installed documents, drawings and O&Mmanuals in the required format as specified bythe document production manager Item

Client instruction and operation training Item

Provision of samples and mock-ups as required Item

Provision of tools and spares Item

Any other items not listed above(the sub-contractor to state) Item _________

To Collection £



MECHANICAL INSTALLATION £ p

LPHW heating installation:

Central boiler plant and associated equipment Item

Boiler flue installation Item

LPHW pressurization units Item

LPHW circulation units Item

LPHW pipework installation, fittings, valves, etc. Item

Main entrance overdoor heaters Item

Staircase fan convectors Item

Thermal insulation to LPHW installation Item

Water treatment, dosing and flushing Item

Hot and cold water installations:

Allow for all negotiations/liaison, coordinationassociated with the new supply Item

Water storage tanks Item

Cold water packaged booster set Item

Water supplies for window cleaning Item

Electric showers Item

Hot water heaters Item

Overflow systems Item

Domestic hot and cold water pipework, fittingsand valve installation Item

Final connection to sanitaryware Item

Potable water booster pump set Item

Thermal insulation to hot and cold water services Item _______

To Collection £



MECHANICAL INSTALLATION(Continued) £ p

Hot and cold water installations:

Eye wash facilities Item

Water chlorination, dosing and flushing Item

Condenser water system:

Cooling towers Item

Filter system Item

Packaged water softener Item

Condenser water circuit, water treatmentequipment Item

Chilled water installations:

Main A/C condenser water pumps and watermake up pumps Item

Cooling tower make up water storage tanks Item

Condenser water system pipework fittings andvalves installation Item

Condenser water system installation Item

Chilled water system Item

Centrifugal refrigeration machines Item

Cooling system plate heat exchangers Item

Chilled water circulation pumps Item

Water treatment, flushing and dosing Item

Chilled water system pressurization unit Item

Chilled water system pipework, fittings andvalves installation Item __________

To Collection £




Chilled water installations (Continued):

Chilled water system insulation Item

Refrigeration leak detection system Item

Water leak detection system Item

Fan coil units:

Fan coil units Item

Air conditioning and ventilation:

Ductwork installation, including all ductmounted accessories and fittings Item

Ductwork cleaning requirements Item

Independent ductwork cleanliness inspection,etc. Item

External louvres Item

Ductwork thermal insulation Item

Fire and smoke rated ductwork Item

Grilles and diffusers Item

Flexible connections Item

Air handling units fans, etc. Item

Duct mounted heater batteries Item

Humidifiers Item

Acoustic connections/attenuation Item

Louvre connection plenums Item

Duct mounted control items Item _________

To Collection £




Natural gas service:

New gas service – allow here for allnegotiations, liaison, coordination associatedwith the new supply Item

Allowance for selection of ‘gas shipper’ asdescribed in the specification Item

Gas distribution pipework, fittings and valves Item

Gas meters Item

Gas detection system Item

Sprinkler installation Item

New fire main allow here for all negotiations, liaison,coordination associated with the new supply Item

Dry riser and falling mains installation Item

Hosereel system Item

Condensate system:

Condensate drains from various equipment Item

Building management system and automatic controlscentral processing unit and field processing units:

Control valves, actuators, sensors and detectors Item

Interfaces with other systems and equipment Item

New motor control centres, life safety MCC andcontrol panels Item

Fireman’s ventilation control panel,pressurization panel, sprinkler panel and wiring Item

All control wiring, trunking, conduit, etc. Item

BMS/automatic controls software Item _________

To Collection £




Building management system and automatic controlscentral processing unit and field processing units(Continued):

Attendance on other trades duringcommissioning of their systems Item

Attendance during demonstration to firebrigade, client’s maintenance staff, the engineerand building control on separate occasions Item

Setting to work, testing and commissioningincluding trend logging, etc. Item

Generator oil storage and distribution system:

Bulk oil storage tank Item

Fuel oil transfer pumps Item

Pipework, fittings and valves Item

Oil fill station Item

General:

Trace heating to pipework system as necessary Item

Allow for all works/factory tests and demonstrationsof plant and equipment as specified Item

Preliminary items Item

Allow for mock-ups and samples specified Item

Test and commission the complete mechanical andpublic health services installation in accordancewith the commissioning manager’s requirements Item _________

To Collection £

Mechanical and public health contractor’s designand installation drawings includingmanufacturers/suppliers shop drawings as necessary Item

Builders work drawings Item




General (Continued):

As installed documents, drawings and O&Mmanuals in the required format as specified bythe document production manager Item

Client instruction and operation training Item

Provision of tools and spares Item

Any other items not listed above,the sub-contractor to state Item __________

To Collection £



PUBLIC HEALTH INSTALLATION £ p

Rainwater installation Item

Above ground drainage installation (note under-grounddrainage may not be part of this sub-contract) Item

Fire fighting lift drainage installation Item _________

To Collection £

PART 4, SECTION 1


PART FOUR: CONSTRUCTION ADMINISTRATION AND MANAGEMENT

SECTION 1: THE PROBLEMS OF PRACTICAL COMPLETION

Introduction

The law and practices in relation to the completion of building andengineering projects are complex issues that often give rise to conflict. Whilstthe title of this section refers to practical completion the subject has beenapproached at a more generic level. Thus, for example, the concepts of‘substantial completion’ and ‘taking over’ have been included andcommented upon, and standard forms other than JCT variants have beenconsidered.

The following related and subsidiary topics are, however, not addressed:• the acceptance of defective work either before or after practical

completion;• wider consideration of the matter of adjudication upon practical

completion;• the law concerning latent defects and its inter-relationship with

contractual defects liability provisions generally;• closer examination of the issues surrounding early completion (although

analysis of the general scheme of the subject under JCT forms isincluded);

• the changing law concerning final certificates;• the operation of fluctuation provisions after practical completion;• the significance of practical completion in relation to performance

bonds; and• the concept of temporary disconformity in building contracts.

4.1.1 What Happens in Practice

There is a considerable number of approaches adopted for the certification ofcompletion in standard forms of contract used in the UK construction industry(see 4.1.2). Similarly, there are a variety of methods by which some of theproblems could be dealt with (see 4.1.3).

Surprisingly, however, there is an almost universally accepted procedureadopted for both building and civil engineering with regard to the actualpractice carried out on site.

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PART 4, SECTION 1


This may be described as follows:

(a) Contractor ‘Offering Up’• The contractor writes to the employer’s representative/contract

administrator suggesting that works will be (or are now) ready forhandover by a particular date.

• This may be accompanied by the contractor’s own list of uncompletedworks, especially, for example, where outstanding information,statutory authorities, or employer’s direct works may be preventingcompletion of a specific element of the contractor’s work.

(b) Snagging List• Either in advance of the contractor’s notice mentioned above, or

prompted by it, the architect, engineer or contract administrator willprepare a list of defects and outstanding works which will be issued tothe contractor.

• Often, but not always, this list is prepared during a joint inspection withthe contractor.

(c) Clearing the Snagging List• The contractor will endeavour to reduce the length of the snag list, but

here is where the disputes will start. Many points will be argued by thecontractor to be unreasonable quality demands, or work constituting avariation.

• The management of this process is often poor, with the architect orengineer producing a new list each time he or she revisits the site.Confusion and distrust is often generated.

(d) Certification• Eventually a point will be reached where completion can be certified in

the opinion of the architect, engineer or contract administrator.Although not defined as such in the majority of standard forms (see4.1.2), the most commonly held belief is that this should occur when theemployer can enjoy beneficial occupation and use of the building orfacility, and that the making good of any remaining works or removal ofsnags will not unduly impede that occupation.

• Such an approach is supported by case law (see 4.1.5).

(e) Influences upon Certification• Inevitably, the client often strongly influences the certification process,

despite the contract demanding otherwise. The strength of this influencemay be dependent upon the demands or otherwise for use or transfer ofthe building or facility, or the commencement of fit-out works.

• The process is also influenced by the relationships which exist betweenthe client, the professional team, and the contractor, and indeed thepressures brought by the contractor, perhaps motivated by substantiallevels of liquidated damages.

PART 4, SECTION 1


4.1.2 Standard Form Approaches

4.1.2.1 JCT 98 ‘PRACTICAL COMPLETION’:

(a) JCT 98 does not define practical completion. At clause 1.3 (Interpretation,Definitions, etc.) the following unhelpful entry is made:

‘Practical Completion: see clause 17.1’

Clause 17.1 provides the following

‘When in the opinion of the Architect Practical Completion of the Worksis achieved and the Contractor has complied sufficiently with clause6A.4, and, if relevant, the Contractor has complied with clause 5.9(Supply of as-built drawings etc. – Performance Specified Work), heshall forthwith issue a certificate to that effect and Practical Completionof the Works shall be deemed for all the purposes of this Contract to havetaken place on the day named in such certificate.’

(b) Clause 17.1 is inextricably bound with the provisions relating to defects,shrinkages or other faults appearing within the defects liability period, or frostdamage. Clause 17.2 commences: (Clauses 17.2 to 17.5).

‘Any defects, shrinkages or other faults which shall appear within theDefects Liability Period … .’

These provisions therefore support a view that practical completion cannot becertified under JCT 98 unless all known (patent) defects have been resolved.This is because the duty of the contractor to rectify defects during the defectsliability period is limited to those defects appearing after practicalcompletion.

Thus, a defect which was apparent at practical completion cannot be a defectfor the purposes of clause 17.2 and, strictly speaking, the architect cannotrequire the contractor to make good such items of work. However, thisdistinction is often ignored by architects and contract administrators.

4.1.2.2 NOMINATED SUB-CONTRACT NSC/C

Under clause 35.16 of JCT 98, the architect must issue separate certificatesof practical completion for each nominated sub-contractor when, in his orher opinion, the nominated sub-contract works have reached practicalcompletion.

Clauses 2.10 and 2.11 of NSC/C state the following:

‘2.10 If the Sub-Contractor notifies the Contractor in writing of thedate when in the opinion of the Sub-Contractor the Sub-Contract

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PART 4, SECTION 1


Works will have reached practical completion, the Contractor shallimmediately pass to the Architect any such notification together withany observations thereon by the Contractor and the Sub-Contractor hascomplied sufficiently with clause 5E.5. A copy of any suchobservations must immediately be sent by the Contractor to theSub-Contractor.

2.11 Practical Completion of the Sub-Contract Works shall be deemed tohave taken place on the day named in the certificate of practicalcompletion of the sub-Contract Works issued by the Architect underclause 35.16 of the Main Contract Conditions or, where clause 18 of theMain Contract Conditions applies, as provided in clause 18.1.11 of theMain Contract Conditions.’

4.1.2.3A DOMESTIC SUB-CONTRACT 2002 EDITION

(a) This form of sub-contract generally maintains the provisions of DOM/1.

(b) Clause 2.13 requires the sub-contractor to notify the main contractor of thedate on which the sub-contractor considers the domestic sub-contract workshave reached practical completion.

(c) If the main contractor does not dissent from that date within 14 days ofreceiving the sub-contractor’s notice, practical completion is deemed to haveoccurred on the date notified by the sub-contractor.

(d) Clause 2.14 requires that if the main contractor does dissent, the date musteither be established by agreement or determined by an adjudicator. In theabsence of such agreement or determination, the date will be that stated by themain contractor in his/her notification of dissent under clause 2.13 or if earlieror no date is stated in the notification of dissent, on the date of PrincipalCompletion of the Works certified by the architect under clause 17.1 of themain contract.

4.1.2.4 JCT INTERMEDIATE FORM (IFC 98)

(a) The Intermediate Form closely follows that described above for JCT 98.

(b) Clause 2.9 provides:

‘When in the opinion of the Architect/the Contract AdministratorPractical Completion of the Works is achieved and the Contractor hascomplied sufficiently with clause 5.7.4 he shall forthwith issue acertificate to that effect. Practical Completion of the Works shall bedeemed for all the purposes of this Contract to have taken place on theday named in such certificate.’

(c) Clause 2.11 provides for partial possession. The effect is similar to thepartial possession provisions of JCT 98 (see 4.1.6.5).

PART 4, SECTION 1


4.1.2.5 JCT 98: WITH CONTRACTOR’S DESIGN

(a) Under this form there is no architect to enable a certificate of practicalcompletion to be issued. Accordingly, the responsibility passes to theemployer.


‘When the Works have reached Practical Completion and the Contractorhas complied with clause 6A.5.1 or has complied sufficiently with clause6A.5.2, whichever clause is applicable, the Employer shall give theContractor a written statement to that effect, which statement shall not beunreasonably delayed or withheld, and Practical Completion of theWorks shall be deemed for all the purposes of this Contract to have takenplace on the day named in such statement.’

(c) Any dispute as to the issuing or withholding of a practical completioncertificate must be referred to adjudication for an interim binding decision orto arbitration.

4.1.2.6 JCT MINOR WORKS: MW98

(a) The JCT Minor Works form provides a crisp, clear statement which has thesame effect as the provisions for the main JCT forms.


‘The Architect/The Contract Administrator shall certify the date when inhis opinion the Works have reached practical completion and theContractor has complied sufficiently with clause 5.9.’

(c) It should be noted, however, that whereas the mechanism for certifyingpractical completion is the same as JCT 98, the provisions for defects liabilitydiffer.

(d) It has been held2 that the MW80 form (predecessor to MW98):• does not require a written schedule of defects and, therefore, oral

notification is sufficient;• in clause 2.5 the words ‘any defects, excessive shrinkages or other

faults which appear within three months of the date of practicalcompletion …’ extend to defects which appear before practicalcompletion;

• the words ‘defects, excessive shrinkages, or other faults’ are notqualified by any reference to the ‘works’ and so would, therefore, extendto an existing structure.

Note: JCT 98 clause 17.2 refers to ‘shrinkages’, whereas MW98 refers to‘excessive shrinkages’.

PART 4, SECTION 1


4.1.2.7 JCT PRIME COST CONTRACT 1998 EDITION

The Prime Cost Contract uses the same wording as the Intermediate Form.See 4.1.2.4.

4.1.2.8 JCT MANAGEMENT CONTRACT 1998 EDITION

The Management Contract also uses similar wording to the IntermediateForm. See 4.1.2.4.

4.1.2.9 JCT WORKS CONTRACT/2

(a) Under clause 2.14 of the WC/2, the management contractor is required toissue separate certificates of practical completion for each works contract. Themanagement contractor is, however, obliged to obtain the architect’s consentunder clause 8.3.4 of the Management Contract, signifying that the relevantworks have, in the architect’s opinion, reached practical completion.

(b) Therefore, these provisions more closely resemble the nominatedsub-contract provisions of the JCT main forms (see 4.1.2.2) than theprocedures found in the domestic sub-contract DOM/1.

4.1.2.10A THE ACA STANDARD FORM OF CONTRACT FOR PROJECT PARTNERING PPC2000

(a) The ACA form of Project Partnering adopts a different approach.

(b) Clause 21.1 requires the constructor when it considers that the project hasachieved Project Completion to give the client representative not less than fiveworking days notice requesting the client representative to attend, inspect andtest as appropriate.

(c) Clause 21.2 requires that within two (working) days of completion of suchattendance, inspection and testing the client representative shall issue a noticethat either:

(i) confirmed that the project has achieved Project Completion;(ii) indicates any aspect of the project which is not in accordance with the

Partnering Documents after which the constructor will again presentthe Project in accordance with Clause 21.1.

(d) At Clause 21.3 there is provision for Part Project Completion byagreement between the client and constructor using a procedure equivalent tothat described in Clauses 21.1 and 21.2.

(e) Rectification of defects after Project Completion is provided for in Clause21.4 which requires the constructor to make good any defects, excessiveshrinkages or other faults notified by the client. It is important to note thatthese defects etc. may have appeared either before project completion orwithin the Defects Liability Period.

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4.1.2.10B THE ACA STANDARD FORM OF SPECIALIST CONTRACT FOR PROJECT PARTNERING

SPC2000

(a) The provisions of the Standard Form of Specialist Contract SPC2000 aresimilar to those on PPC2000, although the time frames are a little longer.

(b) Clause 21.1 requires the specialist to give the constructor seven workingdays notice to attend, inspect and test as provided for in the SpecialistWorking Brief.

(c) Clause 21.2 requires that within four working days of completion of theattendance, inspection and testing the constructor and other appropriatePartnering team members should issue a notice either:

(i) confirming that the specialist works have achieved SpecialistCompletion: or

(ii) indicating where any aspect of the specialist works is not in accordancewith the Specialist Documents. The specialist is required to rectifynon-compliance and thereafter present the specialist works inaccordance with clause 21.1.

(d) Clause 21.3 again provides for Part Specialist Completion of any part ofthe specialist works using a procedure equivalent to clause 21.1 and 21.2.

(e) With regard to defect rectification clause 21.4 requires the specialist toattend site whenever notified by the constructor of any defects, excessiveshrinkages or other faults. This defect rectification can include defects arisingeither before Specialist Completion or during the defects liability period forthe specialist works.

4.1.2.11 ICE 7TH EDITION: ‘SUBSTANTIAL COMPLETION’

(a) Though not as fully developed as the ACA form (see 4.1.2.10) it may wellbe said that the ICE 7th edition provides a framework for completion whichreflects better than the JCT forms what actually happens in practice. In thisform, the contractor ‘offers up’ the works, and a process is provided fordealing with outstanding works and defects.

(b) Clause 48 provides:

(1) When the Contractor considers that:

(a) the whole of the Works or

(b) any Section in respect of which a separate time for completion is providedin the Appendix to the Form of Tender has been substantially completed andhas satisfactorily passed any final test that may be prescribed by the Contracthe may give notice in writing to that effect to the Engineer or to the Engineer’s

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Representative. Such notice shall be accompanied by an undertaking to finishany outstanding work in accordance with the provisions of clause 49(1).

(2) The Engineer shall within 21 days of the date of delivery of such noticeeither:

(a) issue to the Contractor (with a copy to the Employer) a Certificate ofSubstantial Completion stating the date on which in his opinion the Workswere or the section was substantially completed in accordance with theContract; or

(b) give instructions in writing to the Contractor specifying all the work whichin the Engineer’s opinion requires to be done by the Contractor before theissue of such certificate.

If the Engineer gives such instructions the Contractor shall be entitled toreceive a Certificate of Substantial Completion within 21 days of completionto the satisfaction of the Engineer of the work specified in the saidinstructions.

Note: It is the Engineer, not his representative, who is authorized to issue thecertificate.

(c) Clause 49(1) deals with outstanding work and defects as follows:

The undertaking to be given under clause 48(1) may after agreement between theEngineer and the Contractor specify a time or times within which the outstandingwork shall be completed. If no such times are specified any outstanding workshall be completed as soon as practicable during the Defects Correction Period.

The difficulty of this provision, notwithstanding that it reflects commonpractice, is that there is often a dispute as to the extent of outstanding workspermitted. This will be of considerable importance when large liquidateddamages are potentially claimable.

The clause gives the engineer a discretion and, as in other forms, his or herdecision may be reviewed by an adjudicator or arbitrator.

It should also be noted that the ICE 7th edition form caters expressly for thecircumstances where the employer uses or occupies the works or part of theworks prior to a 48(2) certificate being issued.

(d) Clause 48(3) provides:

‘If any substantial part of the Works has been occupied or used by theEmployer other than as provided in the Contract the Contractor may request inwriting and the Engineer shall issue a Certificate of Substantial Completion inrespect thereof. Such certificate shall take effect from the date of delivery of

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the Contractor’s request and upon the issue of such certificate the Contractorshall be deemed to have undertaken to complete any outstanding work in thatpart of the Works during the Defects Correction Period.’

Note: The ICE Design and Construct Clause 48(3) provisions in respect ofoperation and maintenance instructions are not present in the 7th edition.

4.1.2.12 ICE 6TH EDITION:

In respect of substantial completion, the same as ICE 7th Edition.

4.1.2.13 ICE DESIGN AND CONSTRUCT FORMS

(a) These provisions are identically worded to the corresponding clauses ofthe ICE 7th edition, except that reference to the engineer or engineer’srepresentative is replaced by the ‘Employer’s Representative’.

(b) It is to be noted, however, that there is an express requirement under clause48(3) for the contractor to provide operation and maintenance instructionsprior to the issue of any certificate of substantial completion.

4.1.2.14 ICE MINOR WORKS

(a) The ICE Minor Works is unique amongst standard forms in that it definescompletion against the readiness of the works to be used by the employer.

(b) Clause 4.5 states as follows:

(1) Practical completion of the whole of the Works shall occur when theWorks reach a state when notwithstanding any defect or outstanding itemstherein they are fit to be taken into use or possession by the Employer.

(2) Similarly practical completion of part of the Works may also occur butonly if it is fit for such part to be taken into use or possession independently ofthe remainder.

(3) The Engineer shall upon the Contractor’s request promptly certify inwriting the date upon which the Works or any part thereof has reachedpractical completion or otherwise advise the Contractor in writing of the worknecessary to achieve such completion.

(c) Clause 4.7 deals with the completion of outstanding works or defects afterpractical completion has occurred.

4.1.2.15 FCEC ‘BLUE FORM’ OF SUB-CONTRACT

The FCEC sub-contract form approaches completion of the sub-contractworks quite differently from completion under the building sub-contracts.

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Under this form, the sub-contractor must complete within the period forcompletion specified in the Third Schedule (clause 6.1). The schedule couldprovide that such a period is to end prior to substantial completion of themain contract works. However, the sub-contract does not provide aneffective means to establish when completion of the sub-contract works hasbeen achieved. Therefore, unless the parties otherwise agree, it is probablethat completion of the sub-contract works may not be acknowledged untilsubstantial completion of the main contract works and only then by theimplication that the main works have completed. If the sub-contract worksare completed prior to main contract works completion, clause 13(1) of theFCEC ‘blue form’ places the sub-contractor with an absolute obligation tomaintain the sub-contract works until substantial completion of the mainworks.

4.1.2.16 THE NEW ENGINEERING CONTRACT (NEC) 2ND EDITION

(a) The NEC eschews the system set out in the ICE form which reflects currentpractice, namely the contractor offering up the works andcompletion/handover occurring together with clear provisions for dealingwith outstanding works and defects.

(b) Instead it may be thought that the NEC is in some respects closer to JCT:completion takes place when the project manager decides so. As if completionwas not vexed enough already, the NEC gives the project manager three termsto deal with: ‘Completion’, ‘taking over’ and ‘termination’.

(c) The NEC provisions are found in the core clauses as follows:• Part 1 – General – Clause 11.2 (identified and defined terms) (13) states:Completion is when the Contractor has• done all the work which the Works Information states he is to do by the

Completion Date and• corrected notified Defects which would have prevented the Employer

from using the works.• Part 3 – Time – Clause 35 (Take over) states:

35.1 Possession of each part of the Site returns to the Employer whenhe takes over the part of the works which occupies it. Possessionof the whole Site returns to the Employer when the ProjectManager certifies termination.

35.2 The Employer need not take over the Works before theCompletion Date if it is stated in the Contract Data that he is notwilling to do so. Otherwise the Employer takes over the Worksnot more than two weeks after Completion.

35.3 The Employer may use any part of the Works before Completionhas been certified. If he does so, he takes over the part of theWorks when he begins to use it except if the use is:

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• for a reason stated in the Works information• to suit the Contractor’s method of working.

35.4 The Project Manager certifies the date upon which the Employertakes over any part of the Works and its extent within one week ofthe date.

4.1.2.17 GOVERNMENT CONTRACTS – GC/WORKS/1 (1998)

(a) GC/Works/1 (1998) provides that the works are to be completed to thesatisfaction of the Project Manager, who is required to certify completion. Inaddition, the Employer may choose to take partial possession of a part of theworks.

(b) Condition 34(2) (commencement and completion) states the following:

‘34(2) The Contractor shall, at all times, keep the Site tidy and free fromdebris, litter and rubbish and shall, not later than the Completion of theWorks, remove from the Site all Things for incorporation in the Works orany relevant Section which are unused, together with all things not forincorporation. The Contractor shall, by the due date, clear and remove allrubbish and deliver up the Site and the Works in all respects to thesatisfaction of the PM. The Contractor shall comply at his own cost withany Instructions relating to the removal of any things and rubbish.’

(c) Requirements for a completion certificate are to be found in clause 39:

‘The PM shall certify the date when the Works, or any Section, or anycompleted part within the meaning of Condition 37 (Early Possession),are completed in accordance with the Contract. Such completion shallinclude sufficient compliance by the Contractor with Condition 11(7)(Statutory notices and CDM Regulations). After the end of the lastMaintenance Period to expire, he shall issue a certificate when theContractor has complied with Condition 21 (Defects in MaintenancePeriods).’

(d) Clause 37 deals with partial possession before completion:

‘The Employer shall be entitled, before the completion of the Works, totake possession of any part of the Works (in this Condition referred to asa “completed part”) which is certified by the PM as having beencompleted in accordance with the Contract and is either –

(a) a Section; or

(b) any other part of the Works in respect of which the parties agree, or thePM has given an instruction, that possession shall be given before thecompletion of the Works or the relevant Section; and the completed part, onand after the date on which the certificate is given, shall no longer form part

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of the Works for the purposes of Condition 19 (Loss or damage) and 30(Vesting).’

4.1.2.18 INSTITUTION OF CHEMICAL ENGINEERS FORMS: ICHEME

(a) ‘Red Book’ for lump sum contracts. ‘Green Book’ for reimbursablecontracts.

(b) The IChemE forms recognize that on large process plant projects orsimilar, the concepts of completion and taking over have distinctly separateramifications, from both contractual and safety points of view. These arereflected in the contractual procedures provided in the IChemE forms. Theprocedures, therefore, are closer to a true contractual definition of completionthan can be found in any other standard form. There are three aspects ofsignificance which are considered:

• compliance with the specificationwith the description of works

• time finishing tasks according to programme orwith reference to financial incentive

• transfer of responsibility.

(c) Five points in the completion process are thus recognized.

• Clause 33.1 (Red Book), clause 32.1 (Green Book) requires thecontractor to notify the project manager by means of a constructioncompletion report when he or she is of the opinion that the plant issubstantially complete.When the plant has satisfactorily completed tests set out in thespecification and the contractor has adequately demonstratedcompletion in accordance with the specification, the project managerand contractor sign the construction completion report. There may, ofcourse, be a number of these reports related to different elements of theplant.If the project manager is not satisfied he or she may endorse the reportaccordingly and the contractor must repeat the procedure described inclause 33.1.

• Once all the construction completion reports have been signed by theproject manager, and where the contract schedule specifies a date forcompletion of construction, the project manager issues a certificate ofcompletion of construction, under clause 33.4.

• The purchaser normally takes over responsibility for the plant justbefore any raw materials are to be fed into the plant to undergo thedesigned process change.The IChemE forms, therefore, provide for the carrying out of take-overprocedures, including tests, as may be specified within the contractschedules, to follow on from construction completion. As soon as all theprocedures have been successfully carried out, the project managerissues a take-over certificate to be signed by the purchaser and deliveredto the contractor under clause 34.7. The purchaser is thereafter

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responsible for the care, safety, operation, servicing and maintenance ofthe plant.

• The contract may prescribe performance tests embodied by specificguarantees of the contractor. The IChemE forms provide for acceptancecertificates in respect of the satisfactory operation of the plant inaccordance with these tests (clauses 35 and 37).

• Finally, the IChemE forms lay down procedures for the certificationof the correction of defects at the end of the defects liability periodwhere the project manager must issue to the purchaser and contractora final certificate (clause 38) which provides conclusive evidence thatthe contractor has completed the works and made good all defectstherein.3

4.1.3 Effects of Practical Completion

The various standard forms differ in their treatment of the transfer of rightsand obligations between the parties at completion.

The following issues are however common to most forms:

(a) liability to pay damages for delay ceases (whether liquidated andpre-ascertained, or unliquidated);

(b) possession of the site returns to the employer and the risk of security anddamage to the works and third party liability transfers back to the employer(but not damage to the works caused by the contractor during the defectsliability period);

(c) commencement of the defects liability period;

(d) payment to the contractor of one half of the retention fund; and

(e) no further instructions may be issued for variation works or therectification of works other than those appearing during the defects liabilityperiod.

Dependent upon the form of contract, certain other factors are conditionalupon the certificate of completion. For example, under JCT 98:

(a) the employer may assign the right to bring proceedings in his or her name(clause 19.1.2);

(b) the commencement of the period of the final adjustment of the contractsum (clause 30.6);

(c) liability for frost damage is transferred from the contractor to the employer(clauses 17.2, 17.3 and 17.5); and

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(d) the period for final review of extensions of time expires 12 weeks from thisdate (clause 25.3.3).

These factors also impact upon sub-contractors. For example, thesub-contractors’ protection under the main contract all-risks’ policy ends.

In addition to mechanisms under the construction contract, the issue of acertificate of completion may have direct impact upon third parties, such asfor example, to bring an end to obligations of a surety in respect of a guaranteeor performance bond.

4.1.4 Methods for Dealing with Practical Completion

There are a number of principal methods which might be used to reduce theproblems associated with practical completion. The following are seen as themain options available:

(a) The Contract Administrator’s OpinionUnder this method there is no contractual definition of practical completion,this being left entirely to the architect/engineer or contract administrator’sopinion to certify when practical completion has been achieved.

The remedy available to the employer or contractor in the event they considerthe certificate has been wrongly issued or withheld is to adjudicate. Thisoption is used in the traditional JCT contract.

(b) Contractor’s InitiativeThe contractor notifies its own completion which becomes contractuallybinding unless dissented from by the recipient within a set number of days.This is the model used in DOM/1, further developed to deal with the ‘dissent’of the recipient under a main contractor and sub-contractor relationship.

(c) Definition of StandardsInclusion within the contract of a definition of the tests or standards which thecontractor will be required to meet in order to achieve practical completion.

(d) It is possible that this could be dealt with as a ‘code of practice’ boundwithin the contract document and expressly referred to in the conditions, insimilar fashion to the code of practice for opening up and testing under clause8.4.4 of JCT 98.

(e) The IChemE forms come closest to this option, by prescribing tests andstandards to be achieved by the installed plant prior to completion. It issuggested, however, that to define completion similarly for universalapplication in building or civil engineering projects would be extremelydifficult. The primary area of difficulty lies in aspects of subjective evaluation

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such as finishes, and it is doubtful whether this would be lessened by adefinition which called for ‘100% fault free works’ (see 4.1.4.2) since therewill always be disputes on quality issues.

(f) Appendix A offers a number of practical tests for judging the state ofcompletion.

4.1.4.1 READINESS FOR OCCUPATION

(a) Many commentators have agreed that practical completion should bedefined in the contract as that point when beneficial occupation may beobtained by the employer. The decided cases have tended towards apreference for this approach in any event, and the ICE Minor Works form isan example of appropriate wording.

(b) Nonetheless, it is difficult to see how this reduces the incidence ofdisputes: it is merely shifting the point at which arguments will be made.Employers have argued that this represents a weakening of their position. Thebuilding may be capable of being occupied, yet the standards required by theemployer may not have been met.

(c) As a qualification to this approach, an option is to add a rider to the effectthat the rectification of outstanding works and defects are capable of beingcarried out in such a manner and within such a time that the employer’sbeneficial occupation will not be impeded.

4.1.4.2 PERFECT COMPLETION

(a) Here completion would not be granted until all outstanding works arecompleted and defects rectified.

(b) This is not a favoured option in the UK, and the Courts have givencredence to the view that it is a difficult, if not impossible, yardstick to apply.Nonetheless it is closer to the model applied in other European countries, andan increase in the use of latent defects or ‘build’ insurance (such as themandatory decennial type liability in France) may bring a move towards ‘faultfree’ buildings at completion.

4.1.4.3 TWO-STAGE COMPLETION

(a) Various models have been suggested for a two-stage process for thecertification of completion.

(b) Clearly, the intent is to divide into two the numerous benefits and obligationswhich fall upon the contractor and employer at completion (see 4.1.3).

(c) The first stage may be denoted by the issue of a ‘provisional certificate’ and,by example, may be due when beneficial occupation is achieved or achievable.

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(d) At this point, the employer would re-take possession and insurance risksare transferred.

(e) The second stage would be perfect completion of the works. Only at thispoint would the contractor be released from liability for liquidated andascertained damages. This would also mark the commencement of the defectsliability period. It is thought that the first release of retention would also notoccur until this point.

4.1.5 Definitions

Generally, as can be seen in 4.1.2, the standard forms of contract do notprovide definitions of what constitutes practical completion, although the ICEMinor Works form contains a useful development of the term by stating it iscontingent upon the works being ‘fit to be taken into use or possession’.

(a) Fault Free CompletionVarious definitions are available from decided cases and the principaltextbooks on construction law. Some definitions lean towards perfect, faultfree completion:

One would normally say that a task was practically completed when itwas almost, but not entirely finished; but Practical Completion suggeststhat is not the intended meaning and what is meant is the completion ofall the construction work that has to be done.4

And in the same case:

… The defects liability period is provided in order to enable objects notapparent at the date of practical completion to be remedied. If they hadbeen apparent, no such certificate would have been issued.5

(b) Completion for All Practical PurposesThe above quotations need to be compared with the opinion expressed bySalmon LJ when the same case had earlier been heard by the Court ofAppeal:

The obligation on the contractors under clause 21 to complete theworks by the date fixed for completion must, in my view, be anobligation to complete the works in the sense in which the words‘practically completed’ and ‘practical completion’ are used in clause 15and clause 16 of the contract. I take these words to mean completion forall practical purposes, i.e. for the purpose of allowing the council totake possession of the works and use them as intended. If completion inclause 21 meant completion down to the last detail, however trivial andunimportant, then clause 22 would be a penalty clause and as suchunenforceable.6

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(c) The De Minimis RuleThis idea of practical completion being permitted despite the existence ofminor defects has been expressed elsewhere:

I think the word practically … gave the architect a discretion to certifythat [the contractor] had fulfilled its obligation under clause 21(1) (of JCT63) where very minor de minimis work had not been carried out, but thatif there were any patent defects in what [the contractor] had done thearchitect could not have given a certificate of practical completion.7

(d) Impossibility of PerfectionThe development of this argument has involved contrasting the constructionindustry with other forms of manufacture:

Probably the most important background fact which I should keep inmind is that building construction is not like the manufacture of goods ina factory. The size of the project, site conditions, use of many materialsand employment of various types of operatives make it virtuallyimpossible to achieve the same degree of perfection as can amanufacturer. It must be a rare new building in which every screw andevery brush of paint is absolutely correct.8

And in the same case, Judge John Newey said:

In my opinion there is room for ‘completion’ as distinct from ‘practicalcompletion’. Because a building can seldom if ever be built precisely asrequired by drawings and specification, the contract realistically refers to‘practical completion’, and not ‘completion’ but they mean the same. If,contrary to my view, completion is something which occurs only after alldefects, shrinkages and other faults have been remedied in accordancewith clauses 17.2 and 17.3 and a certificate to that effect has been givenunder clause 17.4, it would make the liquidated damages provision inclause 24 unworkable and in practice would require the defects liabilityperiod to be added to the time initially negotiated by the parties for thecarrying out of the works. The construction industry recognizes adifference between the carrying out of new works and ‘snagging’ that isto say dealing with minor defects in them.9

(e) Substantial PerformanceThese arguments applied to practical completion have been used in explainingthe doctrine of substantial performance. This doctrine is concerned withestablishing when payment will be due of an amount payable under an ‘entire’contract:

In considering whether there was substantial performance I am ofthe opinion that it is relevant to take into account both the nature of thedefects and the proportion between the cost of rectifying them and thecontract price. It would be wrong to say that the Contractor is onlyentitled to payment if the defects are so trifling as to be covered by the ‘deminimis’ rule.10

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In the same case, the key element for defining a failure to achieve substantialperformance was emphasized to be:

the general ineffectiveness of (the work) for its primary purpose …11

Substantial performance has been held to have occurred even though theworks were in part defective. The defendants were held liable for the sumclaimed less a deduction based upon the cost of making good the defects:

The question here is whether in a contract for work and labour for a lumpsum payable on completion the defendant can repudiate liability underthe contract on the ground that the work though ‘finished’ or ‘done’ is insome respects not in accordance with the contract … I think on the factsof this case the work was finished in the ordinary sense, though in partdefective …12

It has recently been held by the Court of Appeal in Hong Kong that practicalcompletion should be interpreted in a similar manner to the doctrine ofsubstantial performance.

We return to the issue of practical completion which we cannotdistinguish from substantial performance.13

The judge reached his conclusion that practical completion had not beenachieved in circumstances where, by reason of the failure to modify thesprinkler system, the work contracted for was, in the words of Somervell LJ inHoenig v. Isaacs, neither ‘finished’ nor ‘done’ in the ordinary sense.14

The direct connection between cases dealing with substantial performance andthe definition of practical completion is, however, to be treated cautiously.

It may be doubted whether cases concerned with substantial performanceare relevant to the determination of practical completion as the term isused in the standard form contracts where the event is not directly relatedto payment obligation (as in the contract considered by the Hong Kongcourt) but rather with consequences such as liability for liquidateddamages, repossession and the release of retention.15

(f) Substantial CompletionDefinitions of the term ‘substantial completion’ appearing in the ICE formshave been similar to those applied to practical completion.

This term (or equivalent words) used in clause 48(1) of the ICE 7th Editionform ‘… substantially completed …’ now appears consistently throughout theConditions, inter alia, in clauses 43 and 47. The term is not defined, but theexpressed reference to ‘outstanding work’ to be completed within the DefectsCorrection Period indicates a state plainly falling short of literal completion.Neither is there any definition of ‘outstanding work’. There is no reason tolimit it to work that has not been carried out. It may include work which is

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defective, but is to be re-executed or remedied in accordance with theContract.16

The Concise Oxford Dictionary equates ‘substantial’ with ‘virtual’ which isdefined as ‘that is such for practical purposes though not in name or accordingto strict definition’. It is at least clear on the one hand that the fact that theworks are or are capable of being used by the employer does not automaticallymean that they are substantially complete (‘any substantial part of the Workswhich has both been completed … and occupied or used’) and on the otherhand that the engineer may not postpone his or her certificate under this clauseuntil the works are absolutely completed and free from all defects. The manyreported cases on the question of ‘substantial’ completion in relation topayment under an entire contract, a different legal problem, are of doubtfulrelevance. Obviously both the nature and extent of the uncompleted work ordefects are relevant, and to say that substantial completion allows for minordeficiencies that can be readily remedied and which do not impair thestructure as a whole is probably an accurate summary of what is a question offact in each case.17

4.1.5.1 KEATING’S ANALYSIS

Practical Completion is perhaps easier to recognize than to define. No clearanswer emerges from the authorities as to the meaning of the term. It issubmitted that the following is the correct analysis:

(1) The Works can be practically complete notwithstanding that there arelatent defects;

(2) A Certificate of Practical Completion may not be issued if there arepatent defects. The Defects Liability Period is provided in order toenable defects not apparent at the date of Practical Completion to beremedied;

(3) Practical Completion means the completion of all the constructionwork that has to be done;

(4) However, the Architect is given a discretion under clause 17.1 tocertify Practical Completion where there are very minor items of workleft incomplete, on ‘de minimis’ principles.18

4.1.5.2 HUDSON’S APPROACH

It is desirable to be clear as to the precise meaning of ‘completion’ in a timeobligation. There is surprisingly little English authority on the point, but it isclear that the requirement will be less rigorous than in other contractualcontexts. Usually it will mean bona fide completion free of known or patentdefects so as to enable the owner to enter into occupation. The words‘practical’ or ‘substantial’ in the English standard forms probably do no morethan indicate that trivial defects not affecting beneficial occupancy will not

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prevent completion (the more so, of course, if the contract provides for amaintenance or defects liability period).19

In the last resort the degree of required completion needed to discharge thecontractor’s obligation to complete to time will be a matter of interpretation,but can be expected to differ from other aspects of the contractor’s obligationsto complete. In English standard forms of contract employing liquidateddamages clauses for delay, this is often expressly described as ‘practical’ or‘substantial’ completion, but there is no reason to suppose that theseexpressions mean anything very different from the word ‘completion’simpliciter when used or implied in the context of completion to time. It issubmitted that this will, in the absence of contrary indication, mean when thework reaches a state of readiness for use or occupation by the owner, and freefrom any known omissions or defects which are not merely trivial.20

4.1.5.3 REMEDYING DEFECTS

Another ingredient which it is suggested affects practical completion is theextent of disruption an employer would incur in allowing access to acontractor to remedy defects or complete works outstanding after the issue ofa practical completion certificate.

Furthermore, an employer must wish to reduce to the very minimum thedisruption that is caused by the presence of works going through asnagging list and an architect should not issue a certificate of practicalcompletion until all such work has been completed – unless the employerwaives the right to insist upon it being done, and the contractor is willingto continue to work in an occupied building and suitable arrangementshave been made for the insurance.21

4.1.6 Subsidiary Issues

4.1.6.1 FINANCING CHARGES AFTER PRACTICAL COMPLETION

(a) A specific question was raised in the Rees & Kirby case22 as to whetherfinancing charges incurred by a contractor upon primary elements of loss andexpense would cut off at the certificate of practical completion.

(b) The defendant argued that financing charges, which were to be consideredas a component part of the loss and expense claimed by the contractor as aresult of events occurring during the construction of the works, could not berecoverable after practical completion, since the causative events complainedof must, by that stage, have come to an end.

(c) This contention was rejected by the Court.

As I read the clauses, given that (on the clauses in the form which theytake in the contract now before us) successive applications are made at

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reasonable intervals. I can see no reason why the financing chargesshould not continue to constitute direct loss or expense in which thecontractor is involved by reason of, for example, a variation, until the dateof the last application made before the last issue of the certificate issuedin respect of the primary loss or expense incurred by reason of therelevant variation.

At the date of issue of the certificate, the right to receive payment inrespect of the primary loss or expense merges in the right to receivepayment under the certificate within the time specified in the contract, sothat from the date of the certificate the contractor is out of his money byreason either (1) that the contract permits time to elapse between the issueof the certificate and its payment, or (2) that the certificate has not beenhonoured on the due date.

But I can for my part see no good reason for holding that the contractorshould cease to be involved in loss or expense in the form of financingcharges simply because the date of practical completion has passed.

4.1.6.2 INSTRUCTIONS ISSUED AFTER PRACTICAL COMPLETION

(a) Often practical completion is certified in an extremely hurried manner toallow the employer occupation, for example, to commence fit-out works.Where substantial outstanding works remain, this causes considerabledifficulty to architects or contract administrators who find they must issueinstructions after practical completion, in order to enable the contractor toeffectively finish the works.

(b) This brings about the absurd situation of contractors’ claims for extensionof time after practical completion, or arguments that time is ‘at large’ in orderto defeat the imposition of earlier delay damages.

(c) The Practice and Management Committee of the RICS published ananswer to this question in 199023 as follows:

Q Under JCT 80, is the architect empowered to issue instructions, otherthan for rectifying defects, after the issue of the certificate of practicalcompletion. If the answer is yes, under which clauses of the contract isthis power given.

A The Architect is not so empowered. However, as a matter ofconvenience, the parties may agree that further work is to be carriedout and paid for through the machinery of the contract(Ref.Q/89/136).

(d) It is considered that whether or not payment is made through themachinery of the contract, the additional work will, in effect, become thesubject of a supplemental contract.

PART 4, SECTION 1


4.1.6.3 CERTIFICATION OF PRACTICAL COMPLETION WHEN WORKS NOT COMPLETE

(a) As can be seen in 4.1.3 the issue of a practical completion certificatetransfers rights and obligations between parties to a construction contract andfurthermore often releases a surety from its obligations in respect of aguarantee or bond. It may also be envisaged that a prospective future owner ofa newly-built property may decide to proceed with the purchase upon the issueof a practical completion certificate.

(b) It is not uncommon for consultants to be pressured by both client andcontractor, albeit for differing reasons, for issue of the completion certificate.However, the owner/occupier could be exposed to considerable financial riskif practical completion is certified when in fact the works are not practicallycomplete (i.e. more than minor ‘de minimis’ works remaining) and by reasonof subsequent insolvency, incomplete and defective works remain just so. Theconsultant might be held liable for such a loss in these circumstances.

(c) In one case,24 the Court did not accept the consultant’s defence thatbecause it had qualified its issued completion certificate by a list of ‘reservedmatters’, that this issued certificate should not have been taken to be thecompletion certificate required by the terms of the contract. Even though theemployer was alleged to have instructed the consultant to issue an earlycertificate, the consultant had not properly advised its client of the relevanceand importance of its issue including, amongst other things, the effect it wouldhave of depriving the employer of the benefit of the performance bond.

(d) In another case25 a consultant was held liable under a collateral warrantyto a future owner, for breach of a term to ‘exercise all proper professionalskill and care’, as it had purported in a letter to the architect that themechanical and electrical works were complete, when in fact they were not.The architect subsequently certified practical completion, which induced thepurchase of the property. Although the representation to the architect wasmade upon the employer’s request, the consultant should have declined therequest as it was in conflict with the future owner’s interests (i.e. the interestsof the beneficiary of the warranty that the consultant had agreed to) and theconsultant did not have the future owner’s express written agreement in thisregard.

4.1.6.4 OCCUPATION BY EMPLOYER PRIOR TO PRACTICAL COMPLETION

(a) A question often raised is whether occupation by the employer will bedeemed to constitute practical completion.

(b) Certain standard forms of contract contain clauses that expressly state thisto be the case.

(c) ICE 7th edition, clause 48(3), is an example, although it is qualified by‘substantial part’:

PART 4, SECTION 1


If any substantial part of the works has been occupied or used by theEmployer other than as provided in the Contract, the Contractor mayrequest in writing and the Engineer shall issue a Certificate of SubstantialCompletion in respect thereof …

(d) The New Engineering Contract (NEC) is also clear on this point, clause35.3:

The Employer may use any part of the works before Completion has beencertified. If he does so, he takes over the part of the works when he beginsto use it …

(e) It has been argued that since some standard forms expressly deal with thissubject as above, then those forms of contract which do not include similarexpress provisions should be interpreted to the effect that no assumption ofdeemed practical completion may be made upon occupation or use of part orall of the works. In other words, the express requirements of the contractshould be considered to be exhaustive of the circumstances whereby practicalcompletion can be established.

(f) The JCT forms of contract, including JCT 98, do not expressly provide for‘automatic’ practical completion upon use or occupation by the employer of apart or whole of the works. On the contrary, clause 23.3.2 of JCT 98 providesfor use or occupation in circumstances where practical completion or partialpossession will not occur (see 4.1.6.5(a)).

(g) A number of cases have looked at this question. In Big Island Contractingv. Skink,26 although the owner’s occupation of the building was not argued askey to the determination of the issues, the Court held that it could notdistinguish practical completion from ‘substantial performance’. On the factsof this case, the Court held that practical completion had not been achieved,despite the fact that the defendants had been in occupation of the building.

(h) A somewhat different view was held in Hoenig v. Isaacs,27 where LordDenning said:

It is always open to a party to waive a condition which is inserted for hisbenefit.

There, by entering into possession and using the fitted furniture, the employerwas held to have waived a condition precedent of entire performance andcould no longer rely on it.

(i) In English Industrial Estates v. George Wimpey28, the Court held thatoccupation did not amount to completion.

(j) In spite of the employer’s tenant installing and using machinery and storinglarge quantities of paper in parts of the works, the court of first instance and

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the Court of Appeal found that partial possession had not occurred and heldthe contractor and his insurers liable for damage caused by a fire occurringduring the employer’s occupation.

(k) In an Australian case29, the contract allowed the employer to have accessbefore practical completion for the purpose of fitting out the building. Thecontractor argued that as the liquidated and ascertained damages provisiongave no credit for this benefit, it could not be a genuine pre-estimate of loss,and would fail as being an unenforceable penalty.

(l) The Court summarily rejected this argument. The contract contemplatedstaged completion, and any occupation of the premises prior to practicalcompletion for fitting-out was a contractual right and not a ‘benefit’ conferredon the employer by delayed completion.

4.1.6.5 PARTIAL POSSESSION/SECTIONAL COMPLETION

Under JCT 98 it may be seen that there are four levels of ‘occupation’ whichcan be attained by the employer.

(a) The first level is use or occupation of the site or a part thereof generally forstorage or fit-out.

Clause 23.3.2 states:

Notwithstanding the provisions of clause 23.3.1 the Employer may, withthe consent in writing of the Contractor, use or occupy the site or theWorks or part thereof whether for the purposes of storage of his goods orotherwise before the date of issue of the certificate of PracticalCompletion by the Architect. Before the Contractor shall give his consentto such use or occupation the Contractor or the Employer shall notify theinsurers under clause 22A or clause 22B or clause 22C.2 or .4 whichevermay be applicable and obtain confirmation that such use or occupationwill not prejudice the insurance. Subject to such confirmation the consentof the Contractor shall not be unreasonably delayed or withheld.

It can be seen that such a mechanism is consensual and that the insurers alsomust confirm their consent to the occupation. Clause 23.3.3 provides that anyincrease in the insurance premiums which results must be added to thecontract sum.

(b) The second level is partial possession. Again, this must be by the consentof both parties, which the contractor must not unreasonably withhold.

Clause 18.1 provides:

If at any time or times before the date of issue by the Architect of thecertificate of Practical Completion the Employer wishes to takepossession of any part or parts of the Works and the consent of the

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Contractor (which consent shall not be unreasonably delayed or withheld)has been obtained, then notwithstanding anything expressed or impliedelsewhere in this Contract, the Employer may take possession thereof.The Architect shall thereupon issue to the Contractor on behalf of theEmployer a written statement identifying the part or parts of the Workstaken into possession and giving the date when the Employer tookpossession …

The effect of partial possession under clause 18 is quite different from use oroccupation described under clause 23.3.2 above. With partial possession,practical completion is deemed to have occurred in respect of that part with allthe consequences of a practical completion under clause 17 (see 4.1.4).

The architect’s written statement is used to compile the value of the part takeninto possession, such that retention (clause 30.4.1.2) and liquidated damages(clause 24) will be reduced pro rata to the contract sum.

Reference is also made to insurance which must be dealt with in the event ofany partial possession (clause 18.1.3).

(c) The ‘third level’ is sectional completion.

The contract documents may prescribe predetermined sections of the works,with separate dates for completion for each.

This again is different from partial possession, since it is not consensual innature. The contractor is under an obligation to complete the works under eachsection on or before the dates set down in the contract appendix.

Thus, the architect or contract administrator must administer the projecthaving regard to these dates, including allocating separate extensions of timewhere these apply, and separate practical completion certificates (sectionalcompletion) in respect of each part. The contract will also state the separateamounts of liquidated damages which are to be applied to each section inrespect of any separate delays, whether or not the whole of the works isdelivered up by the overall date for completion.

(d) Finally, there is practical completion.

The architect or contract administrator must certify completion of the wholeof the works according to clause 17 (see 4.1.2.1).

Notes

1. Clause 18.1.1 refers to partial possession.2. William Tomkinson & Sons Ltd v. The Parochial Church Council of St Michael and

Others (1990) 8-CLD-08-01.3. Matthew Hall Ortech Ltd v. Tarmac Roadstone Ltd (1997) 87 BLR 96.4. City of Westminster v.. J. Jarvis & Sons Ltd (1970) HL, 7 BLR 64.5. Ibid, at page 75.6. Ibid, CA [1969] 1 WLR 1448, at page 1458.7. H W Neville (Sunblest) Ltd v. William Press & Sons Ltd (1982) 20 BLR 78.8. Emson Eastern Ltd v. EME Developments Ltd (1991) QBD, 55 BLR 114.9. Ibid, at page 122.10. Bolton v. Madheva (1972) 1 WLR 1009, at page 1013.11. Ibid, at page 1015.12. Hoenig v. Issacs (1952) 2 All ER 176, at page 179.13. Big Island Contracting (HK) Ltd v. Skink Ltd (1990) CA of Hong Kong,

52 BLR 110.14. Ibid, at page 115.15. Commentary by Editor of Building Law Reports, 52 BLR, at page 112.16. Engineering Law and the ICE Conditions, 4th edition, Max W Abrahamson,

at page 160.17. Keating’s Building Contracts, 6th edition, at page 590.18. Hudson’s Building and Engineering Contracts, 11th edition, at page 1109.19. Ibid, at page 1130.20. Commentary by Editors of Building Law Reports, 52 BLR, at page 111.21. Rees & Kirby Ltd. v. Swansea City Council (1985) CA 30 BLR.22. Chartered Quantity Surveyor June 1990 (ref Q/89/136).23. George Fischer Holding Ltd v. Multi Design Consultants Ltd and Davis Langdon

& Everest & others (1998) CILL 1362.24. Environment Agency v. Hilson Moran [2000] CA (unreported to date).25. Big Island Contracting (HK) Ltd v. Skink Ltd (1990) CA of Hong Kong,

52 BLR 110.26. Hoenig v. Issacs (1952) 2 All ER 176.27. English Industrial Estates Corporation v. George Wimpey & Co Ltd (1973) CA 7

BLR 122.28. Multiplex Construction Pty Ltd v. Abgarus Pty Ltd (1992) APCLR.

PART 4, SECTION 1




Appendix A: General Objectives to be Achieved at Practical Completion for Small to Medium-sized Building Projects

The following are a number of practical tests by which it is considered an architect orcontract administrator can judge whether or not practical completion has beenachieved.

A1 THE CONTRACT DOCUMENTS

A1.1 The works should have been undertaken as intended by the specification anddrawings, etc.

A2 COMPLIANCE WITH STATUTORY REQUIREMENTS

A2.1 All relevant statutory requirements should have been complied with,including all appropriate requirements for health, safety, means of escapeand the requirements of the statutory supplies, including confirmation that allplanning conditions and building control matters have been satisfactorilyresolved.

A2.2 Certificates confirming safety of the various installations should beprovided. Electrical test certificates and confirmation of compliance withrelevant statutory requirements for fire alarm or smoke-detector installationsshould be available. In addition, test certificates for pressure vessels as wellas for hoists (whether they be for equipment or people) should be produced.

A2.3 Where appropriate (e.g. under design and build arrangements) the contractorshall have satisfied all local authority requirements with regard to, forexample, refuse collection and postal address confirmation.

A3 THE SITE

A3.1 External works should be substantially complete so that the occupier hasunfettered access. Normally, all building impediments such as skips and sitehuts should have been removed from the site, such that no potential safetyhazard remains present. (Note: Particular attention should be paid to thiswhen considering sectional completion for any part of the works.)

A4 ENTRANCES

A4.1 It is normally expected that the entrance to the premises and access waywould be clear and complete, sufficient for the client to operate for all intentsand purposes in a normal fashion.

A5 STRUCTURE

A5.1 Structural works should be complete and no part of the structure should beunsafe.

A6 CLADDING

A6.1 The building should be wind and watertight and the cladding should beproperly secured. Under normal circumstances, roofs and claddings wouldbe tested by the elements. If, for some reason this has not taken place, thenthe specification should include for water testing or, alternatively, aninstruction should be given to so test these elements.



A7 FINISHES

A7.1 This is the area of works where most reasons for delay in the issue of acertificate of practical completion tend to arise.

A7.2 As suggested above, either a detailed view needs to be taken or potentially amore lenient stance adopted.

A7.3 All the decoration works should be complete. For example, the receptionarea and staircases should be finished, as should in general terms, the internalareas. However, decorations incomplete to a store room in the depths of thebasement would not necessarily be considered as important.

A7.4 External works should be complete, including car-park lining, signage andthe like.

A8 PLANTING

A8.1 If, in the specification, external planting is included and it is acknowledgedthat practical completion may take place during a period when undertakingplanting may be impractical, then the documentation should state this toenable such works to be undertaken without detriment to the parties.

A9 MECHANICAL AND ELECTRICAL SERVICES

A9.1 The origins of all the appropriate commissioning and test certificates shouldbe issued to the architect or contract administrator. For such elements as airconditioning, a definition which allows for balancing to take place followingoccupation should be considered.

A10 MANUALS

A10.1 The requirement for the provision of operating and maintenance manuals andas-installed drawings should be considered closely. Manufacturers’warranties may well be nullified if mechanical plant is not maintained inaccordance with their instructions during the warranty period. Particularattention will be required to be paid to the CDM regulations which call forthe ‘Safety File’ to be produced prior to practical completion.


The Surveyors’ Construction Handbook Part 4, Section 1 Effective from 1/12/00 Page 1Appendix B (revised 10/00)

Appendix B: Table of Cases

1. Big Island v. Skink (1990)Occupation did not mean practical completion.

2. Bolton v. Mahdeva (1972)Substantial performance – it would be wrong to say that the contractor is onlyentitled to payment if the defects are so trifling as to be covered by the deminimis rule.

3. City of Glasgow District Council v. Excess Insurance Co (Scotland) (1988)Performance bond survives practical completion.

4. Emson Eastern v. EME Developments (1991)A building can seldom be built precisely.No set-off for remedial works after practical completion where maincontractor insolvent (JCT(80) pre-amendment 11, July 92) – common lawclaim.Completion in determination provisions is equal to practical completion.

5. English Industrial Estates v. George Wimpey (1973)Fire is the contractor’s risk after possession if clause 16 of JCT 63 is notobserved. Occupation before practical completion without certificate does notamount to partial possession.

6. Hoenig v. Isaacs (1952)Substantial performance was held to have occurred even though the workswere in part defective.

7. Jarvis & Sons Ltd v. City of Westminster (1970)What is meant by completion is the completion of all the construction workthat has to be done. If (defects) had been apparent (at practical completion)no such certificate would have been issued.

8. London Merchant Securities v. London Borough of Islington (1986)The architect’s certificate was not conclusive (for rating purposes) –substantial completion being a broad question of fact.

9. Multiplex Construction Pty v. Abgarus (1992)Occupation prior to practical completion is a right not a benefit.

10. HW Neville v. William Press (1982)The word ‘practically’ gave the architect a discretion to certify … where veryminor de minimis work had not been carried out.

11. Rees & Kirby v. Swansea City Council (1985)Financing charges continue after practical completion.

12. University of Glasgow v. William Whitfield & John Laing (1988)Continuing duty of architect for negligent design after practical completion.


The Surveyors’ Construction Handbook Part 4, Section 1 Effective from 1/12/00 Page 1Appendix C (revised 10/00)

Appendix C: Further Reading

Books

Engineering Law and the ICE Conditions, (4th Edition), Max Abramson, AppliedScience Publishers, 1979

Hudson’s Building and Engineering Contracts, (11th Edition), IN Duncan-Wallace,Sweet & Maxwell, 1995

Keatings Building Contracts, (6th Edition), Sir Anthony May, Sweet & Maxwell, 1995

PART 4, SECTION 2



SECTION 2: ASCERTAINING THE AMOUNT OF LOSS AND EXPENSE INCURRED IN BUILDING PROJECTS

Introduction

The purpose of this Section is to provide practical advice to those who arerequired to ascertain the amounts due in reimbursement of direct loss and/orexpense incurred in building projects.

Surveyors are particularly reminded that their role in these matters is set out intheir building contract and is normally limited to determining quantum; it doesnot usually extend to determining liability.

Reference has been made to the contract administrator throughout thisdocument. This reference includes architects where that function exists underthe contract.

It cannot be emphasised too strongly that the ascertainment of loss and/orexpense is an exercise in calculating as precisely as possible that which isincurred by the contractor directly and solely due to the matters listed in thecontract. It is not an attempt to impose a penalty on an employer or designteam for failing to live up to obligations or expectations.

Equally, it is not the quantity surveyor’s role (to whom the task ofascertainment is usually given) to seek to get away with as little a payment ashe can. The contractor, for his part, may understandably press hard for asignificant figure and on occasions overstate his case either in words or moneyor both. Too often the quantity surveyor is seen, or even sees himself, as beingat the opposite end of a tug-of-war rope to the contractor. This is incorrect.Whilst the quantity surveyor is perfectly entitled to probe such submissions byweighing all the contrary evidence, his ultimate task is to determine a properascertainment in accordance with the conditions of contract and thecircumstances that have prevailed.

4.2.1 General Principles

4.2.1.1 Under common law, if one party to a contract is in breach then that party isliable to the other for damages. The level of such damages has beenestablished by a number of Court cases.

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4.2.1.2 However, the level of damages payable at common law has never intended toact as a penalty or deterrent but simply to ensure that, in respect of theaggrieved party, “he is, so far as money can do it, to be placed in the samesituation with regard to damages, as if the contract had been performed”.1

4.2.1.3 Nor are such damages intended to recompense the aggrieved party for alllosses whatever their nature. In the case of Hadley v. Baxendale2 it wasestablished that damages ought to be of a kind which “should be such as mayfairly and reasonably be considered either arising naturally, that is,according to the usual course of things, from such a breach of contract itself,or such as may reasonably be supposed to have been in the contemplation ofboth parties, at the time they made the contract, as the probable result of thebreach of it”.

4.2.1.4 Where building contracts contain clauses dealing with the entitlement of thecontractor to recover direct loss and/or expense for any delay or disruption tothe regular progress of the Works caused by the client or his team or otherdesignated causes, such clauses have been developed against this generalbackground.

4.2.1.5 There are important distinctions to be drawn between the express provisionsin a form of contract on the recovery of direct loss and/or expense, andrecovery of damages at common law. In the case of the former therequirements laid down in the contract must be rigidly adhered to; if they are,then reimbursement is a contractual entitlement and does not requirejudgement of the Court or an arbitrator.

4.2.1.6 The provisions of the loss and/or expense clauses are generally withoutprejudice to any other rights and remedies which the contractor may possess,and which he may wish to pursue through arbitration or the Courts. Thisconsideration is, however, outside the scope of this Section of the Handbook.

4.2.1.7 To determine the contractor’s entitlement one must calculate the differencebetween the costs arising from the application of the following two questions:

(a) What is the reasonable cost of carrying out the particular element of workin the delayed or disrupted circumstances that were created directly as a resultof the matter under consideration (for example late instructions)?

(b) If that delay or disruption had not been so caused what would those costshave been?

4.2.1.8 An element of judgement and even conjecture is almost always inevitable inanswering the second question; and judgement may indeed be involved inanswering the first question, for even if there are verified cost records of the

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1 Robinson v. Harman (1848) 1 Ex.8502 Hadley v. Baxendale (1854) 9 Ex. 341

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work that was carried out it does not follow necessarily that all such costs wereproperly incurred.

4.2.1.9 Thus, even if the form of contract refers to ‘ascertaining’ the loss – as does theJCT form (see 4.2.1.13) – complete proof in the way of invoices orverified cost records is unlikely to be available. Indeed, as outlined elsewherein this Section, the surveyor is not required to establish ‘complete proof’ butis instead required to use professional judgement. This should not, however,detract from the critical importance of ensuring that proper and reasonablerecords are maintained by the contractor and contract administrator.

4.2.1.10 The primary purpose of this guidance is not to provide a legal treatise on thematter of claims but to provide practical comment on how to go aboutdetermining, as reliably as possible, the contractor’s monetary entitlement.

4.2.1.11 The correct ascertainment of the amount of any direct loss and/or expense tobe reimbursed to the contractor requires sound knowledge and experience ofbuilding practice, careful study of the conditions of the relevant contract andan understanding of their legal application, together with knowledge of therelevant and up-to-date case law. In addition, the person undertaking theevaluation requires access to the best records and other information that isavailable on that particular contract.

4.2.1.12 The principles referred to are generally applicable to all cases where acontractor is entitled, by the conditions of contract, to reimbursement of hisdirect loss and/or expense. This entitlement is provided in most, but not all,forms of building contract, even where the expression ‘direct loss and/orexpense’ may not be used.

4.2.1.13 This guidance is based predominantly upon the provisions of the 1998 editionof the Standard Form of Building Contract, published by the Joint ContractsTribunal – referred to as JCT 98. The wording used in the form is eitheridentical, or very similar, to that adopted in many of the other forms publishedby the JCT, for example the Works Contracts used in association with the JCTStandard Form of Management Contract and the JCT Standard Form ofBuilding Contract with Contractor Design.

4.2.1.14 It should be noted that in this text extracts from printed forms are frequentlyparaphrased. Readers therefore should in all cases check the precise wordingused in the particular form with which they are involved in practice,particularly where the form is not one of those promulgated by the JCT. It mayeven be that, although a JCT Standard Form has been used, particular clauseshave been amended.

4.2.1.15 Following the terminology used in the JCT forms, an event or failure whichgives the contractor grounds for seeking reimbursement of any resultant lossand/or expense is referred to as a ‘matter’; whereas an event or failure which

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gives the contractor grounds for seeking an extension of time for thecompletion of the works is referred to in this Section as an ‘event’ (alsosee 4.2.3.2).

4.2.2 Definitions

4.2.2.1 LOSS AND/OR EXPENSE

Any monies which a contractor has a proper expectation of receiving but hasnot received and/or monies properly expended or to be expended by him.

4.2.2.2 DIRECT

“The direct consequence of the act giving rise to the claim”,1 or “that whichflows naturally from the breach, without other intervening cause”.2 Clearlythis word ‘direct’, when used in conjunction with the words ‘loss and/orexpense’, is a very restricting one and disqualifies all costs and/or expensesthat do not arise as a direct result of the matter under complaint. Thus, anycosts due, for example, to mismanagement, to other causes not recognized asmatters by the wording of the contract or to other concurrent delays should beexcluded from those reimbursable to the contractor as they are not the directresult of the matter under consideration.

4.2.2.3 ASCERTAINMENT

The definition of this word should be seen in the context of the subject of theascertainment. Given that judgement is almost always called for (see4.2.1.5 and 4.2.1.6) it follows that ‘to ascertain’ can rarely mean to provecomprehensively with invoices and records but rather to establish by the useof such facts as are available and by the use of expert judgement.

4.2.3 Entitlement

4.2.3.1 LIMITATIONS

Appendix D provides a checklist of items on which entitlement is allowedunder JCT 98.

The contractor’s entitlement to reimbursement under the terms of the contractshould be determined as set out below:

(a) The loss and/or expense must arise directly as a result of one of the mattersreferred to under the terms of the contract. Such matters do not usually extendto the contractor underpricing the rates to be used in valuing variations. Thus,losses arising from any such underpricing are not usually reimbursable.

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1 A & B Taxis Ltd v. The Secretary of State for Air (1922) 2KB 3282 Saint Line Ltd v. Richardson Westgarth & Co (1940) 25 BLR 140 refers to the case only in passing

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(b) Indirect costs – i.e. costs not arising directly as a result of the matter underconsideration – should be excluded. In this respect the link between cause andeffect is a vital factor.

(c) Costs incurred in respect of which the contractor has not compelled withthe conditions laid down in the contract in relation thereto cannot be dealt withunder the terms of the contract (but see 4.2.1.6). For example, JCT 98requires the contractor to make an application in writing to the contractadministrator as soon as it is reasonably apparent that disruption will occur asa result of a matter referred to in clause 26 of that contract (or under clause 34in the case of loss and/or expense arising from the discovery of antiquities).For the contractor to be able to obtain reimbursement in accordance with thecontract he must first have complied with that provision (see 4.2.3.3 formore detailed advice on the validity of written applications).

(d) Reimbursement is restricted to loss and/or expense which the contractor isnot entitled to recover under any other provision of the contract. For example,the payments made to the contractor may include allowances for workingunder changed conditions, fluctuations in prices, or preliminaries associatedwith variations. None of these costs should therefore be duplicated in anascertainment of loss and/or expense under clause 26.

(e) It is important to consider the mitigation of loss and/or expense. To theextent that any part of the loss and/or expense incurred could reasonably havebeen avoided by the contractor taking reasonable steps, that amount would notbe reimbursable. This requirement to mitigate requires the contractor to actreasonably in all the circumstances. It may be reasonable, for example, for acontractor to bring additional plant or labour to a site in order to reduce theoverall effect of a matter on the project as a whole. Even where such an actwas not entirely successful the contractor would be entitled to thereimbursement of the costs incurred provided that he acted reasonably in sodoing. It is important, therefore, that in reviewing with hindsight what wasreasonable, the quantity surveyor may have good cause to reject certain costsput forward by the contractor. The contractor has to make day-to-daydecisions in developing situations that may, in retrospect, be shown to bewrong. The test must be: “Was the action reasonable in the circumstancesprevailing at the time?”

(f) On the other hand, a contractor who through good management is destinedto increase the profit he anticipated making at tender stage cannot be deniedthis prospect by the incidence of a matter giving rise to a loss and/or expenseclaim. For example, at tender stage the contractor might have anticipatedremoving some element of plant by, say, the twentieth week. In the event hemay be beating this target and be destined to be able to remove it by, say, thefifteenth week. If a delay caused by a matter recognized by the contract occurswhich requires that plant to be retained for a further four weeks, i.e. until thenineteenth week, he is entitled to additional reimbursement for those fourweeks.

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4.2.3.2 EXTENSIONS OF TIME

Under JCT 98 and other forms of contract in the same series, the expression‘extension of time’ is replaced by the words ‘fixing a new completion date’but the more traditional ‘extension of time’ is used in this Section. Extensionof time does not necessarily mean that the contractor has an entitlement toreimbursement of loss and/or expense. On the other hand, the contractor mayhave an entitlement to such reimbursement even when there is no extension oftime. Each matter needs to be treated on its merits whether or not an extensionof time is due or granted. Nevertheless, under JCT 98 there is a requirementthat the contract administrator declares the amount of any extension of timegranted for any event which also constitutes a matter under clause 26 wheresuch a declaration is necessary for the ascertainment of loss and/or expense.Thus, in ascertaining the contractor’s entitlement to reimbursement of lossand/or expense, the existence and amount of any attendant extension of timemust be revealed where this is relevant to that ascertainment.

4.2.3.3 WRITTEN APPLICATION

Before the contractor is entitled to any reimbursement in respect of loss and/orexpense he should first have made an application, at the appropriate time, tothe appropriate party named in the conditions of contract. The purpose of thiswritten application is to enable the contract administrator to form his opinionon whether or not there has been, or will be, loss and/or expense incurredwhich would not be reimbursed under any other provision in the conditions ofthe contract. In addition, it should be noted that, with reference to the matterof applications:

(a) Applications must be made by the contractor as soon as it reasonablybecomes apparent to him that the regular progress of the Works is likely to bematerially affected by any of the relevant matters listed in the conditions ofcontract.

(b) Applications to the quantity surveyor, in contrast to those made to thecontract administrator, are not valid unless specific authority has been givenby the employer.1

(c) Reference to loss and/or expense in site meetings or the like, or referencesto ‘delays’ which do not mention loss and/or expense, do not constitute validwritten applications to recover loss and/or expense.

4.2.3.4 ADEQUACY OF THE DETAILS

JCT 98 requires that the contractor provides the contract administrator (or ifso instructed, the quantity surveyor) with all the documents necessary for

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1 John Laing Construction Ltd v. County and District Properties Ltd (1982) 23 BLR 1

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adjusting the contract sum. This will include documents in support ofascertainments of the contractor’s entitlement to reimbursement of loss and/orexpense (see clause 30.6.1.1). Moreover, clause 26.1.3 requires the contractorto supply to the contract administrator or quantity surveyor, upon request,such details as are reasonably necessary for the ascertainment of anyreimbursable loss and/or expense. But note that these details have to berequested and clearly, for such details to be of maximum use, the request forthem should be made at the earliest opportunity.

4.2.3.5 In practice, what is going to be adequate data will depend upon the nature ofthe disruption or delay. Thus, the request for the contractor to keep suchdetails should not only be timely but should also be as specific as possible asto the data required.

4.2.3.6 NOMINATED SUB-CONTRACTORS

In general the same principles apply to ascertaining the loss and/or expense tobe reimbursed to a nominated sub-contractor as apply to the main contractor.It must be recognized, however, that a nominated sub-contractor may have anentitlement under the terms of the sub-contract to reimbursement by the maincontractor (due, for example, to the latter’s mismanagement) which should bepassed on to the employer.

4.2.4 Ascertainment

4.2.4.1 RESPONSIBILITY FOR ASCERTAINMENT

Under JCT 98 the responsibility for ascertaining the amount due is thecontract administrator’s, unless he instructs the quantity surveyor to undertakethis task. Where the contract administrator so instructs the quantity surveyorthis instruction should be in writing, to be copied to the contractor, and bespecific as to the matters which are covered in such an instruction. However,the contract administrator cannot delegate to the quantity surveyor, or anyoneelse, the task of forming an opinion on whether or not there is a case inprinciple for loss and/or expense to be ascertained. A checklist of stepsrequired under JCT 98 is included at Appendix E.

4.2.4.2 The quantity surveyor should be careful to ensure that the contract administratorundertakes this task of forming an opinion before embarking upon anyascertainment. The quantity surveyor should also ask the contract administratorfor all the data he has upon which he formed that opinion; for the quantitysurveyor’s task is always one of determining quantum in respect of the itemswhich in the opinion of the contract administrator are admissible in principle. Itis not for the quantity surveyor to usurp the role of the contract administrator inmatters which the contract conditions specifically reserve for him.1

G

G

G

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1 John Laing Construction Ltd v. County and District Properties Ltd (1982) 23 BLR 1

PART 4, SECTION 2


4.2.4.3 However, once the quantity surveyor has been properly instructed to ascertainthe amount due he should proceed with this task without delay. It is for thecontract administrator or quantity surveyor, as the case may be, to ascertainthe amount and not to await a detailed submission from the contractor.

4.2.4.4 In general the surveyor should ensure that the basis, calculations andevidential records used in the ascertainment are recorded in writing. This maybe a mandatory requirement on public sector contracts.

4.2.4.5 USE OF JUDGEMENT IN MAKING AN ASCERTAINMENT

An element of professional judgement is often inevitable in ascertaining thecontractor’s entitlement to reimbursement of loss and/or expense. This isbecause what the contractor’s cost would have been had the relevant delay ordisruption not taken place has to be estimated (see 4.2.1.6and 4.2.1.7). However, in forming that judgement the best evidenceavailable should always be used in reference. For example, where there iscontiguous work that has not been affected by delay or disruption this mightwell provide good evidence of the progress that the contractor could have beenexpected to have made generally.

4.2.4.6 Clause 26.1 of JCT 98 requires that ascertainment is made from time to time.This means that ascertainment should be an ongoing process where the factsare sufficiently established to make a proper and finite calculation. Moreover,clause 30.2.2.2 of JCT 98 states that any amount ascertained under clause 26should be included in interim certificates.

4.2.4.7 Thus, wherever ascertainment can properly be made of part of a contractor’sentitlement it is important that this is done and the relevant amounts becertified for payment. If part of a contractor’s entitlement can be whollyascertained then it should be, but there is no provision in this form of contractfor provisional assessment to be made.

4.2.4.8 COSTS VERSUS

When ascertaining a contractor’s entitlement it is the actual loss or actualexpense which is relevant. The prices in the contract bills or schedule of ratesshould not be used as the actual costs may be more or less than these.Additionally, the general rule of damages is that the type or kind of losspayable is that “as may reasonably be supposed to have been in thecontemplation of both parties, at the time they made the contract, as theprobable result of the breach of it” (see 4.2.1.3).

4.2.4.9 GLOBAL OR INDIVIDUAL ASCERTAINMENT

In recent years there has been much discussion on whether claims shouldproperly be considered on a global basis or whether each item should beconsidered in isolation. In this respect the quantity surveyor need only beconcerned with the points in 4.2.4.10 below.

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PART 4, SECTION 2


4.2.4.10 It is important that a contractor makes proper applications on each and everyoccasion that an entitlement to make a claim arises.

(a) It is necessary that each application conforms fully with the rules writteninto the contract about them (for example timing, in writing, sent to thecontract administrator).

(b) The contractor must keep such records as are necessary for theascertainment of the amount due.

(c) Only where the effect of a series of matters (for example the late issue of anumber of instructions or the instructing of a number of variations) is such asto create extra costs which by their nature are indistinguishable from oneanother can an application on a global basis be entertained. Simply becausethere is, for example, a series of variation instructions which createoverlapping or contiguous disturbance, it does not follow that all other matterson that project can be added in to make a global claim. A global approach toascertainment should be restricted solely to events which createindistinguishable effects. Thus, no contractor should be penalised by beingdenied reimbursement simply because extra costs were incurred which couldnot by their nature be particularised. On the other hand, the facility of globalascertainment should not be used to mask facts and figures that could properlyhave been particularised and presented.

4.2.5 Admissible Items

4.2.5.1 GENERAL

A list of possible items admissible as part of an ascertainment of loss and/orexpense (which is to be read as including those attributable to sub-contractors)is as follows:

• extended and/or increased use of ‘preliminaries’, for example moresupervision, more plant etc.;

• reduced labour outputs;• extra waste or abortive purchase of materials;• increase in the price of resources, i.e. inflation;• increased cost of head office overheads;• loss of profit; and• finance charges.

More often than not the dominant items will be the first two from the abovelist.

4.2.5.2 PRELIMINARIES

A representative list of the items normally comprising the preliminaries isgiven at Appendix A.

G

G

G

PART 4, SECTION 2


4.2.5.3 When ascertaining the extra cost of ‘preliminary’ items (but see 4.2.4.8)it is important to break each item down into the following components:

(a) Setting-up costs would be admissible where additional plant is properlybrought onto the site. If plant is already on site, setting-up costs would rarelybe admissible unless setting up has been delayed by a relevant matter andinflation has occurred which is not reimbursable under the fluctuationsclauses.

(b) Removal costs are admissible in the same way as setting-up costs.

(c) Extra hire charges would be reimbursable if the particular item is requiredto be kept on site longer than otherwise would have been the case due to therelevant matter. The comparison is between the period that the item wouldhave been on site had the matter not occurred and the period that it wasreasonable to have been on site given that the matter did occur(see 4.2.1.7). Where the plant in question is owned by the contractor themeasure of his loss is the amount (if any) that he could have earned by usingthe plant elsewhere had it not been tied up on the site for longer than wouldhave been the case if the matter in question had not occurred.

(d) Extra running charges would be reimbursable if, due to a relevant matter,the particular item is required for a longer period than otherwise would havebeen the case. Again the comparison is between the period that the item wouldhave been in use had the matter not occurred and the period that it wasreasonable to have been in use given that the matter did occur(see 4.2.1.7).

4.2.5.4 DISRUPTION OF LABOUR

The ascertainment of the cost of disruption to labour is invariably a difficultprocess. It is impossible to give precise and definitive advice as all will dependupon the circumstances in each case. However, the following general pointersshould be of some assistance:

(a) In all circumstances avoid the application of an overall percentage toglobal labour costs; rarely if ever are the whole labour costs on a projectdisrupted.

(b) Wherever possible request that contemporary records be kept, noting theoutput achieved in practice by the particular workmen who are disrupted.Clerk of works’ records and diaries can be invaluable evidence of this.

(c) Have regard to whether any delay comprises a series of small recurrentdelays or one large one. In the former case the proportional loss of output canbe very high, whereas in the latter case the loss can be mitigated byredeploying resources elsewhere.

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PART 4, SECTION 2


(d) Recognize that there is a learning curve in all activities. The advantage ofthis can be lost if a new gang of men is brought in to undertake work whichhas become familiar to others; the resultant extra cost will be reimbursable.Moreover, if additional labour has to be recruited at short notice it may benecessary to pay premium rates which would in principle be reimbursable.

(e) Whatever the level of variation orders, late instructions and so on, much ofthe work of labour will not actually be significantly affected. For example,bricklaying or fixing pipework once under way may suffer little or no delay.The delay may be associated with becoming familiar with an unexpected orunplanned task. The ‘coal face’ operation may not be affected at all.

(f) Recognize that great economies can flow from a repetitive task, forexample fixing partitions in a series of identical dwellings, the interruption ofwhich can result in far-reaching losses.

4.2.5.5 A list of items relevant to the calculation of reimbursable extra costs ofdisruption is given at Appendix B.

4.2.5.6 EXTRA WASTE AND/OR ABORTIVE PURCHASE OF MATERIALS

These may not be significant elements in an ascertainment but it may be thatthe constant moving of materials, stores or compounds following a relevantmatter will result in extra waste. As long as this has not resulted from a lack ofproper management this cost will properly form part of any ascertainment.Alternatively, it may be that materials purchased for the works have beenomitted by a subsequent variation order. Provided that such materials were notpurchased prematurely the cost would again properly form part of anyascertainment.

4.2.5.7 INFLATION

If work is executed later than otherwise would have been possible as a resultof a relevant matter and if inflation has caused the cost to rise then, providedthat such costs are not reimbursable under the fluctuations clause, they willform part of the ascertainment. Even where the contract contains afluctuations clause, if it contains a non-adjustable element, a delay in theexecution of work might well increase the non-recoverable element, whichwould be reimbursable.

4.2.5.8 INCREASED COST OF HEAD OFFICE OVERHEADS

Loss in the recovery of head office overheads is an admissible item but theamount of such loss may be difficult to substantiate. Overall percentages, notrelated to the particular circumstances, cannot be used.1

4.2.5.9 Wherever possible, proof should be sought of such items as extra site visits byhead office staff or the greater involvement of head office staff in managing

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1 Tate & Lyle Food and Distribution Co. Ltd & Another v. Greater London Council & Another (1982)1WLR 149

PART 4, SECTION 2


the project as a result of the matters giving rise to a claim. Appendix C givesfurther guidance on the components and methods of such an ascertainment.

4.2.5.10 Account should be taken of the extent to which extra costs are already beingreimbursed through the pricing of the variation account.

4.2.5.11 Where there has been a delay as a result of a relevant matter but no consequentincrease in value (thereby excluding some contribution to extra head officecosts) some extra recovery is an entitlement provided that this does not extendto include costs that should have been mitigated. It should also be shown that,but for this delay and the consequent tying-up of head office resources for alonger period than would otherwise have been the case, those resources couldhave been productively used elsewhere. The Courts have increasinglyrecognized that, providing all the pre-conditions are met, a formula approachto calculating this element maybe permissible.1

4.2.5.12 As with the recovery of loss of profit, however, it is important that overridingconsideration be given to the level of recovery that would have been possibleon alternative work had the contractor been free to do so (see 4.2.5.13).

4.2.5.13 LOSS OF PROFIT

If, as a direct result of a matter referred to in the conditions of contract, loss ofprofit is suffered which could have been earned in the normal course ofbusiness elsewhere, there is an entitlement to reimbursement of that profit.2

This amount should be calculated by reference to the level of profit to havebeen made by the use of the resources on other projects during the period ofretention on site as a direct result of the cause of delay. The level should bethat prevailing in the market during the period immediately following theoriginal date for completion or such earlier date at which the resources wouldhave been released from the contract. It might, therefore, be higher or lowerthan that contemplated in the contract sum. Moreover, where loss of profit isbeing calculated as a result of a delay caused by the execution of variations itis important that a deduction be made for any other profit reimbursed to thecontractor for those variations priced at contract rates.

4.2.5.14 FINANCE CHARGES

Clause 30.1.1.1 of JCT 98 now provides for the payment of interest, at 5%over the base rate of the Bank of England, for any payments which areoverdue. This is in line with the statutory right now available to certainclasses of businesses under the Late Payment of Commercial Debts(Interest) Act 1998. The JCT form expressly notes that the payment ofcontractual interest may not be construed as a waiver by the contractor of hisor her rights to proper and timely payments. However, finance charges arenot an interest on a debt, but a debt which has interest charges as one of itscomponent parts which have been paid by a contractor on money which was

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1 St Modwen Developments Ltd v. Bowmer & Kirkland Ltd (1996) 1996 CILL 12032 Peak Construction (Liverpool) Ltd v. McKinney Foundations Ltd (1970) 1 BLR 114

PART 4, SECTION 2


borrowed (or interest that could not be earned on capital) in order to financethe prime cost of the loss and/or expense. Such finance charges arereimbursable.1

4.2.5.15 Finance charges are recoverable from the date that the primary loss and/orexpense was incurred up to the time that the certificate, which included thepayment of that loss and/or expense, was issued, provided, as always, that theconditions in the contract in that respect have been met (see 4.2.3.3 (c)).

4.2.5.16 The rates and manner of interest payable should be those actually incurred (orbeing earned on capital).

4.2.6 Inadmissible Items

4.2.6.1 GENERALLY

It is not possible to list all the items which are inadmissible. However, it mightbe helpful to comment upon certain items which are occasionally claimed asbeing reimbursable when they are not. Among these the most usual are:

(a) The costs of acceleration, unless specifically approved by the employerbeforehand (see 4.2.6.2).

(b) The cost of preparing a submission for the reimbursement of loss and/orexpense.

4.2.6.2 THE COST OF ACCELERATION

In common with most lump sum contracts JCT 98 does not contain provisionsfor instructions to be given to accelerate the works. If acceleration is requiredit should be achieved by means of a separate agreement.

4.2.6.3 However, the contractor’s obligation whenever he is, or is likely to be,delayed is to “use constantly his best endeavours … to prevent the completionof the Works being delayed”. It is generally thought that the use of ‘bestendeavours’ is likely to be limited to the rescheduling of resources and thetaking of such measures as may be appropriate to allow the works to proceedwithout incurring (significant) costs.

4.2.6.4 THE COST OF PREPARING A SUBMISSION FOR REIMBURSEMENT OF LOSS AND/OR

EXPENSE

There is no contractual requirement for a contractor to prepare details of theamount of loss and/or expense and thus there is no entitlement to anyreimbursement for so doing.

4.2.6.5 Where, however, he provides the data which might be required by the quantitysurveyor under clause 26.1.3 the cost of so doing may be reimbursable.

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1 F G Minter Ltd v. Welsh Health Technical Services Organization (1980) 13 BLR 2



Appendix A: Ascertaining the Cost of Running a Site

The items given below are intended only as a guide; the list is not comprehensive.

A1 STAFF AND ADMINISTRATION

Note: This includes security and welfare personnel and the supervisory timeof trades foreman and the like.

Consider:

• staff salaries (including subsistence, guaranteed bonuses and allowanceswhere paid);

• travel costs, including cars and fuel;• national insurance, pensions etc. – employer’s contributions;• private health insurance – employer’s contributions;• employer’s liability insurance, third party insurance;• training levy;• redundancy fund, holidays with pay, superannuation; and• agency staff where applicable.

A2 TEMPORARY ACCOMMODATION

Consider:

• temporary offices – rental/repairs and maintenance;• stores – rental/repairs and maintenance;• canteen – rental/repairs and maintenance;• canteen equipment;• canteen consumables;• canteen subsidy;• signs, boards and notices;• fire-fighting equipment;• first-aid equipment;• nurse/first-aider;• site welfare and safety;• gas and electricity;• rates on temporary buildings;• telephone/facsimile lines/system rental;• telephone/facsimile calls;• mobile phone calls;• office furniture;• computers, including servers and data lines;• photocopiers – equipment and consumables;• office consumables and stationary;• drawing and copying;• postage/franking machine;• office cleaning;• sanitary accommodation and welfare facilities;• general cleaning and disposal;• general site wear; and• progress photographs.



A3 PLANT

This covers plant owned by the contractor or hired from a subsidiary orspecialist company. It is advised that the conditions of hire are examined.There is often a guaranteed minimum period of hire which would have beenpaid for in any case. When long delays have occurred, loss must be mitigatedby use elsewhere or the termination of the hire contract.

Consider:

• tower cranes;• mobile cranes;• banksmen and slingers;• weighbridge;• wheel washing facilities;• compressors;• mixers;• pumps;• hoists;• site surveying equipment;• site/crane radio system;• concrete testing;• general site equipment;• small plant and tools; and• rubbish removal (skips).

A4 TEMPORARY WORKS/ACCESS

Consider:

• temporary roads – maintenance; and• clean access and site roads.

A5 FENCING AND SECURITY

Consider:

• site boundary fencing/hoarding;• site compound fencing;• site security (including guards if appropriate); and• temporary weather proofing.

A6 DISTRIBUTION

Consider:

• service gang –cleaning, attendance and distribution;• forklifts and drivers;• dumpers and drivers;• telescopic hoists, including driver;• internal site transport; and• hoist drivers.



A7 SCAFFOLDING

Consider:

• extra hire;• adaptations; and• additional work – for example safety rails where scaffolding removed.

A8 TEMPORARY ELECTRICS

Consider:

• equipment – generators, transformers etc.;• fuel consumption;• consumables; and• maintenance.

A9 TEMPORARY WATER

Consider:

• water and sewerage – rates/metered consumption; and• maintenance.

A10 INSURANCE

Consider:

• contractor’s all risk;• public liability;• professional indemnity; and• performance bond.

A11 HEAD OFFICE STAFF COSTS

Consider:

• that proportion of time spent on project which is only applicable if notbooked directly to the project. See general comments at 4.2.5.8to 4.2.5.12 and Appendix C.

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Appendix B: Disruption

B1 THE EFFECTS OF DISRUPTION

B1.1 LabourFactors to be taken into account include:

• loss of productivity (labour resources must have been available and ableto have been used profitably elsewhere had the loss of productivity notoccurred);

• standing time;• overtime; and• changes in labour strength on the site and in gangs;

B1.2 PlantRefer to invoices to indicate additional costs due to:

• relocation of plant, on or off site;• additional plant;• additional tools;• alterations or additions to scaffolding; and• standing time.

B1.3 MaterialsExtra costs can be incurred due to the:

• double handling of materials;• waste and damage of materials;• return of materials to the store or supplier; and• substitution of materials.

B2 INFORMATION AVAILABLE TO THE CONTRACT ADMINISTRATOR/QUANTITY

SURVEYOR

B2.1 Apart from issued drawings, written instructions and correspondence, otherinformation that should be referred to includes:

• contractor’s programme and amendments;• site reports;• site measures;• clerk of works’ reports;• daywork records;• photographs; and• minutes of meetings.

B2.2 This information can assist in the ascertainment of the effects of instructionsupon progress.

B3 QUANTITY SURVEYOR’S CONSIDERATIONS

B3.1 It is important to receive from the contractor proper, detailed records ofdelays which disrupt progress. Ideally, this information needs to be in diaryform and should indicate:


Page 2 Part 4, Section 2 Effective from 1/6/99 The Surveyors’ Construction HandbookAppendix B (4/99

• the immediate effect upon working trades;• the knock-on effect upon succeeding trades, particularly sub-contractors;• the effect upon allied trades working in the vicinity;• the inability to divert labour elsewhere (i) on the site, and (ii) to other

contracts;• evidence of efforts made to divert labour to other contracts, or to

otherwise mitigate the costs of construction and effects of disruption; and• the relationship with nominated firms and sub-contractors and records

from them to substantiate the claim of disruption.

B3.2 There may be further items not covered above which the contractor couldbring to the notice of the quantity surveyor. In making an assessment ofdisruption, the quantity surveyor may require the tender progress intentionsof the contractor, and to examine data on which projections of progress werebased in order to indicate the effect that changes have had upon the planning.The information may include critical path analyses and similar information.

B3.3 The quantity surveyor should give careful consideration to all thisinformation and judge its relevance to the particular matters being examined(but see 4.2.4.2).G


Appendix C: Ascertaining the Cost of Head Office Overheads

C1 HEAD OFFICE OVERHEADS

A contractor seeking direct loss and/or expense in relation to head officeoverheads will probably include some or all of the following:

• company offices, rents and rates;• plant yards;• running costs/maintenance costs of these units;• directors’ and staff’s salaries, emoluments and allowances (estimating and

sales staff should not be included);• expenses, including office equipment, postage, telephones etc.;• cost of travelling, including allowances for company’s motor cars etc.;• professional legal and/or accountancy fees; and• depreciation.

C2 ESSENTIAL BACKGROUND INFORMATION

C2.1 Consider the method adopted by the contractor as policy in incorporatingthese costs in his tenders:

• percentage;• lump sum(s) (specify how compiled); and• spread in rates of all items.

C3 ASCERTAINMENT OF THESE COSTS

C3.1 Check:

• time records or diaries which may indicate additional time spent withconsequential financial disbursements (this should be time arising fromrelevant events over and above that which would have been spent onordinary administration of the contract);

• proof of payment made on all admissible items; and• details showing build-up of general head office costs at the relevant time

or throughout any relevant period.

C3.2 For a contractor to succeed, it is recommended that the quantity surveyor isreasonably satisfied that:

• time expended was additional to that reasonably to have been expected;• the extra costs have not been recouped in other ways (for example from

set-off or other arrangements with sub-contractors);• any loss and/or expense sought has not been avoided by re-deployment of

resources on other contracts;• additional costs have not been recovered through rates for measured

works;• additional costs have not been recovered in dayworks; and• head office staff costs have not been recovered elsewhere.


C4 FURTHER CONSIDERATIONS FOR THE QUANTITY SURVEYOR

C4.1 At what stage in the contract did delays occur and what was the impacton head office costs? (The costs are unlikely to have been incurreduntil the end of original contract period.) While it is correct that theactual sum allowed in the contract price for head office overheads willnot necessarily be expanded by the contractor until after the end of theoriginal contract period, the contractor will actually incur theadditional costs at the time of the delay and since it is likely thatoverhead recovery will be delayed as a result of the later execution oforiginal contract work then the additional overheads could be payablebefore the end of the original contract period.

C4.2 What were the relevant events giving rise to delays under theconditions of contract? Were head office costs applicable to thoseevents?

C4.3 To what extent was the head office involved in, for example, site visits,meetings etc.?

C4.4 Was there a need to employ additional head office staff whether or nota delay had occurred?

C4.5 How effectively did the firm employ staff on this contract as againstother contracts that they were undertaking?

C4.6 What was the size of the contract in relation to the size of the firm and,therefore, the impact of the delay to progress on the business of thefirm?


The Surveyors’ Construction Handbook Part 4, Section 2 Effective from 1/9/01 Page 1Appendix D (revised 07/01)

Appendix D: Checklist of Items for which Loss and/or Expense are Allowed

The contract clause numbers referred to in this form are from JCT 98

Contract clause number

Item Tick

26.2.1 The contractor not having received in due time necessary:instructionsdrawings, details; andlevels

for which he specifically applied in writing provided the date of application was neither unreasonably close to nor distant from the date the contractor needed them bearing in mind the date of completion

26.2.2 Inspection – tests under clause 8.3:opening up for inspection any work covered up and making good testing of any executed work and making good unless inspection reveals items not in accordance with the contract

26.2.3 Discrepancy or divergence between the contract drawings and/or the contract bills

26.2.4 Execution of work (not forming part of the contract) by the employer or by persons engaged by him; failure by these parties to execute such work

26.2.5 Postponement by the architect of any work to be executed under the contract

26.2.6 After receipt of any notice the contractor is required to give, failure by the employer to give ingress or egress in due time to the contractor from the site of the works or any part thereof in the possession and control of the employer, in accordance with the contract bills/contract drawings:

through or over land, buildings, way or passage adjoining or connected with the sitethrough or over land etc. as last item as otherwise agreed between architect and contractor

26.2.7 Instructions issued regarding expenditure of provisional sums except work being carried out as a PC sum by the contractor after submission of a tender for it, but excluding variations for which a clause 13A quotation has been accepted

26.2.8 Execution of approximate quantity work where bills are not a reasonably accurate forecast


The Surveyors’ Construction Handbook Part 4, Section 2 Effective from 1/9/01 Page 1Appendix E (revised 07/01)

Appendix E: Checklist of Steps Required when Considering Submissions by Contractor

The contract clause numbers referred to in this form are from JCT 98.

Contract clause number

Item Comments from the quantity surveyor

Tick

26.1 The contractor has applied in writing stating:

he has incurred/is likely to incur direct loss and/or expense not reimbursed by any other contract provision

progress has been/is likely to be materially affected by the items listed in clause 26.2

26.1.1 The contractor has made application as soon as it was reasonably apparent that:

the regular progress of the works/or part of the works has been/is likely to be affected

the contract administrator has requested supporting details to enable an opinion to be formed

26.1.2 The contractor has upon request:

supported the application with information to enable an opinion to be formed

26.1.3 The contractor has upon request:

provided details of loss and/or expense to assist ascertainment

The architect has:

requested information from the contractor (26.1.2, 26.1.3) to form an opinion

has ascertained/requested the quantity surveyor to ascertain the amount of loss and expense

The architect has stated in writing:

the extension of time granted (if any) from time to time during the contract

the relevant event(s) for which it is given (clause 25) and more particularly defined in clause 26.3

25.3.4 A new completion date; not later than 12 weeks after receipt of this notice, sufficient particulars and estimate (where completion is less than 2 weeks distant, set a date not later than completion date)


The Surveyors’ Construction Handbook Part 4, Section 2 Effective from 1/9/01 Page 1Appendix F (revised 07/01)

Appendix F: Further Reading

BOOKS

Chappell, David. Powell-Smith and Sims’ Building Contract Claims, 3rd Edition,Blackwell Science Ltd, 1998

Duncan-Wallace, I N. Hudsons Building and Engineering Contracts, 11th Edition,Sweet & Maxwell, 1995

Keating, Donald and May, Anthony Sir. Keating on Building Contracts, 7th Edition,Sweet & Maxwell, 2001

Parris, John. The Standard Form of Building Contract JCT 80, 2nd Edition, Collins,1985

Powell-Smith, Vincent and Furmston, Michael. A Building Contract Casebook, 2ndEdition, BSP Professional Books, 1990

Trickey, G G and Hackett, M. The Presentation and Settlement of Contractors’Claims, E & FN Spon, 2000

LAW REPORT SERIES

Building Law Reports

Construction Industry Law Letter

Construction Law Digest

Construction Law Reports

PART 4, SECTION 3



SECTION 3: THE MANAGEMENT OF RISK

Introduction

Risk is present in all projects and surveyors are routinely involved in makingdecisions which have a major impact on risk. Risk management is concernedwith establishing a set of procedures by which risk is managed, rather thanbeing dealt with by default. Major clients, such as Network Rail and BAA,already have formal procedures in place for managing risk. Other clients arelikely to seek guidance from their professional advisers, which includessurveyors, on how best to deal with risk.

The effective management of risk can only be achieved by the actions of thewhole project team, including the client. The role of a risk manager is tofacilitate input into the project management process such that risk iseffectively dealt with. With further training, surveyors are well placed toundertake the role of risk manager. The role can be either full- or part-time,combined with other responsibilities on the project.

The risk management process outlined in this section can be applied to anyprocurement route and to new build or refurbishment-based projects,regardless of cost or technical complexity.

Risk management formalises the intuitive approach to risk which projectteams often undertake. By utilising a formal approach, risk may be managedin a more proactive manner. Essentially, there are three steps to perform:

• identification – collect the information available which might affect theachievement of an objective;

• analysis – assess to what extent these aspects might affect the objective;and

• response – review what can be done to limit this effect.

In addition, there needs to be an overall management strategy such that thisthree-step process is implemented in a co-ordinated fashion. This strategyshould include how risk management will be integrated into the projectmanagement process on a project.

This section of the handbook provides an overview of the principles of riskmanagement. The procedures outlined should produce a framework that canbe utilised on the majority of construction projects. Surveyors who want to

PART 4, SECTION 3


specialise in the application of risk management are advised to undertakefurther training in this area with a recognised training provider.

4.3.1 Definitions

In the context of this section of the handbook, risk management is consideredto be a process for identifying, assessing and responding to risks associatedwith delivering an objective, for example, a construction project, and the focusis on commercial type risks. Health and safety related risks are likely to needseparate consideration and the Health and Safety Executive (HSE) providespecialist guidance in this area.

Definitions for key terms used in this section are:

4.3.1.1 Risk: An uncertain event which, should it occur, will have an effect on theachievement of the project’s objectives. A risk can be measured in terms oflikelihood (probability) and consequence (impact).

4.3.1.2 Risk management: A structured and auditable process for the benefit of allmembers of the project team which is dedicated to the sole purpose ofcontrolling and mitigating uncertainty in a project.

4.3.1.3 Risk identification: The utilisation of methods assessed as effective andappropriate (desk-top studies, interviews, brainstorming, etc.) to collate all thepotential uncertainties in delivering an objective.

4.3.1.4 Risk analysis: An adequate and effective assessment of the individual andcombined effect of identified risks on the successful delivery of the objective.

4.3.1.5 Risk response: An action to reduce either the probability of risk arising or thesignificance of its detrimental impact if it should arise.

4.3.1.6 Risk management plan: An auditable document which describes the riskmanagement approach (identification, analysis and response) to be adoptedfor a specific project or objective delivery and which states who shouldundertake it and when.

4.3.1.7 Risk register: A document listing all the risks identified for the project,explaining the nature of each risk and recording information relevant to itsassessment and management.

4.3.2 The rationale for risk management in the construction process

4.3.2.1 Surveyors will invariably be called upon to advise clients as to whether theyshould undertake risk management on their project. While the benefits of risk

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management may not be immediately apparent to clients, the direct costs ofundertaking the process will be.

4.3.2.2 The demands of delivering a construction project are extremely onerous. Thedesire to deliver projects cheaper and faster, while moving closer to theboundaries of innovative design, all increase the risk profile of a project. Inthis respect risk is good, without it there would be no opportunity. It is the verypresence of risk that represents the opportunity for a building project to goahead in the first place.

Furthermore, the actual impact of risk is unique to a project even though itspresence may be commonplace. The risk management process may not be atfault just because risks were realised. Indeed, if no risks were realised, theeffectiveness of risk assessment would be questioned because without riskthere would be no opportunity.

4.3.2.3 Risk management is not a panacea and there are likely to be times when it maynot be effective to practise all its facets. However, the delivery of anyobjective can be made more effective if the risks are fully appreciated. Thereis a need for appreciation of risk not just its analysis. The extent of analysisnecessary is related to the extent to which the cumulative effects of risks canbe appreciated.

4.3.2.4 Risk management, together with other services provided, should be flexible,adapting to the circumstances of the client’s needs and the project. Someclients require a snapshot of the risks at the outset of the project, with an initialrisk assessment, the provision of a one-off risk register and a quick estimate ofthe combined effect. Other projects may require a full risk managementservice with risk being continually addressed throughout the project.

4.3.2.5 A concern often voiced by clients is how to quantify the benefits of riskmanagement. Since risk management has a major emphasis on reducingpotentially detrimental effects, it is not usually politic to demonstrate itseffective application as having minimised the impact of cost overrun to,say, 15%.

4.3.2.6 THE RECOGNITION OF UNCERTAINTY

By undertaking risk management, it is possible to ensure that clientsappreciate just how sensitive their projects are to changing circumstances.This leads to:

• increased confidence in achieving the project objectives and thereforeimproved chances of success;

• ‘surprises’ being reduced, such as cost and/or time overruns and/orforced compromises of performance objectives. These surprises usuallyresult in ‘fire fighting’ and the ineffective application of urgentremedial measures;

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• identification of opportunities as risks are diminished, perhaps byrelaxing overcautious practices such as duplicating insurances orseeking performance bonds unnecessarily;

• all ranges of parameters which might affect the project beingincorporated, rather than a single-point estimate (for example, the costfor bricks can be between £200 and £300 per 1000 rather than £225); and

• the team recognising and understanding the composition ofcontingencies, thus avoiding duplicating any allowance already made.

4.3.2.7 JUSTIFIABLE DECISION MAKING

Risk management allows decision making to be based on an assessment ofknown variables. Judgement can become far more objective and justificationfor action (or inaction) demonstrable both at the time and at a later date,should it be questioned. There are a wide range of techniques which can beutilised to facilitate effective decision making. The use of risk managementprovides an audit trail which can be used should problems occur during laterstages of the project.

4.3.2.8 TEAM DEVELOPMENT

During risk management workshops a ‘snapshot’ of what might happen to thedelivery of a project is taken. During the workshops the project team discussesits concerns and agrees a common way forward. As with other types offacilitated workshops, such as value management, this benefit alone canjustify undertaking risk management. The advantages are:

• it facilitates team development;• it is a communication tool;• it opens up discussion on what could go wrong without fear of penalty;• it acknowledges but transcends contractual restrictions;• it challenges preconceptions; and• it affirms the project procedures.

4.3.2.9 In summary, to fully realise the benefits of risk management, certainprinciples should be understood and appropriately applied:

• risk management is an awareness of uncertainty;• awareness of uncertainty can lead to positive attributes if recognised

early enough;• risk management will add both direct and secondary benefits to the

delivery of any objective;• the management of risk should not remove incentive;• allocation of risk is to be gauged by the various parties' abilities to bear

and control that risk;• complete transfer of risk is rarely wholly effective;• information about and perception of a risk are fundamental to its

assessment and acceptance; and• all risks change with time and any action (or inaction) taken (or not

taken) upon them.

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4.3.3 The risk management process

There are three basic steps to the risk management process; identification,analysis and response. These three steps are iterative in nature and it is thisiteration which constitutes risk management.

4.3.3.1 A risk cannot be managed effectively unless it is identified. The earlier a risk isidentified, the more time is available for analysis and the development of asuitable response. Although the process is linear it does allow for iteration andis designed to be proactive. Unfortunately, most risk is still dealt with in areactive manner where a response has to be devised and implemented as soon asthe risk arises. This reactive response does not allow any time for identificationand analysis and the right response may not always be implemented.

4.3.3.2 The risk management process also needs to be integrated into the projectmanagement process. Since any risk management workshop or assessment isa snapshot in time, the process has to be undertaken on a repetitive basis.Essentially, the risk management process should be commenced as early aspossible in a project life cycle and each of the three stages repeated asnecessary to effectively manage the risks associated with that project. At thestart of the process a risk management plan should be developed. The riskmanagement plan is similar in nature to the project execution plan and mayform part of that document.

4.3.3.3 RISK IDENTIFICATION

The identification stage should commence as early as possible, preferably aspart of any feasibility study for the project. One of the key principles is that theidentification of risks should be undertaken at various stages of the project lifecycle. Identification is not just undertaken at the start of the project and thensimply monitored during construction. The construction phase itself willgenerate new risks and the project team is expanded by new members in theform of trade contractors who can bring additional information to the riskidentification process.

(a) Methodology

(i) Structured identification of all sources of risk to the projectThe risk management process is based on the concept of providing astructured approach to dealing with risk. It may seem obvious that ground

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PART 4, SECTION 3


conditions are one source of risk, but how would this impact on other risks thatmight be identified on the project? It is this inter-relationship between risksthat can only be drawn out through the use of a structured workshop andidentification methods where the whole project team have the ability tocontribute.

(ii) Preliminary analysis to establish probable major risks for furtherinvestigationThe identification stage is designed to prompt team thinking and to bring outall possible risks that might impact on the project. Several hundred risks couldbe identified and the team may not have time to analyse and develop responsesto them all. It is normal during the identification stage to begin by sifting andremoving those risks which the team feel are not worth investigating further.

(iii) The true risk needs to be identified. Risks are caused by backgroundconditions which are essentially ‘givens’ e.g. location of site. If the risk doesoccur it will affect the project. This is shown diagrammatically below.

Cause, risk and effect

It is all too easy to mistakenly manage the effect rather than the risk itself. Byidentifying and managing the true risk, effort is expended managing the riskrather than the effect.

(b) Techniques

(i) ResearchWhile exactly the same project will not have been executed before, somethingsimilar will have been. Investigation into projects on neighbouring sites orprojects previously undertaken by the client should be instigated.

(ii) Structured interviews/questionnairesInterviews with key members of the project team (including client andsuppliers) will elicit the greatest insight into risks to the project and how theyare perceived by individuals. Interviews allow a greater depth of understandingto be achieved than group discussions but do take up a lot of time.

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(iii) Checklists/prompt listsA simple and effective way to stimulate the team into thinking about risk is touse a checklist. An easy way to start a checklist is for each team member towrite down all the variation orders on their last project, with the reasons fortheir issue.

(iv) Brainstorming in a workshop environmentBringing the team together in a focused workshop creates a powerfulenvironment in which to discuss risk. The team can have a betterunderstanding of how each member perceives risk differently. One importantaspect of such workshops is that lateral thinking is encouraged. The workshopgives the team an opportunity to experiment with different viewpoints whichindividuals might normally reject out of hand if working alone.

(v) Risk registerA risk register is probably the most useful tool in the risk managementprocess. It enables risks to be logged and tracked through the life of a project.While a risk register can be maintained by hand, it is much more useful to usea computer spreadsheet package. This allows the information to be sorted intodifferent categories. Specialist risk management software is also availablewhich integrates the risk register with risk analysis tools.

An example of a risk register is shown in figure 1. The example is very genericin nature and additional information may be shown, such as who isresponsible for undertaking actions in response to the risk and by when.

Typical column headings for a risk register are:• Risk number – a unique identifying number for the risk.• Risk description – a written description of the risk.• Ownership – who is responsible for the management action in

responding to the risk.• Probability – how likely is the risk to occur.• Impact – what happens if the risk does occur.• Risk factor – probability multiplied by impact.• Response – what actions need to be taken to deal with the risk.• Status – the status of the risk can be shown as:

– done: the risk has arisen and been dealt with;– active: the risk is currently being managed; and– monitor: the risk has been identified but no analysis or response

has yet been developed for it.• Comments – allows notes to be kept on the risk.

The probability and impact of the risk can also be shown; the importance ofthese factors is discussed in 4.3.3.4(a). Finally the response to the risk can beshown.

The risk register is a very useful format for showing a wide range ofinformation in the risk management process. If the register is placed on a

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Fig

ure

1:T

ypic

alR

isk

Reg

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computer spreadsheet it is easy to sort the risks in a variety of ways, forinstance by category or magnitude of probability. The risk register allowsrisks to be logged but can also display additional information linked to theproject management process.

It is also possible to place identified risks into categories, for example, ‘clientcontrol’. In figure 1 six categories are shown, but these can be altered to suitthe circumstances of each project. The use of categories allow risk to bebundled together and can help responses to be tailored to deal with a category,rather than an individual risk.

(vi) Database of historic risksExperience is a ‘great teacher’ and the provision of a risk register allowsinformation to be stored in a convenient format ready for use on the nextproject. The benefit of historical risk registers is that you know if a riskactually occurred and whether the appropriate response was set in place. Thehistoric database should be used as a starting point in the risk managementprocess, but although it may save some time in the identification stage, thisstage cannot be completely omitted.

4.3.3.4 RISK ANALYSIS

The analysis stage is concerned with trying to achieve a better understandingof the nature of the risks identified during the previous stage.

(a) Methodology

(i) Analysis of risks to assess the severity of impact and the probability ofoccurrenceRisks have two dimensions:

• probability – this is the likelihood of the risk occurring and is generallyexpressed as a percentage; and

• impact – if the risk did occur what impact would it have on meeting theproject’s objectives.

For each of the risks identified, its probability and impact should be assessed,normally in a workshop environment with key stakeholders present.

Before the risks can be entered onto the risk register, a scale should be set forthe probability and impact dimensions. Setting a common scale will ensure aconsistent approach to placing newly-identified risks on the matrix at a laterstage in the project life cycle. An indicative layout for defining scales is shownin figure 2.

While the probability scale shown in figure 2 may be utilised for any project,the impact scale should be set for each project. In figure 2 the cost and timeimpacts are shown as a percentage of the original cost and time. Hence a veryhigh impact would mean the cost of the project would increase by more than50% of the original budget.

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Although time and cost impacts have been shown separately it is possible tocombine them, or to use other criteria such as performance. Again, the scaleshould be set according to the needs of a project. Once set the scales shouldnot be changed during the life of a project. This allows risks to be comparedon a common scale throughout a project and for the risk profile of a project tobe accurately monitored.

A higher level of sophistication can be applied to the ranking of the risks onthe probability/impact matrix. By assigning generic units to a matrix, therelative importance of each cell can be seen, as shown in figure 3.

The method of having the probability scale linear and the impact scalenon-linear emphasises the significance of low probability/high impact risks.The matrix allows each risk to be ranked and compared on an even basis.Where resources are scarce it also allows attention to be focused on those riskswhich sit in the high-risk category of the matrix.

Once assessed, plotting risks on to a matrix, as shown in figure 4, indicatesvery quickly those risks which require detailed consideration and those whichonly need a cursory glance. So, a risk with a high probability of occurring,which does occur, would have a very high impact on the project and wouldrequire detailed consideration. This allows the right amount of resource to be

Figure 2: Scoring of probability impact scales

PROBABILITY IMPACT

Cost Time

Very high 70% – 95% > 50% > 50%

High 50% – 70% 20 – 50% 20 – 50%

Medium 30% – 50% 10 – 20% 10 – 20%

Low 10% – 30% 5 – 10% 5 – 10%

Very Low 5% – 10% < 5% < 5%

Figure 3: Example of weighting of probability and impact scales

PART 4, SECTION 3


used in managing risk. The risk ID numbers from the risk register in figure 1have been plotted in figure 4 to demonstrate the principle more thoroughly.

The probability/impact matrix (figure 4) allows a risk profile for a project tobe developed. For instance, if most of the risks are plotted in the top leftsection of the matrix it indicates a high-risk project. This matrix is very usefulfor providing a graphical representation of the risk on a project. The riskmanagement strategy is to manage these risks proactively through the projectlife cycle. During later risk assessment exercises, the profile should show risksplotted more in the bottom right section of the matrix.

(ii) Synthesis of all risks to predict the most likely project outcomeRisk tends to have a ‘knock-on’ effect and so it is important to consider notonly the effect of individual risks but their cumulative effect as well.

(iii) Investigation of alternative course of actionsAnalysis allows for different scenarios to be developed to provide a highdegree of confidence that the appropriate course of action has been chosen.The alternative courses of action may be plotted on the probability/impactmatrix to obtain a clearer understanding of their relative merits in relation tothe risk profile.

(b) Tools and techniques

The probability/impact matrix is the easiest technique to use and allows allproject team members to participate in the process via a risk workshop. Moresophisticated tools and techniques may be applied to provide a betterunderstanding of the identified risks. There are a wide range of such tools andtechniques available, many of which are supported by computer softwarepackages:

Figure 4: Mapping risks onto the probability/impact matrix

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• Monte Carlo simulation modelling of cost and time risks;

• cost movement forecast;

• decision trees;

• sensitivity analysis;.

• hard/soft money analysis;

• ‘what if?’ analysis;

• influence diagrams;

• simulation packages;

• multiple estimate risk analysis (MERA);

• spider diagrams;

• multi-decision criteria analysis;

• linear regression;

• spreadsheets; and

• flowcharts.

It is not possible to provide an explanation of all the tools and techniquesavailable. However, further information can be obtained from one of the textsin the further reading section (appendix A).

4.3.3.5 RISK RESPONSE

The analysis stage provides the team with a better understanding of the risks.The next stage is to develop a response to those risks.

(a) Methodology

(i) Choose the appropriate course of actionThe principle is to choose the right response based on available information.It might be that the response changes with time as more information becomesavailable. The response will generally fall into one of the followingcategories:

• avoid;

• transfer;

• mitigate; and

• control.

An important point to consider when developing responses concerns thegeneration of secondary risk. When a response is proposed, its fullimplications should be assessed to ascertain if a secondary risk arises out ofimplementing the response. If the sum of the secondary risk plus the reducedrisk (the original risk with the response in place) is greater than the originalrisk, then an appropriate response has clearly not been identified and analternative should be found.

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(b) Tools and techniques

The techniques available are primarily integrated with the projectmanagement process, for example:

• contract acquisition plan;

• contingency management; and

• project controls.

The tools available are not usually related purely to risk management. Forinstance, most surveyors would recommend to their clients that the contractorhas third party insurance for the project. This is a risk management responsedesigned to reduce clients’ exposure to claims for damages if a particularincident were to occur. This is a risk management tool, although mostsurveyors would consider it to be common project procedure. Typical toolsavailable are:

• insurances/bonds/warranties;

• contingency plans;

• forms of contracts;

• contingency drawdown models;

• special cost schedule allowance;

• earned value analysis;

• resource levelling; and

• training.

All responses to risks that are put in place should be managed. This shouldform part of the project management system. Unless responses are effectivelymanaged, the whole risk process fails. Until a response is actioned, the riskmay still occur, regardless of how well it has been identified and analysed.

Figure 5: The creation of secondary risks

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4.3.4 Summary

In conclusion, the key components of a risk management strategy are:• identify staff and resources assigned to the risk management process;• define lines of reporting and responsibility for the risk management

process;• link the risk management plan to other project tools such as safety

(including CDM), quality and environmental management, andplanning and reporting systems;

• consolidate all risks identified into an appropriate and digestibleresponse strategy in order that cumulative effects can be perceived;

• state risk audit intervals and key milestones;• include risk milestones in project plan;• identify possible response strategies and programmes for each risk

category including contingency plans and how to handle new orunresolved risks;

• assess cost involved; and• monitor success of responses strategies and produce feedback for

reporting into future projects.

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Appendix A: Further reading

Akintoye, A. et al., Local Authority Risk Management and the Private Finance Initiative,Royal Institution of Chartered Surveyors, London, 1999 (ISBN 0 85406 990 9)

Akintoye, A. et al., Public Private Partnerships: Managing Risks and Opportunities,Blackwell, Oxford, 2003 (ISBN 0 63206 465 X)

Boothroyd, C. et al., Risk Management: a Practical Guide for ConstructionProfessionals, Witherby Publishing, London, 1996 (ISBN 1 85609 120 1)

BSI, Project Management. Guide to the Management of Business Related Project Risk(BS 6079–3:2000), British Standards Institute, London, 2000 (ISBN 0 580 33122 9)

Chapman, C. and Ward, S., Project Risk Management: Processes, Techniques andInsights, John Wiley and Sons, Chichester, 1997 (ISBN 0 47195 804 2)

Edwards, L., Practical Risk Management in the Construction Industry, ThomasTelford, London, 1995 (ISBN 0 72772 064 3)

Flanagan, R. and Norman, G., Risk Management and Construction, BlackwellScientific Publications, Oxford, 1993 (ISBN 0 63202 816 5)

Godfrey, P. S., Control of Risk: a Guide to the Systematic Management of Risk fromConstruction (SP125), CIRIA, London, 1996 (ISBN 0 86017 441 7)

Smith, N. J. et al., Managing Risk in Construction Projects, Blackwell Science,Oxford, 1998 (ISBN 0 63204 243 5)

Taylor, M., Avoiding Claims in Building Design: Risk Management in Practice,Blackwell Science, Oxford, 2000 (ISBN 0 63205 326 7)

Tweeds, Laxton’s Guide to Risk Analysis and Management,Laxton’s/Butterworth-Heinemann, Oxford, 1996 (ISBN 0 75062 973 8)

PART 4, SECTION 4

PART FOUR: CONSTRUCTION ADMINISTRATION ANDMANAGEMENT

SECTION 4: VALUATIONS FOR INTERIMCERTIFICATES

Introduction

Many construction projects require interim payments to be paid to acontractor. This is in order to relieve the contractor of the burden of financingthe whole of the works until completion; works which may take many monthsor years to complete.

The purpose of valuations is to provide advice to the certifier on aconstruction project (usually the architect) for the issue of interim certificates.The certificates issued by the certifier to the contractor are then presented bythe contractor to the employer who pays the contractor on an interim orinstalment basis.

Within each contract there will be clauses which set out the criteria underwhich interim payments will be made, the timing of these payments and theadministrative rules under which quantity surveyors, architects, employersand contractors must operate. In many contracts, whilst the completion andcalculation of the value is important, the method and procedure of the interimpayment which the contractor receives is equally as important.

This section of the handbook provides guidance to surveyors carrying outsuch valuations.

4.4.1 Valuations

An interim valuation involves a revaluation of the whole work, not the workdone since the last certificate was issued. The valuations should be treatedalmost as ‘mini final accounts’ as they generally reflect all the matters anditems which appear in a final account. Interim valuations may now besubjected to the same scrutiny as final accounts as they may be the subject ofadjudication provisions in contracts and per se are required to be compiledwith care.

The valuation must be a realistic assessment. A low valuation createsunreasonable financial problems for a contractor whereas a high valuationcreates a risk to the employer of paying sums for which he or she obtains nobenefit.


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The quantity surveyor’s purpose is to assess value as distinct from cost,particularly with reference to prices of certain items, for example temporaryworks.

The quantity surveyor carrying out the valuation must be aware of the overallposition of any valuation within a project; to assess what remains of theanticipated final contract value after each valuation and ensure that within theterms of the contract this will be adequate to complete the works. This actionis particularly valid towards the end of the contract.

4.4.2 Assumptions

It has been assumed throughout this section of the handbook that the interimvaluation by the quantity surveyor is provided for the benefit of an architect:the person who certifies the amount of the valuation to the employer. UnderJCT contracts that person is normally the architect but could be referred to asthe contract administrator.

This section has been prepared from the standpoint of a quantity surveyoracting for an employer, assuming normal terms of appointment.

A basic checklist of actions necessary for practicing quantity surveyors isprovided below. However, it should be noted that any specific directiveswithin the quantity surveyor’s own organisation (such as those within qualityassurance schemes) should supplement this advice.

4.4.2.1 JCT FORM OF CONTRACTS

Most quantity surveyors carry out interim valuations under a JCT Form ofContract. Therefore, this section is based on the JCT Standard Form ofBuilding Contract With Quantities 1998 (JCT 1998 With Quantities). Thiscontract is only intended for use where the client has engaged a professionalconsultant to advise on and to administer its terms.

It is recognised that there are differing methods of procurement and differingforms of contract being used. However, the principles set out here will remainvalid. Variations required for different contract terms will be noted later.

4.4.2.2 ROLE OF A QUANTITY SURVEYOR IN CARRYING OUT VALUATIONS FOR INTERIM

PAYMENTS

This section of the handbook assumes that the quantity surveyor has normalterms of appointment and the relative roles of the quantity surveyor carryingout a valuation for an employer under a normal JCT contract.

The guidance in this section is equally relevant to a quantity surveyor actingfor a contractor who will be required to produce valuations in similarcircumstances to that of a quantity surveyor acting for an employer.


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4.4.2.3 DEFINITIONS

Quantity Surveyor This refers to a valuer acting independently for anemployer and carrying out a valuation under a JCT1998 contract. In this section the quantity surveyormay be a quantity surveyor acting for an employer or aquantity surveyor acting for a contractor.

Architect This generally refers to an architect acting for anemployer or, if the local authorities version of the JCTcontract is used, a contract administrator.

Employer The client as used in JCT 1998.

Contractor In JCT 1998 With or Without Quantities the contractoris assumed to be a main contractor who may be askedto employ nominated sub-contractors or requestpermission to sub-contract portions of work todomestic sub-contractors.

4.4.2.4 LEGISLATION

The requirement to provide stage or interim payments is now contained in theHousing Grants and Reconstruction Act 1996 where it is stated in Section 109that, ‘A party to a construction contract is entitled to payment by installments,stage payments or other periodic payments for any work…’

Parties to the contract are free to agree the amounts of the payments and theintervals at which, or circumstances in which, they become due.

Section 110 of the Act states that every construction contract shall provide anadequate mechanism for determining what payments become due under thecontract and provide for a final date for payment in relation to any sum whichbecomes due.

Section 111 states that a party to a construction contract may not withholdpayment after the final date for payment of a sum due under the contractunless an effective notice of intention to withhold payment has been given.

4.4.3 Valuation Under a JCT Contract: Background

The current JCT contract (and the one referred to in this part of the section)is the JCT Standard Form of Building Contract With Quantities 1998 (JCT1998 With Quantities).

JCT 1998 With Quantities contains the right of the contractor to interimpayments at clause 30 (Certificates and Payments). Clause 30.1.1.1 statesthat, ‘The Architect shall from time to time ... issue Interim Certificates


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stating the amount due to the Contractor from the Employer specifying towhat the amount relates and the basis on which that amount was calculated.’

Clause 30.1 also sets out a timescale for payment and the right of thecontractor to interest if the timescale is not adhered to by the employer.

The employer has to advise the contractor of the amount which he or she isdue to be paid and the amount of, and reason for, any deduction to thatpayment.

Clause 30.1.2.1 states, ‘Interim valuations shall be made by the QuantitySurveyor whenever the Architect considers them to be necessary for thepurpose of ascertaining the amount to be stated as due in an InterimCertificate’. Clause 30.1.2.1 allows the contractor to submit an application forpayment to the quantity surveyor which should set out what the contractorconsiders to be the amount of the gross valuation. The quantity surveyor, inresponse to the contractor’s submission, ‘shall make an interim valuation’. Itis essential that the quantity surveyor makes and issues a valuation even if theinterim payment calculation is zero.

Under clause 30.1.3 the dates for the first and subsequent interim certificatesare set out in the Abstract of the conditions.

Clause 30.2 states how the amounts due in an interim certificate are to beascertained. It follows that any interim valuation prepared by the quantitysurveyor should follow the same method as that for an interim certificate.

In clause 35.13 it is stated that the architect shall direct the contractor as tointerim payments to nominated sub-contractors. The ascertainment ofamounts due to nominated sub-contractors are calculated in accordance withclause 4.17 of the JCT 1998 Nominated Sub-Contract Conditions (NSC/C).

Clause 4.17 contains step-down provisions similar to clause 30.2 of JCT 1998With Quantities and the works of nominated sub-contractors are assessed inthe same manner as that of the main contractor.

4.4.4 Recommended Action at the Start of a Contract

4.4.4.1 CONTRACT REQUIREMENTS

(i) Check that the architect requires regular valuations for interimcertificates and refer to the contract for the frequency;

(ii) Note whether there are any ad hoc amendments made to the standardform of contract that have a bearing on interim certificates; and

(iii) Prepare a job progress chart and cash flow forecast ready for checkingagainst the value of work completed at successive valuations.


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4.4.4.2 EMPLOYER’S REQUIREMENTS

(i) Check that the programme of valuations and certificates matches theemployer’s programme of payments;

(ii) Confirm the programme of valuations and certificates with thearchitect; and

(iii) Check whether the employer requires valuations to be built up undervarious headings.

4.4.4.3 GENERAL ADMINISTRATION

(i) Obtain a breakdown of preliminaries from the contractor (if notpreviously supplied);

(ii) Note any adjustments to the contract price made in the summary of thebills of quantities or elsewhere;

(iii) If not already detailed, establish which preliminaries are one-offexpenditure items and which are related to time or to value of workdone; similarly, with the items in the summary of the bills of quantities;

(iv) Where there are to be fluctuations, refer to 4.4.9.3 of this section; and

(v) Calculations made in the course of the interim valuation should be setout in a clear form and retained for future reference. Any details whichare applicable to the final account should be collected together as arunning record.

4.4.5 Communications

4.4.5.1 PRELIMINARY DISCUSSIONS WITH THE CONTRACTOR

(i) Agree with the contractor the programme of valuations decided withthe employer, in line with the employer’s arrangements for payment;

(ii) Arrange a procedure for the receipt and verification of invoices,daywork sheets and other supporting information. Remind thecontractor that you will be keeping/organising a close watch in themonitoring and checking of daywork and labour returns, and that yourown records will be kept. Stipulate that the provision of the contract forsubmitting daywork records (clause 13.5.4) must be seen asrepresenting the latest permissible time for submission; and

(iii) Agree the basis on which preliminaries and sums in adjustments to thetender (and/or in the correction of errors) will be incorporated intovaluations.


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4.4.5.2 PRELIMINARY DISCUSSIONS WITH THE CONSULTANTS

(i) Provide the consultants responsible for preparing valuations forspecialist work with details of the interim valuations programme andagree deadlines for the consultants submission to you; and

(ii) Arrange with the architect a detailed procedure for recording thecontractor’s resources on site. Obtain the architect’s agreement that youset up this procedure, including briefing and controlling the clerk ofworks in this respect. Remind the architect that he or she (or authoriseddeputy) has responsibility for verifying daywork.

4.4.5.3 PRELIMINARY DISCUSSIONS WITH THE NOMINATED SUB-CONTRACTORS

(i) Inform the nominated sub-contractors of the valuations programme andmake arrangements for the valuation of their work (the evaluation to bemade by you, or by the consultant (vetted by you) in the case ofspecialist work where a specialist consultant is appointed).

4.4.5.4 PRELIMINARY DISCUSSIONS WITH THE CLERK OF WORKS

(i) Impress on the clerk of works (or site engineer or any person to whomthe responsibility has been given to record contractor’s resources, time,materials, plant, etc.) that diligence and accuracy in checking onresources used is crucial and that, therefore, he or she must keep areliable daily record. Inform him or her that you will be visiting the siteto make spot checks unannounced;

(ii) Acquaint the clerk of works with the valuation dates programmed.Request that you are notified of all items of work likely to becomehidden so that you can ensure that records are made, ready formeasurement; and

(iii) Arrange with the clerk of works to receive his or her labour record(which is required for checking wages fluctuations).

4.4.6 Approach

4.4.6.1 METHOD

(i) The method of approach for preparing the valuations should bedetermined by the quantity surveyor after consideration of all theemployer’s, contractor’s and architect’s requirements;

(ii) The format for the valuations will be suited to the particular project,and for measured works, the format of the bills of quantities (forexample, separate buildings, elements, trades) may well determine theorder of sections that best suits the contract basis (for example,grouping as that required for fluctuations);


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(iii) In approaching each valuation, the quantity surveyor should note firstin general terms the position of the particular valuation in relation tothe overall project and the progress that has been made relative to theforecast of payments; and

(iv) The quantity surveyor should ensure that backup information anddocumentation which he or she requires from the contractor is availablein time for each valuation.

4.4.6.2 CONTRACTOR’S SUBMISSION

(i) The JCT 1998 With Quantities allows the contractor to submit anapplication for payment to the quantity surveyor;

(ii) The format in which the contractor presents his or her valuation shouldbe agreed in the same manner as detailed earlier in 4.4.5.1 and 4.4.6.1of this section.

Whilst the format which the contractor uses will, in normalcircumstances, be pre-agreed, there is no requirement for the contractorto use an agreed format. However, it is necessary for the quantitysurveyor to respond to the contractor’s submission in the same detail asthat used by the contractor; and

(iii) The contractor has the opportunity when submitting his or hervaluation to include with it all the relevant documentation. Agreementshould be made with the contractor at the outset of the contract that heor she must submit this documentation at the same time as his or hervaluation.

4.4.6.3 SITE VISIT

(i) It is important (and necessary) to visit the site of the works. First, toassess the overall progress of the works and, secondly, to assess thevarious aspects of the valuation in detail.

It is also necessary to assess the materials on site for incorporation inthe works. The details and quantities should be checked.

4.4.6.4 DETAIL OF VALUATION

(i) It is important to detail the calculations made to assess the interimvaluation and to retain these calculations for future reference;

(ii) When the valuation is complete, sufficient calculations should besupplied to the contractor in order for him or her to understand how thevaluation was calculated. It is good practice for the contractor to be inattendance when the quantity surveyor is carrying out the valuation sothat most of this information will be known to him or her;


PART 4, SECTION 4

(iii) It is important for the contractor to be aware of these calculations,particularly the calculation of the amounts in respect of work which heor she has sub-contracted; and

(iv) If the contractor has made a submission under clause 30.1.2.1 of thecontract, the quantity surveyor must respond to the contractor’s submission in the same detail as was supplied by the contractor.

4.4.7 Content of a Valuation

4.4.7.1 A valuation is likely to consist of the following elements (although not all ofthese elements will be found in every valuation):

Work ExecutedMeasured WorkApproximate QuantitiesPreliminariesSub-Contracts – NominatedSub-Contracts – DomesticSuppliers

VariationsDayworksMaterials – On SiteMaterials – Off SiteFluctuationsLoss and ExpenseSpecial PaymentsDeductions

4.4.7.2 WORK EXECUTED

(a) Measured Work

Work under this category relates to work included in the tender documentsand, subsequently, the contract as measured either in bills of quantity formator schedules, or descriptions of work items.

Include an assessment of the work properly executed using rates within thebills of quantities. Consider whether an adjustment shall be made to the rateswhere the item is partially executed, allowing for the location of the work andfor inflation if it is a fixed price contract.

This assessment will normally be carried out using rates within the bills ofquantities. However, where the item is only partially executed, adjustment tothe rates will be necessary having due regard to the location andcircumstances of the work.


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(b) Approximate Quantities

During the construction the quantity surveyor should take regularmeasurements in respect of work for which there is an approximate quantity inthe bills. If measurements are taken regularly, the quantities for these items willbe up to date and available for valuations, or to check against the contractor’ssubmission. The rates for the work are contained in the bills and adjustmentsmade in valuations as described in 4.4.7.2 (a) for partially completed work.

(c) Preliminaries

From the detail of preliminaries items (see 4.4.4.3 (i)) include one-offpayment items as circumstances dictate.

Assess items which are related to value, including those items which appearin the summary of the bills of quantities.

Assess time-related items in relation to the programme.

Consider adjustments where the contract is behind schedule.

Preliminary items should be further divided into set-up, running and removalcosts where appropriate.

(d) Sub-Contractors – Nominated

The work carried out by nominated sub-contractors should be assessed in thesame way as the main contract works.

The work represented in the categories Measured Work and ApproximateQuantities, together with Variations to Special Payments are equallyapplicable to nominated sub-contracts and should be considered as part of thenominated sub-contract work values. They should not be included with themain contractor’s value headings.

(e) Sub-Contractors – Domestic

Under JCT 1998 With Quantities the contractor is permitted to sub-contractwith his or her own choice of sub-contractor (defined as domestic sub-contractors in the contract). However, work carried out in a project bydomestic sub-contractors may comprise a substantial proportion of the wholeof the works. The contractor will provide the quantity surveyor withdocumentation from the domestic sub-contractor as part of his or hersubstantiation of the valuation.

The quantity surveyor must ensure that the detail and information providedfrom this source is in the terms of the main contract and not the values whichoccur in the contract between the contractor and domestic sub-contractor asthese values may be different.


PART 4, SECTION 4

(f) Suppliers

The value of goods on site supplied by nominated suppliers should beincluded at the rates stated in the nomination. Invoices confirming the valuesshould be obtained and the relevant discounts checked.

4.4.7.3 VARIATIONS

It is not possible to cover all the required information on variations within thissection. However, the following simple rules should be followed:

(i) Only variations properly instructed under the terms of the contractshould be included in a valuation. The valuation of variations isdescribed in clause 13 of the Conditions of Contract.

(ii) For simplicity, variations have been categorised in accordance with thefollowing:• Pre agreed – where the variation has been agreed both in terms of

content price and time before being instructed.• Agreed in terms of price but not in terms of effect on the contract.• Instructed to be carried out and to be evaluated in terms of the

contract.• Items identified by the contractor as variations but not instructed

by the architect at the time of valuation.

(iii) All variations should be identified in the quantity surveyor’s valuationin a separate section so that they can be easily identified.

Items pre-agreed in all facets – for the purposes of valuations items inthis category are easily dealt with by following the rules for valuationunder Work Executed. It is relevant to keep the variation items separateeven if the work within the variation is the same as that withinMeasured Work.

Items agreed in terms of price but not in terms of effect on the contract– the price for work in this category, having been agreed, can be dealtwith as for pre-agreed items. The quantity surveyor has to seek furtherinformation from the architect and contractor regarding effect oncontract. There may be no easy answer in respect of this item.

Instructed to be carried out and to be evaluated in terms of the contract– the variation must be evaluated in terms of the contract (clause 13)and the rules are set out in that clause. The quantity surveyor must seekagreement with the contractor for the way in which any variation isaccounted for at an early stage. Remember, the contractor will beseeking to maximise his or her interim recovery in respect of the itemuntil final agreement is reached. In an ongoing situation the contractorwill be basing his or her level of recovery on the amount which he orshe is having to pay out and for an interim valuation the quantity


PART 4, SECTION 4

surveyor should seek from the contractor the same information,invoices, etc. so that he or she can make a judgement using the sameinformation.

Contractor’s price statement – an alternative to evaluation of anarchitect’s instruction or of an approximate quantity, which thecontractor is free to adopt, is for the contractor to submit a ‘pricestatement’ within a prescribed timescale. The contractor’s price in thisstatement must be based on the provisions of clause 13.5 of the contractand then, if the price statement is accepted, when the work related to theinstruction is being carried out, appropriate amounts will be includedin interim valuations. If the price statement is not accepted, theinstruction is evaluated in the normal way.

A price statement may include loss and expense or the price may beaccepted without an assessment of the effect on the contract. Thequantity surveyor should be aware of the content of any price statementbefore including it in an interim valuation.

(iv) Clause 13A quotation

When the architect issues a variation instruction it is at the employer’soption to ask the contractor to submit a clause 13A quotation on thepremis that after a suitable timescale the instruction may not be ratifiedand thus falls.

If accepted, a clause 13A quotation becomes an instruction with anagreed price for the scope of work represented by that instruction. Careshould be taken by the quantity surveyor when including the value orpart of the value of the clause 13A quotation in an interim valuation asit may include loss and expense as part of the evaluation of the variationinstruction, together with the cost of preparing the quotation.

4.4.7.4 DAYWORKS

Include dayworks only if they are prepared in accordance with clause 13.5.4of the contract and verified by the architect.

If dayworks are to be included, check that the percentage additions to primecosts are in accordance with those quoted in the contract documents.

4.4.7.5 MATERIALS – ON SITE

Include materials on site in accordance with the provisions of clause 30.2.1.2of the contract.

Value materials at current rates where it is a fixed price contract underclause 38.


PART 4, SECTION 4

Value materials at base rates where it is a fluctuating price contract underclause 39.

Value materials at current rates where it is a fluctuating price contract underclause 40.

4.4.7.6 MATERIALS – OFF SITE

The value of materials or goods intended for the works but stored off site arenot included in interim valuations except those which were noted as ‘the listeditems’ prior to the contract.

Clause 30.3.1 of the contract states that the property in uniquely identifiedlisted items must be demonstrated by the contractor to the architect to bevested in the contractor.

Where the items listed are not uniquely identified the contractor must provideevidence of vesting.

The means by which the contractor supplies ‘reasonable proof’ of ownershipis explained by a special note in the guidance notes which accompanied thepublication of Amendment 18 to JCT 80 (see Appendix B of this section ofthe handbook).

A bond (details of which are set out in Annex 1 to the appendix to thecontract) is provided by the contractor if required by the contract.

Clause 30.3.4 sets out the conditions under which the materials are to bestored before payment is included in a valuation.

The quantity surveyor may be asked by the architect to view and assess thematerials off site. If so, the quantity surveyor should ensure that all therelevant conditions have been met before including the value of the materialsor goods in the interim valuation.

4.4.7.7 FLUCTUATIONS

Where there are to be fluctuations these should be added as described in4.4.7.3 of this section of the handbook (or deducted, if appropriate (see4.4.7.10 (e)).

4.4.7.8 LOSS AND EXPENSE

Loss and expense may be included within an interim valuation. The basis ofthe loss and expense in a contract must be established before any monies areincluded in an interim payment.


PART 4, SECTION 4

4.4.7.9 SPECIAL PAYMENTS

Within the terms of the contract there may be other costs which are requiredto be added into the valuation.

Examples of special payments include:• Clause 6.2: Statutory fees and charges – fees and charges detailed

in this clause shall be added to the contract sum only under theconditions outlined in clause 6.2.

• Clause 8.3: Inspection and tests – the cost for this work, togetherwith making good, is to be added to the contract sum if the testsshow that the works or materials being tested are in accordancewith the contract.

• Clause 9.2: Royalties – where, in compliance with the architect’sinstructions, the contractor is liable to pay royalties or other moniesfor patent rights, these royalties are added to the contract sum.

• Clause 21.2.1: Insurance – the premiums incurred by the contractorto affect 21.2.1 insurance (which is a joint insurance indemnifyingagainst injury or damage to adjoining buildings which are not theproperty of the employer) are included in interim valuations.

4.4.7.10 DEDUCATIONS

(a) Retention

Retention should be deducted from the gross valuation at the rate statedin the contract. The gross valuation is calculated in the total derived in thecategories referred to above (Work Executed to Special Payments).Retention is applied in terms of the contract. Clause 30.4 sets out therules for ascertainment of retention and clause 30.2.1 clarifies the items.

The items described in the categories Work Executed to Materials – OffSite are subject to retention; Fluctuations is generally subject toretention; Loss and Expense is excluded from the retention calculation;and the items detailed in Special Payments (statutory fees and charges)are not subject to retention.

For retention at practical completion or partial possession see4.4.7.10(c) below.

(b) Work not properly executed

The architect should advise the quantity surveyor in writing of workwhich, although having been carried out, is not in accordance with thecontract. The value in the contract for this work should not be includedwithin an interim valuation. The quantity surveyor, when compiling hisor her valuation, assumes that all work completed is in accordance withthe contract. It therefore follows that he or she must then deduct thevalue of work which is not.


PART 4, SECTION 4

The quantity surveyor should compile a list of the work and valuesdeducted and include the list with the notes passed to the contractor.

The previous two paragraphs assume that, in deducting for work whichis not in accordance with the contract, the work will require to beredone or amended in accordance with the contract. However, underclause 8.4.2 the work not in accordance with the contract may beaccepted by the architect and a reduction in value allowed for it. Thisreduction will be shown as a deduction to the valuation.

In a similar manner, if defects, shrinkages, etc. are not made good, adeduction may be made under clauses 17.2 and 17.3.

(c) Amounts previously certified

Although it may be obvious, the amount previously certified should bededucted. It is important to check the amount certified by the architectand not to assume that the amounts within the quantity surveyor’sprevious valuation have been used. However, payment to the contractorby the employer as distinct from certification by the architect is adifferent matter. Payment to the contractor is determined by theemployer, and the quantity surveyor should ignore the amounts paid.The quantity surveyor’s valuation should refer to the total value to thatproscribed date less the amount certified by the architect.

Retention held at interim valuations is partially released at practicalcompletion of the works and where the employer takes partialpossession of part of the works. Clause 30.4.1.3 of the contract refersto this.

(d) Advance payments(This item does not occur in the local authority version of JCT 1998With Quantities)

If an advance payment has been made to the contractor, the amount ofthe advance will be stated in the appendix to the contract. The amountof the advance will be reimbursed to the employer in the amounts andat the times stated (this is also stated in the appendix).

(e) Fluctuations

Where the operation of the fluctuations clauses and the subsequentcalculation indicates a reduction, a deduction will have to be made tothe valuation.

For additional information please see 4.4.9 below.


PART 4, SECTION 4

(f) Errors in setting out

Under clause 7 of the contract, if errors have been made in setting out,these errors may not be amended (at the sole cost to the contractor). Adeduction may be made to the contract in lieu.

(g) Nominated sub-contracts (clause 4.17.3)

Where work has not been properly executed, as stated in 4.4.7.1(b)above, the rules apply equally to the work of nominated sub-contractors. An appropriate deduction is made but kept separate fromthat of the main contractor.

4.4.8 Administration

4.4.8.1 GENERAL

The quantity surveyor should ascertain the way in which the architect requiresthe valuation and whether any additional explanation and information is to beprovided at the time of valuation.

The use of a standard form, such as that issued by the Royal Institution ofChartered Surveyors (RICS) for interim valuations is recommended.

As indicated in 4.4.3 above, under clause 30.1.1.1 of the contract, thearchitect, when issuing the certificate to the employer, must specify to whatthe amount of the certificate relates and the basis on which that amount wascalculated.

Whilst the same wording is not used in the contract in the context of thequantity surveyor issuing a valuation to the architect, it is prudent for thequantity surveyor to provide additional detail of the valuation to the architectthan is required by the contract terms. The architect may well require thisadditional detail when explaining the content of the certificate to theemployer.

One way for the quantity surveyor to achieve this additional detail is for thequantity surveyor to use in his or her advice, a similar format that is used inthe example in Appendix C of this guidance.

4.4.8.2 COVERING LETTER

When making his or her recommendation for payment, the quantity surveyorshould state the basis of his or her calculations in a covering letter to thearchitect, if not detailed separately (as described in 4.4.6.1 above) or on thevaluation form. This covering letter would need to include a statement on theauthority for part release of retention and details of defective works notincluded in the valuation.


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PART 4, SECTION 4

In a letter advise the architect whether all the work executed is included in thevaluation (the quantity surveyor may have been instructed to exclude specificitems). It is prudent to remind the architect that he or she is to adjust therecommended figure if there are further works or unfixed materials that arenot acceptable to him or her. The wording of the RICS standard form at note(iii)(a) refers to this point, but it is advisable to mention the matter in theletter.

Where appropriate, advise the architect in respect of matters regardingprevious valuations, for example, whether nominated sub-contractors have allreceived their payments under previous certificates.

4.4.9 Special Situations

4.4.9.1 DETERMINATION OF THE EMPLOYMENT OF A CONTRACTOR OR NOMINATED

SUB-CONTRACTOR

There are special provisions relating to valuations in the case of adetermination of the employment of a contractor (or of a nominated sub-contractor) under the Conditions of Contract.

The detail of the requirements for valuations are to be found in clause 27 ofthe contract and will depend on the circumstances of the determination.

4.4.9.2 LIQUIDATED DAMAGES

The application of liquidated damages affects payments to the contractor, butit is generally not an element of a valuation which should be included (oramounts deducted) by the quantity surveyor.

Advice to the employer and the architect should include:• In a contract, where there is a provision for liquidated damages to be

applied at the rate included in the contract, the quantity surveyor maybe required to advise of the amount of liquidated damages for whichthe contractor is liable.

• On there being an appropriate certificate issued under clause 24 ofthe contract, when issuing valuations the quantity surveyor shouldadvise the employer and/or the architect of the amount of liquidateddamages for which the contractor is liable and continue to advisethereafter, each time stating the amount.

4.4.9.3 FLUCTUATIONS

The contract will state the basis of adjustment: whether there is to be detailedcost recovery (clause 38 or 39) or the use of price adjustment formulae (clause40). Where detailed cost recovery is to be the basis, check that basic prices ofmaterials goods, electricity and fuels have been agreed. Note any imported


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goods which will be subject to currency fluctuations. If fluctuations are to bedealt with by the price adjustment formulae method, agree with the contractorthe allocation of bill items to categories, as this method requires.

4.4.10 Other Contract Terms (relative to valuations)

4.4.10.1 PRIME COST SUMS

Prime cost sums are expended on the written orders of the architect in respectof nominated sub-contractors or nominated suppliers.

A separate section of the quantity surveyor’s interim valuation should becreated for all work carried out under the expenditure of prime cost sums.

4.4.10.2 PROVISIONAL SUMS

Provisional sums are expended on the written orders of the architect. Thevaluation of work instructed under this method may be dealt with by referenceto the other sections.

A separate section of the quantity surveyor’s interim valuation should becreated for all work carried out under the expenditure of provisional sums.

4.4.10.3 PERFORMANCE SPECIFIED WORK

JCT 1998 With Quantities allows for performance specified work which shallnot be carried out by nominated sub-contractors or nominated suppliers.

The contractor is required by the contract to supply an analysis of the portionof the contract sum to which the performance specified work relates. Thisanalysis may then be used for interim valuations.

4.4.10.4 STAGE PAYMENTS

In clause 30.2 the contract allows the parties to agree to stage payments. Ifstage payments were included in the contract for all or part of the works, thevalues for these parts or sub-portions have been pre-agreed. The stagepayment will be included in valuations when the scope of work to which thestage payment relates has been completed and so indicated by the architect.

4.4.10.5 ACTIVITY SCHEDULE

An activity schedule may be included in the contract. Clause 30.2.1.1 stateshow the value of work in an activity schedule is to be included in an interimvaluation.

An example of an activity schedule issued by JCT is included in Appendix Cof this section of the handbook.


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4.4.10.6 ELECTRONIC DATA INTERCHANGE (EDI)

Annex 2 of the contract allows for an agreement between the parties in respectof the exchange of communications by electronic means. Therefore, interimvaluations can be communicated by such means.

The simplest form of electronic communication is by fax machine and the useof this is now widespread. Information is simply reproduced by a fax and therecipient receives a copy. This is useful where invoices and the like require tobe transferred.

The transfer of information through computers does not generally provide‘copies’ of material to the recipient unless the original material was scannedinto the computer. When using computers to transfer the valuation, backupcare should be exercised where originals or copies of invoices and the like arerequired to be provided.

The Code of Practice for Electronic Data Interchange states that partiesproposing to contract on terms which expressly give administrative or otherresponsibilities to third parties should not adopt EDI in connection with thatcontract without the agreement of those third parties.

It would appear to be prudent that when EDI is being set up at the outset ofthe contract the ‘rules’ for interim valuations should also be set out clearly.

4.4.11 Valuations Under Other Forms of Contract

The principles and procedures set out in this section for valuations carried outunder JCT 1998 With Quantities will largely be pertinent to other forms ofJCT contract, together with forms of contract produced by other bodies.

The guidance provided in this section will apply equally to the JCT WithoutQuantities edition, the Local Authority editions, and these forms used with thesectional completion supplement and with the contractors designed portionsupplement.

4.4.11.1 OTHER JCT CONTRACTS

In general terms other JCT contracts will have the principles set out hereapplied although the detail may be different.

4.4.11.2 OTHER FORMS OF CONTRACT

Contracts issued by other bodies will, in general terms, have the principles setout here applied although the detail may be different.


I



JCT. Practice Note 26 (’94) Valuation and Certification for Interim Paymentsincluding Variation, RIBA, London, 1994

Seeley, I.H. Quantity Surveying Practice, Macmillan Press Limited,Basingstoke, 1997

The Aqua Group. Contract Administration for the Building Team, BlackwellScience, London, 1996




Appendix B: JCT Definition of ‘Reasonable Proof’

1. Clause 30.3.1 makes it one of the conditions of the inclusion, in the amountstated as due in an Interim Certificate, of the value of what clause 30.3defines as ‘listed items' before their delivery to or adjacent to the Works, thatthe Contractor has provided the Architect with 'reasonable proof ' that theproperty (ownership) in the listed items is vested in the Contractor.

2. The Contractor is only required to provide ‘reasonable proof’. Thus if,notwithstanding the provision of such reasonable proof, it transpires that theproperty in the listed items is not vested in the Contractor the risk of havingpaid for listed items for which the Contractor cannot give a good title to theEmployer is with the Employer. In practice however Employers will only paypursuant to clause 30.3 if the proof provided of the Contractors ownership isas water-tight as possible.

3. Where the listed items are purchased from a supplier by the Contractor, theContractor should give the Architect a copy of the written contract of saleapplicable to the listed items; and a written statement from the supplier thatany conditions in that sale contract that must be fulfilled before the propertypasses to the Contractor have been fulfilled. The statement of the suppliershould also say that the supplier's property in the listed items is not subject toany charge or encumbrance which would prevent the passing of the propertyunconditionally to the Contractor after fulfilment of all the relevant terms ofthe sale contract with the Contractor.

4. Where the listed items have been purchased from a supplier by a sub-contractorthe Contractor should give the Architect a copy of the written sub-contract withthe sub-contractor which should expressly state the conditions that have to befulfilled before the property in these listed items passes from the sub-contractorto the Contractor; and a written statement from the sub-contractor that anyconditions in that sub-contract that must be fulfilled before the property passesto the Contractor have been fulfilled.

5. Where the listed items are manufactured or assembled by any sub-contractor,the Contractor should give the Architect a copy of the written sub-contractwith the sub-contractor which should expressly state the conditions that haveto be fulfilled before the property in those listed items passes from the sub-contractor to the Contractor; and a written statement from the sub-contractorthat any conditions in that sub-contract that must be fulfilled before theproperty passes to the Contractor have been fulfilled.



Appendix C: Example of Priced Activity Schedule

A Preliminaries – see breakdown on page 2 170,000.00B Demolition 40,000.00C Substructure including ground floor slab 178,000.00D Structural frame 265,000.00E Upper floor and staircase structures 112,000.00F Roof structure and coverings 58,000.00G External walls 203,000.00H Windows and external doors 102,000.00J Internal walls and doors therein 75,000.00K Partitioning and doors therein 45,000.00L Plasterwork 21,000.00M Screeds 33,000.00N Suspended ceilings 53,000.00P Wall tiling 16,000.00Q Floor tiling 11,000.00R Other floor finishings 64,000.00S Metalwork 30,000.00T Fittings and fixtures 35,000.00U Decorations 12,000.00V Sanitary installation and fittings 48,000.00W Rainwater installation 8,500.00X Mechanical services – see breakdown on page 3 297,000.00Y Electrical services – see breakdown on page 4 222,000.00Z Underground drainage 16,500.00AA External works 75,000.00

___________

£ 2,190,000.00___________

Note that the above excludes the prime cost sums and profit thereon,provisional sums and provisional quantities.


Page 2 Part 4, Section 4 Effective from 1/7/00 The Surveyors’ Construction HandbookAppendix C(05/00)

Preliminaries breakdown

A Site accommodation (offices, stores, toilets, etc.) 16,000.00

B Services (power, lighting, telephones, small plant,rubbish disposal, etc.) 11,000.00

C Mechanical plant 8,500.00

D Temporary works (roads, walkways, scaffolding, hoardings, etc.) 5,000.00

E Management and staff 122,500.00

F The contract, etc. (insurance premiums,cost of providing bond, etc.) 7,000.00

___________

£ 170,000.00___________



Mechanical Services breakdown

A Heating installation 235,000.00

B Hot water installation 6,000.00

C Cold water installation includingrising main and tank 14,000.00

D Gas installation 2,500.00

E Mechanical ventilation 25,000.00

F Controls and wiring 9,000.00

G Testing and commissioning 3,000.00

H As installed record drawings 1,500.00

J Operation and maintenance manuals 1,000.00___________

£ 297,000.00___________


Electrical Services breakdown

A Distribution boards, switchgear andsub main cabling 28,000.00

B Power installation 72,000.00

C Lighting installation including fittings 92,000.00

D Fire alarm system 14,500.00

E Security system 6,000.00

F Earthing and bonding 5,000.00

G Testing and certification 2,500.00

H As installed record drawings 1,250.00

J Operation and maintenance manuals 750.00

___________

£ 222,000.00___________

Page 4 Part 4, Section 4 Effective from 1/7/00 The Surveyors’ Construction HandbookAppendix C(05/00)

PART 4, SECTION 5



SECTION 5: EXTENSION OF TIME

Introduction

There are probably more disputes about extension of time and consequentialcost issues than any other disputes under construction contracts. It is thereforeimperative that extension of time issues are dealt with in a proper manner bythe contract administrator.

The majority of standard form construction contracts enable the contractadministrator to grant extensions of time for completion of the work wheredelay occurs due to certain specified causes. Such provision is of benefit toboth parties to the contract. The contractor will benefit because the effect ofthe provision, if operated, will be to reduce or avoid liability to pay liquidatedor unliquidated damages in the event of the delay in question. However, theprimary benefit is to the employer. This is because the absence of extension oftime provisions can have the effect of preventing the employer’s entitlementto liquidated damages in cases where the delay, or even a small part of it, isdue to some prevention or default of the employer or his or her agents, or anyother matter for which the employer would be responsible.

Therefore the primary purpose of extension of time is to preserve theeffectiveness of the liquidated damages provisions for the benefit of theemployer.

Standard forms and bespoke construction contracts contain extension of timeclauses setting out the criteria under which extensions of time will beawarded. This includes:

• the provisions for the timing and content of delay notices by thecontractor;

• the parameters that a contract administrator needs to work within toassess a contractor’s entitlement to an extension of time;

• the administrative procedure to be adopted in awarding an extension oftime;

• the events that entitle a contractor to an extension of time.

However, most forms of construction contracts do not include practicalguidance on how a contract administrator should carry out an assessment of anextension of time entitlement. Instead, practitioners have to look at guidance

PART 4, SECTION 5


provided by case law as well as good practice as defined by legalcommentators.

This section of the handbook provides guidance to surveyors who are requiredto carry out assessments of extension of time entitlement under a constructioncontract by virtue of appointment under the contract as contract administrator.It is also for surveyors who are asked to advise either party to a constructioncontract on extension of time issues.

4.5.1 Extension of Time Clauses

There are several forms of construction contract and each form will have itsown procedure for dealing with extension of time. Whilst the principles to beadopted may be similar, the exact procedure and events that entitle acontractor to an extension of time may well be different depending on theform or edition of contract adopted or indeed the amendments made thereto.The practitioner should therefore always be primarily guided by the wordscontained in the relevant contract.

4.5.2 Assumptions

This section has been prepared from the standpoint of the surveyor who has toassess extension of time entitlement under a construction contract by virtue ofappointment under the contract as contract administrator.

4.5.2.1 JCT FORMS OF CONTRACTS

This section introduces the principles of an extension of time. For illustrativepurposes, it is based on the JCT Standard Form of Building Contract WithQuantities 1998 (JCT 1998 With Quantities).

It is recognized that there are other forms of contract being used. However, theprinciples set out here will remain valid. Extension of time procedures fordifferent contract terms are briefly noted later (see 4.5.11 and 4.5.12).

4.5.2.2 DEFINITIONS

Contract administrator This refers to the person undertaking the functions ofthe ‘architect’ on behalf of the employer under a JCT1998 With Quantities contract.

Employer The client as used in a JCT 1998 With Quantitiescontract.

Contractor In JCT 1998 With Quantities the contractor is assumedto be a main contractor who may be asked to employnominated sub-contractors or request permission tosub-contract portions of work to domesticsub-contractors.

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4.5.3 Extension of Time Under a JCT Contract

JCT 1998 With Quantities contains the provision for the contractadministrator to award an extension of time at clause 25.

Clause 25.2.1.1 provides that:

If and whenever it becomes reasonably apparent that the progress of theWorks is being or is likely to be delayed the Contractor shall forthwithgive written notice to the [contract administrator] of the materialcircumstances including the cause or causes of the delay and identify insuch notice any event which in his opinion is a Relevant Event.

Clause 25.2.2 provides that:

In respect of each and every Relevant Event identified in the noticegiven ... the Contractor shall, if practicable in such notice, or otherwise inwriting as soon as is possible after such notice: (25.2.2.1) give particularsof the expected effects thereof; and (25.2.2.2) estimate the extent, if any,of the expected delay in the completion of the Works beyond theCompletion Date resulting therefrom whether or not concurrently withdelay resulting from any other Relevant Event...

Clause 25.3.1 provides that:

If, in the opinion of the [contract administrator], upon receipt of anynotice, particulars or estimate ... (25.3.1.1) any of the events which arestated by the Contractor to be the cause of the delay is a Relevant Eventand (25.3.1.2) the completion of the Works is likely to be delayed therebybeyond the Completion Date the [contract administrator] shall in writingto the Contractor give an extension of time by fixing such later date as theCompletion date as he then estimates to be fair and reasonable.

The contract administrator is required to state which relevant events he or shehas taken into account and fix a new completion date within 12 weeks. Thisshould not be later than the completion date that applies at that time, fromreceipt of the notice and of reasonably sufficient particulars or estimates.

The contract administrator, by virtue of clause 25.3.3, also has the power tocarry out a final review of the completion date not later than 12 weeks after thedate of practical completion. This can result in the fixing of an earlier or latercompletion date than previously set under clause 25.3.1. (It should be notedthat the contract administrator cannot set a completion date earlier than thatstated in the appendix.) This final review is not subject to receipt of a notice orparticulars and estimate from the contractor.

Clause 25.3.4 provides the award of an extension of time is always dependanton the contractor using ‘constantly his best endeavours to prevent delay in theprogress of the Works, howsoever caused, and to prevent the completion ofthe Works being delayed or further delayed beyond the Completion Date.’

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Clause 25.4 includes reference to relevant events. Each of these relevantevents entitles the contract administrator to award an extension of time in theevent, and to the extent, that they cause a delay. Whilst all relevant events maygive rise to entitlement to an extension of time, not all of them entitle thecontractor to be reimbursed for any loss and expense arising therefrom. (Inany event it should be noted that JCT 1998 With Quantities contains separateprovisions under clause 26 in dealing with the financial effect of delay to theWorks. It specifically deals with the separate notice provisions required and alist of matters that may entitle the contractor to be reimbursed for any loss andexpense incurred arising from the Works being delayed.) Whilst it isconvenient to categorize relevant events which are not also set out in the listof matters under clause 26 as neutral events and those which are also set outunder clause 26 as employer risk events, it should be emphasized that clause25 does not provide for financial adjustment of the contract sum. If thecontractor wishes to claim loss and expense arising from delay to the Works,he or she is required to make the necessary applications under clause 26.1. Thegranting of an extension of time under clause 25 is not a condition precedentto a right to direct loss and expense under clause 26.11.

4.5.4 Notice by the Contractor of Delay to Progress

To receive entitlement to an extension of time during the contract period andbefore practical completion, the contractor is required to give notice‘forthwith’ where ‘the progress of the Works is being or is likely to bedelayed’. The contractor must give written particulars of the expected effectsof the relevant events delaying the Works, estimate the expected delay andkeep the particulars and estimates up to date.

It is implicit that the contractor should provide information that the contractadministrator reasonably requires in order to assist the contract administratorin his or her duty in relation to extensions of time.

Whilst the contractor is required to give notice forthwith, the courts have heldthat such notice (in relation to the JCT 1963 form) was not a conditionprecedent to the performance of the contract administrator’s duties in respectof giving an extension of time2. Whilst this was in relation to an earlier formof contract, case law further indicates that for something to be a conditionprecedent a time for compliance must be given and the consequence ofnon-compliance stated3.

Therefore, whilst it may well be that if the contract administrator is unable totake steps to reduce the delay as a result of the contractor not giving noticeforthwith, then the contractor should only be entitled to the extension of timethat would have occurred had the notice been given. The failure to give noticeforthwith does not prevent the contract administrator from awarding anextension of time during the contract period and before practical completion ifnotice is given later.

Further, it should be stressed that, by virtue of clause 25.3.3.1, the giving ofnotice per se is not a condition precedent to the granting of an extension oftime after practical completion.

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4.5.5 The Award of an Extension of Time during the Contract Period and Before the Completion Date

Clause 25.3.1 requires the contract administrator to give extensions of time ifhe or she is of the opinion that the completion of the Works is likely to bedelayed beyond the completion date by one or more of the relevant eventsnotified by the contractor. The contract administrator has 12 weeks (subjectalways to a cut-off point of the completion date in place at that time) fromreceipt of the contractor’s notice and reasonably sufficient particulars andestimates.

‘Sufficient’ particulars and estimates are thought to be those that comply withclauses 25.2.2.1 and 25.2.2.2. Therefore it follows that, provided a contractorgives the best particulars and estimates it can in the circumstances that exist atthe time of the notice, the contract administrator will not be able to delaygranting an extension of time beyond the 12 weeks (or such shorter period ifnotice is given within 12 weeks of the completion date), on grounds that he orshe cannot yet judge the effect that the cause of delay will have on theprogress.

Whilst the granting of an extension of time is subject to the opinion of thecontract administrator, ultimately the opinion may be subject to review by anarbitrator or judge. Therefore, it important that the principles adopted by acontract administrator in assessing an extension of time entitlement are sound.

When assessing an extension of time during the contract period and beforepractical completion, the contract administrator, by virtue of clause 25.3.1.2,can only take into account relevant events that occur before the original orpreviously fixed (in the event of further extension of time assessments)completion date. Relevant events that occur after the completion date are dealtwith when the contract administrator reconsiders extensions of time aftereither the completion date or practical completion under clause 25.3.3.

The contract administrator is required to award an extension of time that he orshe estimates to be ‘fair and reasonable’. This reflects that the assessment ofthe extension of time entitlement will not be an exact science, but will have tobe the result of a consideration of various factors such as:

• the exact terms and application of the facts of the relevant event inquestion;

• the amount of the immediate delay in the progress of the Works;

• the effect of any delay caused by the contractor’s default;

• the effect of concurrent causes of delay and whether one of them is aneffective dominant cause; and

• the extent to which the contractor has used its best endeavours to preventdelay in accordance with clause 25.3.4.

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The courts have held that a contract administrator, in assessing an extension oftime, should conduct a logical analysis in a methodical way of the impactwhich events, whether relevant events or not, were likely to have on theplanned programme4. A contract administrator is required to make acalculated, rather than impressionistic, assessment of extension of timeentitlement. Therefore the contract administrator, having satisfied him orherself that an event is relevant, is required to assess whether the affectedactivities were on the critical path or not.

In assessing delay the contract administrator could consider the effect of thecauses of delay as a whole by carrying out a retrospective delay analysis. Thiswill involve assessing the effect of each individual delaying event inconjunction with other delaying events. This will inevitably involve thepreparation of an ‘as built’ record or programme to identify the delayedactivities and a subsequent analysis of the causes of the delayed activities andassessment of whether the causes of delay are relevant events. A comment onthe approach in dealing with the effect of concurrent delays and consequentialentitlement is made later in this section (see 4.5.8 and 4.5.9).

Further, if the contract is drafted to include sectional completion dates, thecontract administrator is required to assess the effect of each delay in respectof each section and decide whether appropriate extensions of time need to beissued.

There will be times where the records either do not exist or are inadequate toconstruct an ‘as built’ record. Further, an assessment of an extension of timeentitlement may have to be considered before the effects of delays are known,thereby preventing a retrospective delay analysis. In these instances thecontract administrator should undertake an objective analysis of the likely orprobable impact on the critical path activities based on logical analysis and notan impressionistic assessment.

4.5.6 The Award of an Extension of Time after the Completion Date

Clause 25.3.3. requires the contract administrator to reconsider any previousextension of time awards and/or deal finally with the question of extension oftime within a period of 12 weeks from the date of practical completion. Inreviewing the completion date, the contract administrator is required again togrant an extension of time that is fair and reasonable. The contractadministrator is not limited to relevant events notified by the contractor and,in reviewing earlier extension of time awards, can fix an earlier completiondate by taking into account any omissions justifying a reduction in anyextension of time awards granted previously.

Prior to 1993 it has been argued, in relation to the JCT 1963 form of contract,that if a variation was issued after the completion date, that is, after the date ofany previous extension of time awards, the employer would be prevented fromdeducting liquidated damages for the period up to the date of the issue of theinstruction to undertake the variation. However, it has been held that this

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principle does not apply to the JCT 1980 form and, by virtue of the samewording being adopted, its successor the JCT 1998 form. The correct positionnow is that if instructions for additional work are issued at a time when thecontractor is in culpable delay, that is, the Works being incomplete after thelatest extended completion date, the contractor is only entitled to a fair andreasonable ‘net’ addition (sometimes referred to as the ‘dot on’ principle) tothe previously fixed completion date and not by fixing as the completion datethe calendar date upon which the work would reasonably be expected to becompleted having regard to the calendar date upon which the variations wereinstructed5.

4.5.7 Relevant Events

The relevant events have been categorized as ‘employer risk’ (4.5.7.1) and‘neutral’ (4.5.7.2) events.

4.5.7.1 EMPLOYER RISK EVENTS

Clauses 25.4.5.1 and 25.4.5.2:

Compliance with [contract administrator’s] instructions under clauses2.3, 2.4.1, 13.2 (except for a confirmed acceptance of a 13A Quotation),13.3 (except compliance with a [contract administrator’s instruction forthe expenditure of a provisional sum for defined work or of a provisionalsum for Performance Specified Work), 13A 4.1, 23.2, [34, 35 or 366] orin regard to opening up for inspection of any work covered up or thetesting of any of the work, materials or goods in accordance with clause8.3 (including making good in consequence of such opening up ortesting) unless the inspection or test showed that the work, materials orgoods were not in accordance with this Contract.

A contract administrator will need to examine the cause of instructions beingissued in the first place (for example, was it a result of defectiveworkmanship?) before assessing the effect of its timing and scope of work onthe progress of the Works. It will also be necessary to assess whether thecontractor was already in culpable delay or if there are competing causes ofdelay for which the contractor is responsible.

Clauses 25.4.6.1 and 25.4.6.2:

Where an information release schedule has been provided, failure of the[contract administrator] to comply with clause 5.4.1 [or] failure of the[contract administrator] to comply with clause 5.4.2.

If there is to be an information release schedule the contract administrator willbe required to follow it. To the extent that it is not complied with and suchnon-compliance causes a delay, the contractor will be entitled to an extensionof time. However, if there is no provision for an information release schedule,by virtue of clause 5.4.1 being deleted, or if the information release schedule

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does not cover the issue of information that is required, then the contractadministrator is required to provide any other drawings and details to explainand amplify the contract drawings when they are reasonably necessary.

It has been held that a contractor’s programme or document presented at thecommencement of the Works could constitute a specific application forinstructions or information provided that the date specified for delivery foreach set of instructions met the requirement of not being unreasonably distantfrom nor unreasonably close to the relevant date7, subject to it being modifiedif the Works did not progress to plan.

It has also been held (by analogy to a House of Lords decision in relation to asimilar clause in JCT 1963) that whilst the withdrawal of a nominatedsub-contractor may not come within this clause, delay by the employer inmaking a timeous re-nomination was covered8.

Clauses 25.4.8.1 and 25.4.8.2:

The execution of work not forming part of this Contract by the Employerhimself or by persons employed or otherwise engaged by the Employer asreferred to in Clause 29 or the failure to execute such work [or] the supplyby the Employer of materials and goods which the Employer as referredto in clause 29 or the failure so to supply.

This clause is also known as the ‘artists and tradesmen’ clause. Its scopeincludes work by a local authority or statutory undertaker under a contractwith the employer.

Clause 25.4.12:

Failure of the Employer to give in due time ingress to and egress from thesite of the Works or any part thereof through or over any land, buildings,way or passage adjoining or connected with the site and in the possessionand control of the Employer, in accordance with the Contract Bills and/orContract Drawings, after receipt by the [contract administrator] of suchnotice, if any, as the Contractor may be required to give, or failure of theEmployer to give such ingress or egress as otherwise agreed between the[contract administrator] and the Contractor.

This clause is not concerned with possession of the site itself, but with accessto it over other land in the possession and control of the employer as stated inthe contract documents.

Clause 25.4.14:

By reason of the execution of work for which an Approximate Quantityis included in the Contract Bills which is not a reasonably accurateforecast of the quantity of work required.

What constitutes a reasonably accurate forecast will be a matter of fact.However, it is suggested that empirical studies of the accuracy of quantitysurveyor’s estimates may give guidance, that is, +/– 5 per cent accuracy.

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Clause 25.4.17:

Compliance or non-compliance by the Employer with clause 6A.1.

Clause 6A.1 relates to the employer ensuring that the planning supervisor (andthe principle contractor, where the contractor is not the principle contractor)carries out his or her duties under the CDM regulations.

Clause 25.4.18:

Delay arising from a suspension by the Contractor of the performance ofhis obligations under the Contract to the Employer pursuant to clause30.1.4.

Clause 30.1.4 relates to the contractor’s rights to suspend the Works as a resultof failure by the employer to pay the contractor in accordance with thecontract payment terms and procedure in compliance with the HousingGrants, Construction and Regeneration Act 1996. Therefore, if the contractoris entitled to suspend the Works under clause 30.1.4 it will be entitled to anextension of time in the event that the Works are delayed as a result. It isinteresting to note that the corresponding matter clause (26.2.10) is morerestrictive in that it only entitles the contractor to recover any direct loss andexpense if the suspension was not ‘frivolous or vexatious’.

4.5.7.2 NEUTRAL EVENTS

Clause 25.4.1:

‘force majeure’

This term is used in reference to all circumstances independent of the will ofhumankind which is not in our power to control, such as war, inundations andepidemics. It is wider than ‘Acts of God’, but it is generally thought that inrelation to standard forms of construction contracts it has a restricted meaning.This is because matters such as war, strikes, fire, weather and governmentaction are expressly dealt with in the contract.

Clause 25.4.2:

‘exceptionally adverse weather conditions’

The correct test to be applied by the contract administrator is whether theweather itself was exceptionally adverse9 so as to give rise to delay. Thisshould be decided in light of the historic norm for the area and the status of theWorks when the delay occurred. Therefore, the contract administrator shouldexamine local meteorological and site records, looking at details and timing ofrainfall, high wind speed, temperature and assess the effect on the labour,plant and work operations on site for the relevant periods.

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Clause 25.4.3:

‘loss or damage occasioned by any one or more of the Specified Perils’

These are defined by clause 1.3 and include:

• fire;

• lightning;

• explosion;

• storm;

• tempest;

• flood;

• bursting or overflowing of water tanks;

• apparatus or pipes;

• earthquake;

• aircraft and other aerial devices or articles dropped therefrom; and

• riot and civil commotion.

However, they exclude:

• ionizing radiations or contamination by radioactivity from any nuclearfuel or nuclear waste from the combustion of nuclear fuel;

• radioactive toxic explosive or other hazardous properties of anyexplosive nuclear assembly or nuclear component thereof; and

• pressure waves caused by aircraft or other aerial devices travelling atsonic or supersonic speeds.

The scope of the specified perils is very wide and could stem from acts ofnegligence by the contractor.

Clause 25.4.4:

Civil commotion, local combination of workmen, strike or lock-outaffecting any of the trades employed upon the Works or any of the tradesengaged in the preparation, manufacture or transportation of any of thegoods or materials required for the Works.

The terms strike and lock-out should be given their ordinary meaning. Thecourts have given guidance on the meaning of civil commotion in relation toinsurance contracts to include a stage between ‘riot and civil war’10.

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Clause 25.4.5.1:

Compliance with [contract administrator’s] instructions under clauses ...34, 35 or 36...

Clause 34 instructions relate to ‘fossils, antiquities and other objects ofinterest or value’ found on site during excavation. Clauses 35 and 36 relate toinstructions connected with nomination. Whilst the contractor is seeminglynot protected for recovering loss and expense monies by virtue of there notbeing a corresponding ‘matter’ listed under clause 26, with regard to a latenomination it would appear that a contractor could seek to rely on clause26.2.1 for late instruction of the expenditure of a provisional sum relating to anominated sub-contractor or supplier.

Clause 25.4.6:

Delay on the part of nominated sub-contractors or nominated supplierswhich the contractor has taken all practicable steps to avoid or reduce.

The effect of this clause is that if such a delay causes an extension of time,even if the delay is due to the default of the nominated sub-contractor, theemployer is deprived of the right to deduct liquidated damages. However, itshould be noted that if a nominated sub-contractor has completed its work andhas to return to site to remedy defective workmanship which in turn causes adelay to the Works, then this clause does not apply11. In this scenario anextension of time would not be granted. Whilst the employer is not liable tothe contractor for losses caused by nominated sub-contractors and nominatedsuppliers, the contractor may be able to recover its losses directly through itsnominated sub-contract or supplier contract.

Clause 25.4.9:

The exercise after the Base Date by the United Kingdom Government ofany statutory power which directly affects the execution of the Works byrestricting the availability or use of labour which is essential to the propercarrying out of the Works or preventing the Contractor from, or delayingthe Contractor in, securing such goods or materials or such fuel or energyas are essential to the proper carrying out of the Works.

The effect of this sub-clause is to reduce the scope of the force majeuresub-clause (clause 25.4.1) to those events not contained within this wording.

Clauses 25.4.10.1 and 25.4.10.2:

The contractor’s inability for reasons beyond his control and which hecould not reasonably have foreseen at the Base Date to secure such labour[goods or materials] as is [are] essential to the proper carrying out of theWorks.

These words limit the effect of the sub-clause in respect of shortage of labour,materials or goods that the contractor could have foreseen by reasonableenquiry were likely to continue or arise at all.

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Clause 25.4.11:

The carrying out by a local authority or statutory undertaker of work inpursuance of its statutory obligations in relation to the Works, or thefailure to carry out such work.

This sub-clause is limited to situations where the relevant authority orundertaker carries out work using its statutory powers, as opposed to under acontract with either the employer or contractor, and such work hinders theWorks and causes delay.

Clause 25.4.13:

Where clause 23.1.2 is stated in the appendix to apply, the deferment bythe Employer of giving possession of the site under clause 23.1.2.

Clause 23.1.2 enables the employer to defer possession of the site by sixweeks without being in breach of contract. This clause enables the completiondate to be extended accordingly without the employer losing his or her right todeduct liquidated damages for any delay for which the contractor is culpable.

Clause 25.4.15:

Delay which the Contractor has taken all practicable steps to avoid orreduce consequent upon a change in the Statutory Requirements after theBase Date which necessitates some alteration or modification to anyPerformance Specified Work.

The effect of this clause is limited to legislative changes that affectperformance specified work, the effects of which the contractor has madeattempts to mitigate. There is no requirement for the contractor to have madereasonable enquiry at or before the base date.

Clause 25.4.16

The use or threat of terrorism and/or the activity of the relevantauthorities in dealing with such use or threat.

The effect of this sub-clause is to reduce the scope of the force majeuresub-clause (clause 25.4.1) to those events not contained within this wording.

4.5.8 Concurrent Delays

When assessing a contractor’s entitlement to an extension of time, the contractadministrator will need to assess the effect of concurrent causes of delay. Thisis important for two reasons:

1) In relation to the granting of an extension of time: for example inassessing whether delay is caused in total or in part by an event for whichthe contractor is culpable under the contract.

2) In relation to clause 26 which deals with loss and expense: that is, somerelevant events are paying and some are non-paying.

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The contract administrator may be faced with a scenario where there areconcurrent causes of delay, each of which could have an equal delaying effect,or alternatively could have significantly unequal effect. The law is unclear onthe correct approach. However, the generally accepted approach is that it is thedominant delaying event that should govern the award of an extension of time.Therefore, if a contractor seeks to rely on late instructions as entitlement foran extension of time and at the same relevant time the contractor is alsodelayed by events for which it is culpable, the contract administrator will needto satisfy him or herself that the delay caused by the late instructions was thedominant delay in order to award an extension of time. Which cause isdominant is a question of fact. This is not solved by the mere point of order oftime but is to be decided by applying common sense standards12.

The court had to consider the question of concurrent delays in 1999 and heldthat a contract administrator is entitled to consider the contractor responsiblefor concurrent delays when establishing whether or not a relevant event has infact caused a delay13. Therefore, the question for consideration by the contractadministrator when there are competing causes of delay, one of which is arelevant event and one which is not, is which cause was the dominant cause ofdelay. The courts also commented that where those competing causes were ofequal causes, then if the contract administrator considers it fair and reasonableto do so, he or she is required to grant an extension of time14.

4.5.9 Consequential Entitlement

Consequential entitlement is where a delay that is a non-paying relevant eventcould fall to be an ‘employer risk’ event or ‘matter’ under clause 26. Forexample, the Works could be delayed by the issue of contract administrator’sinstructions that cause the Works to overrun into an ‘exceptional adverseweather’ or industry shutdown period. It is generally thought that theextension should be given under the primary cause.

4.5.10 Administration

A notification granting an extension of time must be taken with great care. Useof the RIBA and/or RICS Notification of Extension of Time form isrecommended. The notification should include:

• the job title and number (if any);

• the contractor’s name;

• the date of issue;

• the completion date;

• a list of the relevant events for which an extension of time has beengiven;

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• the extent to which the omission of work has been taken intoconsideration;

• the date of the contractor’s written notice of delay (if any); and

• the revised completion date.

4.5.11 Extension of Time under an ICE Contract

Although the specific contract clauses differ, the principles set out in relationto JCT contracts equally apply to the ICE contracts. The contractor can applyfor an extension of time by giving notice, although such notice is not acondition precedent for the giving of an extension of time as the engineer canmake an assessment in the absence of such notice. In assessing a contractor’sentitlement for an extension of time, the engineer is required to make anassessment of the delay suffered and consider whether that delay fairly entitlesthe contractor to an extension of time. The engineer is required to undertake afinal review within 14 days of substantial completion.

4.5.12 Extension of Time under a GC Works Contract

The project manager or supervising officer under GC/Works forms of contracthas the power to award an extension of time. However, it should be noted thatsome forms do make the giving of a notice by the contractor a conditionprecedent of an extension of time being awarded.

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Notes

1. Fairweather v. Wandsworth (1987) 39 BLR 106

2. London Borough of Merton v. Leech (1985) 32 BLR at pp.89 et seq.

3. Bremer Handelgesellschaft MBH v. Vanden Avenne-Izegem [1978] 2LLR 109

4. John Barker Construction Limited v. London Portman Hotel Limited(1996) BLR 83

5. Balfour Beatty v. Chestermount Properties (1993) 62 BLR 1

6. Instructions under clauses 34 (antiquities), 35 and 36 (nomination ofsub-contractors and suppliers) are non-paying

7. London Borough of Merton v. Leach [1985] 32 BLR 51 at pp.85-89 issue 5

8. Percy Bilton v. GLC [1982] 1 WLR 794 (HL)

9. Walter Lawrence v. Commercial Union Properties (1984) 4 ConLR 37

10. Levy v. Assicurazioni Generali [1940] 3 All ER 427 at p.437

11. Jarvis J. & Sons v. Westminster Corporation [1970] 1 WLR 637 (HL)

12. Leyland Shipping v. Norwich Union [1918] AC 350, Yorkshire DaleSteamship v. Minister of Ware Transport [1942] AC 691

13. Henry Book Construction (UK) Limited v. Malmaison Hotel(Manchester) Limited 1999) TCC 18.10.99

14. Henry Book Construction (UK) Limited v. Malmaison Hotel(Manchester) Limited 1999) TCC 18.10.99 at paragraph 13




Eggleston, B. (1997) Liquidated Damages and Extensions of Time in ConstructionContracts, 2nd edition, Oxford: Blackwell Science

Emden’s Construction Law, Butterworth Tolley

Duncan Wallace, I.N. (1994) Hudson’s Building and Engineering Contracts, 11th

edition, London: Sweet & Maxwell

Ramsey, V. & Furst, S. (2000) Keating on Building Contracts, 7th edition, London:Sweet & Maxwell

Pickavance, K. (2000) Delay and Disruption in Building Contracts, 2nd edition,Lloyds of London

RIBA, The Architect and Extensions of Time

Surveying safelyYour guide to personal safety at work

Surveying safely Your guide to personal safety at work

2

Why ishealth and

safetyimportant?

Serious accidents at work destroy and disrupt family and personal lives. The loss of a parent,breadwinner, partner, friend is devastating and trying to rebuild a life after an accident can beequally traumatic, especially if it could have been avoided.

You have a critical role, whatever part you play in the industry. Decisions taken in theboardroom can have as much influence on health and safety as working practices in theoffice, travelling on business or being at a property or on site. Adequate planning,innovation and best practice, good design, sufficient resources and effective training willprovide a better product more safely and more economically.

This guide has been produced by the new RICS Health and Safety Forum to help you to puthealth and safety first when carrying out your duties and responsibilities. It will alsoremind you of the many aspects of our industry that can be hazardous.

Using effective health and safety procedures will:

• Provide a safer environment for those involved in managing property and construction

• Result in higher productivity, and

• Lessen the chance of having accidents or suffering illness.

If we are to make a difference, and make our industry a safer place to work, we have totake personal responsibility to make it happen by eliminating or reducing risks, andplanning and controlling the risks that remain for ourselves, to our colleagues and thepublic at large.

You can make a difference by putting health and safety first.

Ian Watson, FRICS MCIArb MaPSChairman of RICS Health and Safety Forum

Because it affects you! We take significant risks in our jobsregularly, be it driving in connection with our work, being at apremises or on site.

3

Contents

General statement of employers’ and employees’ duties 4

Safety of employees 4

Your workplace 5

Identifying hazards and undertaking risk assessments 6

Before visiting premises/sites 7

Upon arrival and during visits to premises/sites 9

Safety of yourself and others 11

Your legal duties 12

Case studies 14

For more information 15


4

General statement on employers’ and employees’ duties

The Health and Safety at Work etc Act 1974 places a statutory duty on all employers,including their managers, to provide and maintain equipment and systems of work thatare safe and without risk to the health of employees, or others who may be affected bytheir undertaking.

Equally, employees need to take reasonable care of their own safety and that of others whomay be affected by their acts or oversights.

In addition, both employers and employees have a duty of care in tort (particularlynegligence) towards those who may be affected by their actions or instructions.

Safety of employees

Make sure you comply with the provisions of the Health and Safety at Work etc Act 1974. Other regulations that are important to know and adopt include:

• The Workplace (Health Safety and Welfare) Regulations 1992

• The Management of Health and Safety at Work Regulations 1999.

Employers must:

• Provide information on health and safety

• Have emergency procedures

• Carry out risk assessments

• Eliminate and control risks

• Have insurance

• Carry out health surveillance

• Provide Personal Protective Equipment (PPE)

• Provide for those with special needs

• Control working hours

• Provide regular health and safety training.

Employers with five or more employees must:

• Have written health and safety documents. The HSE document ‘Successful Health andSafety Management (HS(G) 65)’ provides guidance on how to satisfy the legalrequirements of the regulations

• Have a policy statement by the chief executive/managing director/senior partneroutlining the organisation’s commitment to health and safety, and that it will bereviewed on a regular basis

• Detail the organisation’s health and safety structure, with roles and responsibilities formanaging health and safety

• Make sure arrangements are in place that show the organisation’s approach to healthand safety, and how the management system is planned and implemented (includinghazard identification, risk assessments and control measures)

• Measure, audit and review the organisation’s health and safety performance on a regular basis.

5

Employer’s actions You have a special responsibility for people in your charge, particularly those in training orwho are inexperienced.

• Make sure employees in your charge take the right equipment with them on visits.Check they know how to use it

• Make sure scrupulous records are kept of employees’ movements

• Keep available, records of hazards on particular sites. Make sure all relevantpeople are notified

• Make sure a supply of the right equipment is available. Helmets, steel capped shoes, eardefenders, face masks, overalls, torches and batteries – these should be in your office asappropriate and in good condition

• Make sure your offices are safe:Are there fire precautions and means of escape? Washing facilities? Is electrical equipment up to date and safe? Do you prepare and store food and drink safely? Have you carried out Display Screen Equipment Assessments? Are you aware of the stress that some employees may be suffering?

• Assess the risks of manual handling in the office or look at the materials being used orstored and whether COSHH assessments are needed

• Provide guidance on driving on your organisations business or the use of hand held devices while driving.

Finally, the best way to make sure safe practice by people in your charge is to set a good example.

Your workplace

The Workplace Health Safety and Welfare Regulations 1992 provide information on whatassessments you should be making and the facilities you should provide, depending on thesize and nature of your organisation:

WelfareSmokersRest room First aidPregnant mothers

Fire – The Fire Regulations Act 1991 and Fire Regulations 1997 need you to maintainadequate fire safety equipment. Your employees need to have training on how to use it.Occupiers of premises must also carry out fire risk assessments.

First aid – accident books – you should have the correct form of accident book, whichallows personal details to be extracted from the book and placed in a secure location tocomply with the Data Protection Act 1998.


6

Signage – in addition to helpful Health & Safety signs on first aid, fire or manual handling,you should have safety signs displayed for any other significant risks, whether it be veryhot water or fragile roofs.

Portable Appliance Testing (PAT) – around 25% of reportable electrical accidents involveportable appliances. Make sure you have them tested regularly (recommended annually)by an approved tester.

Contractors – to protect yourselves, you should have procedures to make sure no onecomes into your building to work without you knowing they are competent, a riskassessment has been carried out and a safe system of work has been established.

Asbestos – everyone in control of premises must proactively locate and manage anyasbestos that exists.

Disability Discrimination Act 1995 (DDA) – the DDA and the Disability Rights CommissionAct 1999 requires anyone providing a service from their building and receiving visitors, tosuitably provide for people with disabilities.

Legionnaires disease – depending on the use of the building with which you may beinvolved, you should make sure you are not at risk, by employing a WTC (Water TreatmentCompany) to carry out an assessment. And get advice on how to reduce any risks and howto carry out your own checks.

Identifying hazards and carrying out risk assessments

An underlying principle of effective management of health and safety is that of riskassessment.

In the words of the Health and Safety Executive (HSE), risk assessment is ‘nothing morethan a careful examination of what, in your work, could cause harm to people so that youcan weigh up whether you have taken enough precautions or should do more to preventharm.’ Risk assessment involves two key concepts, being those of hazard and risk.

Hazard and risk Hazard is something with the potential to cause harm to someone.

Risk is the likelihood (whether high or low) of the harm being caused.

Importantly, risk increases as both the severity or likelihood of the harm increases.

Working with risk assessments The principles of risk assessment are based on common sense. Familiarity with the basis ofrisk assessment will make the process a natural part of your day to day work and will giveyou the mental skills to deal effectively with hazards on site.

However, it is important to write down a summary of the risk assessment process so thereis a record of it and so that other people can refer to it. A range of HSE and other guidanceis available that will allow you to develop a system suitable for you and your business.

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Managing risk Having identified a hazard and assessed the risk involved, consider how the risk might bereduced to a level as low as reasonably practicable by looking at:

• Removal of the hazard by re-planning the work process or activity

• Accepting the hazard will remain but re-planning of the work process or activity toreduce the likelihood of harm happening or to reduce the severity of the consequences if it does.

Either option will involve a consideration of the method of working and if necessarydocumenting a ‘Safe system of work’ or ‘Method statement’ for the activity.

Before visiting premises/sites

When you receive instructions to inspect a site or premises, make sure you get relevantinformation about the property, identify likely hazards and carry out a risk assessment.

You must make as full an assessment as reasonably possible, consulting with others asnecessary. The sorts of factors you need to take into account include:

Travelling to and from site

• Plan the journey to avoid driving too fast, for too long or when tired

• Be aware of where to park (clear, secure, easy to exit, well lit).

Lone working

• Is lone working a safe option and if so what provisions are made for communications inan emergency. Does the office have a record of employees’ mobile numbers?

• Who has a record of where the lone worker is and when to expect them back in theoffice or at home?

• Have procedures been made for regular ‘check-in’ calls?

• How would access for rescue be achieved?

• Does a lone worker suffer from any medical condition which could affect personalsafety, ie epilepsy, diabetes, etc?

Condition of site

• If a construction site, what stage has been reached? hat are the site rules?

• Are the premises known to be derelict or in poor condition, and if so what is the extentand nature of the damage?

• Are areas to be defined as unsafe for access?

• Are security measures in force and how is access to be gained?

• Is protective clothing or special equipment needed (see later)?

Occupation

• Is the property occupied? If so, does the occupant know you are coming and have theymade any special access arrangements?

• Who are you likely to encounter on the building or site, eg children, squatters, vagrants, animals?

• Are the occupants or neighbours likely to be aggressive or disaffected?


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Activity

• If a building/site is occupied, what is the nature of that occupation, i.e. residential,manufacturing, warehousing, etc, and what might you encounter, e.g. noise, fumes,vehicle movements, electronic equipment etc?

Site rules and welfare

• Does the client/premises manager have ‘house rules’?

• Are there ‘Permit to work/enter’ procedures to be followed?

• If a site, is there a ‘Construction phase health and safety plan’ including inductionprocedures to be followed?

• Might toilet, wash and first aid facilities be needed and how will these facilities be provided?

High structures

• If a scaffold exists, it is safe to use? When it was last inspected by a competent person?

• Are any towers, masts or tall chimneys involved?

• Are they to be inspected, and if so how will they be accessed?

• Is a ‘cherry picker’ or other special access equipment needed and who is toprovide/manage it?

Dangerous substances

• Is the inspection likely to bring you into contact with hazardous substances such aschemicals, radiation, asbestos, gas or other noxious atmosphere, explosives etc?

• Are records such as a Register of Asbestos Containing Materials or environmentalreports available? What do they reveal and what special precautions need to be taken?

Diseases

• Is the nature of the site such that it could be contaminated with any form of clinical waste?

• Are you likely to encounter used syringes/needles, condoms, razor blades etc?

• Could the site be a source of anthrax which, for example, could be present in haired plaster?

• Could legionella be present in disused water storage systems?

• What hazards might arise from vermin (eg Weil’s disease)?

Special access

• Will special access arrangements be required (eg underground) and who will provide it and manage it?

• Is special training needed?

Special risks

• Is the nature of the building or site such that it presents special hazards, eg railwaypremises, security establishments, confined spaces, plant rooms, etc?

Special equipmentIn certain circumstances any of the following equipment may be necessary:

• Gloves

• Respirator or face mask

• Safety helmet

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• Ear defenders

• Eye protection

• Boots

• Temporary lighting

Having considered the ‘physical hazards’ that might exist, you need to consider these in thelight of personal and environmental issues:

Environmental

• Will weather conditions and/or light levels increase risk? (eg windy conditions and high structures)

• Will temperature extremes present a hazard?

Personal

• Does gender or level of fitness have any bearing on the hazards which have beenidentified? Pregnant or nursing mothers need special consideration. Would lack offitness present a hazard in itself?

• Are special skills needed and do you have those skills?

• Do you have any phobias or suffer from vertigo or claustrophobia that would impairjudgement with regard to personal safety?

The above lists are by no means exhaustive and the extent to which any of the itemsmight be relevant in a particular circumstance will vary.

Arriving and during visits to premises/sites

However well a survey or inspection is planned in advance, you need to be alert to mattersthat are unknown until arrival at the premises or site. This may arise simply through ageneral lack of information about the site, or because the condition of the property, itsoccupation or other factors have changed unexpectedly.

Review the risk assessment as necessary and be alert during the inspection to otherhazards such as.

Structures

• The chance of partial or total collapse of:

• Chimney stacks, gable walls or parapets

• Leaning, bulged and unrestrained walls (including boundary walls)

• Rotten or corroded beams and columns

• Roofs and floors.

Timbers and glass

• Rotten and broken floors and staircases. Flimsy cellar flaps and broken pavement lights

• Floorboards, joists and buried timbers weakened by age, decay or attack

• Projecting nails and screws, broken glass

• Glazing in windows and partitions may be loose, hinges and sashcords weak or broken. Glass panels in doors and winglights may be painted over.

Roofs

• Fragile asbestos cement and plastic coverings

• Fragile rooflights (often obscured by dirt or temporary coverings)

• Low parapets or unguarded roof edges, loose copings

• Rusted, rotten or moss covered fire escapes, access ladders and guard rails

• Rotten roof decking and joists

• Slippery roof coverings (slates, moss or algae covered slopes)

• Broken access hatches

• Mineral wool dust, mortar droppings and birds’ nesting material and excrement in roof voids. Cornered birds and vermin

• Insects, including bee and wasp colonies

• Water cooling plant may harbour legionella

• Unguarded flat roofs

• Broken, loose, rotten and slippery crawling boards and escape ladders

• Weak flat roofs and dust covered rooflights

• Slippery roof surfaces

• High winds during roof inspection

• Ill-secured or flimsy, collapsible, sectional or fixed loft ladders

• Concealed ceiling joists and low purlins

• Ill-lit roof voids.

Unsafe atmospheres

• Confined spaces with insufficient oxygen including manholes, roof voids, cellars, vaults,ducts and sealed rooms

• Rotting vegetation which may consume oxygen and give off poisonous fumes

• Accumulation of poisonous of flammable gases in buildings on contaminated land

• Stores containing flammable materials such as paint, adhesives, fuel and cleaning fluids

• Hazardous substances, including toxic insecticides and fungicides

• Gas build-up in subfloor voids.

Danger from live and unsecured services

• Electricity, gas, water and steam supplies

• Awkward entrances into sub-stations and fuel stores

• Temporary lighting installations: mains connections and generators

• Buried cables and pipes

• Overhead electrical cables.

Hidden traps, ducts and openings

• Lift and services shafts, stairwells and other unguarded openings

• Manholes, including those obscured by flimsy coverings. Cesspools, wells and septic tanks.

Intruders and others

• Physical dangers from squatters, vagrants or guard dogs

• Disease risks from discarded syringes and condoms

• Structures weakened by vandalism or arson

• Aggressive tenants or property owners.


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Contamination

• Asbestos, lead and other substances hazardous to health

• Chemicals in storage or leaked

• Contaminated water supplies

• Contaminated air conditioning systems (legionella)

Rural Environments

• Hazardous operations such as tree felling or tractor work

• Shafts, holes, pits, ditches, etc

• Farm animals

• Chemicals in storage or in use.

Vermin and birds

• Rats and mice (Weil’s and other diseases)

• Bird droppings

• Lice and fleas may be present in bedding, soft furniture and carpets.

Securing the site and leaving

• Upon completion of the visit, the property should be left secure

• Inform any occupier or staff in site office that you are leaving

• Someone in the office or at home should know where you are and when you are due toreturn. Let them know as you leave and confirm when you expect to be back.

Safety of yourself and others

All employees of any organisation must, under the health and safety legislation, takereasonable care of their own health and safety and that of others who may be affected bytheir acts or omissions. As well as cooperating with their employer as necessary to helptheir employer to comply with their statutory duties.

It is equally a criminal offence for you to intentionally or recklessly interfere with or misuseany thing provided in the interests of health, safety or welfare. If you are a manager withinan organisation you are also personally liable if you do not carry out the health and safetyresponsibilities associated with your duties.

Safety of yourself

• Make sure you are familiar with your organisation’s health and safety policy andarrangements for implementing safe working procedures

• Comply with the office safety policy and ensure that any equipment you may use is ingood and safe condition

• Comply with your organisation’s safe systems of work, or ensure one is put in place priorto carrying out work, particularly where a risk assessment shows that a hazard exists

• Refuse to condone unsafe working practices by yourself or others and distributeinformation on hazards

• Make sure your advice to clients will minimise the risk to the health and safety of others

• Make sure you are aware of any hazards which may exist, together with any safeworking instructions, which have been issued by clients prior to carrying work attheir premises

• If you are working alone, make sure you follow your organisation’s lone working procedures.

In other words, follow the dictates of common sense.

Safety of others You are responsible for anyone under your supervision, particularly those in training or whoare inexperienced, and also towards anyone who may be affected by your or their work.

• Make sure anyone in your charge takes the right equipment with them on visits. Checkthat they know how to use it and that it is safe to use

• Make sure a suitable and sufficient risk assessment has been carried out of the tasks tobe performed, and a safe working method is in place that has been communicated toand understood before any field work taking place

• Make sure everyone has suitable and sufficient information, training and instruction onhealth and safety matters for the task in hand

• Check available records of hazards on particular sites and make sure that all relevantpeople are notified

• Make sure, wherever necessary that precautions are put in place to safeguard anyonewho may be in the vicinity of works and unaware of the possible hazards

• Make sure the right equipment is used. Helmets, safety shoes, ear defenders, face masks,overalls, torches and batteries. Do not use any equipment that is defective – report it toyour employer.

Finally, the best way to ensure safe practice by people in your charge is to set a good example.

Your legal duties

Criminal liability The wide ranging requirements of the Health and Safety at Work etc Act 1974 areimplemented principally through the Management of Health and Safety at WorkRegulations 1999. These must be followed to make sure there are satisfactory and safesystems in place for the carrying out of surveying activities, many of which by their verynature (particularly when working alone) must be regarded as hazardous activities.

The regulations need you to have a health and safety policy and to have effectivemanagement systems in place for the planning, organisation, control and review of safeworking practices (identified through the risk assessment). You will find the key elementsof such systems in HSE publication HS(G) 65 – Successful Health and Safety Management.

Not taking the necessary actions to protect people from avoidable dangers in theworkplace is in itself a criminal offence and charges may be brought against both theorganisation, the directors/partners and individual managers for non compliance with anyhealth and safety regulations. An accident does not have to happen before action is takenagainst you for non-compliance. If action is taken, it is for you to prove everythingreasonably practicable was done to comply with the relevant legislation.


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Employers may develop generic sets of safe working practices for each activity carried out.However, individual managers/team leaders also have a further responsibility for makingsure any generic safe working practices are either sufficient or expanded as necessary forany particular activity taking place within their area of responsibility (Armour v Skeen, seecase studies).

Equally employees must be given sufficient training in hazard identification and reduction/control techniques to ensure that any non-foreseeable hazards arising during the course oftheir work do not give rise to otherwise avoidable accidents occurring.

Civil liability Employers and employees owe a duty of care to anyone who may be affected by theiractions, where effects of their actions are reasonably foreseeable.

The duty to provide safe systems of work is illustrated by the judgement in GeneralCleaning Contractors v Christmas which stated: ‘It is the duty of the employer to consider thesituation, to devise a suitable system, to instruct his/her men what they must do, and supplyany implements which may be required.’

An increasing area of liability in negligence is that of stress through work overload,particularly in cases where the result is reasonably foreseeable (Barber v Somerset CountyCouncil see case studies).

Key regulations This publication sets down the background to health and safety legislation as it affects thework of surveyors. Bearing in mind the wide ranging nature of the profession it is notintended to specify every piece of health and safety legislation, code of practice orguidance notes published by the HSE.

The employer or employee must seek out the relevant information themselves. Where indoubt get specialist advice.

Case studies

Criminal offence caused by neglect of director, manager or secretary of an organisationArmour v Skeen Strathclyde Regional Council and its director of highways were bothprosecuted following the death of one of its employees due to lack of a safe system ofwork and failure to make notification of certain works taking place. While it was held thatit was SRC (as the body corporate ) that had committed the offence, its director of roads(being a manager or similar officer within the meaning of the Health and Safety at Worketc Act 1974) was found to have been negligent in not having a sound safety policy,developed from the authority’s overall policy, in place for his department, failing to provideinformation to his subordinates, and failing to provide training and instructions in safeworking practices.

Criminal offence caused by failure to ensure persons not in an organisations employmentwere not exposed to safety risks A heating engineer was working on a development in Fitzroy Square, London. He climbedan unguarded ladder to a half platform from which he fell some 2.5metres and sufferedfatal injuries. The principal contractor on site had not carried out a risk assessment in thearea in the engineer was working, the half platform had no edge protection, nor had thearea been declared an exclusion zone. The principal contractor was found guilty of failingto make sure people not in their employ were not exposed to health and safety risks underS3(1) of the Health and Safety at Work etc Act 1974.

Criminal offence caused by employer’s failure to manage asbestosHigh street retailer Poundstretcher Ltd was ordered to pay £15 000 in fines and costs afterexposing employees to asbestos fibres. A routine inspection by environment health officersfound damaged asbestos insulation boarding and asbestos debris on the floor. Employeeshad been exposed to asbestos fibres over a period of time during routine work activities.

Civil liability for safe systems of work General Cleaning Contractors v Christmas A person was employed by a contractor to cleanthe outside windows of a club. To carry out this work he stood on the sill on the outside ofthe window, using one hand on the window sash to steady himself. The second sash fell onto his fingers, causing him to let go, fall and injure himself. It was decided, in the House ofLords, that his employers were negligent in failing to devise a safe system for carrying outsuch operations on the properties their employees had to visit. And they ought to haveinstructed their employees how to avoid accidents and supply any implements that may be needed.

Civil liability relating to stress at workBarber v Somerset County Council The House of Lords decision published in April 2004 isthe leading case relating to stress at work. Mr Barber was a teacher who was forced to takethree weeks off work due to stress, which was known to his employers. When he returnedto work, his employers took no action to help, monitor his situation or reduce his workload.This resulted in his being forced to retire through work related stress and the courtawarding him £100 000 damages.


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For more information

www.rics.org

www.hse.gov.uk

www.hse.books.com

www.shponline.co.uk

www.iosh.co.uk

www.rospa.com

www.britishsafetycouncil.co.uk

http://agency.osha.eu.int/

www.aps.org.uk

www.rics.org

The Royal Institutionof Chartered Surveyors12 Great George StreetParliament SquareLondon SW1P 3ADUnited Kingdom

T +44 (0)870 333 1600F +44 (0)207 334 [email protected]

Oct

20

04

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00

/40

23

6/D

.Fre

eman

RICS is the mark of property professionalism worldwide, promoting best practice, regulation and consumer protection for business and the community. It is the home of property related knowledge and is an impartial advisor to governments and global organisations.

PART 5, SECTION 2


SECTION 5.2: CONSTRUCTION (DESIGN AND MANAGEMENT) INFORMATION

Health and Safety, and CDM in particular, is a growth industry and issupported by a plethora of books, publications and other sources of reference.The number of publications is daunting and the members of the RICS workingparty on CDM are frequently asked for advice in this respect.

In response to this, guidance has been prepared which is based on the personalexperience of the working party members. The list is not exhaustive and hasbeen prepared impartially without inference or preference or ranking and nodoubt there are many other equally suitable sources of information notincluded.

Other eminent organizations, not the least of which is the Library Service ofthe Institution, produce reading lists which contain much more comprehensiveinformation, if this is required.

This schedule attempts to meet the widest needs, ranging from introductorybackground for the beginner to more detailed coverage on specific topics forthe more experienced reader. A variety of available media has been includedsuch as videos and audio tapes, as well as the written word. Where possible,data has been collated on a functional basis under the heading of the variousrepresentatives of the project team for whom it is felt that the information ismost useful.

THE RICS HEALTH AND SAFETY IN CONSTRUCTION PRACTICE PANEL

PART 5, SECTION 2

Page 2 Effective from 1/12/02 Part 5, Section 2 (10/02) The Surveyors’ Construction Handbook

5.2.1. Schedule of Sources of Useful CDM Information

Regulations

The Construction (Design and Management) Regulations 1994, HMSO, 1994[0110438450]

The Construction (Design and Management) (Amendment) Regulations 2000, HMSO,2000

‘Managing Construction for Health and Safety’ Construction (Design andManagement) Regulations 1994. Approved Code of Practice and Guidance, HSC, 2001[071 7621391]

The Construction (Health, Safety and Welfare) Regulations 1996, HMSO, 1996[0110359046]

Accident Awareness/Statistics

‘Blackspot Construction’ – Study of fatal accidents in the building and civil engineeringindustries 1981–1988 (out of print), HSE, 1988 [0118839926]

‘Not Just an Accident.’ Video, CIRIA, 1993 [Video SP100V]

Health and Safety Statistics of HSE 2000/01, HSE, 2000/01 [0717621103]

Risk Assessment

5 Steps to Risk Assessment, HSE, 1998 [0717615804]

Clients

Engaging an Architect: Guidance for Clients on Health and Safety, RIBA, 1995[1859460062]

Clients and The CDM Regulations: What You Need to Do, APS, 2002

Construction Sheet No. 39 Construction (Design and Management) Regulations 1994:The Role of the Client, HSE, 2000 [CIS 39]

Clerk of Works

The CDM Regulations: Their Implications for Practice. A Guidance Note for Clerk ofWorks, ICW GB

PART 5, SECTION 2


Forms of Appointment for Planning Supervisors

Form of Appointment as Planning Supervisor, RIBA, 2000 [PS/99]

Form of Appointment as Planning Supervisor, APS, 2000 [FOA/2000]

Where a Consulting Engineer is Engaged to Act as Planning Supervisor, ACE, 1995[Agreement F]

Designers

Designing for Health and Safety in Construction (The Green Book), CONIAC, 1995[0717608077]

CDM Regulations Case Study Guidance for Designers: An Interim Report, CIRIA,1995 [0860174212]

Information on Site Safety for Designers of Smaller Building Projects, by SylvesterBone, HSE, 1995 [0717607771]

A Safer Bet: An Introduction to the Principles of the CDM Regulations 1994, CERCI,1995 [Video 1898671044] Out of Print

Construction Safety Sheet No. 41. Construction (Design and Management) Regulations1994: The Role of the Designer, HSE, 1995 [CIS 41]

Site Safety Handbook, CIRIA, 2001 3rd edition [08 601 78005]

Building Design: Easibrief. CDM Primer by Henry Haverstock, Building Design, 1997Out of Print

Planning Supervisor

Construction Sheet No. 40. Construction (Design and Management) Regulations 1994:The Role of the Planning Supervisor, HSE, 2000 [CIS 40]

CDM Documents

(See also ‘Comprehensive Guidance’)

Construction Sheet No. 42: CDM – The Pre-Tender Stage Health and Safety Plan, HSE,1995 [CIS 42]

Construction Sheet No. 43: The Health and Safety Plan During the Construction Phase,HSE, 1995 [CIS 43]

PART 5, SECTION 2


Construction Sheet No. 44: The Health and Safety File, HSE, 1995 [CIS 44]

The Building Centre Maintenance Manual & Health and Safety File, Building CentreTrust, 1997 [0901919136]

Comprehensive Guidance

CDM Regulations: How Do Regulations Affect You? HSE, 1995 [PML 54] Out of Print

A Guide to Managing Health and Safety in Construction (The Brown Book), HSC, 1995[0717607550]

CDM Regulations Explained by Raymond Joyce, Thomas Telford 2nd edition 2001[0727730363]

Croner’s Management of Construction Safety (includes 2 updates and 12 newslettersp.a.), Croner, 1997

CDM: The View from Here, CITB, 1995 [GCI]

Health and Safety in Construction, HSE, 1996 [HS G 150] [0717621065]

Construction Health and Safety Manual (includes 2 updates/year), CIP, 1997 [1852630027]

Specific Hazards

Safety in Excavations, HSE, 1997 [CIS 8 rev]

Tower Scaffolds, HSE, 1997 [CIS 10 rev]

Inspections and Reports, HSE, 1997 [CIS 47]

General Access, Scaffolds and Ladders, HSE, 1997 [CIS 49]

Dust and Noise in the Construction Process, Contract Research Report, HSE, 1995[CRR73] [0717607682]

Control of Substances Hazardous to Health in Construction by HSC, HMSO, 1990[M20 6/90] Out of Print

Prevention of Falls to Window Cleaners: Guidance Note, HSE, 1991 [GS 250118856820] Out of Print

Contractors

(See also ‘Comprehensive Guidance’)

PART 5, SECTION 2


Safety Policies for Construction – BEC Guide, BEC, Newsletter [SPOL]

Construction Safety Manual (2 Volumes), BEC, 1997 [CHSMAN]

Construction Site Safety: Safety Notes Loose-leaf, CITB, 2000 [GE 700] CD-Rom

Audio Tapes

CONDAM – CDM Regulations. RICS and College of Estate Management, Owlion1995 [ASP 10100]

Construction Radio: Talking Point on the CDM Regulations, CITB, 1995 [AT 1]

Health and Safety in Property. RICS and College of Estate Management, Owlion, 1995[ASP 17230]

Key to References Used

Name Address TelephoneACE (Association ofConsulting Engineers)

Alliance House12 Caxton StreetLondon SW1H 0QL

020 7222 6557

APS (Association of PlanningSupervisors)

16 Rutland SquareEdinburgh EH1 2BB

0131 221 9959

Building Centre Trust The Building Centre26 Store StreetLondon WC1E 7BT

020 7692 4000

Building Design CMP InformationCity Reach5 Greenwich View PlaceMillharbourLondon E14 9NN

020 7861 6467

CIC (ConstructioIndustry Council)

26 Store StreetLondon WC1E 7BT

020 7637 8692

CIRIA (Construction IndustryResearch and InformationAssociation)

6 Storey’s GateLondon SW1P 3AU

020 7222 8891

CITB (ConstructionIndustry Training Board)

CITB PublicationsBircham NewtonKings LynnNorfolk PE31 6RH

01485 577577

CONIAC (ConstructionIndustry Advisory Committee)

HSE BooksPO Box 1999SudburySuffolk CO10 2WA

01787 881165

PART 5, SECTION 2


Construction Federation Construction House56–64 Leonard StLondon EC2A 4JX

020 7608 5000

Croner Croner CCH Group Ltd145 London RoadKingston upon ThamesSurrey KT2 6SR

020 8547 3333

HSE/HSC (Health and SafetyExecutive/Commission)

HSE BooksPO Box 1999SudburySuffolk CO10 2WA

01787 881165

ICW GB (Institute of Clerksof Works of GB)

1st & 2nd FloorsThe Old HouseThe Lawns33 Thorpe RoadPeterborough PE3 6AD

01733 564 033

LPC (Loss PreventionCouncil)

Bracknells LaneGarstonWatford WD25 9XX

01923 66 4000

Owlion RICS Books Mail OrderSurveyor CourtWestwood Business ParkCoventry CV4 8JE

020 7222 7000(mail order)

RIBA (Royal Instituteof British Architects)

66 Portland PlaceLondon W1B 4AD

020 7580 5533

The Stationery Office(previously HMSO)

0870 600 5522

Thomas Telford Publishing The Institution of CivilEngineers1 Great George StreetLondon SW1P 3AA

020 7987 6999

PART 5, SECTION 3


PART FIVE: ADDITIONAL GUIDANCE AND INFORMATION

SECTION 3: BUILT ENVIRONMENT GROUP ROLES AND INFORMATION

Introduction

The articles and guidance published in the Construction Handbook are largelythe responsibility of three faculties and their associated forums.

The contributing faculties are:

BUILDING SURVEYING

The Building Surveying Faculty aims to increase the public perception andappreciation of the core values offered by a building surveyor and in particularthe building surveying specialisms. The faculty wants to be identified as theprincipal source of knowledge and innovative thought on building surveyingmatters. It also seeks a clearer understanding for the public, employers, mediaand other construction professionals of the skills building surveyors hold andan awareness of what can be added through their appointment.

CONSTRUCTION

The Construction Faculty is responsible for:

• strategic construction consultancy;• construction management, economics, planning, contracts and materials

procurement, management, and health and safety relating to all forms ofconstruction; and

• surveying profession services in civil, heavy, mechanical, electrical,petrochemical and instrumentation engineering.

PROJECT MANAGEMENT

This Faculty is responsible for project management in the property andconstruction industries.

The associated forums are:

BUILDING CONTROL

The Building Control Forum was initially established as a consequence of themembers of the former Institute of Building Control (IBC) taking upmembership of RICS on 1 January 2001. It represents the building controldiscipline within RICS but also has a remit to provide a mechanism for allthose interested, involved or affected by building control issues to network. Itcurrently has a membership of approximately 4000.

PART 5, SECTION 3


BUILDING CONSERVATION

The Building Conservation Forum was founded in 1987 to develop a forumfor chartered surveyors linked by common interest in conservation. Since itsformation the forum has contributed to increasing the profile of buildingconservation. It represents the building conservation discipline within RICSbut also has a remit to provide a networking mechanism for all thoseinterested, involved or affected by building conservation issues. It currentlyhas around 1000 members.

The forum runs an accreditation scheme for surveyors in conservation. Thishighly respected scheme was started to help surveyors win church work andgrant-aided work. Now there is an architects’ accreditation scheme inoperation and one for engineers in prospect. English Heritage and HistoricScotland will be making it a requirement that professionals involved ingrant-aided work be accredited by their professional organisation. The forumpublishes a regular series of short guides on matters related to historicbuildings, and has arranged an active programme of events for members. Mostof these are low cost, and are a very pleasant way to achieve CPD. The eventsrange from an annual seminar to half-day visits to work in progress at historicbuildings.

5.3.1 Faculty working groups and committees of selected members have thefollowing roles in respect of defined spheres of surveying services:

• to help members meet the market’s requirements for their professionalservices;

• to respond to consultation papers from other bodies on the content ofprofessional services and to developments in the market;

• to produce or contribute to responses to government consultation papers;• to assist in answering queries on the content and quality of professional

services (from members, lawyers, the public, the media, etc.);• to make strategy recommendations for new marketing activity and to assist

in the implementation as appropriate; and• to receive market briefings and advice on developments in the market and

to provide appropriate support to members.

Groups and committees fulfil these roles primarily by providing these types ofoutputs:

• Practice Statements, Guidance Notes, and Information Papers, afterconsultation with members;

• information and articles in RICS Business and (if produced) facultyjournals;

• electronic communications;• dedicated web-sites;• model and standard conditions of engagement and standard services, e.g.

Appointing a Building Surveyor (guidance note);• seminars and conferences;

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PART 5, SECTION 3


• representations to other bodies;• advice to others on the content of professional services; and• proposals for marketing and policy initiatives.

5.3.2 Faculty working groups and committees are responsible for producingmaterial for this handbook.

Within the Faculties and Forums department there is a ProfessionalInformation Section which provides a free professional and technical enquiryservice. The section can be contacted:

• by telephone on +44 (0)20 7334 3791;• by fax on +44 (0)20 7334 3844; or• by email to [email protected]

5.3.3 Working groups and committees are not permanent and are subject tocontinuous review.

The following working groups are currently in existence and are listed byfaculty:

BUILDING SURVEYING FACULTY

Asbestos – management of asbestos regulations, guidance and relatedasbestos matters.

Building Insurance and Assessment of Claims

Construction Administration and Management

Building Survey and Maintenance

Dilapidations

DDA

Construction Design and Economics – certification of domestic structures

Boundaries and Party Walls

CONSTRUCTION FACULTY

IT – working with construction IT

Railways – cost planning and cost control of major infrastructure projects andmaintenance contracts

Cost Planning

Taxation – capital allowances, etc.

Health and Safety

Oil and Gas

M & E

Engineering

JCT

Consultant QS

Procurement

Contractors

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PROJECT MANAGEMENT FACULTY

Project Management – PM Agreement

FACULTY CONTACTS

The relevant faculties can be contacted by Email at the following addresses:

Building Surveying: [email protected]: [email protected] Management: [email protected]

or by fax on +44 (0)20 7334 3844.

GENERAL ENQUIRIES

For general enquiries, please get in touch with the RICS Contact Centre on+44 (0)870 333 1600, by Email at [email protected] or by post to:

RICS Contact CentreSurveyor CourtWestwood WayCoventryCV4 8JEUnited Kingdom

If you already know who you need to speak to, please call our mainswitchboard on +44 (0)20 7222 7000. The postal addresses of ourheadquarters (Parliament Square) and two other central offices are:

RICS RICS RICS12 Great George Street Surveyor Court 3 Cadogan GateParliament Square Westwood Way LondonLondon Coventry SW1X 0ASSW1P 3AD CV4 8JE United KingdomUnited Kingdom United Kingdom

PART 5, SECTION 4


SECTION 5.4: BUILDING COST INFORMATION SERVICE (BCIS)

5.4.1 BCIS provides current, accurate building cost and tender price information forthe construction industry and the property market. It is regarded asauthoritative, reliable and useful by subscribers, who include quantitysurveyors, building surveyors, general practice surveyors, architects,engineers, building contractors, developers, financial analysts and propertyowners in both public and private sectors.

5.4.2 The BCIS database is collated by analyzing unique data submitted bymembers and incorporates material from all other relevant sources. Theinformation is interpreted by BCIS professional staff and presented tosubscribers in two accessible and practical formats: the comprehensive BCISBulletin Service, which provides hard copy data; and BCIS Online for thosepreferring to receive it electronically via the internet.

5.4.3 BCIS Online

BCIS Online gives direct access to the BCIS database of information and istherefore always complete and up-to-date. It includes the following information.

5.4.3.1 ANALYSES

Elemental analyses have been at the heart of BCIS since the first printedservice was launched. Using analyses allows the cost of a new building to beforecast using examples of buildings priced in the market place. BCIS Onlinehas a search capability which allows you to quickly and easily find the mostappropriate examples to match your current project from the database of over14,500 projects.

Subscribers can also automatically recalculate the costs to reflect a selectedlocation and date.

5.4.3.2 INDICES

BCIS compiles a full range of building cost, tender and output indices; a rangeof derived regional tender price indices and trade price indices; together withindices for certain sub-markets in the construction industry. A wide range ofbackground statistics is available, including consumer prices, constructionoutput and new order statistics.

5.4.3.3 AVERAGE PRICES

BCIS average prices can be used to give indicative costs prior to producingelemental estimates and they can also be used as a cost check. Five studies areavailable:

• £/m2 study;

• Element cost per m2;

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PART 5, SECTION 4

Page 2 Effective from 1/12/02 Part 5, Section 4 (revised 10/02) The Surveyors’ Construction Handbook

• Element unit rate study;

• Functional unit prices; and

• Group element prices

5.4.3.4 BRIEFING

BCIS Online Briefing carries the latest news in areas of key importance to theconstruction economy, together with the BCIS commentary and background tothe forecasts. This section also includes the annual BCIS Five Year Forecast.

5.4.3.5 STUDIES

Tender price studies report on the effect on tender prices of location; regionaltrends; selection of contractor; building function; building height; type ofwork; site conditions and contract sum.

Contract percentage studies report on preliminary percentages and percentageadditions to PC sums.

5.4.3.6 DAYWORKS

BCIS interprets the definitions of prime cost of daywork for all the main typesof operative in the industry. Current and historic base rates are provided,together with the build-up for the latest rates. Details of construction wageagreements, national insurance and CITB levy supplement this part of theservice.

5.4.4 Other BCIS Publications and Services

5.4.4.1 BCIS Review Online provides access to summary level information for theBCIS Database. It includes the following sections:

• Indices

BCIS Cost and Tender Price Indices are available together with Retail PriceIndices.

• Average Prices

Two studies are available:

• £/m2 study

• functional unit prices

BriefingBCIS Review Online Briefing carries the latest news in areas of keyimportance to the construction economy. Together with the BCIScommentary and background to the forecasts. This section also includes theannual BCIS Five Year Forecast.

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StudiesTender price studies report on the effect on tender prices of location; regionaltrends; selection of contractor; building function; building height; type ofwork; site conditions and contract sum.

5.4.4.2 QUARTERLY REVIEW OF BUILDING PRICES

The BCIS Quarterly Review contains a selection of BCIS data which givesguidelines on the general level of building prices. It also carries a briefcommentary on market conditions and tender prices, location factors andaverage £/m2 building prices.

5.4.4.3 BULLETIN SERVICES

BCIS Bulletin Services contain information selected from the BCIS databasepublished in regular bulletins. They include:

(a) Indices and Forecasts

Published quarterly, this bulletin contains a complete series of BCIS indices,including tender prices, regional prices, input costs and output costs. It also hasan executive summary, commentary on market conditions and projected trends.

(b) Surveys of Tender Prices

This quarterly publication contains a range of current pricing studies and anupdate of the BCIS Tender Price Index.

(c) Elemental Analyses

The key source of price information from accepted tenders available at eitherconcise or detailed level. Detailed analyses break down tender prices into 34elements. Published quarterly.

(d) Labour, Hours and Wages and Dayworks

BCIS publishes details of the principal wage rates in the building and alliedindustries. The information shows the rates and operative dates for current andrecent settlements.

(e) Digests

Digests give the source of publication and a brief summary of articles onconstruction economics.

5.4.4.4 GUIDE TO DAYWORK RATES AND UPDATING SERVICE

This annual guide covers the daywork rate for 63 grades of operative. Anupdating service informs subscribers of any changes.

5.4.4.5 RICS SCHEDULE OF BASIC PLANT CHARGES

For use in connection with Daywork under a Building Contract. The 2001edition of the schedule has been revised and extended to reflect the types ofplant likely to be available on a building site.

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PART 5, SECTION 4


5.4.4.6 GUIDES TO DOMESTIC REBUILDING COSTS FOR INSURANCE PURPOSES

(a) Guide to House Rebuilding Costs

This annual guide is widely used by professionals when assessing rebuildingcosts for insurance valuations. It contains sixteen main tables of costs for:

• four regional groups;

• five house types;

• three sizes of house; and

• three quality specifications

(b) Guide to Rebuilding Cost of Flats

This new guide provides cost per unit area tables for:

• modern low-rise and medium-rise flats which will be applicable to manyflats built post 1950; and

• flats in converted houses built between 1900 and 1950 which will alsobe applicable to low-rise purpose built mansion blocks

Additional cost advice is given to help to adjust the base figures for a range ofspecific circumstances.

(c) Regional Supplement

The Regional Supplement contains separate tables of costs for each of theStandard Regions. It helps surveyors and valuers take account of differencesin various parts of the country.

(d) ABI/BCIS House Rebuilding Cost Index

This index assists in the updating of the figures in the guides between theannual issues. A monthly figure is circulated to all subscribers.

5.4.5 Further details are available from:

BCIS Ltd12 Great George StreetParliament SquareLondonSW1P 3ADTel: 020 7695 1500Fax: 020 7695 1501Email: [email protected]: www.bcis.co.uk

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SECTION 5.5: BUILDING OCCUPANCY COST INFORMATION (BMI)

5.5.1 BMI provides an independent cost information service for professionals infacilities management, maintenance and refurbishment. Subscribers areprovided with information on current, historic and forecast costs of buildingmaintenance and occupancy in a readily accessible form.

The BMI information will help in budgeting, forecasting, benchmarking, costcontrol, contract administration and life-cycle costing.

The publications listed below are included in the full BMI subscription servicebut are also available separately.

5.5.2 BMI Quarterly Cost Briefing

The BMI Quarterly Cost Briefing provides information o current and forecasttrends in maintenance costs making it an essential tool for the facilities andmaintenance manager. Cost indices track the general movement of costs indifferent industry sectors allowing users to monitor their own costs againstgeneral maintenance cost inflation.

Indices are included for:

• redecoration;

• fabric maintenance;

• services maintenance;

• cleaning (labour and materials);

• lift service labour; and

• energy (coal, gas, fuel, oil, electricity)

5.5.3 Building Maintenance Price Book

The BMI Building Maintenance Price Book is the only annual guide toestimating and pricing exclusively for building maintenance and repairs. ThePrice Book gives labour constants and measured rates for over 1,300 items aswell as current wage rates and materials prices. It contains guidance on lettingmaintenance work. It is a valuable working document for all those involved inestimating, checking and negotiating rates for maintenance and repair work. Itis widely used as a schedule of rates to ensure competitive prices.

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5.5.4 Special Reports for Benchmarking

BMI publishes regular reports on maintenance, occupancy and rehabilitationcosts covering a range of common building types, detailed occupancy costplans and special benchmarking studies. The annual surveys of informationprovide estimated annual average costs for a range of common building types:

• maintenance (redecoration, fabric, services);

• occupancy (cleaning, utilities, administrative costs); and

• rehabilitation.

Detailed occupancy cost plans for typical buildings show maintenance andoccupancy costs projected over a 20 year period. Two plans a year arepublished and recent examples include retail centres and sports centres.

5.5.5 News, Digests and Reports

BMI also monitors changes in the maintenance and facilities managementindustries and reports the findings to keep subscribers up to date. BMIoccasional reports include:

• The Economic Significance of Maintenance; and

• Guide to Information Sources for Facilities Management

BMI News summarizes the latest industry developments and containsstatistical and editorial articles designed for quick reading to keep subscriberswell informed.

BMI publishes digests of articles with a bearing on property occupancy froma wide cross-section of the building maintenance and facilities managementpress. This information can save subscribers hours of reading time and isbacked up with a photocopying service.

5.5.6 Annual subscription rates, further details, a full list of BMI special reports,up-to-date prices and special rates for chartered surveyors are available bycontacting:

BMI12 Great George StreetParliament SquareLondonSW1P 3ADTel: 020 7695 1500Fax: 020 7695 1501Email: [email protected]

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PART 5, SECTION 6

The Surveyors’ Construction Handbook Part 5, Section 6 (12/03) Effective from 12/03 Page 1

PART FIVE: ADDITIONAL GUIDANCE AND INFORMATION

SECTION 6: ELECTRONIC DOCUMENT STORAGE – LEGAL ADMISSIBILITY

Introduction

The production and storage of documents and other information on computersystems has become increasingly common and it is, therefore, inevitable thatthese stored documents will be used in their electronic form as a basis forbusiness transactions, and will be produced, transmitted and stored insignificant numbers.

There is a need to store and retain records for professional and legal purposes.However, paper storage is a significant problem for many practices. Thequantity of paper produced is increasing year on year and would do so evenwithout expansion of the business. Two factors have led to the increase in theamount of documentation being produced by businesses. First, there is far moreregulation being introduced into everyday life, and this is linked directly to amore litigious population. The need is now to be able to prove what actionsoccurred and when. Secondly, the growth in management systems generally, aspreviously promulgated in BS EN ISO 9001:1994 and now in BS EN ISO9001:2000, has led to an increase in documentation. In fact, the processesinvolved in compliance with ISO 9001 are designed to provide the documentaryevidence which will satisfy the regulations which are relevant to the particularbusiness and, it is hoped, provide acceptable evidence in the event of litigation.

The requirement for storage also has implications – not least of which is thecost of dedicated storage areas. Storage conditions must be right to ensure thatstorage is effective. Using a local lock-up garage will probably not beadequate to prevent deterioration of paper copies over a period of time.

Increasingly, businesses are turning to electronic storage. This is a mediumthat requires far less floor space and ensures longer term storage, withoutdeterioration, under the right conditions. However, there are a number ofproblems related to electronic storage which have to be addressed. Inparticular, legal admissibility has to be considered: there has to be a certaintythat electronically stored documents will have the same weight and validity asthe original versions.

There is no current standard which guarantees legal admissibility (somecountries have made a move towards this), but there is a shift of emphasis awayfrom admissibility towards evidential value or weight which is in line with theCivil Evidence Act 1995. Annex G of the Code of Practice (see Part 1) givesinformation on relevant national legislation. The purpose of this text is toprovide information on the best practice principles which have thus far beenidentified.

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Page 2 Part 5, Section 6 (12/03) Effective from 12/03 The Surveyors’ Construction Handbook

5.6.1 Code of Practice – DISC PD 0008: 1999 A Code of Practice for Legal Admissibility and Evidential Weight of Information Stored Electronically

There has been considerable discussion about the value of documents storedon a document management system (DMS) when documents are required tobe kept as evidence for a considerable time. It has been accepted by mostcommentators that a common discipline needs to be agreed so that the valueof these documents as evidence can be maximised.

It has not been possible to develop a set of requirements and may not be forsome time. The difficulty is the range of issues which have to be considered,the rate of change of technology and the need to consult our European partnerson all legal aspects. The Civil Evidence Act 1995 would have to be updatedannually just to keep pace and this clearly cannot happen. Instead, a Code ofPractice (DISC PD 0008) has been developed, which is evolving astechnology and electronic commercial practices mature. It defines bestpractice in document management and provides guidance that will helpmaximise the value and integrity of information in a court of law. Firstprepared and published in 1996, the Code came about as a result of themerging of the research carried out by two organisations, namely the LegalImages Initiative (formed by the Information and Document ManagementAssociation) and the Document Management Forum (a group of theComputing Suppliers Federation). In the absence of a formal set ofrequirements approved by the courts through case law or by Parliamentthrough the Civil Evidence Act, leading institutions took the view that a Codewas required which recognised new technologies and would give a frameworkwhich reflected the existing legal precedents but applied to the newtechnologies. A document entitled Principles of Good Practice forInformation Management, written by two of the authors of the Code ofPractice, contains a detailed explanation of the background to each of thesections of the Code.

The Code of Practice should be used as a basic reference document. It coversdata files stored on Write-Once-Read-Many times (WORM) optical storagesystems and as such covers WORM, multi-function media systems used in awrite-once mode, and compact-disc-recordable (CD-R) systems. It has alsobeen extended from the original version to cover any type of electronic storagemedium, including those that are rewriteable. The use of rewriteable mediarequires additional controls, as it is necessary to be able to demonstrate notonly that the correct data was stored in the first place, but also that the datanow present has not been modified in any way.

It should be emphasised that the Code does not guarantee legal admissibility.It seeks to define the current interpretation of best practice.

In this guidance note, where it is stated that an action ‘should’ be carried outin relation to the Code, the word ‘should’ indicates that such action isnecessary in order to claim compliance with the Code.

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The Code pays particular attention to the setting up of authorisationprocedures and to the subsequent ability to be able to demonstrate, in a courtof law, that these procedures have been followed. Whilst the Code definesessential procedures to be implemented, it does not follow that documentsheld on a system that does not conform are not legally acceptable. It is likely,however, that it will be more difficult to prove their integrity in a court of law.

The Code contains examples of compliance statements at Annex I andrecommends that the Compliance Workbook PD 0009 be used to demonstratecompliance with the Code.

5.6.2 Weight of evidence and document destruction

Each business will have its own requirements and it is important to determine,in advance, how a document would be presented to a court of law, and ifweight of evidence or courtroom tactics could be unduly influenced by thedestruction of the original document, the document storage system or theaccess control systems. It will rarely be possible to give a definitiverecommendation regarding the destruction of original documents because,until there is a request to produce a document, the reason behind the requestmay not be known. It is the reason for the request that will indicate whether, ifpossible, the original document should be produced. Each business shouldconsult its solicitor, who will be able to provide a view as to which types ofdocument are most likely to be disputed regarding their authenticity ratherthan their content.

There are different considerations for civil and criminal law. In a criminalcase, the prosecution faces a much higher burden of proof ‘beyond reasonabledoubt’ than in civil proceedings ‘on the balance of probability’.

5.6.3 Authenticity

It is important to be able to demonstrate that the computer has beenfunctioning properly (i.e. according to agreed procedures) in order toauthenticate documents stored on the system. Documents may be rejected ifthis cannot be shown. There are three methods for doing this:

(1) A maintenance record should be kept recording regular servicing of theequipment and any repair work either by the supplier/maintenance contract orby the in-house IT support where qualified/trained to do this.

(2) By having a control set of documents which have been used, scanned andreproduced from the scanned version to set a benchmark for the quality ofcopy.

(3) By keeping proper records of scanning and scanning difficulties,especially of any modifications to settings required. This is explained in moredetail below (see 5.6.7).

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In most cases, arguments are over what a document says rather than theauthenticity of the document. However, the adversarial legal process meansthat the other party may try to discredit evidence on the basis of authenticity,to avoid dealing with the content. Arguments over authenticity of evidencecan lead to an investigation into the system that produced the paper and themethod of storage; operation and access control; and even the computerprograms and source code.

It could be necessary to satisfy the court that the information is stored in aproper manner. This issue could be used by the opponent to try to discredit theevidence and to make inadmissible that and any similarly stored documentsthat are produced. By questioning hardware reliability, for example, anopponent could establish, to the satisfaction of the court, that the documentstorage system is flawed and cannot be trusted. This would allow the wholesystem to be brought into question and any documents stored within it ruledinadmissible.

5.6.4 Photocopies, microfilm and image processing

In very general terms, image processed documents will be treated assecondary evidence in the same manner as a photocopy or microfilm image.However, photocopies and microfilm images are admissible as evidence.Indeed, some photocopies use a raster scan copying mechanism which isessentially the same as an image processing scanner. It follows that imageprocessed documents are likely to be admissible with the same weight ofevidence as photocopies and microfilm images, although no cases have yetbeen reported where this has been tested.

5.6.5 Document storage

It is very important to note that, no matter how an organisation stores businessdocuments, it is the responsibility of the executives of the organisation to beable to produce the documents when required. The company secretary orpartners and the manager of the document storage systems are responsible forthis document retrieval process, not the vendor of the storage system.Therefore, the advice of the company secretary (or solicitor) should always besought before implementing any document storage system, particularly whenthe original documents are subsequently destroyed.

The Code recommends that all interested third parties should be consulted,and it would be prudent to include professional indemnity insurers. It could bedisastrous for a business to find that it was uninsured because it hadintroduced a scan and destroy procedure.

The procedures by which documents are stored and accessed are vital insatisfying a court of law about the authenticity of a ‘copy’ of a document andthe inability to tamper with it. All copies of documents (photocopy, microfilmor image processing) will be treated as secondary evidence by a court of law,

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with a subsequent reduction of weight of evidence if the authenticity of thecopy can be questioned. For example, where the content of a document isunder question, the original or a copy should be treated with equal weight, butif a signature is being disputed then the original is likely to carry more weightthan the copy.

There may be some confusion about ‘originals’ and ‘copies’. Many items tobe scanned are actually themselves photocopies. The original document mayreside in a file elsewhere. It may be necessary, if this is not readily apparent,for the image processing system to indicate whether an image taken was fromthe original or from a copy of it.

5.6.6 Storage and access procedures

Due to the duration of storage of many documents, the person who ‘certified’a system, or a document stored on it, may not be able to give evidence inperson. It is essential that a proper system for auditing and certifying isimplemented to demonstrate that the integrity of the system has beenmaintained from the time the document was stored.

Regular audits of the system should be performed, and certificates obtainedfrom the company auditors. This is in line with current procedures formicrofilmed documents. Although formal affidavits will not usually benecessary, advice should be sought from a company solicitor, particularly ifthe original documents are to be destroyed.

It may help demonstrate the proper functioning of a system if a copy of theaudit record is stored in the image system at the time of audit.

As well as the specific details included in the Code, users should also complywith the relevant sections of BS 7799-1:2000 – Information Technology – ACode of Practice for Information Security Management.

Of major importance to this Code is the Civil Evidence Act 1995. The Actintroduces a flexible system whereby all documents and copy documents,including computer records, can be admitted as evidence in civil proceedings.However, the court judge or arbitrator still has to be persuaded to treat theevidence as reliable and so organisations have to put in place procedures toprove the authenticity and reliability of the record.

Sections 8 and 9 of the Act address the hub of this issue:

8 (1) Where a statement contained in a document is admissible asevidence in civil proceedings, it may be proved:

(a) by the production of that document; or

(b) whether or not that document is still in existence, by theproduction of a copy of that document or of the material part of it,authenticated in such manner as the court may approve.

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(2) It is immaterial for this purpose how many removes there arebetween a copy and the original.

9 (1) A document which is shown to form part of the records of abusiness or public authority may be received in evidence in civilproceedings without further proof.

(2) A document shall be taken to form part of the records of a businessor public authority if there is produced to a court a certificate to thateffect signed by an officer of the business to which the recordsbelong.

Similar work is being undertaken by the Home Office on a Police andCriminal Law amendment.

5.6.7 Format of the Code of Practice

The Code of Practice contains an introduction and six sections, each of whichincludes details of processes and procedures that need to be put into place toensure conformity with the Code. In addition, there are ten annexes, includingone which identifies the changes since the previous edition.

Sections 2 to 6 are structured in accordance with a set of five principlesestablished in BSI DISC PD 0010 Principles of Good Practice forInformation Management which are as follows:

1) recognise and understand all types of information;

2) understand the legal issues and execute ‘duty of care responsibilities’;

3) identify and specify business processes and procedures;

4) identify enabling technologies to support business processes andprocedures; and

5) monitor and audit business processes and procedures.

5.6.7.1 GENERAL

Scope

The Code describes the use of electronic management systems to storeinformation, where the issues of legal admissibility, authenticity andevidential weight of information contained in these stored documents isimportant. It is used with a document management system (DMS)incorporating write-once optical media as the storage device, coveringWrite-Once-Read-Many times (WORM), multi-functional media systemsused in a write-once mode, and compact-disc-recordable (CD-R) systems. Itnow incorporates rewriteable media (for example, magnetic storage).

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The Code covers any type of data file controlled by the DMS. Data files maybe created by the DMS, or may be imported into it. The Code covers all suchdata files, either created or imported, directly or through a network system,from the time at which the system assumes complete control of the data file.Such networks may be local or wide area.

While the Code covers aspects of document management that impinge uponthe issue of legal admissibility of digitised images, it also covers aspects thatmay affect the use of images in a legal context, even where admissibility perse is not at issue. Such aspects include the legibility and completeness of thedocument images, and the transfer of the images to other systems.

The Code covers the capture of digitised images both from the originaldocuments and from microform versions of the original documents. In thelatter case, users should be aware of the implications of the processes used inthe microfilming of the original documents.

The Code is intended for:

• systems integrators and developers whose equipment provides facilitiesto meet the requirements of end users; and

• end users who wish to ensure that the information created by, enteredinto and/or stored within the information management systems can beused with confidence as evidence in a court of law.

Where users wish to claim adherence to the Code, the paragraphs identified bytext in bold type in the Code are considered essential in so far as they apply tothe specific application concerned. Other paragraphs contain recommendationsin italics that should be followed where practical.

DISC PD 0008 was first published by the BSI in 1996, covering legaladmissibility of information stored on electronic management systems. It hassince been revised and reissued in 1999, and re-titled ‘A Code of Practice forLegal Admissibility and Evidential Weight of Information StoredElectronically’. Prior to this, BS 7799:1995 was published in 1995 setting outbest practice for information security management. The Code is heavilyreliant on this document, which has now been revised as InformationTechnology – Code of Practice for Information Security Management.

BS ISO/IEC 17799:2000 (BS 7799-1:2000) specifies eight controls which areeither essential requirements, for example, legislative requirements, or areconsidered to be fundamental building blocks for information security. Theseare designated ‘key controls’ and apply to all organisations and environments.They are intended as a basis for use by organisations setting out to implementinformation security controls.

PART 5, SECTION 6


The recommendations for essential controls include the following:

a) data protection and privacy of personal information;

b) safeguarding of organisational records;

c) intellectual property rights.

The recommendations for common best practice include the following:

a) development of an information security policy document;

b) allocation of information security responsibilities;

c) information, security, education and training;

d) reporting of security incidents;

e) business continuity management.

BS 7799-1 is to be read in conjunction with BS 7799-2:2002 – InformationSecurity Management Systems – Specification with Guidance for Use.

5.6.7.2 INFORMATION MANAGEMENT POLICY

The Code advises that a policy document should be produced, dealing with thepolicy on:

• what information is covered;

• security classification, where appropriate;

• storage media;

• data file format and version control;

• relevant information management standards;

• retention periods and destruction;

• responsibilities; and

• legal advice sought and acted upon, including any special regulations. Inaddition, such bodies as professional indemnity insurers may wish to beconsulted.

This policy must be approved by senior management and reviewed at regularintervals. It is also recommended that the policy document details theresponsibilities for compliance with the Code by identifying a person or jobfunction and specifying retention periods for compliance documentation.

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The requirement for an information retention and destruction schedule isamplified as being critical to the successful implementation of the revisedCode.

In order to define the organisation’s information management policy, theCode recommends that information should be grouped into types, with thepolicy for all information within a type being consistent.

The policy should list all types which are to be stored in compliance with theCode such as:

1) information generated by a computer system – also known as encodeddata files;

2) scanned images/digitised voice and/or video; and

3) information generated at a remote user or third party site, in either of theabove two types.

5.6.7.3 DUTY OF CARE

It is essential that an organisation is aware of the value of information that itstores and executes its responsibility with regard to that information under theduty of care principle. Appropriate levels of security for managinginformation should be agreed and documented; systems should be adequatelymanaged; and relevant sections of the Code should be implemented.Consultation with interested third parties at the planning stage, before thesystem is installed, is also critical.

The revised Code contains more details of information security requirementswhich would be satisfied by compliance with BS 7799. Where the full weightof BS 7799 is not applicable, the controls listed in the Code should beimplemented.

In any event, there should be business continuity planning to ensure that alldata can be recovered successfully following major failures of equipment,environment or personnel.

5.6.7.4 BUSINESS PROCEDURES AND PROCESSES

The organisation should develop its own manual for the DMS. This can beincorporated in the quality management system, where the organisationalready has one. Such a procedures manual, in addition to anyvendor-supplied manuals for the system, should include the following topics:

• document capture;

• data capture;

• indexing;

PART 5, SECTION 6


• authenticated output procedures;

• authentication of copies of data files;

• file transmission;

• information destruction;

• backup and system recovery;

• system maintenance

• security and protection;

• use of contracted services;

• use of trusted third parties;

• workflow;

• self-modifying files;

• date and time stamps;

• video, audio and voice data (if applicable);

• version control; and

• maintenance of documentation.

Procedures need to be implemented to ensure that staff who operate thesystem will comply with the requirements. Any changes to procedures have tobe documented and checked, and it is necessary to keep copies of previousversions of the procedure.

All procedures must be reviewed at least annually and the results of reviewsmust be documented.

Document capture

There must be procedures dealing with the situations either where data filesare created by the system or where they are imported into the system.

If the information management system is used for storing images, then theseprocedures should be documented and users should comply with therecommendations set out in Annex C of the Code.

Preparation of paper documents

The Code requires documents to be examined before scanning to ensure thatthey are suitable. The business should, therefore, have procedures for theexamination process documented in its procedures manual.

PART 5, SECTION 6


Factors which may affect the scanning process should be considered andthere must be a procedure to deal with scanning difficulties. There shouldalso be a method for identifying such things as ‘post-it’ notes attached to theoriginal document or physical amendments which might not be visible afterscanning.

Detailed procedures need to be established for general document preparationand collation.

Document batching

Wherever possible, documents should be grouped in batches. Whereworkflow is used, alternative methods of controlling the scanning processmay need to be established.

Photocopying

It may be necessary to photocopy a document prior to scanning and theprocedures used must ensure that there is no loss of quality or of the totalimage. It is also advisable to provide some method of distinguishing betweenscanned originals and scanned photocopies.

Scanning processes

The Code requires that the procedures manual should include details of theoperational procedures used in the scanning process and that records be keptof all audit trails. In particular, it requires each document to have a uniqueidentity that cannot be changed or removed except on deletion and then onlyunder tightly controlled circumstances.

Information held in the records is expected to include as a minimum:

• a unique identifier for each batch;

• the date and time of scanning;

• the name of the person who performed the scanning;

• the type of material scanned;

• the number of documents; and

• details of post-scanning processes, if any.

In practice, the scanning software will take care of many of the requirementsand a paper record will fill the gaps. (Appendix A shows a specimen form forrecording scanning information.)

The procedures should also describe how it is ensured that all documents in abatch are scanned.

PART 5, SECTION 6


Quality control

To be able to assess the validity of any scanned copy, it is necessary to preparea benchmark for evaluation. The operator, using normal settings, should makescanned copies of a range of types and conditions of document. Prints are thenobtained through the normal printing process. All hardware and settings arerecorded and the quality of each reprint is checked against the originals toensure it is acceptable by the standards required by the business. (It may beacceptable, for example, for the copy to be fractionally smaller than theoriginal, where no scale is needed or where a drawn scale is available.)

This set of prints and originals is retained and periodically rescanned andchecked.

The Code gives a number of criteria which may be appropriate to the user,including print size and grey scale, which can be used to establish the qualityof the scanned image.

The results of all quality control checks (including audits) should be recorded,as should any problems or difficulties which are experienced. In addition theequipment should be properly maintained at all times.

Rescanning

If, following an audit, a document has to be rescanned, the procedures shouldensure that the original image is replaced and that the batch numbering andaudit trail are not compromised.

Image processing

If image processing is used to improve the quality of the image, this couldconceivably lead to image manipulation. The procedures manual shoulddefine how this is managed.

Annex D of the Code describes some of the different documents andassociated image processing facilities that may be used.

Data capture

This is mainly used where the original data is provided by such methods asOptical Mark Reading (OMR) or manual entry from an existing document.

Procedures need to be established which specify the quality and accuracylevel required and that records of accuracy checking are retained.

There should also be a procedure to deal with data migration from one systemto another.

PART 5, SECTION 6


Indexing

The procedures manual must describe the indexing technique to be used andshould include a method for checking the accuracy of the records. This is oftenbuilt into scanning software and electronic document management systems.Any changes to the index should be fully explained and audit trails dealingwith the amendment should be available. The Code also advises that in allcases the index files should be retained for at least as long as the informationto which they relate.

There should be procedures for rebuilding indexes and foramending/correcting information held in the indexes and ensuring its accuracyat all times.

Authenticated output procedures

For the prints to be legally admissible, there should be a formal process forrecovery whereby the operator certifies that all equipment is operatingnormally and identifying the storage index data and document informationwhich confirms that the reproduction is a true and complete record. AppendixB shows a specimen retrieval record for a scanned document/file, whichallows the operator to effectively certify that the document/file has beencorrectly retrieved.

The Code also places great stress on the authentication process and forcontrols where the output is not an exact reproduction, for example,monochrome rather than coloured. If some aspect of the layout such as font orpagination is not maintained, then retrieval characteristics must be agreed anddocumented.

Authentication of copies of data files

It may be necessary to be able to identify whether a data file is original or acopy. In these instances, the Code suggests that an electronic/digital signaturecan be stored with a trusted third party and could then be used to demonstratewhether a file is a true copy of the original.

File transmission

If the documents are to be transmitted within a system, via a network orexternal, wide-area communications system to the storage device, thenprocedures should be defined to ensure that changes cannot occur during thetransmission either accidentally or deliberately.

When a data file is transmitted to another party, the original should be storedon the system. Equally, a data file received from an external source must besaved on the system and the time and date of any data file should be stored aspart of the audit trail.

PART 5, SECTION 6


The Code goes on to explain the benefits of this in questions of authenticitywhere, for example, the original file purports to have been saved at a later datethan the copy.

Information retention and destruction

The procedure for retention and/or destruction of originals must be properlydocumented. For the sake of the business, it should not be possible todestroy an original before it is confirmed it has been safely stored.

In some cases the original document will need to be retained, for example,where the original is of poor quality or holds annotations which cannot bescanned, or where fraud is suspected. In each case, the procedures should dealwith this.

Backup and system recovery

Backup facilities on the system should allow for automatic backup andverification of all data files and associated information, including audit trailsat regular intervals. Procedures used in these systems should be documentedin the procedures manual, including the requirement for secure off-site storageof the backups. There should also be a record kept in the system audit trail ofall backup activity, which should include details of any problems incurredduring the procedure.

It is important to ensure that the files can be read even when the originalhardware is no longer available.

Where backup data is used to recover from a system failure, there should bedocumented procedures to ensure that data file integrity has not beencompromised. It is therefore important that the backup media be testedregularly.

System maintenance

Obviously, the hardware and the software should be operating normally. It isnecessary, therefore, to have complete maintenance records, including recordsof any down-time and reasons for faults and to undertake routine preventativemaintenance.

Under certain circumstances, it will be necessary to rescan documentsfollowing the identification of a fault (see Information retention anddestruction).

Where document scanning is used, the procedures for checking of qualityshould be followed after maintenance procedures have been completed.

PART 5, SECTION 6


Security and protection

The system should operate within the guidelines provided in BS 7799-1:2000,although this is not now referred to directly in the Code. The proceduresimplemented should be described in the procedures manual and shouldinclude the following:

• appropriate security controls, e.g. limited access, encryption keys anddigital signatures;

• mixed media may not be in write-once mode. This should be assessed;

• removable media must be handled and stored as recommended;

• data file transfers must be strictly controlled;

• all media must be kept secure, with at least one backup off site;

• user facilities may be in open areas, but the central system should be ina secure area;

• virus protection should be installed;

• hardware must be protected against power failure; and

• all information on status of documents, maintenance and quality controland audit trails should be kept in a secure manner and be available forinspection and audit.

Use of contracted services

Having gone to the trouble of defining an internal procedure which complieswith the Code, it would be unacceptable if the business used outside serviceswhich afforded any less protection. The procedures manual should contain allinformation relevant to the service provider; copies of their procedures andaudit records may be necessary.

Details of the procedures used and the transfer of documents and/or mediafrom the client to the service provider and from the service provider to theclient should be documented in the procedures manual.

The Code recommends that the contract between the supplier and the clientshould set out details of the extent to which compliance is claimed.

In addition, where the supplier also performs an indexing service, the clientshould check that the required accuracy is being achieved.

If the documents have to be transported physically, there should be aprocedure for despatch and receipt, including checking.

The Code also describes the procedure where a copy is stored with a trustedthird party as a secure means of detecting tampering with data files.

PART 5, SECTION 6


Workflow

This process allows a number of individuals to review a document at variousstages. This record of review needs to be stored in conjunction with theoriginal document as a complete record.

Some workflow applications link documents by virtue of changes to the indexinformation. The creation and destruction of these links should be recorded inthe audit trail of each document affected.

The Code requires operational details such as flow diagrams to bedocumented, as well as the process definition classification and the processdefinition life cycle.

Self-modifying files

In some cases, document files contain automatic functions such as date entrieswhich change to the current date when the file is opened. This means that thefile cannot be ‘frozen’ in the sense required by the Code. Either the automaticfunctions need to be disabled before storing or there need to be procedureswhich define how the files are to be stored and retrieved to ensure thatauthenticated copies of the original can be produced.

Date and time stamps

Of key importance is an accurate record of the date and time and, to this end,it is essential that the system is maintained with the correct information.Regular checking of system clocks and changes to reflect seasonal changes,i.e. ‘summer time’ must be incorporated into the procedures. Only authorisedpersonnel should be able to change the system clocks.

Voice, audio and video data

The procedures should define how voice, audio and video data are to be dealtwith. Where the recording is not under the control of the informationmanagement system, the recording system must be up to the same standard asthat required by the Code for the information management system. There alsoneeds to be a procedure dealing with authentication of the source data.

Version control

If changes are allowed to stored data files, then this must be in accordancewith a documented procedure which includes any requirement to keepprevious versions.

The information management system should include version control andsuperseded versions should be kept for at least as long as the final version.

The Code then makes the point that all changes to procedures and processesshould be implemented in accordance with an approved change controlprocedure.

PART 5, SECTION 6


Maintenance of documentation

Procedures and records should be maintained and stored in the same way asinformation generally.

5.6.7.5 ENABLING TECHNOLOGIES

General

For a new system, the user should ensure that the system has been designed inaccordance with the requirements of the Code. For systems already inoperation, documents stored on the system prior to the introduction of theCode cannot be considered as conforming to it unless controls which meet therequirements of the Code were in place from the time of storing thedocuments.

This section of the Code describes technologies and how they should beutilised and controlled. The following elements need to be addressed toachieve compliance with the Code.

Systems description manual

A list of hardware and software should be compiled, with information on howthey interact, including system configuration and details of changes to thesystem.

Storage media and sub-system considerations

Access to information must be controlled with ‘read only’ access or ‘readwrite’ access where appropriate and it should be possible to identify anychanges to the document or data by those with ‘write’ access. It is alsoimportant to prevent modifications being made without detection.

Access levels

The systems description manual must define the levels of access available, asfollows:

• system manager;

• system administrator;

• system maintenance;

• authors or originators;

• information storage and indexing; and

• information retrieval.

PART 5, SECTION 6


Only authorised members of staff may have access and such authority mayonly be given after suitable training.

System integrity checks

The system should ensure that the integrity of data files is maintainedthroughout the system, including during the transfer of this data to and fromthe storage media.

An additional element in the Code deals with digital and electronic signaturesand the ability to verify the true identity of a person prior to their beingenrolled as document signatory.

Compound documents

Where an image such as a CAD (computer-aided design) drawing or a linkedspreadsheet is stored, the parts may be separated electronically. The systemshould ensure that they are stored in the same location and can be retrieved asa complete facsimile of the image.

Image processing

There are a number of ways in which an image may be processed to improveits appearance. These may include the following:

• deskew;

• despeckle;

• black border removal;

• background clean up;

• noise removal; and

• forms removal.

These should only be used with extreme care and should be fully documented.It is safer not to allow image processing, as any interference could invalidatenot only that document but any other which may possibly have been adjusted.

Compression techniques

Two type of compression technique are recognised:

(1) lossy; and

(2) lossless.

PART 5, SECTION 6


Lossy should not be used on primarily text files, as the compressed image willlose certain details which may be replaced by artificially generated data whenit is reproduced.

In general, it is safest not to use lossy compression at all, but the Code sets outthe requirements should this method be used.

Form overlays and form removal

Where the system software removes a fixed overlay from the digitized image,leaving only the variable data, a record should be automatically generated torecord the removal and a copy of the template should also be stored on thesame medium.

Environmental considerations

The hardware manufacturer may well have its own recommendations for theoperational environment. These should be acknowledged and addressed in thesystem manual. Handling and storage procedures should also be described, aswell as the procedure for checking the storage media regularly.

Data file migration

With changes in technology, it is almost inevitable that the hardware and/orsoftware will cease to be supported. The business should have procedures inplace to handle the transfer of files at the appropriate time.

Information deletion and/or expungement

It is essential that the system is able to delete or expunge documents asdescribed in the Data Protection Act 1998. This deletion can be accomplishedby the removal of index entries to the relevant documents. It is also essentialto be able to amend or remove incorrect or irrelevant data typically held incontravention of the Data Protection Act. Such correction may beaccomplished by deleting the original document and substituting the correcteddocument or by using masks.

In any event, the procedure for doing this must be documented.

Audit trails

To be able to use the stored information as evidence, it may be necessary toprovide supporting information on the history of the document or data,including date of creation and/or storage, movements from one medium toanother and evidence of the controlled operation of the system.

This information will be the subject of the audit trails and the records keptshould be sufficient to provide a full historical record of all significant eventsassociated with the stored information, and the information managementsystem.

PART 5, SECTION 6


It is important that the audit trail be agreed with all stakeholders who mightneed to refer to the information, including the user, audit and legal functions.

The Code recommends that, as far as possible, audit trail data should begenerated automatically and that where this does not occur, there should beadequate procedures in place and that, in either case, the date and time shouldbe recorded contemporaneously.

Audit trail data should also be stored as a separate entity on the system. Itshould be kept for at least as long as the information to which it refers andshould be accessible. In particular, it may be necessary to make it easilyaccessible to third parties who have little or no experience in the use of thesystem.

The audit trail information should be treated as having the same level ofsecurity as the information to which it pertains with secure backup copiesbeing kept. If paper copies are kept then the procedures should define howfrequently they should be removed and stored.

The procedures for data migration should be defined and the audit trail shouldinclude this information.

Part of the audit trail should include the records of information capture, batchinformation, indexing, change control, destruction information and workflow.

5.6.8 Conclusion

The Code of Practice provides a sound basis for the use of electronicdocument and information management systems which, if followed, shouldmean that the information can be used as evidence in the civil courts.

Even without this requirement, it defines the best-practice approach forelectronic storage generally.

With the enactment of the Human Rights Act 1998 and the Data ProtectionAct 1998, it is expected that the pressure will continue to increase for a formaldocumented statement on legal admissibility. In time, this is likely to featurein the Civil Evidence Act, either by reference to the Code or to some Europeanwide standard.

The danger, however, is that technology will continue to outpace any attemptat legislation.

G


The Surveyors’ Construction Handbook Part 5, Section 6 Effective from 12/03 Page 1Appendix A (12/03)

Appendix A: Specimen form for recording scanning information

The following files are authorised for scanning

Confirmation of scanning

The above files have been scanned by

................................................................................ DIP Operator/Archivist

Date

Indexing information

Confirmation of acceptance

The above scanned files have been checked, the images are true and completerepresentations of the documents scanned.

The batch contains ............... (No) images and consists of ................ (No) documents.

Signed …..............……........... DIP Operator/Archivist Disk refererence…....………...

Optical disk backup confirmed by IT Date

........................................................ …………………...................

Confirmation of destruction

The above original documents may now be destroyed

Signed ……………………………........................................................................ Managing Partner

Project number Project

Project number File Folder reference Commentary


The Surveyors’ Construction Handbook Part 5, Section 6 Effective from 12/03 Page 1Appendix B (12/03)

Appendix B: Specimen form for recording retrievalRequest for certified copies

The following files/documents are required as certified copies

Request authorised by Group Leader

……………………………………...........................................

Authorisation to make certified copies

The DIP Operator/Archivist/CAD Manager is authorised to make certified copies of theabove

Signed …………………………….................................................... Managing Partner

Files/Documents/Drawings retrieved

The above files/documents/drawings have been retrieved from disk/tape reference:

Retrieved by …………………………................................................................ Name

Date

Indexing information

Certificate of authenticity

I ……………………............................. being the DIP Operator/Archivist/CAD Manageremployed by …………………….............................., certify that the attachedfiles/documents are a true reproduction of the originals which were archived inaccordance with the procedures set out in our user manual.

Signed ………………………………………..

Date ………………………………….............

Project number Project Documents or drawings

Project number File Folder reference Commentary


The Surveyors’ Construction Handbook Part 5, Section 6 Effective from 12/03 Page 1Appendix C (12/03)

Appendix C: References

Further and more detailed information can be obtained from the British StandardsInstitution (BSI). Publications include:

BSI-DISC PD 0005 Information Service Management

BSI-DISC PD 0008:1996 A Code of Practice for Legal Admissibility of InformationStored on Electronic Document Management Systems (Edition 1)

BSI-DISC PD 0008:1999 A Code of Practice for Legal Admissibility and EvidentialWeight of Information Stored Electronically

BSI-DISC PD 0009 Compliance Workbook

BSI-DISC PD 0010 Principles of Good Practice for Information Management

BSI-DISC PD 3000 Information Security Management: An Introduction

BSI-DISC PD 3001 Preparing for BS 7799 Certification

BSI-DISC PD 3002 Guide to BS 7799 Risk Assessment and Risk Management

BSI-DISC PD 3003 Are you ready for a BS 7799 Audit?

BSI-DISC PD 3004 Guide to BS 7799 Auditing

BS 4783 Parts 1 to 8 Storage, Transportation and Maintenance of Media used in DataProcessing and Information Storage

BS 7083:1996 Guide to the Accommodation and Operating Environment forInformation Technology Equipment

BS 7799-1:2000 Information Technology – A Code of Practice for InformationSecurity Management

BS EN ISO 9000 Quality Management and Quality Assurance Standards

BSI publications are available from Customer Services, Sales Department,389 Chiswick High Road, London, W4 4AL. Tel: 020 8996 7000 Fax: 020 8996 7001Web: www.bsi-global.com

The following publications are available from The Stationery Office, 123 Kingsway,London WC1. Tel: 0870 600 5522 Fax: 0870 600 5533 Web: www.tso.co.uk

• Civil Evidence Act 1995

• Civil Evidence (Scotland) Act 1968

• Police and Criminal Evidence Act 1984

• Criminal Justice Act 1988


Page 2 Part 5, Section 6 Effective from 12/03 The Surveyors’ Construction HandbookAppendix C (12/03)

• Evidence Act (Northern Ireland) 1939

• Civil Evidence Act (Northern Ireland) 1971

• Statute Law Revision Act (Northern Ireland) 1973

• Police and Criminal Evidence (Northern Ireland) Order 1989

• Criminal Justice (Evidence) (Northern Ireland) Order 1988

Data Protection Registrar, Data Protection Guidance for Users of Document ImageProcessing Systems, 1995

Available from Information Commissioner, Wycliffe House, Water Lane, Wilmslow,Cheshire SK9 5AF. Tel: 01625 545700 Fax: 01625 524510

The Surveyors’ Construction Handbook Index (12/03) Page 1

INDEXNote: references are to paragraphs. Figures and tables are not included

AACA Standard Form of Contract for Project Partnering PPC

2000 4.1.2.10Aacceleration 4.2.6.1(a); 4.2.6.2; 4.2.6.3acceptance certificates 4.1.2.18(c)accidents 5.2.1ACE see Association of Consulting Engineersactivity schedules 2.3.3.2; 4.4.10.5;

Part 4 Section 4: Appendix Caddendums 3.2.4.6adjudication 4.1(Intro); 4.4.1administration cost Part 4 Section 2: Appendix A1admissible items 4.2.4.2; 4.2.5; Part 4 Section 2:

Appendix C3, Dadvance payments 4.4.7.10(d)agent see employer’s agentall–risks insurance 4.1.3; Part 4 Section 2: Appendix A10all risks yield 2.2.2.3(d)allowances see tax allowancesalteration costs Part 2 Section 2: Appendix C4alternative design solutions Part 2 Section 1: Appendix Camounts previously certified 4.4.7.10(c)analyses 2.1.7.2(b); 5.4.6analysis 1.2.7; 3.1.2.11; 5.4.3.1

see also risk analysisanalysis checklist 3.1.3.4Appendix to the Form of Tender 4.1.2.11(b)application for reimbursement, written 4.2.3.1(c); 4.2.3.3appointment documents 2.5(Intro)approval processes 3.1.4.14(c)arbitration 4.1.2.5(c); 4.2.1.6arbitrator 4.1.2.11(c); 4.2.1.5architect as certifier 4.4(Intro); 4.4.2; 4.4.8.1; 4.4.8.2architect as contract administrator 4.2(Intro); 4.4.2.3;

4.4.5.2architect’s information 2.1.3.3(c); 2.1.7.3(b)architect’s instruction 4.4.7.3(iii)(iv)Architect’s List 4.1.2.10(c)ascertained damages 4.1.4.3(e)ascertainment 4.2

application 4.2.4.10costs versus prices 4.2.4.8definition of 4.2(Intro); 4.2.2.3documentation for 4.2.3.4global or individual 4.2.4.9judgement in 4.2.2.3; 4.2.4.5responsibility for 4.2.4.1–4.2.4.2

Association of Consulting Engineers 3.2(Intro)conditions of engagement 3.2.1.5; 3.2.2.6(a); 3.2.2.7(a)

assumptions Part 2 Section 1: Appendix Cattendances 3.2.4.3audit trail 4.3.2.4; 5.6.7.4; 5.6.7.5

Australian ruling 4.1.6.4(k)authority, delegated 3.1.4.7(c); Part 2 Section 4:

Appendix A (Intro)automatic practical completion 4.1.6.4(f)average risk premium discount rate 2.2.2.3(c)

Bbalancing adjustment 2.2.3.4(e); 2.2.3.6balancing allowance 2.2.3.4(f); Part 2 Section 2:

Appendix A6, D8balancing charge Part 2 Section 2: Appendix C6, D8BCIS (Building Cost Information Service) 2.3; 5.4BCIS Bulletin Service 5.4.2; 5.4.3; 5.4.4.2BCIS Elements for Design and Build 2.4.4.9; Part 2

Section 4: Appendix A (Intro)BCIS Five Year Forecast 5.4.3.4BCIS Online 5.4.2; 5.4.3BCIS Online Briefing 5.4.3.4BCIS Quarterly Review 5.4.4.1BCIS standard elements 2.3.2.2; 2.3.3.2; Part 2 Section 3:

Appendix ABCIS Standard Form of Cost Analysis 1.2.7.6; 2.3 (Intro);

2.3.2.4; Part 2 Section 4: Appendix B2.5benchmarking 2.6.3.2; 2.6.3.4; 5.5.1; 5.5.4best-fit solution 3.1bills of quantities see quantitiesBlue Form 4.1.2.15BMI (Building Maintenance Information) 5.5BMI Building Maintenance Price Book 5.5.3BMI News 5.5.5BMI Quarterly Cost Briefing 5.5.2bond/parent company guarantee 3.2.4.3briefing 1.1.2.2; 2.5.4.4; 5.4.3.4Brundtland definition 2.6 (Intro)BS 7799: 1995 5.6.7.1BS 7799-1: 2000 5.6.6; 5.6.7.1; 5.6.7.3BS EN ISO 9001 5.6 (Intro)BSRIA Allocation of Design Responsibilities for Building

Engineering Services 3.2.1.4; 3.2.1.5(b)budget 2.1; 2.1.1.1–2.1.1.3; 2.1.2.1; 2.1.3; 2.1.6.2

see also time budgetbudget format Part 2 Section 1: Appendix Bbudget preparation methods 2.1.3.4; 2.3.1.2budgeting 5.5.1build insurance 4.1.4.2(b)buildability 3.1.2.16builder’s work 2.1.5.4(b); Part 2 Section 3: Appendix A5N,

A5OBuilding Cost Information Service see BCISbuilding life 2.2.1.8; 2.2.2(Intro); 2.2.2.1; 2.2.5.1; 2.2.5.6(c);

Part 2 Section 2: Appendix B1, B4Building Occupancy Information see BMI

Page 2 Index (12/03) The Surveyors’ Construction Handbook

building options, life cycle costing 2.2.2(Intro);2.2.5.6

building project Part 2 Section 4:Appendix B2.2, B2.4; 3.1.1.2–3.1.1.3; 4.2

Building Research Establishment 2.2.1.6; 2.6.3.2building services installations 3.2.2.6building services procurement 3.2

conditions of engagement 3.2.1.5contractor 3.2.3design coordination 3.2.2design-only engineer 3.2.1.5design responsiblities 3.2.1.4; 3.2.1.5designer 3.2.1options, procurement routes 3.2.3.3tender documents 3.2.4tendering 3.2.3.4

Building Services Research Information Association seeBSRIA

building standards and requirements 2.4.4.4building surveyor’s information 2.1.3.3(c); 2.1.4.3(c);

2.1.5.3(c); 2.1.7.3(b)building sustainability 2.2.1.8; 2.6.5built environment group 5.3business rates 2.2.3.7

Ccables 2.1.5.4(b)capital allowances 2.2.3(Intro); 2.2.3.2; 2.2.3.3; 2.2.3.4;

2.2.5.5(f); Part 2 Section 2: Appendix D4worked example 2.2.3.7; 2.2.5.6(h)

capital costs 2.2.(Intro); 2.2.2.4(a); 2.2.3(Intro); 2.2.3.2;2.2.3.3; 2.2.5.1; 2.2.5.3; 2.2.5.5(b)(f); 2.2.5.6; Part 2Section 2: Appendix C1

capital expenditure 2.2.3.1; 2.2.3.3; 2.2.5.5(f); Part 2Section 2: Appendix D1, D3, D6

capital income 2.2.5.5(d)CDM (construction (design and management))

information 5.2regulations 2.2.1.4; Part 2 Section 4: Appendix A1;

2.5.3.1; 3.2.2.7(d); Part 4 Section 1: Appendix A10certificates see final certificates; interim certificates;

practical completioncertification of completion 4.1.1change, avoidance of 3.1.4.13(g); 3.1.4.19(a)change control overview 3.1.4.19changes 3.1.2.14(d)

after contract let 3.1.4.19(h)late 3.1.4.13prior to construction 3.1.4.19(g)see also client changes; cost plan; tender documents

checklistsanalysis 3.1.2.13contractor’s proposal Part 2 Section 4: Appendix B2cost 3.1.4.3employer’s requirement Part 2 Section 4: Appendix B2items for which loss and/or expense allowed Part 4

Section 2: Appendix Dprocurement selection 3.1.3.2–3.1.3.4risk 4.3.3.3(b)(iii)

submissions, steps when considering Part 4 Section 2:Appendix E

time 3.1.3.3choice (design) 3.2.1.2CITB Levy 5.4.7civil engineering 2.1Civil Evidence Act 1995 5.6.1; 5.6.6; 5.6.8cladding Part 4 Section 1: Appendix A6clerk of works 2.4.3.4; 3.1.4.18(b); 4.2.5.4(b); Part 4

Section 2: Appendix B2.1; 4.4.5.4; 5.2.1client 1.1; 2.4(Intro); 2.4.4.2; 2.4.4.4; 2.4.4.5; 3.2(Intro); 5.2.1client and consultants 2.5(Intro); 2.5.1; 2.5.4.2client and property costs 2.2.1.1client changes 3.1.4.19(b)client context, life cycle costing 2.2.1client needs 3.1client reserve 3.1.4.13(m)client resources 3.1.2.14(b)client satisfaction 3.1; 3.1.2.7client systems 3.1.4.11client uniqueness 3.1; 3.1.2.7client’s brief 1.2(Intro); 2.1.1.2; 2.4.4.7; 2.5.4.3(a)client’s information 2.1.3.3(b)(f); 2.1.4.3(a)(f); 2.1.5.3(a)(g);

2.1.7.3(a)(d)client’s input 2.4.4.6client’s involvement 3.1; 3.1.1client’s objectives 1.1.1; 1.2(Intro); 1.2.1; 2.4.4.4; 2.4.4.6;

3.1clients requirements 1.2.1.2; 1.2.6.2; 1.2.7; 2.5.4.2client’s responsibilities 1.1.5; 2.4.4.5; 2.4.4.6; 3.1.1.4; 3.1.1.7client’s role 1.1.4; 1.1.6; 3.1.1Code of Practice (DISC PD 0008:1999) 5.6.1; 5.6.5; 5.6.6;

5.6.7; 5.6.8duty of care 5.6.7.3enabling technologies 5.6.7.5format 5.6.7procedures and processes 5.6.7.4procedures manual 5.6.7.4scope and purpose 5.6.7.1

Code of Practice for the Selection of Sub-Contractors3.2.3.3(i); 3.2.3.4(f)

Codes of Practice 3.1.4.9(c); Part 3 Section 1: Appendix A;4.1.4

Codes of Procedure 2.4.4.9; Part 2 Section 4:Appendix A (Intro)

collateral contracts 3.1.1.16(b)commissioning 3.1.1.17common inheritance 2.6 (Intro)competitive tenders 3.1.4.8(e)completed part of the works 4.1.2.17(d)completion

date see completion datesectional 4.1.6.5(c)staged 4.1.6.4(l)see also perfect completion; two-stage completion

completion date 2.1.4.6; 4.1.2.16(c); 4.2.3.2; 4.2.5.13; 4.5.3;4.5.5; 4.5.6

completion distinct from practical completion 4.1.5completion for all practical purposes 4.1.5


completion process 2.5.4.13; 4.1.2.18(c)completion time 3.1.4.14(c)

see also extension of timecompletion to time 4.1.5.2computer aided design (CAD) 3.1.4.12(f); 3.2.2.4(f)computer software, risk analysis 4.3.3.4(b)computerised documentation

authenticity 5.6.3; 5.6.5; 5.6.6photocopies, microfilm and image processing 5.6.4scanning 5.6.3(3); 5.6.7.4

concurrent engineering 3.2.3.3(d)conflict, dealing with 1.1.5.4; 2.4.4.1; 3.1.1.7(d)Constructing the Team see Latham Reportconstruction 3.1.2.8(a)construction administration see construction managementconstruction completion report 4.1.2.18(c)construction costs 2.2.1.3construction (design and management) see CDMconstruction industry 2.6 (Intro); 2.6.3; 2.6.3.4; 2.6.6construction management 3.1.1.14; 3.1.1.16; 3.1.2.5; Part 3

Section 1: Appendix A3; 3.2.3.3(c)see also extension of time

Construction Task Force 1.2(Intro)construction time 3.1.2.14(g)constructors, appointment of 3.1.4.9consultants 2.4.4.8; 3.1.1.16; 3.1.4.9; 4.4.5.2

appointment of 1.1.7; 3.1.4.8lead see lead consultantresponsibilities of 2.4.4.8; 2.5.4.3(b)

consultants’ information 2.1.3.3(h); 2.1.4.3(e)(h);2.1.5.3(e)(h); 2.1.7.3(b)(f)

consultation papers 5.3.1consulting engineers 2.1.5.4(b)contingency Part 2 Section 3: Appendix A8; 3.1.4.13(d);

3.1.4.9(f); 4.3.2.3see also time contingency

contingency allowance 1.1.5.3(e)contingency funds 3.1.4.13(m)contract administration 5.5.1contract administrator 2.4(Intro); 4.1.4; 4.2(Intro);

4.2.1.9; 4.2.3.1(c); 4.2.3.2; 4.2.3.3; 4.2.3.4; 4.2.4.1;4.2.4.2; 4.2.4.3; 4.2.4.10; Part 4 Section 2:Appendix B2; 4.4.2; 4.5

contract documents 2.4.2; Part 2 Section 4: Appendix B1;3.1.1.4; Part 3 Section 1: Appendix A; Part 4Section 1: Appendix A1

contract durationrole of employer’s agent Part 2 Section 4: Appendix A3

contract implementation and administration 3.1.1.16contract stages (design and build)

duration Part 2 Section 4: Appendix A3post-contract Part 2 Section 4: Appendix A4pre-contract Part 2 Section 4: Appendix A2

contract sum 2.1.7.2(a); 4.1.3analysis 2.3.3.1(c)(d)(e); 2.4.4

contract switch Part 3 Section 1: Appendix A6(b)contract terms and conditions 3.1.2.7; 4.2(Intro); 3.2.4.3,

4.2.1.11; 4.2.1.12; 4.2.3.1(c)(d); 4.2.3.3; 4.2.4.2;

4.2.5.13; 4.2.5.15; Part 4 Section 2: Appendix C4;4.4.4.1; 4.4.7.3(i)

see also contractscontractor 4.4.2.3; 5.2

application 4.2.4.10building services 3.2(Intro); 3.2.3coordination 3.2.2.4(h)delay, notification of 4.5.4determination of employment 4.4.9.1interim payments to 4.4(intro); 4.4.3loss and/or expense 4.2(Intro); 4.2.1.4; 4.2.1.11; 4.2.1.12;

4.2.1.15; 4.2.2.1; 4.2.3.1; 4.2.3.2; 4.2.3.3; 4.2.3.4;4.2.3.6; 4.2.4.5; 4.2.4.8; 4.2.6.4; Part 4 Section 2:Appendix C1

performance monitoring 2.4.3.5responsibilities of 2.4.4.8selection of 3.1.4.5(d)submissions 4.2.4.3; Part 4 Section 2: Appendix E;

4.4.6.2; 4.4.6.3(iv)contractor’s initiative 4.1.4Contractor’s List 4.1.2.10(c)contractor’s price statement 4.4.7.3(iii)contractor’s proposals 2.3.3.1(b); 2.4.3.2; 2.4.4; Part 2

Section 4: Appendix Bcontracts

breach of 4.2.1.1; 4.2.1.3building services 3.2.2.4(b-d); 3.2.2.7clause 13A 4.4.7.3(iii)(iv)range of 3.1.2.7risk allocation 3.1.2.2standard 3.1; 3.1.2.7; 3.1.4.10; 4.1(Intro); 4.1.1see also design and build contract; extension of time; and

individually, by titlecontractual arrangements 3.1.4.10control document 2.1.5.2Control in Trade of Endangered Species (CITES) 2.6.3controls 3.1.4.11conversion 2.1coordination

contractor 3.2.2.4(h)design 3.2.2; 3.2.3.5(c)installations 3.2.2.1

Corporation Tax 2.2.3.4(a)(b)(c)(f)cost categories Part 2 Section 2: Appendix Ccost checking 2.1.6; 3.1.4.13(h)cost checklist 3.1.3.3cost comparison (worked example) 2.2.5.5(h)cost consultant 1.1.7cost control 2.5.2.1; 3.1.4.11(d)cost control overview 3.1.4.13cost criterion 3.1.2.8(b)cost estimates 1.1.5.3(d)cost index 5.4.12; 5.5.2cost information Part 2 Section 1: Appendix A;

5.5.1–5.5.2; 5.4cost issues 3.1.2.14(e)cost limit 2.1.1.3(a)cost management, pre-contract 2.1; 2.1.1cost models 2.1.4.4

life cycle (worked examples) 2.2.5


cost plan 3.1.4.13(h)changes to 2.1.4.7; 2.1.5.6format Part 2 Section 1: Appendix Bmodification of 2.1.6.4outline proposals stage 2.1.4scheme design stage 2.1.5

cost planning, pre-contract 2.1; 2.1.1cost reports 2.1.3.7; 3.1.4.13(j)cost risk 3.1.2.9–3.1.2.11cost studies, preliminary 2.1.2cost targets 2.1.4.2; 2.1.5.1–2.1.5.2costs-in-use 2.1.1.2(d); 2.2.1.8; 3.1.4.13(e)costing

calculation 2.2.2; Part 2 Section 2: Appendix A3see also life cycle costing

costscategories of 2.2.2.4excess 2.1.6.4indirect 4.2.3.1(b)

costs versus prices 4.2.4.8criteria

identification of 3.1primary 3.1.2.8

Ddamage to works 4.1.2.17(d)damages 4.2.1.1; 4.2.1.2; 4.2.1.3; 4.2.1.5; 4.4.9.2data

electronic 4.4.10.6; 5.6presentation 2.2.5.4risk 4.3.3.3(b)(vi)sources for costing 2.2.2.4; 2.2.4types of 2.2.4

Data Protection Act 1998 5.6.7.5; 5.6.8dayworks 4.4.5.1(ii); 4.4.5.2(ii); 4.4.7.4; 5.4.3.6; 5.4.4.3dayworks preliminaries 5.4.7; 5.4.10de minimus rule 4.1.5; 4.1.5.1decision-making process 1.1.5.5; 1.2.3.1; 3.1.1.7(e); 4.3.2.4decoration works Part 4 Section 1: Appendix A7deductions 4.4.7.10defects 4.1(Intro)

outstanding 4.1.1; 4.1.2.11(c); 4.1.2.14(c); 4.1.4.1(c);4.1.4.2(a)

remedying 4.1.5.3see also latent defects; patent defects; schedule of

defects; work not properly executeddefects correction 4.1.2.18(c)defects correction period 4.1.2.11(d); 4.1.5defects liability 4.1.2; 4.1.2.6(c)defects liability period 4.1.2.18(c); 4.1.3; 4.1.4.3(e);

4.1.5.1definition of the project 1.1.1.7delay 3.1.1.9(f); 4.1.5.2; 4.1.6.2(b); 4.2.1.4; 4.2.1.7(b);

4.2.2.2; 4.2.3.1(f); 4.2.3.3(c); 4.2.3.5; 4.2.4.3;4.2.4.5; 4.2.5.4(c)(e); 4.2.5.7; 4.2.5.11; 4.2.5.13;Part 4 Section 2: Appendix B, C4; 4.5.4; 4.8.8

see also disruptiondemolish and rebuild, costing 2.2.5.6demolition costs Part 2 Section 2: Appendix A4

density of vertical division Part 2 Section 1: Appendix CDepartment of Environment, Trade and the Regions

(DETR) 2.6.6; Part 2 Section 6: Appendix Bdepreciation 2.2.3(Intro); 2.2.3.2; 2.2.3.5(a); Part 2

Section 2: Appendix D3, D6, D7, D8design 1.1.4.4; 2.3.1.2; 2.6.3.4; 2.6.5; 2.6.6; 2.6.7; 3.1.4.18

amendments 2.5.4.3(e)client-led 2.3.3.1(d)contractor-led 2.3.3.1(d)functional analysis of 1.2.7; Part 1 Section 2:

Appendix Aprocess 3.2.1.2setting of 3.1.1.7

Design and Build 2.1; 2.3.3.1; 2.4; 3.1.1.14; 3.1.1.16; 3.1.2.5;3.1.2.11; Part 3 Section 1: Appendix A6

background 2.4.1Code of Procedure for Selective Tendering 2.4.4.10contract documentation 2.4.2; Part 2 Section 4:

Appendix B1design and build contract

contractor’s proposals 2.4.3.2; 2.4.4; Part 2 Section 4:Appendix B

employer’s requirements 2.4.3.2; 2.4.4services, additional 2.4.3; Part 2 Section 4: Appendix A5services, building 3.2.3.3(c)surveyors as employer’s agent 2.4(Intro)variants 2.4.5see also contract stages (design and build)

design and construction period 2.1.4.6; 2.4.4.4design and manage 3.1.1.14; 3.1.2.5; Part 3 Section 1:

Appendix A5design brief 1.2.12.3; 3.1.4.12design build fund and operate (DBFO) 2.4.5.6design coordination 3.2.2; 3.2.3.5(c)design failure 3.1.2.10(b)design (frozen) 3.1.4.14(f); 3.1.4.19(d)design input, initial Part 2: Section 4: Appendix A1design-only engineer 3.2.1.5design options, life cycle costing (worked examples)

2.2.5.1; 2.2.5.2design overview 3.1.4.12design performance checklist 3.1.3.3design process 2.1.1.2; 2.5.2.4; 2.5.3.3design programme 1.2.3.3design proposals 2.1.6; 2.4.3.7design re-evaluation 3.2.2.6(a)design requirements 3.2.2.6(a)design responsibilities 3.2.1.4; 3.2.1.5; 3.2.3.3(d); 3.2.3.5(f);

3.2.4.2design risk 3.1.2.11(b)design solutions 1.2(Intro); 1.2.2.1; 1.2.2.3; 1.2.3.1; 1.2.6.3;

1.2.8.1; 1.2.9; 1.2.10.1(b)design stages 1.2.3.1; 2.1.1.4; 2.1.5; 2.5.4.6; 2.5.4.7;

3.2.3.2(b)(c)design team 1.1.2.2; 1.1.7; 1.2(Intro); 1.2.12.2; 3.1.4.8;

3.1.4.5(c)design times 3.1.2.14(h)designer 2.4.6.2; 2.6.4.1; 5.2

building services 3.2.1.3


designer’s information 2.1.3.3(c)(g); 2.1.4.3(b)(g);2.1.5.3(b)(h); 2.1.7.3(b)(e)

develop and construct 2.4.5.3; 3.1.2.5; Part 3 Section 1:Appendix A6

developers 1.1.1.3developing the business case 3.1.1.9development 2.6 (Intro); 2.6.1

economic 2.6 (Intro); 2.6.2digests 5.4.4.2; 5.5.5direct, definition of 4.2.2.2DISC PD 0008 see Code of Practice (DISC PD 0008)discount rate 2.2.2(Intro); 2.2.2.2; 2.2.2.3; 2.2.2.4; 2.2.5.1;

2.2.5.2; 2.2.5.4; 2.2.5.5(e); 2.2.5.6(b)average risk premium 2.2.2.3(c)no risk return 2.2.2.3(b)(d)selection 2.2.2.3(e)test 2.2.2.3(a)

discounting 2.2.2.2; 2.2.5(Intro); 2.2.5.1; 2.2.5.2disposal costs 2.2.2.4(g)disputes 4.1.2.5(c); 4.1.4; 4.1.4.1(b)disruption 4.1.5.3; 4.2.1.4; 4.2.1.7(b); 4.2.3.1(c); 4.2.3.5;

4.2.4.5; 4.2.5.4; Part 4 Section 2: Appendix Bsee also delay

distribution Part 4 Section 2: Appendix A6document destruction/deletion 5.6.2; 5.6.7.5document storage 5.6.5

access procedures 5.6.6control set 5.6.3(2)duty of care 5.6.7.3electronic 5.6enabling technologies 5.6.7.5guidance Part 5 Section 6: Appendix Cmaintenance record 5.6.3(1)paper 5.6 (Intro)procedures 5.6.5; 5.6.6; 5.6.7.4retrieval 5.6.5; Part 5 Section 6: Appendix Bsee also Code of Practice (DISC PD 0008); computerised

documentationdocuments see appointment documents;

contract documents; document storage; information;reimbursement documents; tender documents

domestic rebuild 5.4.4.5Domestic Sub-contract 2002 Edition 4.1.2.3Domestic Sub-contract IN/SC 4.1.2.3(e)drawings 2.1.4.2; 2.1.5.4; 2.5.4.3(d); 3.1.4.12(f); 3.2.3.5(d);

5.4.3.1

Eearly completion 4.1(Intro)early possession 4.1.2.17(c)effective management 3.1.1.4electrical services see mechanical and electrical serviceselectronic data interchange 4.4.10.6electronic management system 5.6.7.1; 5.6.8electronic document storage 5.6

see also document storageelement unit quantities Part 2 Section 1: Appendix Celemental cost analysis Part 2 Section 1: Appendix A2.1;

2.3.2; 5.4.4.2elemental unit rate basis 2.1.5.4(a)

elements for buildings 2.3(Intro); 2.3.1elements for design and build 2.4.4.9; Part 2 Section 4:

Appendix A(Intro)employer 2.4(Intro); 4.4.2.3employer’s agent 2.4(Intro); 2.4.3; Part 2 Section 4:

Appendix AEmployer’s Representative 4.1.2.13(a)employer’s requirements 2.3.3.1(a); 2.4.3.2; 2.4.4; Part 2

Section 4: Appendix B; 4.4.4.2employer’s responsibilities 2.4.4.8; Part 2 Section 4:

Appendix Benergy

consumption 2.6.6efficiency 2.2.1.6embodied 2.6.3.3; 2.6.3.4; 2.6.6; Part 2 Section 6:

Appendix Ataxation 2.6.3.4

engineer 2.4.3.4; 4.1.2.11(b)(c); 4.1.2.14(b)engineering services 2.1.5.4(b); 2.2.5.6(e)entitlement 4.2.1.4; 4.2.1.5; 4.2.1.7; 4.2.1.10; 4.2.1.12;

4.2.3; 4.2.4.5; 4.2.4.7; 4.2.4.8; 4.2.4.10; 4.2.5.11;4.2.5.13; 4.2.6.4

entrances Part 4 Section 1: Appendix A4Envest 2.6.3.2; 2.6.3.3environmental 2.6.2

damage 2.6.2impact 2.6.3.3; 3.1.4.12(a)

estimating and estimates 3.1.4.13European Union legislation 3.1.4.9(k)evaluation 1.2.13; 2.1.4.4; 4.2.1.11event 4.2.1.15; 4.2.3.2; 4.2.4.10; Part 4 Section 2

Appendix C3, C4extension of time 4.5.3; 4.5.5; 4.5.7.1; 4.5.7.2

evidence see legal admissibility of documentsexisting building 2.2.5.6(c)(d)(f)expenditure

excess 2.1.6.4see also capital expenditure; revenue expenditure

expense in building projects 4.2extension of time 4.1.3; 4.1.6.2(b); 4.1.6.5(c); 4.2.3.2

administration 4.5.10award, timing of 4.5.5; 4.5.6concurrent delays 4.5.8consequential entitlement 4.5.9contract administrator’s role 4.5(Intro)contract clauses 4.5.1contractor’s obligations 4.5.4further reading Part 4 Section 5: Appendix AGC Works Contract 4.5.12ICE contract 4.5.11JCT contract 4.5.2 – 4.5.4.10Neutral Event 4.5.3; 4.5.5; 4.5.7.2Relevant Event 4.5.3; 4.5.5; 4.5.7.1

external works Part 2 Section 3: Appendix A6; Part 2Section 4: Appendix B2.5.6; Part 4 Section 1:Appendix A7

Ffacilities management 5.5.5factors beyond control 3.1.2.14(a)


faculty working groups and committees 5.3FAST see functional analysis systems technique (FAST)fault free works 4.1.4; 4.1.4.2(b); 4.1.5FCEC Blue Form of Sub-contract 4.1.2.15feasibility studies 2.1.2; 2.5.4.4fees 1.2.8.2; 3.1.4.8(f)

additional activities 2.5.3.2lump sum 3.1.4.8(h)percentage 3.1.4.8(g)professional 2.4.6.1time charge 3.1.4.8(i)

fencing and security Part 4 Section 2: Appendix A5final account 4.4.1final certificates 4.1(Intro); 4.1.2.18(c)Finance Acts 2.2.3.2; Part 2 Section 2: Appendix D3, D6finance charges 4.2.5.1; 4.2.5.14; 4.2.5.15financial resources 3.1.4.3financing charges 4.1.6.1financing costs 2.2.2.4(b); Part 2 Section 2: Appendix C2finishes 4.1.4; Part 4 Section 1: Appendix A7

internal Part 2 Section 3: Appendix A3; Part 2 Section 4:Appendix B2.5.3

first year allowances 2.2.3.2; Part 2 Section 2: Appendix D6fitting-out 3.1.1.18; 3.1.2.6; 4.1.1; 4.1.6.4(k)(l); 4.1.6.5(a)fittings and furnishings Part 2 Section 3: Appendix A4;

Part 2 Section 4: Appendix B2.5.4fluctuation bonds 4.1(Intro)fluctuations 4.4.7.7; 4.4.7.10(a); 4.4.7.10(e); 4.4.9.3forecasting 5.5.1Forest Stewardship Council 2.6.4.1; Part 2 Section 6:

Appendix Bfrost damage 4.1.3function elements 1.2.7.5; 1.2.7.6; Part 1 Section 2:

Appendix Bfunctional analysis systems technique (FAST) 1.2.7

FAST diagram 1.2.7; 1.2.8; 1.2.10.1(a)functional decomposition 1.2.7.5future generation 2.6 (Intro); 2.6.1; 2.6.2; 2.6.5

GGovernment Contracts GC/Works/1/Edition 2 4.1.2.18Government Contracts GC/Works/1/Edition 3 4.1.2.19Government Contracts GC/Works contracts, extension

of time 4.5.12government works 4.1.2.17grants, regional development 2.2.3.2Green Book 4.1.2.18(a)(c)gross floor area 2.1.6.3Gross National Product (GNP) 2.6.2ground conditions 3.1.2.9(c)

HHandbook Introduction; 5.3.2handover 3.1.1.18; 4.1.2.16(a)head office 4.2.5.1; 4.2.5.8; 4.2.5.9; 4.2.5.11; Part 4

Section 2: Appendix A11, Chealth and safety 2.2.1.4; 4.3.1; 5.2

see also safetyhire charges 4.2.5.3(c)

holidays-with-pay 5.4.7Hong Kong decision 4.1.5house rebuilding costs 5.4.4.5Housing Grants and Reconstruction Act 1996 4.4.2.4housing sinking fund 2.2.5.4Hudson’s approach 4.1.5.2human resources 3.1.4.4Human Rights Act 1998 5.6.8

IICE 6th Edition: Substantial Completion 4.1.2.12;ICE 7th Edition: Substantial Completion 4.1.2.11; 4.1.5;

4.1.6.4 (c)ICE contracts, extension of time 4.5.11ICE Design and Construct Clause 48(3) 4.1.2.11(d);

4.1.2.13ICE Design and Construct Forms 4.1.2.13ICE Minor Works 4.1.2.14; 4.1.4.1(a); 4.1.5image processing of documents 5.6.4; 5.6.5; 5.6.7.4; 5.6.7.5implementation 1.1.2.2; 3.1.2.7; 3.1.2.13; 3.1.4implementation of contract 3.1.1.16implementation process 3.1; 3.1.1.13; 3.1.4inadmissible items 4.2.6incentives 2.2.3; Part 2 Section 2 Appendix D5, D6independent client advice 1.1.2; 3.1.1.6indices Part 2 Section 1: Appendix A2.3; 5.4.3.2Indices and Forecasts 5.4.4.2industrial building Part 2 Section 2: Appendix D4inflation 2.1.3.6; 2.1.4.8; 2.1.5.7; 2.2.2.2; 3.1.4.13(k); 4.2.5.7information

general, design and build contract Part 2 Section 4:Appendix B2.1

preparation of 2.1.4.4; 2.1.5.5production of 2.5.4.8requirements 2.1.3.3; 2.1.4.3; 2.1.5.3; 2.1.7.3; Part 2

Section 4: Appendix B2see also cost information; data; documents; records of costs

information management policy 5.6.7.2information security 5.6.7.1; 5.6.7.4information services 5.2–5.5initial control document 1.1.3.2initial design input

role of employer’s agent Part 2 Section 4: Appendix A1initial/first year allowances Part 2 Section 2: Appendix D6inspection 2.4.3.4; 3.1.4.18; 4.4.7.9installations Part 4 Section 1: Appendix A2.2

specialist 3.2.2.6(b)Institute of Chemical Engineers Forms (I Chem E) 4.1.2.18instructions

late 4.2.1.7(b); 4.2.4.10(c); 4.2.5.4(e)post-completion 4.1.6.2

insurance 3.1.2.9(f); Part 3 Section 1: Appendix A6(n);3.2.4.3; 4.1.6.5(b); Part 4 Section 2: Appendix A10;4.3.3.5(b); 4.4.7.9

insurance risks 4.1.4.3(d)interest rates 2.2.2.2; 2.2.2.3; 2.2.5.1; 2.2.5.3; 5.2.5.6interested parties 1.1.5.4inter-generational equality 2.6 (Intro); 2.6.1; 2.6.5; 2.6.7interim certificates 4.2.4.6

see also valuations for interim certificates


interim payments 2.3.3.1(e); 2.3.3.2; 4.4(Intro); 4.4.2.4;4.4.3

interim valuations 2.3.3.1(e)see also valuations for interim certificates

Intermediate Form 4.1.2.3(e); 4.1.2.4; 4.1.2.7–4.1.2.8investment appraisal 1.1.1.6investment tables (Parry’s) 2.2.5.7ISO 9000 3.1.4.18(c)ISO 9001 5.6(Intro)items see admissable items; inadmissable items

JJCT Forms of Building Contracts

Intermediate Form of Building Contract 1998 (IFC 99)4.1.2.4

NAM/SC Sub-Contract Conditions: for Sub–Contractorsnamed under the IFC 84 4.1.2.3(e)

JCT 80 Standard Form of Building Contract4.2.1.9; 4.2.1.13; 4.2.3.1; 4.2.3.2; 4.2.3.4;4.2.4.1; 4.2.4.6; 4.2.6.2; Part 4 Section 2:Appendix D, E; 4.4.7.6

JCT 98 Standard Form of Building Contract 4.1.2;4.1.6.4 (f)

JCT Agreement for Minor Building Works 1998 (MW98)4.1.2.6

Management Contract 1987 4.2.1.13Management Contract 1998 4.1.2.8

Works Contract/2 4.1.2.9; 4.2.1.13NSC/C Nominated Sub-contract Conditions 4.1.2.2Standard Form of Building Contract 1998 (JCT 98)

2.3.3.2Standard Form of Building Contract With Contractor’s

Design 2.4.2Standard Form of Building Contract With Contractor’s

Design (CD 81); 4.2.1.13Standard Form of Building Contract With Contractor’s

Design (CD 98) 2.3.3.1(e); 2.4(Intro); 2.4.2.1;2.4.2.2; 2.4.2.3; 4.1.2.5

Standard Form of Building Contract With Quantities 1998(JCT98 With Quantities) 4.4.2.1; 4.4.3; 4.4.6.2;4.5.2 – 4.5.10

Standard Form of Prime Cost Contract 1998 4.1.2.7JCT practice note CD1A 2.3.3.1(a)JCT Standard Form: wording 4.2.1.14JCT variant forms of contract 4.1(Intro); 4.4.11.1joint venture/negotiated project 2.4.5.5

KKeating’s analysis 4.1.5.1key decisions 1.1.5.5(a); 3.1key elements 2.1.4.4

Llabour, disruption of 4.2.5.4; Part 4 Section 2: Appendix B1.1labour record 4.4.5.4(iii)land 2.6 (Intro)late completion 3.1.2.12late finish 3.1.4.14(e)latent defects 4.1(Intro); 4.1.4.2(b)

Latham Report 2.2.1.3Latham Review Part 3 Section 1: Appendix A3(d)lead consultant

competency level 2.5.3.1; 2.5.3.3fees and duties 2.5.3.2role of 2.5.1.2schedule of duties 2.5.4surveyor as 2.5(Intro); 2.5.2

legal admissibility of documentsauthenticity 5.6.3; 5.6.5; 5.6.6Code of Practice 5.6.1electronic documentation 5.6(Intro); 5.6.1; 5.6.7.1;

5.6.8photocopies, microfilm, image processing 5.6.4; 5.6.5;

5.6.7.4legal contracts 3.2.2.7liability

at practical completion 4.1.3design 3.1.2.10(c)determination of 4.2(Intro)see also limited liability

life cycle costappraisal 2.2.5.6(a)payments 2.2.2.4techniques 2.2(Intro)

life cycle costing 1.2.10.1(c)(d); 2.1.1.2(d); 2.1.4.2; 2.2; 5.5.1building life 2.2.2.1client context 2.2.1costing calculation 2.2.2costs and values Part 2 Section 2: Appendix Cdata sources 2.2.4obsolescence 2.2.1.8; 2.2.2.1; Part 2 Section 2: Appendix Bresidual values 2.2.2.1; 2.2.2.4(g); Part 2 Section 2:

Appendix A, C6tax allowances

examples Part 2 Section 2: Appendix Eincentives and business rates 2.2.3

tax relief, impact on 2.2.3terms for taxation Part 2 Section 2: Appendix Dworked examples 2.2.5

life cycle information 2.1.5.5(c)life cycle period, mechanical and electrical 2.2.1.7limited liability 3.1.2.10(c)liquidated damages 3.1.2.12; 4.1.4.3(e);

4.1.5.2; 4.1.6.5(b)(c); 4.4.9.2; 4.5.6; 4.5.7.2litigation and evidence see legal admissibility of documentslocal authority requirements Part 4 Section 1:

Appendix A2.3loss and expense 4.4.7.8; 4.4.7.10(a)loss in building projects 4.2lump sum contracts 2.4.2.1; 4.1.2.18(a)lump sum price 2.3.3.1(c); 3.1.2.5; 3.1.2.9(d); 3.1.2.11(b)

Mmachinery see plant and machinerymaintenance and repairs 5.5.3; 5.5.4; 5.5.5maintenance, costed planned 2.2.5.4maintenance costs 2.2.1.4; 2.2.2.4; 2.2.3(Intro); 2.2.3.2;

2.2.5.5(b)(c); Part 2 Section 2: Appendix C4, D2


annual 2.2.2.4(d); Part 2 Section 2: Appendix C4cyclical 2.2.5.5example 2.2.5.1(c)future 2.2.1.4intermittent 2.2.2.4(e); Part 2 Section 2: Appendix C4tax relief 2.2.3

maintenance of the building 2.2.1.4; 3.1.1.16maintenance option, life cycle costing (worked example)

2.2.5.3; 2.2.5.6(h)making good 4.1.1management see facilities management; project management.Management Contract 3.1.1.14; 4.1.2.8–4.1.2.9management contracting 3.1.2.5; 3.1.2.11(c); Part 3

Section 1: Appendix A4; 3.2.3.3(c)management systems 5.6(Intro)

audits of systems 5.6.6see also Code of Practice (DISC PD 0008)

managing risk 3.1.2.9; 3.1.2.12manuals Part 4 Section 1: Appendix A10market conditions 3.1.4.13(l)markets and marketing 5.3.1materials 2.2.1.4; 2.2.2.4; 4.2.5.6; Part 4 Section 2:

Appendix A4, B1.3off site 4.4.7.6; 4.4.7.10(a); Part 4 Section 4: Appendix Bon site 4.4.7.5ownership of 4.4.7.6; Part 4 Section 4: Appendix B

matter 4.2.1.15measurement see quantitiesmeasurement contracts Part 3 Section 1: Appendix A2mechanical and electrical (M & E) services 2.2.1.7;

3.2.3.3(a); Part 4 Section 1: Appendix A9schedule of Rates Part 3 Section 2: Appendix A

minor works 4.1.2.6; 4.1.2.14mitigation 4.2.3.1(e)

NNamed Sub-contract NAM/SC 4.1.2.3(e)National Insurance 5.4.7negligence 2.4.3.1; 2.4.3.7; 3.2.2.7(d)new building 3.1.2.1New Engineering Contract (NEC) 4.1.2.16; 4.1.6.4(d)new-build 2.1NJCC 2.4.4.9; Part 2 Section 4: Appendix A(Intro); Part 3

Section 1: Appendix Ano risk return discount rate 2.2.2.3(b)(d)Nominated Sub-contract NSC/C 4.1.2.2; 4.4.3nomination 3.2.3.3(a)novation 2.4.6; Part 3 Section 1: Appendix A6(b)

Oobsolescence 2.2.2.1; Part 2 Section 2: Appendix Bobsolescent properties 2.2.1.8occupancy 1.2.13; 5.5.4; 5.5.5occupancy costs 2.2.2.4(f); Part 2 Section 2: Appendix C5occupation 3.1.1.18

beneficial 4.1.4.1; 4.1.4.3(c)prior to completion 4.1.6.4readiness for 4.1.4.1

offering up 4.1.1; 4.1.2.16(a)offices, centralisation of 2.2.5.5

operation of the building 3.1.1.18operation costs 2.2.2.4(c); Part 2 Section 2: Appendix C3operatives 5.4.3.6; 5.4.4.3options

appraisal criteria 1.2.3.1(a); 2.2.1.2; 2.2.2building 2.2.5.2; 2.2.5.6choice of 3.1.2.13; 3.1.2.15–3.1.2.17; Part 3 Section 1:

Appendix Adesign 2.2.5.1; 2.2.5.2maintenance 2.2.5.3

organisational structure 3.1.4.6organisations 5.2outline proposals stage 2.1.4; 2.5.4.5overheads 2.2.1.6; 4.2.5.8; Part 4 Section 2: Appendix Coverlap 3.1.2.8(b)overrun 3.1.2.8(a); 3.1.2.9(c)

cost 3.1time 3.1

over-specification 3.1.2.14(i)overspending 3.1.4.13(j)(k)overview see change control overview; cost control overview;

design overview; quality control overview; time controloverview

owner occupiers 1.1.1.3–1.1.1.4ownership ‘reasonable proof’ 4.4.7.6;

Part 4 Section 4: Appendix B

Ppace 3.1.4.11(e)package deal 2.4.5.2parameters, quantity and quality 2.1.3.5; 2.1.4.15;

2.1.5.1–2.1.5.3; 2.1.5.5; 2.1.6.3Parry’s Valuation and Investment Tables 2.2.5.7partial possession 4.1.2.4(c); 4.1.2.17(a)(d); 4.1.6.4(j);

4.1.6.5(b)partnering 3.1.1.15; 3.2.1.4; 3.2.3.3(d)patent defects 4.1.5.1; 4.1.5.2payments see advance payments; fees; interim payments;

life cycle cost payments; special paymentsperfect completion 4.1.4.2; 4.1.4.3(e)

Europe 4.1.4.2(b)France 4.1.4.2(b)see also fault free works

perfection, impossibility of 4.1.5performance 2.4.4.3; 2.4.4.4; 3.1.2.14(j)performance bonds 4.1(Intro)performance criterion 3.1.2.8(b)(c)performance failure 3.1performance requirements Part 2 Section 4: Appendix B2.4performance risk 3.1.2.9performance specified work 4.4.10.3performance tests 4.1.2.18(c)periodic payments 2.3.3.1(e)PFI see Private Finance Initiative (PFI)physical resources 3.1.4.5pipework 2.1.5.4(b)planned maintenance, costed 2.2.5.4planned maintenance programme 2.2.5.4Planning Supervisors 5.2.1


plant and machinery 2.2.3.7; Part 4 Section 2: Appendix A3,A4, A6, B1.2, D5

plant charges 5.4.4.4plant projects 4.1.2.18(b)planting Part 4 Section 1: Appendix A8possession 4.1.2.16(c); 4.1.3.1(b); Part 4 Section 1:

Appendix A3fitness for 4.1.5see also early possession; partial possession

post-contractrole of employer’s agent Part 2 Section 4: Appendix A4

practical completioncase decisions Part 4 Section 1: Appendix Bdefinitions of 4.1.4.1(a); 4.1.5effects of 4.1.3methods 4.1.4objectives Part 4 Section 1: Appendix Aproblems of 4.1standard forms and certification 4.1.2subsidiary issues, determination of 4.1.6see also early completion; substantial completion

Practice notes 2.3.3.1; Part 3 Section 1: Appendix APractice Statements 5.3.1pre-contract

role of employer’s agent Part 2 Section 4: Appendix A2preliminaries Part 2 Section 3: Appendix A7; Part 3 Section 2:

Appendix A; 4.2.5.2; 4.2.5.3; Part 4 Section 2:Appendix A; 4.4.4.3; 4.4.5.1(iii); 4.4.7.2(c); 5.4.5

prescriptive requirements 2.4.4.3; Part 2 Section 4:Appendix B2.5

price premiums 3.1.2.9(c)prices 4.2.4.8; 5.4.11; 5.5.3

average 5.4.3.3construction 3.1.4.13(l)tender 3.1.4.13(l)

pricing 1.2.8; 2.1.5.4(a); 3.2.4.2; 3.2.4.4; 3.2.4.5pricing and risk 3.1.2.10(d)pricing options 3.2.4.5pricing schedules 3.2.4.4(a)Prime Cost Contract 4.1.2.7prime cost sums 4.4.10.1principal adviser 3.1.2.10(b)

role of 1.1.4.5; 1.1.7; 3.1.1.16Principals of Good Practice for Information

Management 5.6.1Private Finance Initiative (PFI) 2.2.1.5probability/impact matrix 4.3.3.4(a)(i)proceedings, right to bring 4.1.3procurement

options 2.4(Intro); 3.1; 3.1.2.15–3.1.2.17; Part 3 Section 1:Appendix A

primary activities 3.1.1.5process 2.5.3.3routes 2.1strategy 1.1.7; 2.4(Intro); 3.1.1.14; 3.1.2; 3.1.2.9;

3.1.2.11; 3.1.2.13development of 3.1; 3.1.1.13; 3.1.2selection of 3.1.3see also building services procurement

professional advice 3.1; 3.1.4.9(c)

professional adviser 3.1.4.16(c)professional judgement 4.2.1.9; 4.2.4.5professional liabilities 2.5(Intro)professional services 5.3.1profit, loss of 4.2.5.12; 4.2.5.13profit margins 3.1.4.13(l)profit target 4.2.3.1(f)programme 3.1.4.14(a); 3.1.4.11(e); 3.2.2.4(g); 3.2.3.5(g);

3.2.4.3progress see stages of a project; updatingproject brief 1.1.3; 1.1.5.3(a); 3.1.4.16(c); 3.1.4.18(a)project characteristics 3.1; 3.1.1.2; 3.1.1.3; 3.1.2.14(c)project cycle 3.1.2.13; 4.3.3.2project definition 3.1.1.10–3.1.1.11project evaluation 1.2.13project funder(s) 1.1.5.3(b)project management 1.1.4.3; 1.1.5.2; 1.1.5.3(g); 2.5.4.3(c);

4.3.3.2; 4.3.3.5see also building services procurement

Project Manager 1.1.4.2; 1.1.4.5; 1.1.6; 2.4(Intro); 2.5.1.1;2.5.1.2; 3.1.1.1; 3.1.2.8; 3.1.2.10(b); 3.1.4.7;4.1.2.16(c); 4.1.2.17

project monitoring 2.4.3.3project objectives 1.1.5.1(a); 3.1.2.8; 3.1.2.14; 3.1.4.16project planning 2.5.4.11project stages 2.5.4.4–2.5.4.13project structure 2.5.1.1; 2.5.1.2project testing 3.1.1.3project type 1.1.2.2project uniqueness 3.1.1.2; 3.1.1.3protection and safe practice 5.1provisional certificate 4.1.4.3(c)provisional sums 4.4.10.2public health installation Part 3 Section 2: Appendix Apublic sector see procurement, public sectorpublications Part 2 Section 1: Appendix D; Part 4 Section 1:

Appendix C; 5.1

Qquality see parameters, quantity and qualityquality assurance 3.1.4.18(c); 4.4.2quality control 2.4.3.4; 3.1.4.11(f); 5.6.7.4quality control overview 3.1.4.18quality/price mechanism 1.1.7.4quantities 2.1.4.4; 2.5.4.9; 3.2.4.4(b); 3.2.4.5

approximate 2.1.5.4(a); 2.1.6.3see also element unit quantities; work executed

quantity see parameters, quantity and qualityquantity surveyor 2.1.4.6; 2.1.6.4

ascertainment by 4.2.4.2; 4.2.4.3; 4.2.4.4role of 2.1; 2.1.1.3; 2.1.1.4; 3.2(Intro); 3.2.4.2; 3.2.4.5;

4.2(Intro)see also valuations for interim certificates

quantity surveyor’s considerations Part 4 Section 2:Appendix B3, C3.2, C4

quantity surveyor’s information 2.1.3.3; 2.1.4.3; 2.1.5.3;2.1.7.3; 4.2.6.5; Part 4 Section 2: Appendix B2

Rraw materials 2.6 (Intro); 2.6.1; 2.6.2; 2.6.3.3; 2.6.5; 2.6.7;


Part 2 Section 6 Appendix Afossil fuels 2.6.1mahogany 2.6.3masonary 2.6.3; 2.6.4; 2.6.4.2timber 2.6 (Intro); 2.6.3; 2.6.4; 2.6.4.1

rebuild, costing 2.2.5.6; 5.4.4.5records of costs 4.2.1.9; 4.2.1.11; 4.2.5.4(b); Part 4

Section 2: Appendix C2rectification of works 4.1.3recycling 2.6.4; 2.6.5; 2.6.6Red Book 4.1.2.18(a)(c)redevelopment 2.2.5.6(g)refurbishment 2.1; 2.2.1.6; 2.2.3; 2.2.5.5; 2.2.5.6; Part 2

Section 2: Appendix B5; 3.1.2.8(a)regional development grants 2.2.3.2regulations 2.6.3.4; 5.2.1rehabilitation 5.5.4reimbursable contracts 4.1.2.18(a)reimbursement 4.2(Intro); 4.2.15; 4.2.4.5; 4.2.6.1

contractural entitlement 4.2.1.2; 4.2.1.5; 4.2.3.1documents 4.2.3.4entitlement to 4.2.3extensions of time 4.2.3.2of subcontractors 4.2.3.6submission cost 4.2.6.1(b); 4.2.6.4; 4.2.6.5written application 4.2.3.3

relationships (time, quality, cost) 3.1.4.14(h)removal costs 4.2.5.3(b)renewal costs 2.2.5.5(g)replacement costs 2.2.1.7; 2.2.2.4; 2.2.3.4; 2.2.5.1(d); Part 2

Section 2: Appendix C4research 4.3.3.3(b)(i)(ii)resequencing 3.1.4.14(h)residual values 2.2.2.1; 2.2.2.4(g); Part 2 Section 2:

Appendix A, C6resources 3.1.4.3–3.1.4.5responsibility

additional Part 2 Section 4: Appendix B2.6allocation of 3.1.2.5; 3.1.2.9; 3.1.2.10delegated 3.1.4.7see also consultant; contractor; employer’s

responsibilitiesretail buildings Part 2 Section 2: Appendix B5retention 4.1.3; 4.1.4.3(e); 4.1.6.5(b); 4.4.7.10Rethinking Construction 1.2(Intro); 1.2.2.2; 3.2(Intro)re-usable materials Part 2 Section 2: Appendix A4revenue allowances 2.2.3.4; 2.2.3.7revenue costs 2.2.5.5(c)revenue expenditure Part 2 Section 2: Appendix D2RIBA Notification of Extension of Time form 4.5.10RIBA Plan of Work 2.1.1.4RICS Building Cost Information Service (BCIS) 2.1.3.4(b)RICS Notification of Extension of Time form 4.5.10RICS publications 2.5.4.1RICS standard forms for interim valuations 4.4.8.1risk 2.4.3.7; 3.1.4.13(m); 3.1.2.9–3.1.2.11; 4.3.1.1; 4.3.2.9

residual 3.1.2.11(c)secondary 4.3.3.5(a)(i)

risk allocation 2.4.3.8; 3.1.2.5; 3.1.2.9; 3.1.2.10

risk analysis 3.1.4.13(c); 4.3(Intro); 4.3.1.4; 4.3.3.1;4.3.3.3(a)(ii); 4.3.3.4

risk and extension of time 4.5.7risk assessment 5.2.1risk averse 3.1.2.11(a)risk distribution 3.1; 3.1.2.12risk identification 4.3(Intro); 4.3.1.3; 4.3.3.1; 4.3.3.3risk management 3.1.2.9–3.1.2.12; 4.3(Intro); 4.3.1.2; 4.3.4

assessment 4.3.2.2–5benefits 4.3.2.1; 4.3.2.5in construction process 4.3.2definitions 4.3.1key components 4.3.4plan 4.3.1.6; 4.3.3.2probability/impact matrix 4.3.3.4workshops 4.3.2.5; 4.3.3.3(a)(i) and (b)(iv); 4.3.3.4(b)principles 4.3.2.9process 4.3.3see also uncertainty

risk profile 4.3.3.4risk register 4.3.1.7; 4.3.3.3(b)(v) and (vi)risk response 4.3(Intro); 4.3.1.5; 4.3.3.1; 4.3.3.5risk taker 3.1.2.11(a)risk transfer 3.1.2.10roles

built environment groups 5.3royalties 4.4.7.9running charges 4.2.5.3(d)running costs 2.2.5.1(b)

SSafety File Part 4 Section 1: Appendix A10saving 2.1.6.4; 3.1.1.8(j); 3.1.4.19(g)scaffolding Part 4 Section 2: Appendix A7scanning of documents 5.6.3(3); 5.6.7.4; Part 5 Section 6:

Appendix Aschedule of defects 4.1.2.6(d)Schedule of Rates Part 3 Section 2: Appendix A; 5.5.3scheme design stage 1.2.3; 2.5.4.6security Part 4 Section 2: Appendix A5security

see also information securityselection process 3.1.1.13; 3.1.2; 3.2.3.4sensitivity analysis 1.1.5.3(f); 2.2.5.5(i); 3.1.4.13(c)sequential see traditional strategyservice engineer’s information 2.1.3.3(e); 2.1.4.3(d);

2.1.5.3(d)services

mechanical and electrical (M & E) 2.2.1.7; 3.2.3.3(a);Part 3 Section 2: Appendix A; Part 4 Section 1:Appendix A9

provision costs Part 4 Section 2: Appendix A8, A9standard elements Part 2 Section 3: Appendix A5; Part 2

Section 4: Appendix B2.5.5see also building services procurement

setting-up costs 4.2.5.3(a)setting out, errors in 4.4.7.10(f)shell and core contract 3.1.2.6sinking fund 2.2.2(Intro) 2.2.5.4

valuation and investment table 2.2.5.7


site cost Part 4 Section 2: Appendix Asite meetings 4.2.3.3(c)site operations 2.5.4.12site visits 4.4.6.3; 5.1snagging 4.1.1snagging list 4.1.1; 4.1.5.3special payments 4.4.7.9; 4.4.7.10(a)specialised activity 2.5.2.4specialist installers 3.2.2.6(b)specialist services 2.1.5.4(b); 3.2(Intro); 4.4.5.3specification 2.3.3.1(b); 2.4.4.4; Part 2 Section 4: Appendix

B2.3, B2.5; 2.5.4.3(d); 3.1.4.18; Part 3 Section 1:Appendix A6

square index Part 2 Section 1: Appendix Cstaff cost Part 4 Section 2: Appendix A1, A11, C3stage payments 2.3.3.1(e); 4.4.10.4standard contracts see contractsstandard elements see BCIS standard elementsstandard rules and practices 3.1.1.3standards and requirements 2.4.4.4standards and tests 4.1.4statutory controls 3.1.2.9(c)statutory duty 3.2.2.7(d)statutory fees and charges 4.4.7.9statutory requirements Part 4 Section 1: Appendix A2step-down provisions 4.4.3storage 4.1.6.5(a); 4.4.7.6storage

see also document storagestraight line allowances 2.2.3.2Structural Engineer’s information 2.1.3.3.(e); 2.1.4.3(d);

2.1.5.3(d)structure Part 4 Section 1: Appendix A5subcontract completion 4.1.2.15Subcontract DOM/2 4.1.2.3(e)subcontract work 4.1.2.2–4.1.2.3; 5.4.5subcontractors 3.1.2.10(c); 4.1.3

building services 3.2.3.3(a)domestic 4.1.2.3; 4.4.7.2(e)named 4.1.2.3(e)nominated 4.1.2.2; 4.2.3.6; Part 4 Section 2:

Appendix B3.1; 4.4.3; 4.4.5.3; 4.4.7.2(d);4.4.7.10(g); 4.4.9.1; 4.5.7.1; 4.5.7.2

submission cost 4.2.6.1(b); 4.2.6.4; 4.2.6.5submissions 4.2(Intro); 4.2.4.3; 4.2.6.1; 4.2.6.4; Part 4

Section 2: Appendix Dchecklist Part 4 Section 2: Appendix E

substantial completion 4.1(Intro); 4.1.1; 4.1.2.11; 4.1.2.12;4.1.2.15; 4.1.5

substantial performance 4.1.5; 4.1.6.4(g)substructure Part 2 Section 3: Appendix A1; Part 2 Section 4:

Appendix B2.5.1superstructure Part 2 Section 3: Appendix A2; Part 2

Section 4: Appendix B2.5.2suppliers 4.4.7.2(f)supply-chain management 3.2.3.3(d)Surveying Safely 5.1Surveyor 1.1.1.1

advisory role 2.5.2.3

professional judgement 4.2.1.9; 4.2.4.5see also lead consultant

sustainability 2.6 (Intro); 2.6.1; 2.6.2; 2.6.6; 2.6.7see also building sustainability

systems and controls 3.1.4.11

Ttake-over 3.1.1.18taking over 4.1(Intro); 4.1.2.10; 4.1.2.16(b); 4.1.2.18(b)taking over certificate 4.1.2.18(c)tax allowances 2.2.3

applications 2.2.3.6categories defined Part 2 Section 2: Appendix D3expenditure, examples of Part 2 Section 2: Appendix Eglossary of terms Part 2 Section 2: Appendix Dtypes 2.2.3.2variables 2.2.3.5worked examples 2.2.3.7; 2.2.5.5(f); 2.2.5.6(h)

tax relief see tax allowancestaxation

glossary of terms Part 2 Section 2: Appendix Dissues and adjustments Part 2 Section 2: Appendix A5,

A6, A7see also Corporation Tax; VAT (Value Added Tax)

team 3.1.1.3team development 4.3.2.8technology 2.6.1; 2.6.2; 2.6.5

alternative 2.6.1temporary accommodation Part 4 Section 2: Appendix A2temporary disconformity 4.1(Intro)temporary services Part 4 Section 2: Appendix A8, A9temporary works/access Part 4 Section 2: Appendix A4tender

acceptance of 2.1action 2.5.4.10building services 3.2.3.4cost 2.3.2.2design and build 2.4.4.9evaluation 3.2.4.9time of 3.1.4.13(l)two-stage 2.4.5.4; 3.2.3.3(a)

tender documents 3.1.4.9(c); 3.2.3.5(b); 3.2.4addendums 3.2.4.6changes from initial 2.1.7.1clarification 3.2.4.7sub-contract Part 3 Section 2: Appendix A

tender price index 5.4.3.2; 5.4.4.2tender proposals, evaluation of 2.3.3.1(d)tender stage 2.1.7tenderers, information from 3.2.4.8termination 4.1.2.16(b)test discount rate 2.2.2.3(a)tests 4.4.7.9

at completion 4.1.4of plant 4.1.4see also standards and tests

third party insurance 4.3.3.5(b)timber see raw materialsTimber Trade Federation 2.6.4.1


time‘at large’ 4.1.6.2(b)budget 3.1.4.14(d)checking 3.1.4.14(d)checklist 3.1.3.14constraints 3.1.4.14(g)contingency 3.1.4.14(g)control overview 3.1.4.14criterion 3.1.2.8(b)extension of see extension of timeframework 3.1.4.14(a)plan 3.1.4.11(e); 3.1.4.14(d)risk 3.1.2.9; 3.1.2.10

timescale 3.1.2.2timing 3.1.2.14(f)tort 3.2.2.7(c)traditional strategy 3.1.1.14; 3.1.2.5; 3.1.2.11; Part 3

Section 1: Appendix A1transfer of building 4.1.1Treasury Bonds 2.2.2.3(b)(c)(d)turnkey 2.4.5.2two-stage completion 4.1.4two-stage tender 2.4.5.4

Uultimate cost 3.1.2.2uncertainty 4.3.2.6

see also riskunderpricing 4.2.3.1(a)uniqueness 3.1; 3.1.1.2; 3.1.1.3unit quantities see element unit quantitiesunit rates Part 2 Section 1: Appendix A2.1; A2.2updating 3.1.4.12(e)user functions 1.2.7.5; 1.2.7.6; Part 1 Section 2: Appendix Auser requirements 3.1.4.13

Vvaluation and investment tables (Parry’s) 2.2.5.7valuations for interim certificates

administration 4.4.8checklist 4.4.2.1–4.4.2.4communications 4.4.5content 4.4.7covering letter 4.4.8.2further reading Part 4 Section 4: Appendix Aother Forms of Contract 4.4.11other relevant Contract Terms 4.4.10preparation method 4.4.6purpose of 4.4(Intro); 4.4.1special situations 4.4.9start of contract 4.4.4under JCT Contract 4.4.3

value added tax see VAT (Value Added Tax)

value categories Part 2 Section 2: Appendix Cvalue engineering 1.2(Intro); 2.1.1.5; 2.2.1.2; 3.1.4.17

applicability 1.2.2implementation of the exercise 1.2.4; 1.2.5; 1.2.12process Part 1 Section 2: Appendix Btiming 1.2.3use and function 1.2.1workshop 1.2(Intro); 1.2.3.1; 1.2.4.4; 1.2.5; 1.2.6;

1.2.9–11value engineering panel 1.2.4; 1.2.11.3; 1.2.12.1value engineering participants 1.2.4; 1.2.6.2value management 1.2(Intro); 1.2.1.2; 1.2.3.1; 3.1.4.16value management facilitator 1.2(Intro); 1.2.4.1; 1.2.4.3;

1.2.4.4; 1.2.6.2; 1.2.10.1(b)(c)(d)value for money 1.2(Intro); 1.2.1.3; 3.1.4.8(d); 3.1.4.9(e);

3.1.4.19(g)values, monetary see discount rate; discountingValue Tree 1.2.7.6; 1.2.7.7variation works 4.1.3.1(f); 4.2.4.10(c); 4.2.5.4(e)

interim valuation 4.4.7.3VAT (Value Added Tax) 1.2.8.2; 2.1.3.2(a); 2.2.3.3;

2.2.5.5(f); 2.4.6.1vesting 4.1.2.17(d)

Wwage rates 5.4.4.2wall to floor ratio Part 2 Section 1: Appendix Cwarranty 3.1.2.10(c); 3.2.4.3warranty contracts 3.1.1.16(b)waste 4.2.5.6water testing Part 4 Section 1: Appendix A6whole-life costs 3.1.4.15With Contractor’s Design Form 4.1.2.3(e); 4.1.2.5work executed 4.4.7.1; 4.4.7.2work not properly executed 4.4.7.10(b); 4.4.7.10(g)worked examples

life cycle costing 2.2.5tax allowances 2.2.3.7

worksoutstanding 4.1.1; 4.1.2.10(b); 4.1.2.11(c); 4.1.2.13;

4.1.2.14(c); 4.1.4.1(c); 4.1.4.2(a); 4.1.5packages 2.4.5.2; 3.1.2.5

workshopsrisk management 4.3.2.8; 4.3.3.3(a)(i)(b)(iv); 4.3.3.4(b)value engineering 1.2(Intro); 1.2.3.1; 1.2.4.4; 1.2.5; 1.2.6;

1.2.9–11World Commission on the Environment and Development

2.6 (Intro)‘writing down’ allowance Part 2 Section 2: Appendix D7written application for reimbursement 4.2.3.3; 4.2.6.1;

4.2.6.4written down value Part 2 Section 2: Appendix A6