Post Contract Management

8/9/2019 Post Contract Management

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POST CONTRACT MANAGEMENT

Table of Contents

Introduction................................................................................................................ 2

Task 01: Contract Documents.....................................................................................3Identifying Contract Documents in Construction Contracts.....................................4

Various type of Standard form of contracts used in construction orks..................!

"CT Standard #orm of Contract................................................................................ $

ICT%D Standard #orm of Contract............................................................................&

Di'erentiating standard form of contract documents (ased on )arious types of

contracts............................................................................................................... 10

*sefu+ness of proper e,ecution of t-e contract.....................................................13

Task 02: Cost anagement.......................................................................................1!et-od of /ayment for permanent orks and pre+iminaries.................................1

Interim payment....................................................................................................1

Stage /ayment...................................................................................................... 1$

Items to (e inc+uded in an interim )a+uation.........................................................1&

Items to (e inc+uded in a #ina+ %ccount.................................................................21

Task 03 : ump Sum................................................................................................. 22

easons for inc+usions of /rime Cost Sums in a contract......................................23

easons for inc+usions of /ro)isiona+ Sums in a contract......................................24

,amp+es for /rime Cost.......................................................................................2!

,amp+es for /ro)isiona+ Sum...............................................................................2

Task 04 : C+aims........................................................................................................ 2

De5nition for )ariations as stipu+ated on #IDIC condition of Contract...................2$

Identifying entit+ements for c+aims........................................................................31

Task 0! : Dispute eso+ution..................................................................................33

/otentia+ causes for disputes during construction.................................................34

+iminating or minimi6ing causes for dispute........................................................3

et-ods of %+ternati)e dispute reso+ution.............................................................3$

Conc+usion................................................................................................................ 3&

eference................................................................................................................. 40

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Introduction

The contact document is a vital factor in the construction industry. It is the document that indsthe contractor and the client le!ally and it is a must to have a "ro"er #no$led!e on ho$ to

choose and ho$ to e%ecute $or# accordin! to the contract document such as claimin! fordama!es from the client or the contractor also the methods ho$ $or#s are done accordin! o thecontract document. Another im"ortant factor is findin! resolutions for dis"utes any dis"utes canoccur $hen constructin!& it can occur in various $ay ut its hi!hly disadvanta!eous if you !o forliti!ation there for its im"ortant that every 'uantity Surveyor to #no$ aout the Alternativedis"ute resolutions.

Than# you

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Task 01: Contract Documents

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Identifying Contract Documents in Construction Contracts

Accordin! to the O%ford En!lish (ictionary the definition of a contract is “a written orspoken agreement, especially one concerning employment, sales, or tenancy, which isintended to be enforceable by law”. In construction industry the t$o main "arties are #no$n

as the contractor and the Client. The client "rovides his financial resources and hisre)uirements to the contractor and the contractor uilds the structure accordin! to the client*sre)uirements $ith the financial resources the client "rovides. In the definition of contract it says “which is intended to be enforceable by law” .If theclient and the contractor is not onded le!ally& the contractor can chan!e the structure& ne!lectthe re)uirements of the client& otain money from the client and not constructin! the structureetc. the contractor can do any chan!e or any unethical $or#s also the client may also ne!lecthis res"onsiilities such as doin! "ayments to the contractor ut oth "arties $ill not e ale tota#e any action or to retrieve any remedy ecause they are not le!ally onded.

Therefore havin! a contract a!reement is a vital factor in any industry& oth "arties $ille le!ally onded and if one or oth "arties are reachin! the contract the other "arty $ill havethe "rivile!e to claim the loss or the dama!es caused due to the reachin! of the contract and

the other "arty cannot ne!lect or esca"e after reachin! the contract ecause they can eenforced y la$. The main "ur"ose of havin! a contract is to encoura!e the "arties to hold on totheir res"onsiilities.

Even the oth "arties are enforced y la$ there need to e a "ro"er form of contractdocument ecause if the oth "arties are "re"arin! the contract document it $ill cause moretime and many dis"utes et$een the "arties therefore +Standard Contract (ocuments, $ere"ulished y certain $ell reco!ni-ed odies locally and internationally. There are many contractdocuments "ulished y local authorities accordin! to the local re)uirements and also there arecontracts documents can e used internationally $hich are "ulished y internationalauthorities. There are many differences et$een these contract documents accordin! the ty"eof $or# or the method of construction etc.

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Various type of Standard form of contracts used in

construction works

FIDIC Standard form of contract

I(IC standard form of contract is "ulished y the International ederation of ConsultantEn!ineers/ this is an internationally reco!ni-ed standard contract. The foundin! memers ofI(IC are 0el!ium& rance and S$it-erland and it has evolved throu!h the years and most ofthe countries in the $orld has otained the memershi" of the or!ani-ed and I(C standardform of contract is ein! used all over the $orld.There are several "ulications y the I(IC to use accordin! the ty"e of the "ro1ect and the$illin!ness of the oth "arties. The "ulication of the I(IC is as follo$s&

FIDIC Condition of contract for construction !ed "ook#

FIDIC Condition of contract for $lant and Design%"uild &ellow "ook#

FIDIC Condition of contract for Shot form of contract 'reen "ook#

FIDIC Condition of contract for ($C)*urnkey pro+ects Siler "ook#

FIDIC Condition of contract for construction !ed "ook#

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I(IC Condition of contract for construction or $hich is commonly #no$n as the +I(IC Red0oo#, is commonly used for 0uildin! or Civil En!ineerin! $or# $here the desi!ns are done ythe client or y a re"resentative of his or the En!ineer of the client. Generally under thecircumstances $ithin this standard form of contract the contractor carries on the construction$or# accordin! to the (esi!n "rovided y the client ut there can some level of involvement ofthe contractor in the desi!n re!ardin! civil& mechanical& electrical or other related construction

$or#.

FIDIC Condition of contract for $lant and Design "uild &ellow "ook#

Condition of contract for Plant and (esi!n 0uild or !enerally #no$n as +I(IC 2ello$ 0oo#,.This Standard contract is used s"ecially in electrical or mechanical "lant $or# ut is used in

uildin! construction also. The desi!nin! is usually done y the contractor y himself accordin!to the re)uirements of the client. The $or# may vary from civil& mechanical& electrical or from!eneral construction $or#.

FIDIC Condition of contract for ($C)*urnkey $ro+ects Siler "ook#

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I(IC Silver 0oo# or Condition of contract for EPC3Turn#ey "ro1ects as the name im"lies thestandard form of contract is used for EPC or Turn#ey "ro1ects $here& the contractor holds thefull res"onsiility for the desi!n the e%ecution of the $or# also the contractor carries out all theEn!ineerin!& Procurement and the construction $or# 4EPC5. The client has only very littleinvolvement in the "ro1ect and ecause of the "rocess is ased on +turn#ey method, the client$ill receive a fully e)ui""ed facility ready to o"eration. Generally this ty"e of contract is used

$hen uildin! a factory& "o$er "lants or a similar facility and $hen there is a hi!her certainty onthe final "rice and time needed to com"lete the "ro1ect.

FIDIC Condition of contract for Short Form of Contract 'reen "ook#

The I(IC Green oo# or I(IC Condition of contract for Short orm of Contract is used for"ro1ects $ith less ca"ital value. It is used relatively for sim"ler and for re"etitive $or# of shortduration time. 6nder the normal circumstances the construction $or# is carried on accordin! tothe desi!n "rovided y the client or y the re"resentative of the client ut it is also can e usedfor "ro1ects desi!ned y the contractor.

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Figure 1 : uide to c!oose appropriate form ofFIDIC contract


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"CT Standard Form of Contract

The 7oint Contracts Triunal& also #no$n as the 7CT& "roduces standard forms of contract forconstruction& !uidance notes and other standard documentation for use in the constructionindustry. rom its estalishment in 89:8& 7CT has e%"anded the numer of contriutin!or!ani-ations. ollo$in! recommendations in the 899;


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ICT#D Standard Form of Contract

The Institute for Construction Trainin! and (evelo"ment 4ICTA(5 is an or!ani-ation set u" ythe Government of Sri or# orce& etc. ICTA( has estalished itself as a reco!ni-ed andim"ortant constituent of the Construction Industry.

There are several contract documents "ulished y ICTA(. They are as follo$s&

ICT#D S$D 01 % contracts &alue between 's( 10 million to 100 million

of works

ICT#D S$D 0) % contracts &alue between o&er 's( 100 million *+a,or

contracts-(

ICT#D S$D 0. % contracts up/to 's( 10 million(* +inor contracts-

ICT#D S$D 0 % contracts w!ere t!e contractor is responsible for

Design Construction of t!e works *Design and build-

ICT#D S$D 02 / contracts &alue up to 100 millions

ICT#D S$D 03 / construction related plant

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Di4erentiating standard form of contract documents

based on &arious types of contracts

C l i e

n t

I n v o l v e

m e n t

( e s i ! n

a n d

M a n a ! e m e n t

C a " a c i t y f o r

v a r i a t i o n s

C o m " l e % i t y

S " e

e d

I(IC The involvementof the client isrelatively lo$ inI(IC contracts$hen com"arin!$ith the othercontractdocuments& ut in

+I(IC 2ello$oo#? Plant anddesi!n uild, Theinvolvement ofthe client ishi!her than otherI(ICdocuments. Itdoesn*t im"ly thatthere is no clientinvolvement inother I(ICcontractdocuments& theyre)uire lessattention of theclient to the"ro1ects $henfollo$in! otherI(IC Contractdocuments.

(esi!nin! ismostly done ythe client or y adesi!n teama""ointed ythe client. Therefor most of thehi!hly

mana!erialdecisions areta#en y theclients& ut in+I(IC Silveroo# @ EPC Turn Bey orI(IC 2ello$0oo# @ (esi!nand ill, Themain contractor"lays a mainrole inmana!in! of the"ro1ect.

0ecause of thelessInvolvement of the Client theca"acity forvariationsmi!ht ehi!her than

other contracts

I(IC Contractdocuments areeasy to follo$and easilyunderstandale for either"arties therefor I(IC is

"o"ular amon!manyconstructioncom"anies.

0ecause of thelesscom"le%ity ofthedocumentation$or#s and thedesi!nin! isdone y the

client the"rocess canflo$ faster uta!ain $ith thelessinvolvement ofthe clientoverall thes"eed of the"ro1ect can eavera!e

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C l i e n t

I n v o l v e m e n t

( e s i ! n a n d

M a n a ! e m e n t


v a r i a t i o n s

C o m " l e % i t y

S " e e d

7CT As in I(IC in!enerally theinvolvement ofthe client in 7CTcontractdocuments arecom"aratively lo$and the client hasa lo$er ris#

(esi!nin! ismostly done ya :rd "arty or ya teama""ointed ythe clientho$ever thereare somecontracts $hichallo$s the maincontractor tocarry on the

desi!nin! of the"ro1ect

0ecause of thelessInvolvement of the Client theca"acity forvariationsmi!ht ehi!her thanother contracts

7CT contractsare muchmorecom"licatedcom"arin! toother contractsmaye it cane one of thereasons thatit*s only usedin Euro"ecountries. In

I(ICdocumentsthey narro$eddo$n allconstructionsfor four maincontractdocuments utin 7CT thereare manyminor andma1or contract

documents$hich can erelatively anadvanta!ealso ecauseof the manynumer ofdocuments itma#es the

0ecause of thecom"le%ity ofthedocumentation$or# and dueto the lessinvolvement ofthe client theoverall s"eedof $or# can eslo$com"arin! to

othercontracts.

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contract"rocess morecom"licated

C l i e n t

I n v o l v e m e n t

( e s i ! n a n d

M a n a ! e m e n t


v a r i a t i o n s

C o m " l e % i t y

S " e e d

ICTA(*************

ICTA( is onlyused in Sri


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5sefulness of proper e6ecution of t!e contract

>hen t$o "arties enter an a!reement or si!n a contract& the "ur"ose of havin! a contract is to

ma#e sure that neither "arty $ill ne!lect his or her oli!ations. Accordin! to the ty"e of thecontract document the em"loyer and the contractor a!rees on& the oli!ations differs from oneanother therefore the "arties can choose an a""ro"riate contract document accordin! to his orher needs or accordin! to the ty"e of the "ro1ect and #ee" a fle%ile relationshi" $ith "ossileoli!ation to one another. The contract document is the valid document that inds the "artiesle!ally and the document that e%"lains $hat "arties are liale for. The follo$in! are the factorsaffects and the usefulness of e%ecution a "ro"er contract.

0alue of the $ro+ect

The "arties have the freedom to choose the a""ro"riate contract document accordin! to thevalue of the "ro1ect. Such as in I(IC "ulications& the I(IC red oo# is !enerally used for"ro1ects that e%ceed its value over D& and the I(IC !reen oo# is used for "ro1ectsvalues less than D&. 0y usin! the "ro"er contract document considerin! the value of the"ro1ect it lo$ers the ris# for the em"loyer ecause $hen the value of the "ro1ect !ets hi!her theris# of em"loyers cash !ets misused or !et $asted $ill e hi!h& therefore y usin! the suitaleform of contract it $ill ensure that em"loyer*s money $ill !et into "ro"er use.

*ype of contract

The ty"e of the contract is also an im"ortant factor should e ecause the a""ro"riate contractdocument should e used accordin! to the com"le%ity of the "ro1ect. or an e%am"le if the client$ishes to uild a certain mechanical "lant and if the client don*t have the #no$led!e to desi!nhe $ill have to let the contractor or his consultant team do the $or#s for him therefore accordin!to the $or# load and the com"le%ity of the $or# the contractor should e liale for any mista#eor dama!e or any issue occurs .it*s im"ortant to have a such s"ecial contract documentecause then the contractor #no$s his losses and res"onsiilities also $hat claims he is entitledto.

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$rocedure

There is a "rocedure to follo$ efore startin! the construction $or#s and till the client releasesthe contractor this "rocedure has to e follo$ed. (e"endin! on the ty"e of the "ro1ect& for ane%am"le the "rocedure on I(IC red oo# is different from the I(IC yello$ oo# ecause theI(IC yello$ oo# is for contracts $here the contractor does all the desi!nin! and the

construction therefore the contractor may need more time for the "re contract and the "ostcontract sta!es ut in the I(IC red oo# its commonly used $hen the contractor*sres"onsiility is only the construction $or#. Therefore in I(IC red oo# it has dedicated lesstime for "re and "ost contract sta!e than the yello$ oo#. It is an im"ortant factor to econsidered to #ee" the $or# flo$in! $ithin the "ossile time frames to do that it is a must tochoose the most suitale contract document.

Claims

If the contractor or the client reaches the contract or fail to $or# accordin! to the contract theother "arty can claim the dama!e he3she suffers ecause of the o""osite "arty ut theentitlements for claims are different from contract document to contract document. If the client or

contractor has no #no$led!e aout the contract documents the o""osite "arty can choose acontract favorin! him and the contractor or the client mi!ht e unale to claim for the dama!esalso they mi!ht have to "ay for dama!ed that they are not res"onsile for. Therefore it*sim"ortant to choose the a""ro"riate contract for the a""ro"riate "ro1ect.

!estrictions

There are many or!ani-ations "ulish contract documents such as I(IC&7CT and ICTA( utthere are some restrictions $hen usin! these contracts& for an e%am"le ICTA( "ulications cane only e used $ithin Sri


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Task 0): Cost +anagement

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+et!od of 7ayment for permanent works and

preliminaries

The $or# contractor is res"onsile to e%ecute under the contract is #no$n as "ermanent $or#s&as in an e%am"le in a uildin! "ro1ect construction of the uildin! is the "ermanent $or# the$or#s that*s come under the contract that client is entitled to use after the construction $or#sare com"leted.In every construction there should e some $or# done efore the $or# starts on theconstruction such as uildin! the site offices& store rooms& laour huts& yards to storea!!re!ates or sand etc. or these $or# the contractor $ill have ear an additional cost otherthan the construction $or# therefore therefore the cost for these $or#s are illed as "reliminaryItems. Also as in for construction of these items each month there $ill e an additional cost formaintenance& electricity& food and lod!in! for laours as $ell as for en!ineers and the staff etc.these items are also illed under the "reliminary ill ut the cost for these items are included tothe "reliminary ill monthly.

Fo$ever for oth "reliminary and "ermanent $or#s the method of "ayment is done throu!h aInterim "ayment or y a lum" sum "ayment it de"ends on the contract the em"loyer $ished tofollo$.

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Interim payment

Interim "ayment is done for a "eriod of time as a!reed on the contract& if it is a smaller "ro1ectand the sco"e of $or# is com"aratively lo$ the contractor can a""ly for the interim "aymentonce in : months or once a month ut if it is a lar!e "ro1ect the contractor can a""ly for theinterim "ayment once in 8 or 8D days ecause the value of the $or# done is hi!h.

The "ayment for "reliminary items such as laour huts& site office stores are included in firstinterim "ayment or 8st& nd and :rd interim "ayments de"endin! on the "erformance of thecontractor and for items such as electricity& $ater& lod!in!& food& sanitary etc. they are added toevery interim "ayment additional to the "ermanent $or#s.

The method of "ayment differs from contract document to contract document& there is onemethod of "ayment mentioned in I(IC "ulications and there is another method mentioned inthe ICTA( "ulications ut relatively they are similar there are only some sli!ht differences.

Accordin! to the I(IC "ulications the contractor should sumit a statement to the En!ineer$ith includin! the follo$in! items&

• The estimated contract value of the $or#s e%ecuted and the contractor*s documents"roduced u" to the end of the interim "ayment "eriod 4includin! variations5

• Any items to e added and deducted for chan!es in le!islation and chan!es in cost

• Any amount to e deducted for retention& calculated y a""lyin! the "ercenta!e of retention

stated in a""endi% to tender to the total of the aove amounts& until the amount so retainedy the em"loyer reaches the limit of Retention money stated in the a""endi% to tender

• Any amounts to e added and deducted for the advance "ayment and re"ayments.

• Any amounts to e added and deducted for "lants and materials

• Any other additions or deductions $hich may have ecome due under the contract orother$ise includin! them under e%tra $or#s& claims& dis"ute and aritration etc.

• The deduction of amounts certified in all "revious "ayments certificates.

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The contractor should sumit si% 4H5 co"ies of the statements containin! aove mentioneditems $ith the su""ortin! documents sho$in! in detail the amount the contractor considerhimself to e entitled.

The interim "ayment certificate $hich is the amount that is fairly determined y the Em"loyer*sen!ineer should e handed over to the Em"loyer after =days after receivin! the statement and

the su""ortin! documents from the contractor.

The Em"loyer is entitled to "ay the contractor $ithin DH days after receivin! the statement andthe su""ortin! documents sumitted y the contractor. The "ayments should e done to a an#account nominated y the contractor from the currency that is mentioned in the contract.

Stage 7ayment

In sta!e "ayment the "ayments are done accordin! to the sta!es the "ro1ect is divided& The"ro1ect is divided for several sta!es and the contractor can otain his "ayment once he hascom"lete the sta!e. If it*s a uildin! "ro1ect the sta!es can e divided as follo$s

• Su structure u" to foundation level&

• 6" to the first floor structural $or#s&

• 6" to first floor&

• 6" to nd floor structural $or#s&

• 6" to to" of nd floor $hole $or#s&

• Roof level and

• All e%ternal and internal $or#s

The method of "ayment is similar to the Interim method the items included are also the sameonly the time "eriod may differ accordin! the $or# sco"es on certain sta!es.

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Items to be included in an interim &aluation

*he estimated contract alue of the works e1ecuted and the contractor2s documents

produced up to the end of the interim payment period including ariations#

The contractor should sumit the value of the $or# done $ithin the interim "ayment"eriod $ith evidence. or an e%am"le if the contractor has com"leted constructin! acertain structure the measurement sheets for the structure should e attached to!ether$ith the interim ill includin! the )uantities of concrete volume& reinforcement $ei!ht&form area etc. or each structure se"arate su""ortin! documents should e sumitted

as evidence and to 1ustify the value of $or# done $ithin the interim "eriod. The total costfor "reliminaries or for moili-ation and overheads are also added to the interim ill

3ny items to be added and deducted for changes in legislation and changes in cost

Price fluctuations& chan!e in ta%es or addin! of ne$ ta%es y the !overnment can costthe contractor more than the a!reed rates on the a!reement. Also the costs can eincreased due to unforeseeale events or ecause of client*s i!norance such as& if theclient is res"onsile for clearance and maintenance of access roads ut due to $eatherchan!es or other events if the contractor has to ear e%tra costs to trans"ort materials tosite the cost $ill e chan!ed there for it should e added as an e%tra cost to the interim

ill.

3ny amount to be deducted for retention, calculated by applying the percentage of

retention stated in appendi1 to tender to the total of the aboe amounts, until theamount so retained by the employer reaches the limit of !etention money stated inthe appendi1 to tender

After calculatin! the total $or# done for the interim "eriod includin! the variations& day$or#s and the e%tra $or#s& the a!reed "ercenta!e for deduction of the retention should

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e deducted from the total value of the $or# done. The deduction for retention can ereduced from the interim ill only till it reaches the a!reed amount y the client and thecontractor.

3ny amounts to be added and deducted for the adance payment and repayments.

The contractor receives an advance "ayment from the client efore startin! the $or# onthe "ro1ect& this advance "ayment is deducted from each interim ill. The recovery of theadvanced "ayment is also done to an a!reed "ercenta!e to e deducted from eachinterim ill. Also if the contractor is entitled to any other "ayments re!ardin! the "ro1ectthe contractor has the aility to add that amount to the interim ills.

3ny amounts to be added and deducted for plants and materials

If the client is "rovidin! materials or "lants to the contractor& the cost for "lants andmaterials are deducted from the interim ill also if the contractor has to ear additionalcost for any s"ecial materials or s"ecial "lants it is added to the interim ill.

3ny other additions or deductions which may hae become due under the contract or

otherwise including them under e1tra works, claims, dispute and arbitration etc.

ariation in the structure can occur in any construction "ro1ect. It can occur due to thefault of the contractor or due to faults of the client& also there can e e%tra $or#s claimsfor losses of the contractor . The contractor can calculate the e%tra costs $ith su""ortin!documents and otain the additions throu!h the interim ill.

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Items to be included in a Final #ccount

Pre"arin! the final account is the "rocess of calculatin! and a!reein! any ad1ustments to thecontract sum 4the amount ori!inally set out in the contract to e "aid to the contractor forcom"letion of the $or#s5 so that the amount of the final "ayment can e determined. The

amount of the final "ayment is then set out in the final certificate 4or final statement5. It is"ossile for the final certificate to sho$ that money is o$ed to the client& rather than due to thecontractor .

Important Items that2s needed to be included in the final account4

0ariations.

Fluctuations

$rime cost sums.

$roisional sums.

$ayments to nominated sub%contractors or nominated suppliers.

Statutory fees.

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http://www.designingbuildings.co.uk/wiki/Contract_sumhttp://www.designingbuildings.co.uk/wiki/Contracthttp://www.designingbuildings.co.uk/wiki/Contractorhttp://www.designingbuildings.co.uk/wiki/Contractorhttp://www.designingbuildings.co.uk/wiki/Final_certificatehttp://www.designingbuildings.co.uk/wiki/Final_certificatehttp://www.designingbuildings.co.uk/wiki/Clienthttp://www.designingbuildings.co.uk/wiki/Contractorhttp://www.designingbuildings.co.uk/wiki/Variationshttp://www.designingbuildings.co.uk/wiki/Fluctuationshttp://www.designingbuildings.co.uk/wiki/Prime_cost_sumhttp://www.designingbuildings.co.uk/wiki/Provisional_sumshttp://www.designingbuildings.co.uk/wiki/Nominated_sub-contractorhttp://www.designingbuildings.co.uk/wiki/Contract_sumhttp://www.designingbuildings.co.uk/wiki/Contracthttp://www.designingbuildings.co.uk/wiki/Contractorhttp://www.designingbuildings.co.uk/wiki/Final_certificatehttp://www.designingbuildings.co.uk/wiki/Final_certificatehttp://www.designingbuildings.co.uk/wiki/Clienthttp://www.designingbuildings.co.uk/wiki/Contractorhttp://www.designingbuildings.co.uk/wiki/Variationshttp://www.designingbuildings.co.uk/wiki/Fluctuationshttp://www.designingbuildings.co.uk/wiki/Prime_cost_sumhttp://www.designingbuildings.co.uk/wiki/Provisional_sumshttp://www.designingbuildings.co.uk/wiki/Nominated_sub-contractor


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$ayments relating to the opening%up and testing of the works.

5oss and e1pense.

5i6uidated and ascertained damages.

Contract claims imposed as a result of the contractor 7s operations such as a third%

party claim resulting from contractor negligence or contractual breach, for e1ample,flooding a neighbor2s property#.

*he release of any remaining retention.

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Task 0. : 8ump Sum

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'easons for inclusions of 7rime Cost Sums in a contract

A "rime cost sum 4sometimes called a PC sum5 is an allo$ance usually calculated y the costconsultant for the su""ly of $or# or materials to e "rovided y a contractor or su""lier that $ille nominated y the client. The allo$ance is e%clusive of any "rofit mar# u" or attendance 4such as material handlin!& scaffoldin! and ruish clearance etc.5 y the main contractor .

The reasons for inclusion of "rime cost sums are&

• or lon! delivery items $here desi!n and manufacturin! times could not $ait for thea""ointment of a main contractor . or e%am"le& lifts& s$itch!ear or refri!eration "lant.

• >here s"ecialist desi!n in"ut $as re)uired in the early sta!es of desi!n develo"ment.or e%am"le& for a claddin! system.

• >here the client directly orders a "referred "iece of e)ui"ment on $hich desi!n is to eased. or e%am"le& an MRI scanner& laoratory fumes cu"oards or ottlin! "lant.

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http://www.designingbuildings.co.uk/wiki/Pc_sumhttp://www.designingbuildings.co.uk/wiki/Cost_consultanthttp://www.designingbuildings.co.uk/wiki/Cost_consultanthttp://www.designingbuildings.co.uk/wiki/Contractorhttp://www.designingbuildings.co.uk/wiki/Clienthttp://www.designingbuildings.co.uk/wiki/Attendancehttp://www.designingbuildings.co.uk/wiki/Attendancehttp://www.designingbuildings.co.uk/wiki/Scaffoldinghttp://www.designingbuildings.co.uk/wiki/Scaffoldinghttp://www.designingbuildings.co.uk/wiki/Contractorhttp://www.designingbuildings.co.uk/wiki/Appointmenthttp://www.designingbuildings.co.uk/wiki/Contractorhttp://www.designingbuildings.co.uk/wiki/Clienthttp://www.designingbuildings.co.uk/wiki/Equipmenthttp://www.designingbuildings.co.uk/wiki/Pc_sumhttp://www.designingbuildings.co.uk/wiki/Cost_consultanthttp://www.designingbuildings.co.uk/wiki/Cost_consultanthttp://www.designingbuildings.co.uk/wiki/Contractorhttp://www.designingbuildings.co.uk/wiki/Clienthttp://www.designingbuildings.co.uk/wiki/Attendancehttp://www.designingbuildings.co.uk/wiki/Scaffoldinghttp://www.designingbuildings.co.uk/wiki/Contractorhttp://www.designingbuildings.co.uk/wiki/Appointmenthttp://www.designingbuildings.co.uk/wiki/Contractorhttp://www.designingbuildings.co.uk/wiki/Clienthttp://www.designingbuildings.co.uk/wiki/Equipment


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'easons for inclusions of 7ro&isional Sums in a contract

A "rovisional sum is an allo$ance usually estimated y the cost consultant and inserted intotender documents for a s"ecific element of $or#s not yet defined in enou!h detail forcontractors to "rice. This& to!ether $ith a rief descri"tion& allo$s tenderers to a""ly mar# u"and attendance costs $ithin their overall tender "rice and ma#e allo$ance for this element of$or# in the contract "ro!ram.

An e%am"le of a situation $here a "rovisional sum mi!ht e a""ro"riate is $here $or# isre)uired under!round& or elo$ an e%istin! structure& $here the conditions cannot e

determined until the $or# e!ins and the e%istin! structure demolished or the !round o"enedu".

Provisional sums can e JdefinedJ or JundefinedJK

• (efined "rovisional sums are considered to have een accounted for $ithin thecontractor Js "rice and "ro!ram. In effect the contractor is ta#in! the ris# that theirestimate $ill e sufficient.

• 6ndefined "rovisional sums are not accounted for in the the contractor Js "rice and"ro!ram. This means that the client is earin! the ris# for the $or#s and the contractor may e entitled to an e%tension of time and additional "ayments.

They should only e used as a last resort& they should not e an JeasyJ fall?ac# "osition forconsultants $hen desi!ns are incom"lete or information is difficult to otain& as this can urdenthe client $ith considerale unnecessary ris# and uncertainty. The ris#s are si!nificant enou!hthat the NEC En!ineerin! and Construction Contract does not have any allo$ance for"rovisional sums.

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96amples for 7rime Cost

Prime Cost Items are items that either have not een selected or $hose "rice is not #no$n atthe time the contract is entered into& and for $hich the cost of su""ly and delivery the uilderhas made allo$ance for in the contract "rice. E%am"les include

• $hite?!oods

• ta"?$are

•


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96amples for 7ro&isional Sum

Provisional Sums are estimated allo$ances for $or# that involves oth su""ly of material&laour and associated $or#. This normally involves a s"ecialist sucontractor or a s"eciali-ed$or# that is difficult to measure or unforeseeale $or#s and for services re)uired such as&

• E%cavation $or#s

• Constructin! eneath an e%istin! structure• Roc# E%cavation

• Pilin! $or#

• (emolition of a structure

• And "laces $here the condition cannot e determined until the $or# is ein!e%ecuted

• Otainin! Permits

• Tem"orary Tele"hone3 Internet lines

• Accommodation

0aluation for proisional sums

In clause 8:.D LProvisional Sums of the 8999 I(IC Red 0oo# "rovides that “Each ProvisionalSum shall only be used, in whole or in part, in accordance with the Engineer’s instructions, andthe Contract Price shall be adjusted accordingly. The total sum paid to the Contractor shallinclude only such amounts, for the work, supplies or services to which the Provisional Sumrelates, as the Engineer shall have instructed!

Therefore accordin! to the I(IC "ulication the valuation of the "rovisional sums are done ythe client*s En!ineer or the cost En!ineer. The $or# re)uires a "rovisional sum $ill ethorou!hly evaluated y the En!ineer and the valuation is done accordin! to the information theEn!ineer "rovides therefore $hen valuin! a "rovisional sum the En!ineer of the client "lays a

ma1or role.

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Task 0 : Claims

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Denition for &ariations as stipulated on FIDIC condition of Contract

ariation and chan!e fall under the same definition& and mechanisms for mana!in! the im"actof the variation or chan!e are usually e%"ressly "rovided for in terms of the contract .In other$ords& there are !enerally contractual mechanisms& $hich enale the contractor or theem"loyer under certain construction contracts& the 8999 irst Edition of the I(IC contract toclaim additional "ayment or e%tensions of time $hen variation or chan!e ta#es "lace. 6suallythere is some enchmar# a!ainst $hich to measure the e%tent or im"act of the variation orchan!e $hich o"erates to!ether $ith these chan!e mana!ement mechanisms.

ariation or chan!e usually follo$s from the occurrence of one or more of the follo$in!circumstancesK

• Additions to the $or# descried

• Omissions from the $or# descried

• Chan!es in material or methods to e used

• Chan!es in construction se)uence• Restrictions in $or#in! hours

• Corrections to rectify discre"ancies in the contract documents

• Corrections to the descri"tions in the ills of )uantities

• Corrections to the )uantities in the ills of )uantities

• Chan!es to the #ind& )uantity or timin! of $or# to e "erformed y others

• Chan!es to the )uality& )uantity or timin! of free issue e)ui"ment or materials

• Chan!es to the time of e%ecution of the $or# re)uired y the a!reed "ro!ram

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• Chan!es resultin! from une%"ected natural events and "hysical conditions.

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Figure ) : Circumstances for&ariations

Figure . : FIDIC Variations


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Identifying entitlements for claims

Clause) Sub Clause 8umber (ntitlement

Client (mployer# Contractor

Clause 8 @ General ProvisionsSu Clause 8.9 @ (elayed (ra$in!s orInstruction

Contractor2s (ntitlement

Clause 9 : *he (mployer Sub Clause "# $ %ight of &ccess to the site Contractor2s (ntitlement

Sub Clause "' $ Employer’s claims (mployer2s (ntitlement

Clause ; : *he Contractor

Sub Clause () $ Setting out Contractor2s (ntitlement

Sub Clause (#" $ *nforeseeable physicalconditions


Sub Clause (#+ $ Electricity, ater and -as (mployer2s (ntitlement

Sub Clause (". $ Employer’s E/uipment and0ree12ssue 3aterial

(mployer2s (ntitlement

Sub Clause ("( 1 0ossils Contractor2s (ntitlement

Clause < : $lants, aterial and/orkmanship

Sub Clause )( 1 Testing Contractor2s (ntitlement

Sub Clause )' $ %e4ection (mployer2s (ntitlement

Sub Clause )5 $ %emedial ork (mployer2s (ntitlement

Clause = : Commencement, Delays andSuspension

Sub Clause 6( $ E7tension of time forcompletion


Sub Clause 6' $ 8elays caused by authorities Contractor2s (ntitlement

Sub Clause 65 $ %ate of Progress (mployer2s (ntitlement

Sub Clause 6) $ 8elay 8amages (mployer2s (ntitlement

Sub Clause 6+ $ Conse/uences of suspension Contractor2s (ntitlement

Clause > : *ests and completionSub Clause +( $ 0ailure to pass tests oncompletion (mployer2s (ntitlement

Clause ?@ : (mployers taking oer Sub Clause #." $ Taking over of parts of thework


Sub Clause #.9 $ 2nterference with test oncompletion


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Clause) Sub Clause 8umber (ntitlement

Client (mployer# Contractor

Clause ?? : Completion of Autstanding/ork and !emedying DefectsSub Clause ##9 $ E7tension of 8efect:otification period

(mployer2s (ntitlement

Sub Clause ##( $ 0ailure to %emedy 8efects (mployer2s (ntitlement

Sub Clause ##6 $ Contractor to search Contractor2s (ntitlement

Clause ?9 : easurement and (aluationSub Clause #"( 1 ;missions Contractor2s (ntitlement

Clause ?B : 0ariations and 3d+ustments

Sub Clause #9" $


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Task 02 : Dispute 'esolution

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7otential causes for disputes during construction

E ncertainty

6ncertainty is the difference et$een the amount of information re)uired to do the tas# and theamount of information availale 4Galraith& 89:5. The amount of information re)uired de"endson the tas# com"le%ity and the "erformance re)uirements& usually measured in time or to aud!et. The amount of information availale de"ends on the effectiveness of "lannin! andre)uires the collection and inter"retation of that information for the tas#.

Contractual problems

Standard forms of contract clearly "rescrie the ris#s and oli!ations each "arty has a!reed tota#e. Such ri!id a!reements may not e a""ro"riate for lon!?term transactions carried out under conditions of uncertainty.

"ehaior

Since contracts cannot cater for every eventuality& $herever "rolems arise either "arty mayhave an interest in !ainin! as much as they can from the other. E)ually& the "arties may have adifferent "erce"tion of the facts. At least one of the "arties may have unrealistic e%"ectations&affectin! their aility to reach a!reement. Alternatively& one "arty may sim"ly deny res"onsiilityin an attem"t to avoid liaility.

3cceleration

It is not uncommon for commercial "ro"erty o$ners to insist u"on acceleration of a construction"ro1ect. Such e%am"les mi!ht include the com"letion of a ma1or retail scheme& and the need tomeet #ey o"enin! dates or tenant occu"ation in an office develo"ment. The construction costsassociated $ith acceleration are li#ely to e less than the commercial ris# the develo"er mayface if #ey dates are missed.

Co%ordination

In com"le% "ro1ects involvin! many s"ecialist trades& "articularly mechanical and electricalinstallations& co?ordination is #ey& yet conflict often arises ecause $or# is not "ro"erly co?ordinated. This inevitaly leads to conflict durin! installation $hich is often costly and time?consumin! to resolve& $ith each "arty lamin! the other for the "rolems that have arisen.Ineffective mana!ement control may result in a reactive defense to "rolems that arise& ratherthan a "roactive a""roach to resolve the "rolems once they ecome a""arent.

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Culture

The "ersonnel re)uired to visuali-e& initiate& "lan& desi!n& su""ly materials and "lant& construct&administer& mana!e& su"ervise& commission and correct defects throu!hout the s"an of a lar!econstruction contract is sustantial. Such "ersonnel may come from different social classes orethnic ac#!rounds.

Differing goals

Personnel en!a!ed on a lar!e construction contract are li#ely to e em"loyed y one of manysucontracted firms& includin! those en!a!ed as su""liers and manufacturers. Each of thesefirms may have their o$n commitments and !oals& $hich may not e com"atile $ith each other and could result in dis"utes.

Delays

(is"utes fre)uently arise in res"ect of delays and $ho should ear the res"onsiility for them.Most construction contracts ma#e "rovision for e%tendin! the time for com"letion. The solereason for this is that the o$ner can #ee" alive any ri!hts to delay dama!es recoverale fromthe contractor. On international construction "ro1ects the )uestion of any ri!hts the contractormi!ht have to e%tend the time for com"letion $as a matter often addressed to$ards the end ofthe contract& $hen an overrun loo#ed li#ely. rom the o$ner*s "oint of vie$& this made thee%amination of the true causes of delay "rolematical and inevitaly led to dis"utes et$een thecontractor and the o$ner as to the contractor *s "ro"er entitlement.Design

Errors in desi!n can lead to delays and additional costs that ecome the su1ect of dis"utes.Often no "lannin! or se)uencin! is !iven to the release of desi!n information& $hich thenim"acts on construction. E)ually& the desi!n team sometimes aro!ate their res"onsiilities forthe desi!n& leavin! the contractor to e dra$n into solvin! any desi!n deficiencies y carryin!out that "art of the $or# itself to try to avoid delays& and& in doin! so& innocently assumin! theris# for any suse)uent desi!n failures.

(ngineer and (mployer2s !epresentatie

The "ersonality of the En!ineer or the Em"loyer*s Re"resentative and their a""roach to the"ro"er and fair administration of the contract on ehalf of the Em"loyer is crucial to avoidin!

dis"utes& yet a sustantial "ro"ortion of dis"utes have een driven y the En!ineer or theEm"loyer*s Re"resentative e%ercisin! an uneven hand in decidin! differences in favour of theEm"loyer.

uality and workmanship

In traditional construction contracts& dis"utes often arise as to $hether or not the com"leted$or# is in accordance $ith the s"ecifications. The s"ecification may e va!ue on the su1ect of

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the dis"ute in )uestion& and each "arty to the contract may have a different vie$ on $hether the)uality and $or#manshi" is acce"tale

Site conditions

If the contract inade)uately descries $hich "arty is to ta#e the ris# for the site conditions&dis"utes are inevitale $hen adverse site or !round conditions im"ede the "ro!ress of $or# orre)uire more e%"ensive en!ineerin! solutions.Even if the Em"loyer& in !ood faith& "rovides detailed information on the site conditions to thecontractor & if that information is discovered to e incorrect and the contractor has relied on it andacted u"on it to their detriment& the Em"loyer may e liale to the contractor for theconse)uences.

0ariations

ariations are a "rime cause of construction dis"utes& "articularly $here there are a sustantialnumer& or the variations im"act on "artially com"leted $or# or are issued as $or# is nearin!

com"letion. The nature and numer of variations can transform a relatively strai!htfor$ard"ro1ect into one of unmana!eale com"le%ity. The ne$ Parliament uildin! in Edinur!h is suchan e%am"le. The uildin! $as "lanned to house :9 "eo"le& ut throu!h variations the uildin!increased in si-e and com"le%ity to house 8 "eo"le. It $as "erha"s not sur"risin! that thetotal cost of construction e%ceeded D million& almost ten times more than the ori!inal ud!et.

0alue engineering

This term often lac#s definition in construction contracts and can lead to dis"utes& "articularly$here the savin! is to e shared et$een the contractor and the o$ner. Savin!s in res"ect ofthe su""ly and installation of the material or "roduct in )uestion mi!ht e relatively easy todetermine and a!ree& ut these are not the only enchmar#s& and a "ro"er value en!ineerin!

a""roach needs to ta#e full account of the life cycle costs of any "ro"osed chan!e.

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9liminating or minimi;ing causes for dispute

$ro+ect team selection

(esi!ners and other advisers are selected ased on their aility to $or# $ell to!ether as ateam& as $ell as their technical s#ills and trac# record. Particularly $ith more com"le% "ro1ects&!reater certainty of cost and constructaility is achieved $hen the client en!a!es a headcontractor and #ey sucontractors to $or# $ith en!ineers& architects and other advisers ono"tion develo"ment and early desi!n and "lannin! $or#.

Scope of work

The sco"e of the $or# and the functionality or "erformance characteristics to e delivered ythe asset should e clearly documented. This should include the time $ithin $hich the asset isre)uired& and ta#e into account the characteristics of the site on $hich it is to e constructed&includin! ade)uate !eotechnical analysis.

!isk management

A thorou!h ris# re!ister& identifyin! "ossile ris#s to achievin! re)uired time& cost andfunctionality& and strate!ies to miti!ate those ris#s& is shared $ith desi!ners and contractors.Res"onsiility for mana!in! each ris# is clearly allocated to the or!ani-ation or "erson est ale

to mana!e it& and that or!ani-ation or "erson is "aid to assume the ris#.

Client2s pro+ect management

The client*s most senior re"resentative char!ed $ith ma#in! decisions under the head contractis !iven a clear rief to act in the est interests of the "ro1ect& includin! monitorin! the )uality of"ro1ect team relationshi"s. That re"resentative may e an em"loyee of the client& or aconsultant.

Communication protocols

The head contract $ill re)uire communication "rotocols that encoura!e o"en communication

and the solvin! of "rolems or issues as )uic#ly as "ossile. It $ill include a frame$or# forformal& alternative& issue resolution& focused on ra"id identification of issues& and escalation ofissues that cannot e resolved y a!reement at site level& to the lo$est "ossile level of off?sitene!otiation and resolution.

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+et!ods of #lternati&e dispute resolution

Alternative (is"ute Resolution "rovides a voluntary alternative for liti!ation. In constructionindustry re!ardin! the cost and the time it is not "ractical to !o for liti!ation therefore alternativedis"ute resolutions are the most effective and the reliale $ay to solve dis"utes in constructionindustry.

Aritration Ad1udication Mediation8. Party Autonomy Party Autonomy Party Autonomy.


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Conclusion

T!is is t!e nal page of t!e assignment it was

really di

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'eference

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