APC Q&A

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TECHNICAL COMPETENCES

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CONTRACT PRACTICE AND ADMINISTRATION

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General Questions

What are the principles of contract law?

Offer (tender from the contractor), acceptance (by client), consideration (typically money as payment),
intend to create a legal relationship (must not be against law), capacity (sound mind to make binding
contract), certainty of terms

What are benefits of standard form of contracts?

• Saving time in drafting and less cost

• Checklist of items to be agreed which also prevents overlooking items such as design liability,
LD…
• Tried and tested
• Familiarity- all the technically qualified managers are familiar with the contract terms
• Benefits from the previous interpretation of the contract clauses

Why would you use bespoke contract?

• Clear allocation of risk and responsibilities

• Could be made simpler and easier to administrate
• Faster method of dispute resolution can be introduced which reduces delay and expenses

What are disadvantages of bespoke contracts?

• Costly and time consuming drafting the contracts

• Untested in courts
• Required expert advice
• Contractor may by unwilling to take on the contract

What is contract proferentem?

If there is any unclear or ambiguous in contract terms or clauses. It would be interpreted in a favour of
the party who did not draft the contract.

It applies to bespoke contracts only

What are standard forms of contract you are aware of?

• FIDIC which is widely used in ME

• JCT for property project in UK
• NEC for infrastructure projects in UK

What are FIDIC Contract you are aware of?

• Red Book: for construction for buildings and engineering works designed by the employer
• Yellow book: for plant, design and build for building and engineering works designed by the
contractor
• Green book: short form of contract. This is the Short Form of Contract. It is used mostly for
simple, repetitive, short duration jobs.
• Silver book: condition of contract for EPC/Turnkey projects
• White book: client/consultant agreement

What would you find in a set of contract documents?

FIDIC contracts consists mainly from:

• Contract Agreement;
• Letter of Tender;
• Letter of Acceptance;
• Conditions of Contract;
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 • Specifications;
• Drawings;
• Schedules; and
• Dispute Adjudication Agreement.

What FIDIC stands for?

International Federation of consulting engineers

FIDIC contracts consists of two types of terms and conditions, general conditions and particular
conditions. The general conditions are the standard combination of contract provisions, while the
particular conditions are the result of negotiation between the parties and are designed to modify or
delete some of the general conditions. If you are a contractor pay attention mostly to the particular
conditions, they will reflect the conditions of work on the contractual level.

What would you consider when choosing an appropriate form of contract?

To select a form of contract, the nature of the project is of little relevance.

Usually, the choice of contract I obvious once the procurement route has been selected but you do not
seem to have reached this stage yet.

You need to ask many questions to the client;

• What is the desired completion date? Is there any flexibility? Where are we in the programme?
Can the project be delivered on time using a traditional procurement or do you need to find a
faster way?
• How important is early cost certainty? (FIDIC Yellow or maybe Silver book would be suitable,
or a NEC4 Option A with secondary clause X15)
• Is the funding fixed or could additional funding be obtained if needed?
• Can we have a fully designed scheme with full BoQ by the tender date?
• Is the design fixed or will the client want to incorporate many late changes once on site?
• Is the client happy to let the contractor develop the detailed design or do they want to keep
complete control?
• Do they want early contractor’s involvement for their input into specialist design OR to
accelerate the master programme? (you would be looking at two-stage tender with a PCSA or
ECI agreement)
• Does the client need to demonstrate value for money? (a BoQ and an unamended Red Book
would useful here)
• Do they want to promote collaboration with the contractor and use the NEC4?
• What are the client’s internal resources and experience? Would they be prepared to have
several contracts with trade contractors to accelerate the programme and maximise their
control? (This is construction management / multi-prime contractor project and a standard NEC
option F or a very amended FIDIC Red Book would be suitable. However there is no cost
certainty until very late in the project)
• Does the client want to transfer as many risks as possible to the contractor? (FIDIC silver book
would be good here but expensive and they would loose all control over the design)
• Does the client want to incentivise the contractor to save money? (A NEC option C or D –
Target Cost - would be suitable)
• There are many other questions that you may ask but without the answer to all these questions,
it is impossible to assess which procurement route and form of contract are the most suitable.

So tell me what your client’s objectives are and then I will be able to advise you.

What would you do if the client asked you to draft the amendments to a contract?

Consult the client’s lawyer who advised on the necessary amendments. The make these amendments
by hand or annexed to the contract.
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What is subrogation?

It is substitution of one person in the place of another person in relation to a claim.

What is a breach of contract?

It occurs when one or more party has failed to comply with its obligations to carry out the works in
accordance to the contract.

What are the key changes of FIDIC 2017?

• Clause (1.3) Notices the 2017 red book includes notice requirements is approx. 80 places. The
term ‘Notice’ is now defined and distinguished from other forms of communication; whereas the
latter must reference the clause under which it is issued, a Notice does not. In addition, all
Notices and communications must “not be unreasonably withheld or delayed.”
• Profit (Cl. 1.1.20, 13.3 & 15.6): In terms of Cost Plus Profit for relief events, unless stated
otherwise, a Contractor will be entitled to a 5% profit (while under the 1999 Red Book, there
was no stated figure). The 2017 Red Book also specifically entitles the Contractor to “any loss
of profit or other losses and damages suffered” for variations and termination for convenience.
• Exceptional Event (Cl. 18): Force majeure is now called “Exceptional Event,” but the risk
allocation remains the same.
• Advance Warning (Cl. 8.4): For the first time, the 2017 Red Book introduces advance warning
provisions, which require each Party to advise the other “in advance of any known or probable
future events which may (a) adversely affect the work of the Contractor’s Personnel; (b)
adversely affect the performance of the Works when completed; (c) increase the Contract Price;
and/or (d) delay the execution of the Works or a Section (if any).” There is no time limit for giving
an advance warning, nor is there any explicit sanction for failing to do so.
• Extension of Time (Cl. 8.5): At least four important changes have been made to the EOT
provision. First, unlike the 1999 Red Book, the Contractor is not required to give a separate
notice of a claim for an EOT for a delay caused by a Variation (as this notice has been built into
the Variation clause at 13.3). Second, delay for “exceptionally adverse climatic conditions” has
been qualified to be “Unforeseeable having regard to climatic data.” Third, the Contractor has
an explicit entitlement to an EOT if the delay is caused by an increase of more than 10% of an
estimated quantity. Fourth, the clause specifically contemplates the parties adopt provisions in
respect of concurrent delay.
• Claims (Cl. 20): The provisions relating to Claims and Disputes have been separated and
redrafted substantially. Clause 20 (Claims) sets out a procedure for (a) Employer Claims
(“additional payment from the Contractor (or reduction in the Contract Price) and/or to an
extension of the DNP”); (b) Contractor claims for “additional payment from the Employer and/or
to EOT”; and (c) either Party for “another entitlement or relief against the other...of any kind
whatsoever…except (a) and (b).” Notably, the existing 28-day time requirement for notifying
claims now applies to the Employer as well, and the old 42-day timeframe for the “fully detailed
claim” has been increased to 84 Days.
• DAAB (Cl. 21): The newly introduced “DAAB,” which stands for “Dispute Avoidance /
Adjudication Board” (in contrast to the previous “DAB”), brings with it a number of important
procedures. First, unless the Parties agree otherwise, the DAAB members are to be appointed
within 28 days after the Contractor receives the Letter of Acceptance; there are also detailed
procedures for resignation, termination and new appointments. Second, the DAAB may provide
“Informal Assistance” if jointly requested by the Parties, who are not bound to act on the DAAB’s
advice. Third, in terms of time-bars (a) the DAAB must give its decision within 84 days after
receiving the reference; (b) a Party must refer a Dispute to the DAAB within 42 days after giving
or receiving a Notice of Dissatisfaction with the Engineer’s determination; and (c) a Party that
is dissatisfied with the DAAB’s decision must give an NOD to the other within 28 days or else
the decision becomes final and binding on both Parties. Fourth, arbitral tribunals are
empowered to order the enforcement of a DAAB decision, by way of summary or other
expedited procedure, whether by an interim or provisional measure or award.

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Assume the project is lump sum, can we use FIDIC Red Book?

Yes

What are the amendments needed to be done in FIDIC Red Book to be used for lump sum
projects?

• The wording of tender and form of agreement should be amended to suit the amended
provisions of the contract
• The following clauses should be amended 1(b), 7.1 to 7.3, 12.1 (works to be measured), 18.1,
38.1, 51.2, 52.2, 57.1, 58.1, 59.4 and 60.1
• The following clauses to be deleted: 52.3, 55 and 56
• The lump sum form maintains the essential traditions of the red book philosophy including the
authority of the engineer. However, the responsibility of the construction drawings is shifted to
the contractor who is required to prepare them and submit them for engineer’s approval. Such
approvals do not relieve the contactor of any of his responsibilities under the contract.
• As there is neither a bill of quantities nor a re-measurement of the contract price, interim and
final payments should be made on the basis of percentage completion of the various
components of the project. Accordingly, a schedule containing a breakdown of the lump sum is
annexed to the Tender form for completion by the contractor. The term ‘breakdown of the lump
sum’ is a defined term under the amended clause 1 and is intended only for the purposes of
the monthly interim payments. Although the final cost of the project is fixed in respect of any
variations in quantities, it is adjustable in accordance with a certain number of the contract
provisions.

Who do align contract selection to the procurement route?

How many copies of drawings is the contractor is entitled to under FIDIC contracts?

Two copies of contract and each subsequent drawings shall be supplied to the contractor who may
request further copies at the cost of the contractor.

What is the priority of documents as per FIDIC?

• Contract agreement
• Letter of acceptance
• Letter of tender
• The particular conditions part A- contract data
• The particular conditions part B- special provisions
• The general conditions
• The specifications
• The drawings
• The schedules
• JV undertaking (if contractor is a JV)
• Any other documents forming part of the contract

What is the role of contract administrator?

• Establish client brief

• Prepare contract documentation
• Administrate the contract
• Monitor, time, cost and quality
o Authorizing payments to contractor
o Management of variations/change/extra works
o Resolving quality issues
o Issuing instructions
o Monitoring contractor progress
o Record keeping

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 o Issuing certificates
o Chairing site meetings and seeking hand over and practical completion

Some typical certificates:

• Payment certificate (interim)

• Sectional completion certificate
• Non completion certificate
• Practical completion certificate
• Certificate of making good defects
• Final certificate

if a delay occurs that is not a fault of the contractor, and the contractor writes a delay notice,
what should the contract administration do?

• Respond to delay notice from the contractor

• Issue fair and reasonable extension of time if due
• State reasons for the EOT
• Issue an EOT certificate

Why is record keeping is important?

• Quality issues
• Defects
• Late payment
• delays

Nominated Sub contractors (Clause 5)

What is nominated subcontractors?

Nomination is the process by which the employer nominates selects or approves who will perform a
subcontract or specialist trade role. The NSC then enters into a subcontract with MC. It means the
Employer retain some control over the selection of specialist contractor or supplier without necessarily
becoming directly involved in detailed contractual agreement with the specialist.

Either nomination can be at tender stage or instructed under clause 13

As per FIDIC, NSC means the SC named as such in the specification or whom the engineer under
clause 13.4 [provisional sum] instruct the MC to employ as subcontractor.

What is the difference between nominated SC and domestic SC?

A domestic subcontractor is one whose selection and appointment, the employer traditionally plays no
role other than simply giving consent when that is required under the terms of the main contract. The
appointment of subcontract is treated as something entirely for the benefit of MC.

Although MC delegates performance of a part of the works to his domestic subcontractors, MC

nonetheless remains fully responsible to the Employer with respect to these works. The Employer in no
way underwrites the risk of subcontractor default. MC also is directly responsible to the domestic
subcontractor for payment and for their fundamental cooperation

What are the benefits of NSC?

• The employer is control over the choice of and the performance required from NSC-the
employer reserves to itself the choice of subcontractor.
• The employer may have developed a long term business relationship with NSC. The employer
may wish a proprietary system offered by NSC.

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 • Reduce procurement times. Some specialist SC requires a longer lead time than the
construction programme-such work must be started before MC has been chosen.

How the NSC is paid?

• The MC must pay the amount that Engineer certifies as due under a nominated SC
• The Engineer must certified the proportional contractor’s OH&P
• The Engineer may request evidence of the contractor payments to nominated subcontractor
under previous certificates
• The contractor must be able to justify any monies withhold and prove that appropriate notice
has been served to NSC
• In case of non-payment, the Employer may pay NSC directly and deduct the amount from the
contractor’s valuation.

Can the MC object the NSC selection?

The contractor may reasonably object:

• The subcontractor does not have sufficient competence, resources or financial strength.
• The subcontractor does not specify that the nominated subcontractor shall indemnify the
contractor in case of negligence
• The subcontract does not specify that the nominated subcontractor shall:
o Undertake to the contractor such obligations and liabilities as will enable the contractor
to discharge his obligations and liabilities under the contract
o Indemnify the contractor for the consequences of any failure by the subcontractor to
perform the subcontract obligations.

What are the alternatives if the MC declines to enter into subcontract with NSC?

• Nominate an alternative NSC to whom MC would not object

• Omit the work that is subject to nomination for the main contract and have it carried out by an
independent contractor. There may be claim consequences.
• Seek to negotiate more favourable subcontract terms with NSC
• Subject to MC consent, indemnify MC against any liability he may offer from contracting with
NSC on the terms NSC will accept.
• Direct MC to carry out the work or arrange for supply the goods himself through variation under
FIDIC clause 5.1 this also can have claim consequences.

Provisional Sums (Clause 13.4)

FIDIC has the term provisional sum.

Engineer instruct PS

• Work to executed by the contractor and adjustment to contract price shall be agreed or
determined under clause 13.3.1 [variation by instruction]---contractor submit quotations of the
work to be executed. The Engineer thereafter may respond by giving a notice either instructing
the contractor to accept one of these quotations or revoking the instructions. If the Engineer
does not respond within 7 days of receiving the quotations, the contractor shall be entitled to
accept any of these quotations at the contractor’s discretion.
• Plant, materials, works or services to be purchased by the contractor from NSC as defined in
clause 5.2 [nominated subcontractor] or otherwise and for which there shall be included in the
contract price:
o The actual amount paid by the contractor
o Sum for OHP as percentage of the actual amounts stated in applicable schedule.

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Each statement that includes PS shall also include all applicable invoices, vouchers and accounts or
receipts in substantiation of the PS.

PC terms are used under CESMM

Letter of intent

What is the letter of intent?

The expression in writing of party present intention to enter into contract at a future date. These may
be a binding one or non-binding.

Why LOI is issued?

• The need to obtain necessary approvals and permissions

• Anticipated delay in the preparation if contract
• Need to obtain long lead items of plants and equipment
• Client desire to urgently get the contractor on site
• Need to complete the project funding arrangements

What are the types of LOI?

• Comfort letter
• Instruction to proceed with consent to spend (if contract)
• Letters recognizing the existence of binding contract (subject to contract)—Letter of acceptance
in FIDIC

Can you name different types of non-binding LOIs?

Contract award letter, RFP award letter, comfort letter, offer acceptance letter

When is LOI is binding?

• There must be an intention of both parties to make a contract

• Both parties must be in agreement of which essential terms are required to form a contract
• The parties should not omit any terms which are essential to make the contract workable as
commercial common sense
• There must sufficient manifestation by word, writing or actions to demonstrate offer and
acceptance

What is the privity of contract?

A contract cannot confer rights or impose obligations arising under it on any person or agent except the
parties to it.

What is LOI content?

• The parties, description of the works, key dates and price (may be capped)
• A statement of intention of the parties to enter into a formal contract
• Entitlement of parties upon cancellation/termination of the contract
• Procedure for calculating interim payments if works proceeds
• Insurances that are to be provided
• Confirmation that the contract created by LOI will terminate upon execution of the principle
contract
• Dispute resolution procedure
• Both parties should sign
• Details of relevant documents that may attached in the form of a schedule

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 • An expiry date of LOI

What happens once the LOI has expired or the cap has been exceeded?

• Best practise is to sign a second LOI or stop the works

• Otherwise paid in Quantum Merit which is expensive to the employer (Fair and reasonable
rates + Prelims + OH&P)

What are disadvantage of LOI?

• Can be a complicated legal situation

• Can put a lot of risk on either of the parties (if not a contract, client cannot sue for defects or
delays and contractor may not get payment)
• Need a contract for risk allocation and set out exact details and obligations
• Use of LOI may jeopardise the right to adjudication and make the pursuit of claims more difficult.

What would you say if the client asked you to draft LOI?

We do not draft those and legal advice should be sought

What are the alternatives of LOI?

• Best practise: delaying works until formal contract is signed

• Enabling package

What is Quantum Merit (QM) Principle?

Latin word means as much as one deserves. Payment of fair and reasonable sum for the work done.

When QM is used?

• LOI is issued and no price is agreed

• When extra works falls outside the scope of VO
• Contract is void
• There is an express undertaking from the employer to pay a reasonable sum for services
rendered

Variations and adjustments (Clause 13)

The variations may be initiated by the Engineer at any time before the issue if the taking-over certificate
for the works.

Could the contractor refuse the variations?

• Contractor demonstrate that he is unable to secure the required resources

• The variations will adversely affect the contractor ability to comply with [health and safety
obligations] and [Protection of environment] clauses.

In such case, the variation can be:

• Cancelled
• Confirmed in writing (the engineer must address the contractor’s concerns)
• Varied (a new variation is issued)

Variation may be [clause 13.1]

• Change in quantities
• Change in the quality or characteristics of an item of work

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 • Change to the setting out of works
• Omission of works (except if it is transferred to others)
• Any additional work, plant, materials or services necessary for the permanent works including
tests
• Changes to the sequence or timing of the execution of the works (which is not acceleration)

Variation Procedures [clause 13.3]

Variation by instruction [FIDIC 2017]

• Engineer may instruct a variation by giving a notice as per clause 3.5 [Engineer’s instructions]
• The contractor shall proceed with the execution of the variation with 28 days or other period
proposed by the contractor and agreed by the Engineer of receiving the engineer instructions
submit to the engineer detailed particulars including:
o Description of the varied works performed or to be performed including the details of
the resources or methods adopted or to be adopted.
o Programme for its execution and the contractor proposal for any necessary
modifications to the programme as per clause 8.3 [Programme]
o The contractor proposal for the adjustment to the contract price by valuing the variation
in accordance with clause 12 [Measurement and valuation] with supporting particulars
(which shall include identification of any estimated quantities and if the contractor is
incur cost as a result of any necessary modifications to the time for completion) if the
parties have agreed to the omission of any works which is to be carried out by others,
the contractor proposal may also include the amount of any loss of profit and other
losses and damages suffered by the contractor as a result of omission.
• The Engineer shall then proceed under clause 3.7 [Agreement or Determination] to agree or
determine:
o EOT if any and/or
o The adjustment to the contract price including the valuation of the variation with clause
12 [Measurement and Valuations] using measured quantities of the varied works.

Variation by Request for Proposal

• The Engineer may request a proposal before instructing a variation by giving a notice to the
contractor
• The contractor shall respond as soon as practicable by either:
o Submitting a proposal
o Giving reasons why the contractor cannot comply
• If the contractor submit a proposal, the Engineer shall as soon as practicable after receiving it,
respond by giving a notice to the contractor stating his consent or otherwise. The contractor
shall not delay any work whilst awaiting a response.
• If the Engineer gives consent to the proposal, with or without comments, the Engineer shall
then instruct the variation. Thereafter, the contractor shall submit any further particulars that
the Engineer may reasonably require clause 13 [Variations by instructions]

Unforeseen Physical Conditions [Clause 4.12]

What is unforeseeable physical conditions?

Natural physical conditions and physical obstructions (natural or man-made) and pollutants which the
contractor encounter at the site during the execution of the work including sub-surface and hydrological
conditions but excluding climatic conditions at the site and the effects of those climatic conditions.

What are the contractual procedures for unforeseeable physical conditions?

• Contractor Notice: after discovery of the such event, the contractor shall give a notice to
engineer as soon as practicable and in good time to give the employer to inspect and investigate

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 the physical conditions; describe the physical conditions; the reasons why the contractor
considers the physical conditions to be unforeseen; describe the effect on the progress and the
cost of execution of the works.
• Engineer inspection and investigation and makes determination under clause 3.5
o Reject it
o Instruct variation under clause 12
o Grant EOT under clause 8.4
o Grant additional costs under clause 20.1 (contractor’s claims)

Force Majeure [Clause 19]

What is Force Majeure?

It means an exceptional event which must meet the four following conditions:

• Is beyond a party control

• Such party could not reasonably have provided against before entering into the contract
• Such party could not reasonably have avoided or overcome
• Which is not substantially attributable to other party

Give examples of Force Majeure?

• War, hostilities, invasion and act of foreign enemies

• Terrorism, revolution, military power or civil war
• Riot, disorder, strike or lockout by persons not employed for the works
• Explosive materials, ionising radiation or contamination
• Natural catastrophes such as earthquake, hurricane or typhoon

What are the contractual procedures for Force Majeure?

• A party must notify that they are being preventing from fulfilled all or part of their contractual
obligations within 14 days of becoming aware of Force Majeure event
• Each party has the duty to minimize delays to the works despite the event
• The contactor may be able a claim for Force Majeure suffered by a subcontractor if the relevant
subcontract clause is back to back with FIDIC
• The contractor become entitled to:
o EOT
o Associated costs (except of natural catastrophes as it is usually covered by insurances)
o In extreme circumstances, the contract may be terminated.

Value Engineering [Clause 13.2]

Value Engineering covers:

• Acceleration
• Reduce construction, maintenance or operational costs
• Increase value of the completed works to the employer
• Or be any other greater benefit to the employer

The contractor prepares the proposal (at his costs) following the variation procedures

The contractor may propose value engineering in his favour in exchange of a reduction of his price

In Red Book, if the VE is accepted, the contractor is entitled to a fee: 50% of the saving less any
reduction in value to the employer (e.g. increased maintenance costs…)

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Dayworks [Clause 13.5]

• Dayworks are for work a minor or incidental nature, the Engineer may instruct that a variation
shall be executed on a daywork basis.
• The daywork rates must have been specified in the daywork schedule by the contractor at
tender stage or this clause cannot be applied
• The contractor must submit statements each day that the Engineer must sign off:
o The names, occupations and time of contractor’s personnel
o The identification, type and time of contractor’s equipment and temporary works and
o The quantities and types of plant and materials used

Fluctuations [Clause 13.8]

If a completed table of adjustment data is included in the appendix to tender, the contractor may recover
increase in the cost of labour, materials and plant. This relates to currency exchange rates.

The indices to be applied to the formula stated in clause 13.8 are those included in the table of
adjustments unless the Engineer determine them as unreasonable.

Payments and Valuations

Application for Interim Payment [Clause 14.3]

• The contractor submits a statement in six copies to the Engineer after the end of each months
[Clause 14.3] together with the progress report [Clause 4.21]
• Under P&DB and EPC, the period is stated in the schedules of payments if applicable.

What shall the statement include?

• The estimated contract value of the works and variations executed

• Any amounts to be added or deducted for changes in legislation and changes in cost
• Deduction for retention
• Any amounts to added or deducted for the advance payment
• Any amount to be added or deducted for plants and materials
• Any other additions or deductions which may have become under clause 20 [claims, disputes
and arbitration]
• Any amounts to be added for provisional sums
• Any amount to be added for release of retention money
• Any amount to be deducted for the Contractor’s use of utilities provided by the Employer
• The deduction of amounts certified in all previous payment certificates

Plants and Materials intended for the works [Clause 14.5]

• Clause 14.5 covers both materials on site and off site

• Only 80% is due to the Contractor
• Materials and plants must be for incorporation in the Permanent Works
• The contractor must keep satisfactory records (orders, receipts…) and submit a statement of
the cost supported by satisfactory evidence to the Engineer

Materials on-site

• They must be listed in the Appendix to Tender for payment when delivered to the site

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 • They must have been delivered to and are properly stored on the site, are protected against
loss, damage or deterioration

Materials off-site

• They must be listed in the Appendix to Tender for payment when shipped
• They must have been shipped to the site and evidence of shipment is submitted to the Engineer
with evidence of payment of freight and insurance and a bank guarantee;
• In addition to above, ownership of materials must have been passed on the Employer (Vesting
Certificate)

Under EPC Contracts, only materials off-site are mentioned

Advance Payment [Clause 14.2]

• The contractor may only request advance payment if:

o The total amount/percentage is stated in the Appendix to Tender
o The contactor offers a suitable guarantee (Advance Payment Guarantee)

• The advance payment shall be paid through percentage deductions in payment certificates:
o Deductions shall commence when certified interim payments exceed 10% of the
accepted contract amount less provisional sums
o Deductions shall be 25% of the amount of each payment certificate until the advance
payment has been repaid.

Unless a different percentage is stated in the Appendix to Tender.

Issue Interim Payment Certificate [Clause 14.6]

• No amount will be certified or paid until the Employer has approved the Performance Security
• The Engineer shall issue IPC within 28 days after receiving contractor’s statement
• The Engineer must provide the supporting particulars of his valuation assessment
• The Appendix to Tender may specify a minimum sum for IPC to be issued
• Monies may be withhold if:
o If work done by the Contractor is not in accordance with the contract, the cost of
rectification may be withheld
o If the contractor failed to perform any work or obligation and has been so notified by
the Engineer
• A payment certificate does not indicate the Engineer’s acceptance, approval, consent or
satisfaction of the works

Payment [Clause 14.7]

• The first advance payment is due within 42 days after issuing the Letter of Acceptance
• Or within 21 days after receiving the Performance Security and guarantee requested under
clause 14.2
• The payment date for each IPC is within 56 days after the Engineer receives the Contractor’s
statement and supporting documents
• The payment date for the final payment certificate is within 56 days after the Employer receives
this payment certificate

Delayed Payment [Clause 14.8]

• If the Employer fails to pay within the timescale, the Contractor is entitled to interests.

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 o Interests are calculated at the annual rate 3% above the discount rate of the central
bank in the country unless otherwise stated in the Particular Conditions
o The Contractor does not need to serve any notices

Release of Retention Money [Clause 14.9]

• Half of the retention is released at the issue of the taking-over certificate and completion of the
tests or proportion if works are completed in sections
• The other half is released at the expiry of the Defects Notification Period or as a proportion if in
sections.

Final Account / Final Statement [Clause 14.11]

• The contractor must submit his summary statement of costs within 84 days of taking-over
certificate
• The contractor must submit his draft final account statement within 56 days of the performance
certificate
• The Engineer review the statement and agree the final figures with the Contractor prior to
issuing the Final Statement and Final Payment Certificate
• If both parties cannot agree on the final statement, they must try to find an amicable settlement
or refer the dispute to the Dispute Adjudication Board.

Measurement and Evaluation [Clause 12]

For each measured item, the appropriate rate or price for the item shall be rate or price specified for
such item in the BOQ or other schedules or if there is no such an item, specified for similar work.

Any item of work identified in the BOQ or other schedules but for which no rate or price is specified,
shall be deemed to be included in other rates or prices in the BOQ or other schedules.

If the measures identify items that were missed in the BOQ, there are three options:

• If the BOQ specifies principle of measurement which clearly indicates that the item should be
measured separately then it can be added
• If the BOQ specifies principle of measurement which suggests that the item is deemed included
elsewhere and the item did not arise from a variation, then it cannot be added
• If the BOQ does not specify any principle of measurement and the item did not arise from a
variation, then if cannot be added.

The contract rates must be applied to the measurement except (NEW RATE):

• The measured quantity of the item is changes by more than 10% from the quantity of this item
in the BOQ or other schedules
• This change in quantity multiplied by such specified rate for this item exceeds 0.01% of the
accepted contract amount
• This change in quantity directly changes the cost per unit quantity of this item by more than 1%
• This item is not specified in the contract as a ‘fixed rate item’

OR

• The work is instructed under clause 13 [Variation and adjustment]

• No rate or price is specified in the contract for this item
• No specified rate or price is appropriate because the item of work is not of similar character or
is not executed under similar conditions as any item in the contract.

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In this case, rates may be derived from the BOQ or schedules with reasonable costs together with
applicable percentage for profit

If the cost cannot be agreed, the Engineer makes a determination under [clause 3.5]

Omission Clause [12.4]

• If an item omitted or remeasured as nil, the contractor is entitled to recover the costs he may
have reasonable incurred in the anticipation of this item of works (which may be design,
temporary works…)
• This may include loss of profit

Employer’s Claim [Clause 2.5]

• The Employer may claim against the Contractor

• Or request an extension of the Defect Rectification Period
• He must issue a notice as soon as possible with associated substantiation
• The Engineer makes determination under clause 3.5
Related Clauses:

• [Clause 11.3] Extension of Defects Rectification Period

• [Clause 4.19] Payment of quantities consumed for gas, electricity, water provided by the
Employer
• [Clause 4.20] Financial contribution for the use of equipment provided by the Employer

Contractor Claims [Clause 20]

Notice of Claim

If the Contractor considers himself to be entitled to any EOT for completion and/or any additional
payment, he shall give notice to the Engineer, describing the event, no later than 28 days after the
Contractor become aware of it.

Engineer Initial Response

If the Contractor fails to notify the Engineer within 28 days, the Contractor loses his entitlement to EOT
or claim for additional payments.

Contemporary Records

The contactor shall substantiate his claim and keep records available for the Engineer’s inspection

Fully detailed claim

• The contractor must send the details of his claim within 42 days of becoming aware of it, or an
interim claim if the event is on-going. He must send his final claim within 28 days of the event
having ended.
• The Engineer has 42 days to request more information from the Contractor if required and
respond to the claim.
• Contractor to submit the fully detailed claim which includes:
o A detailed description of the event or circumstances giving arise to the claim
o A statement of the contractual and/or legal basis of the claim
o All contemporary records on which the claiming party relies
o Detailed supporting particulars of the amount of additional payment claimed and/or
EOT claimed or extension of the DNP claimed.

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Agreement or determination of the claim

List of clauses relating to claims under the FIDIC

• Delayed drawings or instruction [clause 1.9]: Contractor may claim time, cost and reasonable
profit if Engineer fails to instruct within notified reasonable time.
• Setting out [Clause 4.7]: Contractor may claim EOT, cost and reasonable profit for errors in
original setting-out points and levels of reference
• Unforeseeable physical conditions [clause 4.12]: Contractor may claim EOT and cost if he
encounters physical conditions which are unforeseeable.
• Taking over of parts of the works [Clause 10.2]: Contractor may claim cost and reasonable
profit attributable to the taking over of a part of the works
• Omissions [clause 12.4]: Contractor may claim a cost which although it had been included in
BOQ item, he would not recover because the item was for work which has been omitted by
variations.
• Value Engineering [Clause 13.2]: Contractor may claim half of the saving in contract value of
his re-designed post-contract alternative proposal, which was approved without prior
agreement of such contract value and of how saving would be shared.
• Adjustments for Changes in Legislation [Clause 13.7]: Contractor may claim extension of time
and Cost attributable to a change in the Laws of the Country
• Delayed Payment [Clause 14.8]: Contractor may claim financing charges if he does not receive
payment in accordance with Sub-Clause 14.7
• Contractor's Entitlement to Suspend Work [Clause 16.1]: Contractor may claim extension of
time, Cost and reasonable profit if Engineer fails to certify or if Employer fails to pay amount
certified or fails to evidence his financial arrangements, and Contractor suspends work
• Payment on Termination [Clause 16.4]: Contractor may claim losses and damages after
terminating Contract
• Indemnities [Clause 17.1]: Contractor may claim cost attributable to a matter against which he
is indemnified by Employer
• Consequences of Employer's Risks [Clause 17.4]: Contractor may claim extension of time, Cost
and (in some cases) reasonable profit if Works, Goods or Contractor's Documents are damaged
by an Employer's risk as listed in Sub-Clause 17.3
• General Requirements for Insurances [Clause 18.1]: Contractor may claim cost of premiums if
Employer fails to effect insurance for which he is the "insuring Party"
• Consequences of Force Majeure [Clause 19.4]: Contractor may claim extension of time and (in
some cases) Cost if Force Majeure prevents him from performing obligations

Possession- Right of access to the site [Clause 2.1]

• Same date of possession

• Stated in appendix to tender or as required to meet the accepted programme
• Failure to provide access results in:
o EOT
o Cost plus reasonable profit
o Termination if access cannot be granted at all
• The commencement date may be stated in the contract agreement or
• By the date notified by the Engineer with at least 7 days notice or
• By default 42 days (6 weeks) after the Letter of Acceptance or contract agreement
• Failure from the Employer to give site possession within 42 days is a breach of contract

[Clause 8.2] The Contractor must complete the works and sections within the time for completion. This
includes:

• All works required under clause 10.1 (taking over of the works and sections)
• Tests on completion

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Program [Clause 8.3]

• The Contractor must provide a programme within 28 days of the commencement date.
• The Contractor must submit a revised programme in case delays or variations.
• The Engineer must approve or reject the programme within 21 days of receipt
o Stages of works including the design, contractor’s documents, procurement,
manufacture of plant, delivery to site, construction, erection and testing
o Works by each nominated subcontractor
o Inspections and tests specified in the contract
o A supporting report which includes:
▪ Methods which the contractor intends to adopt in the execution of the works
▪ Reasonable estimate of the number of contractor’s personnel and equipment
for each major stage

Progress Report [Clause 4.21]

• The Contractor must provide monthly progress report unless stated otherwise in the particular
conditions which includes:
o Charts and detailed descriptions of progress including procurement
o Photographs
o Details of suppliers of plant and materials and dates of manufacture, tests and
deliveries
o Records of contractor’s personnel and equipment
o Copies of quality assurance documents, tests and certificates of materials
o List of notices
o Safety records/statistics
o Comparison of actual and planned progress with details of risks to the programme any
event or circumstances and the measures being or to be adopted to overcome delays
• If the programme is delayed due to slow progress, the Contractor must submit a revised
programme showing alternative methods of works, additional resources or extended working
hours required to recover the delay.
• The Contractor may have to pay costs to the Employer (clause 2.5) if the acceleration measures
cause him additional costs
• Acceleration does not mean that EOT is granted and delay damages may become due.

Extension of Time for completion [Clause 8.4]

The Contractor is entitled to an EOT for completion for:

• A variation (unless an adjustment to the time for completion has been agreed under Clause
13.3) or other substantial change in the quantity of an item of work included in the contract
• A cause of delay giving an entitlement to EOT under sub clauses of the contract
• Exceptionally adverse climatic conditions
• Unforeseeable shortages in the availability of personnel or goods caused by epidemic or
governmental actions
• Any delay, impediment or prevention caused by or attributable to the Employer, the Employer’s
personnel or the Employer’s other contractors on site.

Cost is dealt with under clause 20.1

Other entitlement of EOT included in other clauses:

• Fossils
• Delays caused by authorities
• Unforeseen physical conditions

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 • Force majeure
• Suspension of the works
• Employer prevents tests on completion for more than 14 days

Taking over [Clause 10]

• The Employer takes over the works when the works are complete and a taking over certificate
has been issued.
• The Contractor gives notice to the Engineer no earlier than 14 days before the works are
completed
• The Engineer has 28 days from the notice to earlier:
o Issue taking over certificate stating the date at which the works or section are
completed (except minor outstanding works and defects that do not affect the use by
the Employer)
o Reject it, stating which works must be completed
• If the Engineer fails to respond within 28 days, the taking over certificate is deemed to have
been issued.

If the employer wished to take over part of the works (other than a section):

• Taking over is deemed to have taken place at the date of the use by the employer
• The contractor is no longer liable for this part of the works
• The contractor may request a taking over for this part of the works
• The rates of LD must be reduced proportionally to the value of this part of the works
• The maximum amount (if any specified in the contract) of LD remains unchanged
• The contractor must complete the tests on completion as soon as practicable before the effects
notification period
• The contactor may be entitled to cost + reasonable profit under clause 20.1

This clause does not exist in EPC contracts; the Employer is in a breach of contract if he uses part of
the works that are not a section- except as may be agreed between parties

Delay Damages [Clause 8.7]

If the Contractor has not completed the works and tests by the date for completion, the Employer is
entitled to receive delay damages:

• The rate of delay damages and maximum cap (if any) are stated in the appendix to tender
• The Contractor is not liable to any other damages to the Employer in case of delay
• The employer must give notice to the contractor under clause 2.5 [Employer Claims]

Testing and defects

• Inspections [clause 7.3] The contractor must notify the Engineer when works are available for
inspection or uncover them at his costs
• Testing [clause 7.4] different from tests after completion
• The Contractor is responsible to carry out all testing as listed in the contract or instructed under
clause 13
• He must notify the Engineer in advance
• If the Engineer fails to turn up, tests are deemed to have been carried out as the Engineer had
attended
• The contractor must send all certificates promptly to the Engineer

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 • Any additional tests due the Engineer or Employer default may entitle the contractor to an EOT
and costs
• If the tests fail, the contractor must pre-procure the materials or re-do the works at their own
costs and must reimburse the Employer of any costs incurred for the re-testing

Tests on Completion [clause 9]

• The contractor gives the Engineer 21 days’ notice of the date at which the works will be ready
for testing
• Unless agreed otherwise, the tests on completion must be carried out within 14 days of this
notified date
• The extend of the tests must have been described in the specifications or employer
requirements
• If the employer has already started using the works, this must be taken into consideration in
the result of the tests
• The contractor must provide a certified report to the Engineer
• Under P&DB and EPC, the tests must include pre-commissioning tests, commissioning tests
and trial operation
• If the employer unduly delays the tests, the contractor may be entitled to an EOT and costs
• If the contractor does not complete the tests within 21 days of the notice, the employer may
carry out the tests at the risk and cost of the contractor
• If the works or section fail to pass the tests, the Engineer may;
o Order the repetition of the tests
o Reject the works or section if the Employer cannot use the works
o Issue a taking over certificate if the employer requests it for occupation
• He may reduce the contract price by;
o The value stated in the particular conditions (if stated)
o The value mutually agreed between the parties
o A fair value under clause 2.5 [Employer claims] and 3.5 [Determination]

Defects Liability [Clause 11]

• The Contractor must complete all outstanding works and make good defects as soon as
practically possible or before the end of the defects notification period
• They are carried out at the contractor’s cost
• The Engineer may request further tests to be carried out after the remedial works are completed
• The employer must grant access to the contractor or clause 11 is not applicable
• If the remedial works are not a defect under the contractor’s responsibility, a variation must be
issued under clause 12 and the contractor will be entitled to costs
• Extension of defects notification period [clause 11.3]- if a defect or damage prevents the
employer from using the works for several days, the employer may request for the defects
notification period to be extended.
• If the contractor fails to remedy the defects, the Engineer must issue a notice specifying a
reasonable deadline taking into account availability of specialised labour and lead times for
procurement of major plants.
• If the contractor still does not comply:
o The employer employs others to rectify the defect and contra-charge the contractor
under clause 2.5
o The Engineer determines a reasonable reduction of the contract sum under clause 3.5
o If the defects prevent the employer to use the works, the contract may be terminated,
and legal proceedings initiated to recover damages.
• The employer must deduct any costs already incurred by the contractor such as materials
already procured.
• If the remedial works are variations, the employer is only entitled to claim the extra over cost

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 • The contractor is not responsible for the quality of the remedial works

Performance Certificate

• The Engineer must issue the performance certificate 28 days after the expiry of the defects
notification period or the latest one if works completed in sections
• Or as soon as the contractor has supplied all contractor’s documents, all tests have been
passed and all defects rectified.
• The performance certificate means that:
o The Employer accepts the works as they are
o The Contractor is relieved from all his obligations under the contract
• However, both parties are still obliged to fulfil outstanding obligations such as agreeing the final
statement, final payment, release of sureties…

Securities

Performance Security [Clause 4.2]

• The Contractor shall obtain (at the contractor cost) a performance security to secure the
contractor proper performance of the contract.
• The amount of the Performance Security must be stated in the Appendix to Tender (Particulars
Conditions for EPC) as a lump sum or a percentage of the Accepted Contract Amount
• If stated in the appendix to tender, the contractor must apply a performance security within 28
days of the letter of acceptance or contract agreement
• Expiry date of the security must be extended if the date for completion changes (EOT) or if the
defects notification period is extended
• The Employer must return the security to the contractor within 21 days of receiving the
performance certificate.
• The Employer may claim against the security following the contractors:
o Failure by the contractor to extend the validity of the performance security; in this event
the employer may claim the full amount of the performance security (FULL AMOUNT)
o Failure by the contractor to pay the employer an amount due either agreed by the
contractor or determined under clause 2.5 [Employer Claims] or clause 20 [claims,
disputes and arbitration] (FAIR AND RESONABLE AMOUNT)
o Failure by the contractor to remedy a default within 42 days after receiving the employer
notice requiring the default to be remedied (FAIR AND RESONABLE AMOUNT)
o Circumstances which entitle the employer to termination under clause 15.2
[Termination by Employer] (FAIR AND RESONABLE AMOUNT)

What is a bond?

A surety bond is a guarantee from the surety in favour of the employer that the contractual obligation of
the principle will be fulfilled. Effectively, bonds are agreement between three parties for the benefits of
one of them; i.e. the Employer

The bond only provides financial compensation up to a stated value. It does not guarantee the
completion of the works.

What is an on-demand bond?

Where the beneficiary can call upon the surety for payment whether or not there has a default under
the main contract as long as the call is not fraudulent. Proof is not required.

Also called ‘independent guarantee’ as it is not linked to the terms of the contract

Favourable to the Employer

What is a conditional bond?

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Where the surety will only pay out if certain specified conditions have been met e.g. default under the
main contract. Proof is required. Usually need to go through adjudication or courts

Also called ‘accessory guarantee/bond’ as it is directly linked to the contractor’s obligations under the
terms of the contract.

The FIDIC recommend conditional bonds in order to encourage bidders and avoid tender prices
premiums.

Defects

• Patent defects: defects identified through inspection at completion or during the rectification
period.
• Latent defects: a fault that could not reasonably identified during inspection.

Collateral Warranties, Third Party Rights and Assignment

What are the three ways that benefits can be transferred under the construction contracts?

• Collateral Warranties
• Third Party Rights
• Assignment

Due to the privity of contract, the rights and obligations under a contract can only be enforced by a party
to that contract.

CW gives remedies to parties that due to privity of contract would not otherwise have them.

Not mentioned in FIDIC- They must be included in the particular conditions!

CW is a form of protection usually for the client in the event that third parties involved in the contract fail
to perform their contractual obligations. This is a method of joining parties who does not have a
contractual relationship (due to contract privity) who are involved in the same undertaking.

Who might want a collateral Warranty?

• Any third party with financial institution in a project but not party to the main contract. E.g.
funding institution, future tenants / purchasers
• The Employer may want CW with key subcontractors or suppliers as if the main contractor were
to go into liquidation they would have no contractual link with them for redress in case of
defective workmanship...

What are common terms in CW?

• The obligations of CW should mirror that of the main agreement; therefore, if a party in breach
of the main agreement they would also be in a breach of the warranty.
• Limitation of liability
• Reasonable skill and care vs. fitness for purpose
• Requirements for PI insurance
• Assignment rights

What are the alternative to CW?

Latent defects insurance & contract act (right of third parties)

Third Party Rights

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Similar terms to CW but they can be invoked simply by serving a notice on the party giving the warranty
rather than party having to execute a CW

They may be useful if a lot of warranties are required, it involves a lot of administration and cost-easier
for third party rights

Not mentioned in FIDIC- They must be included in the particular conditions!

What is reasonable skill and care?

The ordinary skill and care expected of an ordinary competent man carrying out that particular act.

Is there a higher level expected for professional?

Yes. A specialist or professional would be expected to show the same level of skill and care expected
of a similar man with that particular specialism.

What is fitness for purpose?

• The provision of a building that is suitable for the employer intended purpose
• It is clearly a more onerous obligation that reasonable skill and care

Assignment and Novation

• Assignment: is where the rights and benefits of one contractual party are transferred to a third
party. In this the original party transfers only the contractual benefits. E.g. Employer/developer
wish to assign to the first purchaser the rights to claim against the contractor for breach of
contract if any defects appear.
• Novation: a new contract that transfers the rights and obligations of one contractual party to a
new third party- assignment is only the rights. i.e. contract between A & B. in this A cannot
decide to be replaced by C unless all parties agree and novate wherein a new contract to
replace the old.

What are the issues after a design team has been novated?

• The Employer looses all contractual relations with the novated party and the right to take action
for a breach. It is therefore common to request a collateral warranty between the employer and
novated party.
• There may be an issue of allegiance and potential conflicts of interest for the novated designer.

Insurances

Limitation of liability [Clause 17.6]

• Neither party shall be liable for any loss of profit or consequential loss and damages to other
party except:
• [Clause 16.4] payment of termination due to employer default
• [Clause 17.1] Indemnities
• This clause shall not limit liability in any case of fraud, deliberate default or reckless misconduct
by one of the parties
• The total liability of the contractor to the employer shall not exceed the sum stated in the
particular conditions or the accepted contract amount except for:
• Clause 4.19 [reimbursement for use of Employer’s electricity, water and gas]
• Clause 4.20 [reimbursement for use of employer equipment and free-issue material]
• Clause 17.1 [payment of indemnities for injury to persons or damage to property]
• Clause 17.5 [payment for breach of intellectual and industrial property rights]

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 • The insuring party is generally the contractor unless the employer states otherwise in
a particular condition.

• The insurer and the terms of insurance shall be compliant with the requirements stated
in the letter of acceptance and approved by the employer

• The insuring party must provide evidence of insurance including evidence of payment
and copies of the policies.

• If the insuring party fails to effect or maintain a policy, the other party may take the
required insurance, but the cost of the premium will be recovered for the defaulting
party.

• The contractor may take insurances in joint names to include the employer,
subcontractors or users of the site. It is recommended to have only two parties in a
joint-name policy to avoid complex indemnity situations.

Clause 18.2 [Insurance for works and contractor’s Equipment]

• The insuring party shall insure the works, plant, materials and contractor document for not less
than the full reinstatement cost until the issue of the taking over certificate.
• The insuring party shall insure the contractor’s equipment for not less than the full replacement
value including delivery to site.
• Unless otherwise stated in the particular conditions, insurances:
o Shall be effected and maintained by the contractor as insuring party
o Shall be the joint names of the parties who shall be jointly entitled to receive payments
form the insurers.
o Shall cover all loss and damage from any cause not listed in clause 17.3 [Employer
risks]
o Shall cover the risks listed in clause 17.2 excluding risks which are not insurable at
commercially reasonable terms
o But it excludes the loss of, damage and reinstatement of:
▪ A part of the works which in a defective condition due to a defect in its design,
materials or workmanship
▪ Another part of the works which is lost or damages in order to reinstate the
above of the works
▪ A part of the works which has been taken over the employer
▪ Good while they are not in the country

Clause 17.3 [Employer Risk] for which the Employer shall take an insurance policy

• War, hostilities, invasion, act of foreign enemies

• Terrorism, civil wars
• Riot, commotion or disorder within the country by persons other than the contractor’s personnel
or other employees of the contractor and subcontractors
• Munitions of war, explosive materials, ionising radiation or contamination
• Pressure waves caused by aircraft or other aerial devices
• Non-contractual use
• Design of any part of works for which employer is responsible
• Unforeseeable forces of nature against which an experienced contractor could not reasonably
have been expected to have taken adequate preventative precautions.

Clause 17.4 [Consequences of Employer’s Risks]

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 • If the works are damaged due to an employer’s risk, the contractor shall notify the Engineer
• The Engineer may instruct the Contractor to carry out remedial works or it may be necessary
for HSE compliance or continuation of the works
• The contractor may be entitled to an EOT
• The Contractor may be entitled to cost for prolongation and remobilization
• Plus reasonable profit if due to employer use or occupation or employer design. The contractor
serves a notice for the above and the engineer makes a determination

Clause 18.3 [Insurance against injury to persons and damage to property]

• The insuring party shall insure against each party liability for any loss, damage, death or bodily
injury which may occur to any physical property except things under clause 18.2 [insurance for
works and contractor’s equipment] or to any persons except persons insured under clause 18.4
[insurance for contractor’s personnel] which may arise out of the contractor performance of the
contract and occurring before the issue of the performance certificate.
• This insurance shall be for a limit per occurrence of not less than the amount stated in the
appendix to tender with no limit on the number of occurrences.
• If an amount is not stated in the appendix to tender; this sub clause shall not apply.
• Unless otherwise stated in the particular conditions; the insurances:
o Shall be effected and maintained by the contractor as insuring party
o Shall be in the joint names of the parties
o Shall be extended to cover liability for all loss and damage to the employer property
o But may however exclude liability to the extend that it arises from:
▪ The employer right to have the permanent works executed on, over, under, in
or through any land, and to occupy this land for the permanent works
▪ Damage which is unavoidable result of the contractor obligations to execute
the works and remedy any defects
▪ A cause listed in clause 17.3 [Employer’s Risk] except to the extent that cover
is available at commercially reasonable terms.

Clause 18.4 [Insurance for Contractor’s Personnel]

• The contractor shall affect and maintain insurance against liability for claims, damages, losses
and expenses (including legal fees and expenses) arising from injury, sickness, disease or
death of any person employed by the contractor or any other of the contractor personnel
• The employer and the engineer shall be also indemnified under the policy of insurance, except
that this insurance may exclude losses and claims to the extent that they arise from the act or
neglect of the employer or the employer personnel.
• The insurance shall be maintained in full force and effect during the whole time that these
personnel are assisting in the execution of the works
• For subcontractor’s employees, the insurance may be affected by the subcontractors, but the
contractor shall responsible for compliance with this clause

Suspension by the Employer

[Clause 8.8] The Engineer may instruct a suspension;

• For reasons beyond of any party’s control

• For reasons due to the Employer (no need to give detailed explanation to the contractor)
• For reasons due to the contractor (clause 8.9 to 8.12 do not apply)

• If a suspension is obvious (e.g. fire, flood…), the Engineer is not obliged to issue a suspension
notice but it would be good practice for record keeping

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Clause 8.9 Consequences of suspension

• The contractor may be entitled to EOT

• The contractor may be entitled to cost for prolongation and remobilisation but not profit
• The contractor serves a notice for the above and the Engineer makes a determination

The contractor must protect, store and secure such part of works against any deterioration, loss or
damage and is liable for the cost of make good if they fail to do so.

Clause 8.10 Payment for Plant and Materials in Event of suspension

The Contractor is entitled to payment for materials and plant of site if:

• Suspension exceed 28 days

• The contractor has taken the required measures to transfer ownership to the employer

If the employer fails to pay, local laws will apply, and ownership is generally transferred back to the
contractor.

Clause 7.7 Ownership of plant of materials is passed on to the Employer:

• When it is delivered to the site

o It is essential that the contractor has back to back supply contract
o The contractor is only entitled to payment for materials on site and off site
• When the contractor is entitled to payment of the value of the plant and materials
• As long as it complies with local laws
Clause 8.11

• If the suspension exceed 84 days, the contractor may request the Engineer’s permission to
proceed
• If the Engineer does not give permission within 28 days, the contractor may give notice to the
Engineer and treat the suspension as an omission of part of the works under clause 13
• If the suspension affects the whole of the works, the contractor may give notice of termination
Clause 8.12

• The Engineer must give permission to the contractor to resume the works
• They both inspect the works and assess whether any works need to be made good and whom
shall be liable.

Suspension by the Contractor

Clause [16.1] The contractor is entitled to suspend the works if:

• The Engineer fails to certify in accordance with clause 14.6 [issue of interim payment
certificates within 28 days of receiving a contractor statement including supporting evidence
and progress report]
• The employer fails to comply with clause 2.4 [employer financial arrangement]
o The employer shall submit within 28 days after receiving any request from the
contractor, reasonable evidence that financial arrangements have been made and are
being maintained which will enable the employer to pay the contract price.
• The employer fails to comply with clause 14.7 [payment within 56 days of the contractor’s
statement including supporting evidence and progress report]

• The contractor may suspend work (or reduce the rate of work) until he has received the payment
certificate and/or evidence or payment
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 • He must give no less than 21 days notice to the employer

• Disagreeing with a deduction made by the engineer determination is not a valid ground for
suspension.

• The contractor is entitled to payment of financial charges under clause 14.8 [interest]

• The contractor may be entitled to an EOT

• The contractor may be entitled to cost for prolongation and remobilisation plus reasonable profit

• The contractor serves a notice for the above and the engineer makes a determination

Termination

There are 3 types of termination:

• Termination by the Employer [Clause 15]

• Termination by the Contractor [Clause 16]
• Termination due to force majeure [Clause 19.6]

Termination by the Employer [Clause 15]

• The Engineer may-but is not obliged-issue a warning notice [clause 15.1-notice to correct]
requiring the contractor to address a default in his obligations within a specified reasonable
time
• If the time for completion has already expired, the Engineer must specify that this reasonable
time does not affect the employer entitlement to delay damages

[Clause 15.2] Grounds for termination:

• Failure to address a notice to correct [clause 15.1]

• Failure to provide the requested securities under clause 4.2
• Walk away from the project
• Failure to rectify defects or complete remedial works within a reasonable time
• Sub-contract the whole of the works or assign the contract without authorization
• Insolvency or administration
• Bribery, corruption or fraud

The Employer should seek legal advice to write the termination notice!

• Termination takes effects 14 days after the notice of termination

• Termination is immediate in the case of insolvency or corruption
• The contractor must:
o Secure the works and ensure they are left in a safe state
o Deliver all the contractor documents (design) to the employer and any goods already
paid for
o Assist with the assignment of subcontracts to the employer
o Assist the employer to maintain all HSE requirements on site
• The employer may complete the works themselves or employ another contractor
• They will use contractor documents and any goods already paid for
• However, the contractor is entitled to remove all his temporary works and equipment (at their
own cost) WHEN notified by the employer to do so
• If the contractor fails to pay monies due to the employer, the employer may sell the temporary
works and equipment and pay the balance to the contractor

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Clause 15.3 & 15.4 [Valuation and Payment]

• The Engineer makes a determination of the amount due to the contractor or the employer as
per the normal rules
• The date is as soon as practicable after the termination takes effect (14 days after notice)
• The contractor must immediately repay the advance payment (dealt with separately from the
valuation) or the employer may call upon advance payment guarantee
• Final payment to the contractor is not due until:
o All employer claims have been ascertained
o All additional costs to the employer such as correcting defects, completion of the works
by new contractor, delay damages, professional fees have been ascertained
• The Employer has the right to terminate the works for any reasons not listed in clause 15.2
• Termination takes effect 28 days at the latest of the following:
o The employer serves notice to the contractor
o The employer returns the performance security
• The Employer cannot terminate the contract simply because he wants to complete the works
himself or pass them to another contractor. It would be a breach of contract and the contractor
would be entitled to loss and damages.

After this termination, the contractor shall proceed in accordance with clause 16.3 [cessation of work
and removal of contractor’s equipment] and shall be paid in accordance with clause 19.6 [optional
termination payment and release]

Termination by the Contractor

[Clause 16.2-8] grounds for termination by the contractor:

• The contractor does not receive the reasonable evidence of the employer financial arrangement
within 42 days after giving notice of suspension
• The engineer fails to issue the relevant payment certificate within 56 days after receiving a
statement and supporting documents (=a further 28 days after the contractual deadline)
• The contractor does not receive payment due under an interim payment certificate within 42
days after the expiry of the contractual deadline
• The employer substantially fails to perform his obligations under the contract
• The employer fails to employ with cause 1.6 [contract not signed within 28 days of the letter of
acceptance] or clause 1.7 [contractor does not agree on assignment]
• A prolonged suspension affects the whole of the works as described in clause 8.11 [suspension
by the employer]
• The employer becomes bankrupt or insolvent or any similar situation

Clause 16.3 [Cessation of work and removal of contractor equipment]

After termination (for any reason), the contractor shall:

• Cease all further works except for such works as may have been instructed by the engineer for
safety (as may be required by HSE laws)
• Hand over contractor documents, plant, materials and other works for which the contractor has
received payment
• Remove all other goods from the site, except as necessary for safety and leave the site
[Clause 16.4] after termination by the contractor, the employer shall promptly:

• Return the performance security to the contractor

• Pay the contractor in accordance with clause 19.6 [optional termination payment and release]
• Pay the contractor the amount of any loss of profit or other loss or damage sustained by the
contractor as a result of this termination

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 • The contractor must also repay any advance payment immediately

Termination due to force majeure

• If the execution of substantially all the works in progress is prevented for a continuous period
of 84 days by reason of force majeure of which notice has been given under clause 19.2 [notice
to force majeure] or for multiple periods which total more than 140 days due to the same notified
force majeure, then either party may give to other party a notice of termination of the contract.
• Termination shall take effect 7 days after the notice is given, and the contractor shall proceed
in accordance with clause 16.3 [cessation of work and removal of contractor equipment]

Upon such termination, the engineer shall determine the value of work done and issue a payment
certificate:

• The amount payable for any works carried out for which the price is stated in the contract
• The cost of plant and materials ordered for the works which have been delivered to the
contractor or of which the contractor is liable to accept delivery; this plant and materials shall
become the property of (and be at risk of) the employer when paid for by the employer and the
contractor shall place the same at the employer disposal
• Any other cost or liability which in the circumstances was reasonably incurred by the contractor
in the expectation of completing the works
• The cost of removal of temporary works and contractor equipment from the site and the return
of these items to the contractor works in his country
• The cost of repatriation of the contractor staff and labour employed wholly in connection with
the works at the date of termination.

Employer Equipment and Free-issue Materials [clause 4.20]

• The Employer shall make the employer equipment available for use of the contractor in the
execution of the works in accordance with the details, arrangements and prices stated in the
specifications.
• The Employer shall supply, free of charge, the free-issue materials in accordance with details
stated in the specifications. The Employer shall at his risk and cost provide these materials at
the time and place specified in the contract. The contractor then visually inspect them and shall
promptly give notice to the Engineer of any shortage, defects or default in these materials.
Unless otherwise agreed by both parties. The employer shall immediately rectify the notified
storage, defect or default.
• After the visual inspection, the free-issue materials shall come under the care, custody and
control of contractor. The contractor obligations of inspection, care, custody and control shall
not relieve the employer of liability for any shortage, defect or default not apparent from a visual
inspection.

Various APC Questions

What is retention?

Retention is deducted from each monthly payment to provide the client with some security that the
contractor/subcontractor will return to rectify any defects during the defects liability period.

What is Subrogation?

Subrogation is the substitution of one person in the place of another person in relation to a claim.

What take precedence; drawings or specs?

How would you make payment to the sub-contractor if you appoint him earlier?

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What is insolvency?

A company is deemed to be insolvent when it does not have sufficient assets to cover its debts
as they fall due.

• What are signs of insolvency?

• Work on site is in slow progress without any particular reason.
• Contractor statements are overvalued or on-account payments are requested.
• Unexpected claims for additional payment are made.
• Materials required for the work are not delivered to site as expected.
• Lack of labour resources to execute the work.
• Word of mouth/verbal evidence.

If a subcontractor is to take any responsibility for the design, how would you recommend your
client ensure he takes responsibility for that?

I would recommend that collateral warranty is put in place such there is a direct contractual link between
the client and the subcontractor.

How would you deal with defective works in a valuation?

What would you do as a QS following an EOT being granted?

• Extend preliminaries
• Revise the cash flow
• Review scope of services

If you had a program constraint with a long lead in time and you need to place and order before
the main contractor is appointed; would you use nomination?

What is a star rate?

How do you calculate LD and who does it?

What advice did you give to the client on the level of liquidated damages to be inserted into the
contract?

• Loss of rent or other income

• Additional fees
• Fines from statutory bodies
• Costs imposed by other parties on the client
• Possibility of additional storage costs where equipment is involved

What advice would you give to the client on whether or not he can deduct liquidated damages
where he has not incurred the loss?

Yes provided the calculation is not deemed a penalty and is a genuine pre-estimate.

How would the nominated subcontractors be paid differently?

How can you be sure that the specifications are carried out to the required quality in design and
build contracts?

What is your understanding of determination?

Is there a clause in FIDIC Red book talking about defined and undefined provisional sums?

If a subcontractor submits a claim, how will you evaluate it?

How will you calculate the cost of a claim?

What will you do after awarding a claim?

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Did you prepare any subcontract agreement?

Why contractor indemnify the Employer?

When an accident happens to the Employers personnel how the indemnify affect?

When an accident happens to both the contractor’s personnel and Engineer’s personnel, what
are the insurances that it covers?

What are the insurances to be included as the conditions of contract?

If any damage happens to a property adjacent to site because of construction work, what
insurances it covers?

What do you mean by cross liability?

In a lump sum contract (where the work would not be re-measured). The drawings show 200m
boundary wall, but it is given in the BOQ (by the Employer), and priced (by the contractor) as
follows: Boundary wall: 100m @ 100SAR/m = 10,000SAR

A variation has been instructed to delete the whole boundary wall. What would you use in the
valuation of this variation?

Answer depends on the type of the contract;

A. With only schedule of rates (plus drawings and specs)

Measured qty 200@BOQ rate 100 = 20,000 omission

B. With bill of quantities (plus drawings and specs) and BOQ has provision for the tenderers to
price an adjustment in respect of any missing items, errors in item descriptions and differences
in quantities (between drawings/specs. And BOQ)

Measured qty 200@BOQ rate 100 = 20,000 omission

C. With bill of quantities (plus drawings and specs) and BOQ does not have a provision for the
tenderers to price an adjustment above

The contractor can argue the rate is inapplicable due to the error in the BOQ and no place to
price the errors. Therefore omission is calculated as;

Measured Qty 200m @varied rate 50 = 10,000 omission

In either scenario the quantity omitted is as measured from the drawings but not what is stated
in BOQ. Only scenario C the contractor can ask fir varied rate (or Engineer may in case of
additional works).

A design team has been novated to a design and build contractor. The contractor wants to re-
negotiate their fees as part of the novation. Can he do it?

Explain how you have produced a preliminaries document for one of your projects?

From your experience of design and build projects, if there is a discrepancy between contract
documents, which takes priority, the employer’s requirements or the contractor’s proposals?

A contractor has received an instruction for the expenditure of a defined provisional sum. The
contractor has applied for a consequential extension of time. What would your response be and
why?

Your client has agreed to make an advanced payment to his contractor. How would you go about
setting this up?

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How do you value variations?

Who can instruct changes on a construction project?

As the QS, can you instruct changes on a construction project?

You are carrying out a valuation and you notice a suspended ceiling system that has been
installed looks poorly constructed, do you include the payment for this work within your
valuation?

The key client requirements for your project was the contract completion date. What
mechanisms exist under the form of contract to protect the client’s position with regard to
completion date?

The inclusion of a liquidated damages clause within the contract. Liquidated damages are a genuine
pre-estimate of the loss a client is likely to incur should the project be delayed and where no extension
of time has been allowed. They are normally included as a cost per day or week depending on the
contract.

What are the duties of the Engineer under FIDIC contracts?

In general, his duties are:

• Advise the employer

• Instructions to the contractor
• Information to contractor
• Inspection and monitoring the contract works
• Quantity surveying functions

As an independent adjudicator

• To certify interim payments

• Final certificate
• Take over certificate
• Defects liability certificate
• Liability to the employer
• Liability to the contractor

The Engineer should obtain approval from the client for the following duties:

• Instructing work to be carried out-additions/omissions

• Instructions for expenditure of provisional sums/contingency
• Instruction for tests
• Consenting the contractor program
• Issuing taking-over certificate
• Issuing defects liability certificate

What are options for contractors for non-payment?

• Amicable settlement, quick dispute resolution

• Contractual mechanism (suspension/termination)
• Dispute resolutions methods as per the contract
• Litigation

What are types of securities?

Surety (conditional) guarantees

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 • Performance guarantees
• Parent company guarantee

On demand (unconditional) bonds

Tender bonds, advance payment bonds, retention bond

What is the remedy if the contractor fails to provide insurances?

The employer may take insurances, pay premium and deduct the amount so paid as a debt due to the
contractor.

What is meant by subrogation in insurance?

Right of insurance company (generally) to sue the person who has caused the defect in order to recover
the amount the insurer has to pay to the policy holder.

Subrogation is the right of the insurer to sue whoever’s responsible for causing loss to the insured.

What is cross liability clause?

Cross liability is the liability incurred by an insured because of him damaging another insured when both
insured are covered under the same liability insurance policy. Each insured will then be treated as a
discrete entity by the insurer under cross liability clause.

Suppose that a large development had bought an umbrella. CAR policy for the whole of the project
covering all contractors and while working concurrently had, say, a culvert slab cast by infra contractor
crashes and damages a cable laid by the building contractor, the cross liability extension would kick in
because the same CAR policy covers both contractors and both would receive compensation from the
insurer for losses suffered by each of them individually.

As per FIDIC, the insurance policy shall include a cross liability clause such that the insurance shall
apply to the contractor and to the employer as a separate insured.
CAR do not cover loss due to terrorism or any electronic data loss

What is first party insurance?

A policy where payment is first made to the insured, not to a third party. Most of material damage
insurances are first party type.

What are employer’s risk?

• War, hostilities, invasion, act of foreign enemies

• Rebellion, revolution, insurrection or military or usurped power
• Ionizing radiation or contaminated by radio activity
• Pressure waves by aircraft
• Riot commotion or disorder
• Loss or damage due to the employer’s occupation
• Loss and damage due design given by the employer
• Any forces of nature which an experienced contractor could not foresee

On what grounds the contractor’s is not entitled to costs when there is an award of
EOT?
If delay is caused by neutral events.
Why would the contractor accelerate the works?

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If the employer does not approve an EOT or he delay the EOT, the contractor will have problem. Either
he pumps his own money to speed up the works or he has to wait the EOT claim resolved by the
arbitrator or court. But he is not sure about the outcome. Hence to avoid delay damages, contractor
accelerates progress to complete on time, meanwhile trying to convince the employer that he is entitled
for his acceleration cost.

How would you value acceleration costs?

• Working additional hours (OT)

• Providing additional labors
• Providing additional or different equipment
• Advancing the date of delivery of manufactured elements

If you have to accelerate the works for employer or contractor delay, what are the costs to be
considered?

If the contractor was negligent and damaged an adjoining building, where would the employer
is covered?

Third party liability insurance

Give examples of contractor’s breach of contract?

• Failed to commence
• Failed to proceed with works diligently and regularly
• Failed to comply with notices
• Neglecting to comply with engineer’s instructions
• Subcontract full works

Name of employer’s breach of contract.

• Not paying on time

• Not giving access to site
• Interrupting the contractors work
• Becomes insolvent

How is the protection of nominated subcontractors covered in respect of insurance?

What are the exclusions of TP liability insurance?

• Permanent use or occupation of land

• Right of employer to execute the works
• Damage to property which was unavoidable result of execution of works
• Death or injury due to an act or neglect of employer or agents

If the damage is caused to a project through design fault, how does the employer recover
losses?

PI insurance

A fire damaged building that you worked on was only six years old. Assume that the cause of
fire was through an original design fault. Does the client have any resource against the original
design team for the fault?

PI insurance, decennial liability clause

What are the common types of insurance for a building project?

CAR, public liability, workmen compensation, motor vehicle, machinery, plant and equipment.

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What happens if construction work causes damage to adjacent buildings, who is responsible
and what sort of insurance do you need?

Third party insurance

If the project is in the city, would you need terrorism cover? What is the standard cover for
terrorism?

Is a program a contract document?

No. it is not a contract document.

Why defects liability period is for 12 months generally?

It is to cover all climate seasons so as to test and reconfirm that the building and its services are suitable
for all seasons.

What path can be followed to improve contractual links between parties such as clients and
consultants under a traditional D&B job?

Novated D&B, collateral warrantee

What are the procedures for paying a subcontractor? What timescales?

What FIDIC says about Health and Safety? What is the relevant clause?

Clause 19.1 (Safety, security and protection of environment)

What are types of claims?

• Contractual claims (as per the contract conditions)

• Legitimate claims that occur but that do not have their basis in the conditions of contract so it
should be dealt with mediation, arbitration or litigation) e.g. intermittent rain disrupted the works
• Ex gratia claims- out of kindness- to maintain good relationship between parties
• Quantum merit- if no price is agreed, or if contract is replaced with a new one due to number of
variations.

How will you analyse a claim?

Claims and remedies:

• Claims under the contract- remedy is specified in contract

• Claims arising from the contract- terms of contract has breached, but remedy is not specified
in contract (e.g. prolongation cost)

Contra charges: is effectively a back- charge. A term is often used in construction that refers to offsetting
a particular element of works to another contractor. i.e. a main contractor will contra charge a sub-
contractor if they had to incur additional costs for fixing a fault.

How variations are valued?

By rate in BOQ, pro-rata rates, agreed rates, daywork rates, quotation rates from the
subcontractor/supplier, derived from the first principle

If you saw a defective work during valuation at site, what should be your course of action?

We have to include the defective in the valuation for time being and inform the engineer about this
matter for him to decide. If the engineer decide that it is a defective work, they have to omit it from the
valuation.

CAR insurance- who is covered?

• Principal/ owner/employer/agent
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 • Main contractor
• Subcontractor
• Engineer/consultant/ architect
• Banks
• Other having insurable interest

CAR- what are insured?

• Contracts works
• Plant and machinery
• Principle & Surrounding property

Third party liability insurance

• Accidental injury/death to third party

• Property damage (adjacent property)

What are exclusions of CAR?

• Penalties of delay/guarantee of performance

• War, terrorism, nuclear weapons
• Consequential losses
• Faulty design, material, workmanship
• Cessation of work
• Inventory losses
• Damage to works put into use or which certificate of completion is issued
• Arising out of employment of a person by insured (or under workmen’s compensation)
• liability of vehicles under motor insurance

What is cross liability?

Generally various parties like principle contractor and subcontractors are all covered under the same
policy.

These parties cannot be considered as third parties to each other. Any claim against each other is not
covered. If a cross liability extension is endorsed on the policy, each insured party is considered as
separate entities and will be treated as if separate policy has been issued to each. This extension
excludes damage to property who be covered elsewhere.

What is claim procedure for insurance?

• Notification of claims immediately

• Detailed incident report (damage report)
• Original replacement/repair invoices
• Basis of loss settlement
-In case of damage which can be repaired, the cost of repairs necessary to restore the items to
their condition immediately before occurrence of the damage less salvage and excess
-In the case of a total loss, the actual of the items immediately before the occurrence of the loss
less salvage and excess

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PROCUREMENT AND TENDERING

Page | 38
Procurement

• The overall process of acquiring products or services from the external resources. This may
include buying from a shop or supplier, buying at auction, exchanging or tendering.
• The procurement strategy is based on the client’s requirements and their attitude to risk.
• It is purpose is to ensure that the right project is delivered at the right time and the right price.

Tendering

• Tendering is a method of obtaining the resources necessary to carry out the required work. It
includes the bidding process and the contractor selection mechanism.
• The employer submits his requirements and the bidders submit their proposals.

Advising on the procurement strategy

Relative importance of primary factors/client’s key drivers

• Cost
o Cost certainty
o Value for money
o Dealing with inflation
o Dealing with currency fluctuation
o Return on investment
o Funding
o CAPEX vs OPEX

• Time
o Flexibility on completion date
o Sequence of works/restrictions
o Overlap of design and construction
o Approval periods
o Availability of reliable project duration data
o Cost of accelerated procurement vs early client income
o Severity of impact of late completion on client

• Performance
o As per business case
o Satisfaction of both end-users and developer
o Over-specifications is not performance
o Ability to make change
• Others
o Client experience and resources
o Accountability
o Client aversion to risk
o External risks

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Need to achieve optimal balance between best value for money and while life cycle.

Procurement Routes

• Traditional (lump sum)

• Traditional (Remeasurement)
• Design and build
• Construction management
• Management contracting
• Partnering
• Public private partnerships (PPP)
• Target cost

Basis of contract sum

• Lump sum
• Remeasurement
• Target Cost
• Reimbursable / Cost Plus

Traditional [Lump Sum]

• The design is completed by the client design team before competitive tenders are invited and
a main contractor is employed to build what the designers have specified
• The contractor takes responsibility and financial risk for the construction of the works to the
design produced by the client design team for the contract sum within the contract period.

Advantages

• Full client control on the design

• Cost and programme certainty (if no changes)
• Accountability (competitive and transparent)
• Changes easy to issue and value

Disadvantages

• Incomplete tender documents lead to uncertainty and disputes

• Longer overall project duration
• Inability to harness the supply chain expertise
• Strategy based on price competition-could lead to adversarial relations
• Dual point of responsibility- client for design and contractor for construction
• On a complex project, the client will pay a high premium on risks

When might traditional (lump sum) procurement be appropriate?

• If the design is substantially completed at time of contractor selection

• The client wishes to retain some control over the design and specifications
• Cost certainty at start on site is important
• The shortest overall programme is not the client’s main priority
• Accountability is required
• Inexperience clients

Traditional (remeasurement)

• Mostly used in civil engineering projects

• The high level design is completed but the detailed design will be completed as works progress
• No contract sum- based on schedule of rates or approximate quantities
• The price of each package is finished as they are procured
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Design and Build

• The contractor is responsible for the design and construction of the works to the employer
requirements for a fixed lump sum
• The employer usually prepares the Employer Requirements and the contractor respond with
the Contractor Proposals which includes the price for the works

Advantages

• Single point of responsibility- less client resources required

• Reduce client risk
• Earlier commencement on site
• Early price certainty
• Benefit of contractor experience harnessed during design

Disadvantages

• Client may find it hard to prepare a sufficiently comprehensive brief

• Client has to commit to a concept design early
• Variations form the original brief are difficult to arrange and often expensive
• Harder to compare tenders- harder to determine if getting value for money

What might design and build procurement be appropriate?

• Where there is a need to make an early start on site- can overlap design and construction
• Where the client wishes to minimise their risk- not got responsibility for design
• For technically complex projects- benefit of contractor’s expertise
• Where the Employer does not want to retain control over the design development

Who carries out the design for the contractor?

• It may be constructed to a separate design company (contractor retains responsibility)

• They may have in-house design capabilities
• Or the client’s team may be novated

How can you make sure that the specification is carried out to the required level of quality?

Novation vs. Assignment

• Novation
o A new contract that transfers the rights and obligations of one contractual party to a
new third party i.e. design rights and obligations of architect transferred to the
contractor.
o Consent is required
o Collateral warranties are required to give remedies for breach of contract
o Client has full control over the design before novation
o Potential conflict of interest if the consultant is also appointed by the client to
inspect/certify the contractor works
o Designer may feel as they are sitting between two chairs
o Issue of liability for pre-novation design
o Novation does not make the contractor responsible for the design pre-novation
o Need a clause stating that the contractor has examined and approved the design
o The contractor must accept design liability but cannot sue the designer
• Assignment
o Transfer of benefits-such as right to payment- but not burdens-such as obligation to
pay

Construction Management

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The employer places a direct contract with each of the trade contractors and utilises the expertise of a
construction managers who act as a consultant to coordinate the contracts

• The client employs a construction manager to supervise the construction process and
coordinate the design team (but no contractual links)
• The trade contractors are in direct contract with the client
• Their role includes preparation of the programme, determining requirements for such facilities,
breaking down the project into suitable works packages, obtaining and evaluating tenders,
coordinating and supervising the works
• The CM may provide some of the preliminaries items

When might construction management be appropriate?

• On large complex projects where the advantages of CM can be put to use e.g. upfront
buildability knowledge, programme advise, specialist input from trade contractors
• Where early start on site is key
• When flexibility in design, procurement and/or construction strategy is required
• Where price certainty before commencement is not key
• Where the client is experienced in construction

Management Contracting

A management contractor is employed to contribute their expertise to the design and to manage
construction and is paid a fee for doing so.

• The management contractor has direct contractual links with all of the works contractors
• He has the responsibility for the construction works without actually carrying them out
• Fast-track: design overlaps construction
The client reimburses the cost of these packages to the MC plus their fee [the MC role is low risk- get
prime cost plus a fee]
• The MC must committed not just a post box

When might management contracting be appropriate?

• Where the client does not require cost certainty before commencement
• Where an early start on site is critical
• Where changes may need to instructed late in the process

Partnering

• A different way of structuring business relationships

• Involves two or more organizations working together to achieve specific mutual objectives and
deliver continuous measurable improvements (KPI)
• Project Partnering (One-off)
• Strategic Partnering (long term)
• Framework Agreement: two parties agree the general T&C for potential future purchases over
a given period of time + mechanism for inflation [work is either on pre-agreed rates or through
mini competition]

Public Private Partnerships (PPP)

• Project or service is provided by the private sector in collaboration with the public sector
• Most common form is Private Finance Initiative [PFI]
• Private sector agrees to finance, build and operate the project
• Long term concession agreement [25-30 years]
• Revenues are collected by a specially formed company [special purpose vehicle-SPV]

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 • Build Lease Transfer (BLT): the building is owned by the contractor and leased back to the
government for a predetermined period of time. At the end the government can renew the lease,
buy out the private sector or walk away from the deal.

• Build Operate Transfer (BOT): The facility is designed, financed, operated and maintained by
a concession company for the period of the concession. The government remains the owner.

• Build Own Operate Transfer (BOOT) a variation on BOT where ownership stays with the
concessionaires until the end of the concession period when it is transferred free of charge to
the government.

Target Costs
• A variant of reimbursement procurement
• The contactor and employer agree a target cost to complete the works
• Actual costs+ free are paid to the contractor on open book basis
• They agree the mechanism to share the financial pain/gain
• All other contractor obligations are the same under traditional or D&B
• Encourage collaborative cost control but heavy post contract administration

How did you provide procurement advice to your client (for a school extension for example)?

• Always start by your client objectives: time, cost and quality

• Completion before new term
• Accountability / best value
• Ability to incorporate end users changes
• Design and build and traditional lump sum may be suitable
• Traditional offers the best accountability and the least risks to the client in terms of cost and
programme
• Is the design completed
• Do we need an early start of site? Where are we in the master programme?
• Will end users changes need to be incorporated late in the project?

What do you take into account when deciding on procurement strategy?

I have to identify the client’s objectives and key drivers in terms of cost, time and quality and other
factors like risk allocation, accountability, and ability to incorporate end users changes.

How is risk transferred through procurement routes?

Traditional: design risk with employer; cost and program risk with the contractor.
D&B: design, cost and program risk with the contractor.
Management Contracting: design and cost risk with client; program with the contractor.
Construction management: Design, cost and program risk with the client.

What is target cost contracts?

It is generally a variant of cost plus contracts. The employer and contractor agree a target cost to
complete the works. They agree the mechanism to share the financial pain/gain which encourage
collaborative cost control but heavy post-contract administration.

Tendering

What is open tender?

The tender is advertised in the specialized media. Anyone can submit a bid.
This allows new contractors and suppliers to expand their market and prices are usually most
competitive.
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However, many bidders may be unsuitable and time is wasted analysing poor tender returns.

What is selective tendering?

• 4-6 contractors are invited to submit a tender.

• They can be selected either from an approved list proposed by the employer’s consultant or
through pre-qualification process.
• Only contractors with suitable skills and experience submit a tender return, saving time in
tender analysis.
• The disadvantage is that new contractors are prevented from the market and innovation is not
encouraged
•
What is negotiated tender?

• The tender information is issued to a single contractor who submits a price.

• The final price is negotiated with the employer’s QS (usually based on PTE)
• The PQS must ensure that the price represents value for money that contractor is competent
and that its program and methodology is realistic.
• The invitation to tender (ITT) should specify that the client does not commit to appoint the
lowest contractor.
• Negotiated tender is suitable for specialist work or when time is at premium. The price is usually
higher than with other tendering process

What is serial tendering?

• Rarely used.
• Suitable for projects with multiple phases of similar works.
• The initial phases are competitively tendered and subsequent phases are negotiated with the
successful bidder based on the original tender rates.
• Difficulties occur over long period of time when rates are no longer a reflection of the market
levels.

What is single stage tendering?

RIBA stage 4 design information is issued to 4-6 bidders. They must submit a tender price within a set
period. A contractor is selected based on cost and quality.

What is two-stage tendering?

Two stage tendering is used to allow early appointment of a contractor prior to the completion of all
information required to enable them to offer a fixed price.

In the first stage, a limited appointment is agreed allowing the contractor to begin work and on the
second stage a fixed price is negotiated for the contract. A contractor is selected based on the quality,
his team and the cost of preliminaries and OH&P and the in the second stage the contractor submit a
complete price.

It is possible to include a target cost in second stage to limit the risk of the contractor pricing above the
market levels.

The tenderers return as part of the first stage may consist of:

• Detailed build up of prices for the preliminaries

• Percentage additions for profit and overhead
• Construction program
• Quality submission
• Method statements

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 • Schedule of rates to be applied to the second stage tender
• CV’s for the proposed site and head office staff
• Agreed contract conditions to be applied to the second stage
• It may include pricing of enabling works.

Advantages

• Early involvement of the contractor

• Encourage collaborative working
• Potential for earlier start on site
• Greater involvement in selecting the supply chain
• Contractor can help identify and manage risks

Two stage tendering enables the client to transfer design risk to the contractor. Whilst tender prices for
two stage tendering may initially higher than single stage tenders which are subject to full competition,
the final account tends to include fewer variations and claims. A longer period of familiarity with the
project creates better relationships as well as a reduction in leaning curves and program performance.

Disadvantages

• Cost certainty may not be achieved before construction starts

• Additional pre-construction fees from the contractor
• Contractor could take advantage of second stage negotiation to increase costs
• Potential for parties to not agree contract sum leading to re-tendering

When is two-stage tendering suitable?

• Complex building
• Magnitude of works is unknown at time of contractor selection
• Early completion is required
• Design team would like to make use of contractor’s expertise on buildability issues.
• Market conditions impose it.

Selecting the appropriate tendering practice:

• Traditional procurement: Single-stage tendering or negotiated

• Design and build: single or two stage tendering
• Management procurement: two-stage tendering or negotiated

What is the difference between single and two stage tendering?

Single-stage tendering is used when all information necessary to calculate a realistic price is available
when tendering commences. An invitation to tender is issued to prospective bidders, tenders are
prepared and returned, a preferred tender is selected and following negotiations they may be appointed.

Two-stage tendering is used to allow early appointment of a contractor prior to completion of all the
information required to enable them to offer a fixed price. In first stage, a limited appointment is agreed
to allow work to begin and in second stage a fixed price is negotiated for the contract.

How do you check the financial status of a company?

What is pre-qualification process?

To assess the contractor’s ability to deliver the work.

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What would you include in the pre-qualifications questionnaire?

• Company information
• Financial information and good standing
• Technical ability
• Previous relevant experience and projects
• Turnover
• Company accounts
• Management and organizational structure
• Quality systems and environmental policy

PPQ analysis based on pre-declared scoring matrix.

What are tender documents?

• Invitation to tender (ITT): cover letter with project information and tender return information.
• Form of tender (bona fide): may allow for alternative tenders
• Contract conditions and employer’s amendments
• Instructions to tenders: checklist of documents to be returned by bidders/description of scoring
matrix/how errors will be dealt
• Project information
• Design information: design and specs list with revision status
• Pricing document: schedule of work, BOQ, contract sum analysis, schedule of rates, defined
and undefined provisional sums, prime cost
• Appendices: surveys, planning conditions, health and safety requirements, risk register and any
other project specific information

What is the assessment criteria for tender returns?

It is usually divided into cost and quality.

Cost:

• % against lowest bid

• % against average of bids received
• % against PTE/Target Cost/Available budget

Quality (may include pass/fail questions)

• methodology
• program
• proposed team
• sustainability proposals
• approaches to H&S
• quality control systems

What is the tender process?

• Issue tenders (hard copy or e-tendering)

• Collect tender queries and seek responses from the client’s team
• Issue tender query sheets and new information via tender addenda and bidders must confirm
the receipt of addenda
• mid-tender interviews
• deal with tender withdrawals

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 • keep rigorous audit trails for both accountability purposes and for the efficient construction of
contracts.

What is the tender analysis process?

• All tenders must be opened at pre-set date and time with consultants
• Late tenders cannot be accepted unless exceptional circumstances
• Tender returns must be recorded in tender opening form and signed by all witness which
include tender sum, program, comments, alternative tenders, and checklist of documents
submitted
• Check for arithmetical errors
• Check for errors, omissions and inconsistencies in submissions
• Request clarifications on qualifications: post-tender interviews may be desirable and dis-qualify
non-compliant bids.
• Normalize tenders (compare like-for-like)
• The QS has the duty to inform the bidders of any abnormal rates
• Query low levels of OH&P
• All bidders should price identical risk register
• The tender price must be assessed on the normalized totals
• Contractor must be promptly notified the outcome
• Alternative tenders can only be considered once preferred bidder has been selected.
• The QS must issue a tender report to the client which may be tailored to the specifications of
the project or client.

What is the content of tender report?

• List of tender received

• Initial tender return totals
• Any qualifications identified
• Post-tender adjustments
• Revised tender sum
• Comparison of tender returns
• Comparison with PTE
• Issues to be resolved
• Recommendation

How would you determine the duration of the tender period?

Depends on the procurement process and size of the project.

• If traditional procurement, usually about a month to obtain info from contractors but large
complex schemes would be longer.
• If first stage of a two-stage tendering, it may be a short of 2-3 weeks as only prelims
• If D&B likely to be 6-8 weeks due to the amount of design work needed

It is better to give enough time to ensure contractors can price it correctly rather rush it and encourage
contractors to price a high-risk element into the tender.

When seeking tenders from construction work, in addition to the actual fee bid, what information
would clients typically expect to be submitted?

• Track record of previous experience

• Proposed team
• CV or team profiles
• Methodology or approach
• References

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 • Program

How did you decide the number of tenderers for the project?

• If D&B, have less tenderers (say 2 or 3) due to the cost and time implications; contractor would
like to think they had a good chance in return for their capital outlay.
• For other contracts (5-6 tenderers) are sufficient as a balance between competition and
contractor care with pricing as a result of a belief that they can compete.

Why should you as a surveyor examine tenders?

• Check the tenders included everything

• Errors, omissions and qualifications to be identified and dealt with

How does a contractor day work in their tenders?

What should be examined looked for in a tender?

• Arithmetical errors
• Pricing errors (items not priced or same item but different prices in different sections)
• Pricing methods (front and back loading)
• Qualifications

What happens if a tender is late?

• Safe option is not to consider

• If private client, it is at their discretion (advance of danger though)
• Public clients: late cannot be accepted
• Advise accepting late tenders sets standard, contractor may in future also not keep to
deadlines.

How to evaluate the contractor’s proposal for D&B?

• Method statement and program

• Health and safety
• Resources
• Supply chain
• Technical

How would you do if the lowest tender also has the lowest quality spec?

• The implication should be spelled out to the client e.g. higher maintenance costs.
• It is the client’s decision ultimately

What is the danger of accepting a very low tender?

• They may have missed some of works

• The quality may be lower than some of the other tenders had allowed
• Once on site they may try to recover their costs by large number of variations, claims and EOT
• This could lead to adversarial relationships.

What happens if tenders are returned and are higher than cost plan, PTE?

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Could be market conditions, need to reconcile to identify major differences, VE process could take on
place on those elements.

How would you deal with errors in tender returns?

Depends on instructions to tenders:

• Alternative 1: the QS should amend computing errors arriving at a new tender sum. They should
inform the contractor who can choose to either confirm or withdraw.
• Alternative 2: QS should amend computing errors arriving at a new tender sum. They should
inform the contractor who can choose to confirm, amend or withdraw.

What would you do in a traditional procurement route, if the tenderer returned an alternative
tender with different method of construction?

Assuming I had asked them to supply an alternative tender, I would assess it along with other tender
returns and liaise with client

If not asked, ask for compliant tender.

How do you deal with qualifications within a tender?

• Procedures should be outlined when I go out to tender- in the instructions to tenders

• If they are unauthorized, it might invalidate the tender-leading to disqualification
• Possible to authorized- if tenderer raised a query to QS- in which case all other tenderers should
have been notified and instructions on what to be issued.

What would you do if the lowest tenderer had submitted no pricing of the preliminaries, would
you recommend he was accepted?

• Depends on the form that tender was sent out and instructions to tenderers.
• Usual to have prelims split into method and time related items.
• If they have not break them down as required, then it is officially a non-compliant tender.
• BUT in practice the contractor is usually provided the opportunities to provide a full breakdown
within a couple of days and this would be regarded as valid.
• They are not allowed to change figures-not allowed to gain an advantage.
• The fact this was done should be noted in the tender report.

What would you do if you considered a contractor submitting the lowest tender to be in financial
difficulty?

• As part of the evaluation of tenders, you would look at the company accounts ( if not PQ)
• Also request references from previous employers for work recently done
• See if you can find out if subcontractors were paid on time
• Ensure the contractor can provide a bond and that it is place before commencing.

On what grounds would you advise the client to retender?

• Not enough tenderers returned tenders

• The tendering procedure is believed to have been compromised for some reasons
• If tenders were not at the cost level required and it was believed that re-tendering to different
tenderers would provide a different result
• Design changes or VE has been carried out that has significantly changed the design that was
originally tendered on.

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How would you deal with a front-loaded BO error?

• This is not a pricing error- removing the front loading would not reduce the tender price.
• You can ask the contractor to adjust his pricing to remove it during the analysis
• QS should ensure that all items are consistently priced throughout the document
• It has implications on valuing variations later and may be a sign that the contractor has financial
difficulties.

How do you carry out the tender evaluation?

What documents do you include in a tender?

What would you do if a tender was submitted late?

What if the client requested you to include it?

At tender stage, how do you assess the financial stability of a project?

What are the documents you would look at?

What is a balance sheet?

What is a Profit and loss account?

What is two stage tendering? Why would you advise two stage tendering?

What would you include when inviting companies to tender?

What are the accounting matters, will you consider during the pre-qualification?

How do you check financial strength of a company?

What is pre-qualification?

How do you do pre-qualification process?

What are the procurement methods you are aware?

Why normally Employers decide to go for selective tendering?

What is selective tendering means? Explain two stage tendering?

How do you do tender evaluation?

What are the tender evaluation report including?

When there is an arithmetical error how do you correct it?

The amount in BoQ section is wrong and it transferred to the summary correctly. (in the
summary page figure is correct) How do you deal with this?

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DESIGN ECONOMICS AND COST PLANNING

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What are the RIBA stage of work?

• Stage 0: strategic definition

• Stage 1: preparation and brief
• Stage 2: concept design
• Stage 3: developed design
• Stage 4: technical design
• Stage 5: construction
• Stage 6: hand over and close out
• Stage 7: In use

What type of cost plan is produced at each stage?

• Stage 1: order of cost estimate/feasibility study

• Stage 2: formal cost plan 1
• Stage 3: formal cost plan 2
• Stage 4: pre-tender estimate
• Stage 4-5: post tender estimate

What is the order of cost estimate?

It is prepared at RIBA stage 1 to check the affordability, set out the budget and realistic cost limit.

What are the minimum design information required to prepare order of cost estimate?

• Building use and location

• GIFA/Nr. of functional units
• Nr of storeys and storey height
• Outline program, procurement and contract strategy
• Site conditions/constraints
• Initial design intent or high value elements

The confident level of order of cost estimate is +/- 10%

What is the cost plan?

Prepared at RIBA stage 2-4. The purpose is:

• Value for money

• Keep cost of elements under control
• Provide guidance to the design team
• Assist the client to make informed decisions

Confident level: +/- 5%

Prepare regular updates and cost checks

What is the structure of cost plan and order of cost estimate?

Building works estimate (incl. external works)

+Main contractor’s preliminaries

+Main contractor’s OH&P

= Work Cost Estimate

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+ Professional fees

=Base Cost Estimate

+Risk allowances

=Cost limit

+Tender inflation

+Construction inflation

+VAT assessment

= Order of Cost Estimate / Cost Plan

What is the structure of order of cost estimate?

• Front cover
• Project description
• Statement of cost (Summary)
• Information used
• Schedule of floor areas
• Breakdown of costs
• Basis of estimate (assumptions and exclusions)

What is the structure of cost plan?

• Front cover
• Project description
• Status of cost plan
• Statement of cost (summary)
• Information used
• Schedule of floor areas
• Breakdown of costs
• Basis of estimate (assumptions and exclusions)
• Reconciliation with previous cost plan/ reason for change
• Comments on design options (if relevant)
• Cashflow forecast

What is the difference between order of cost estimate and cost plan?

• An OCE is the determination of the possible overall cost of the building early in the design stage
in relation with the employer fundamental requirements.
• A cost plan is a forecast of the cost limits for the building into cost targets for each element of
the building based on historical data. It is a live document used to control costs.

What is the difference between cost planning and cost analysis?

Cost analysis is a tool to capture data in away that it can be used to calculate the cost impact of design
elements. It is used to build cost models and assess design options.

What is the difference between cost, price and value?

• Cost is the total of labor, plant, material and management deployed for specific activity.
• Price is the amount of a purchaser/client will pay for an item or product- it is cost plus profit.
• Value is the benefit perceived by the client. It impacts on the price the market is willing to pay
for a product or service.

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How do you proceed if the cost plan exceeded the budget?I analyze the costs to assess the
source of the increase and whether any element of work is abnormally high against the order of
cost estimate.
Propose value engineering to my client and the design team.

What are methods of estimating?

• Floor area method: GIFA x cost per m2

• Functional unit method: a functional unit is a unit of measurement used to represent the prime
use of the building or part of the building such as key for hotel and bed for hospital; cost = nr.
Of functional unit x cost per unit
External works are measured separately

• Elemental method:
Initial cost model / elemental cost targets
Quantities x rate where information available
(approximate quantities / composite rates)
cost allowances / GIFA based where information not available

Rates include materials, labor, plant, subcontractors on costs (prelims, OH&P, design fees,
etc.)
Rates exclude main contractor’s prelims, OH&P, professional fees, risks, contingency and
inflation
Rates must be adjusted for time, location and abnormal/ exceptional items.

What is elemental cost plan structure?

0. Facilitating works (demolition, ground remediation)

1. Substructure (basement, piling, foundations, GF slab)
2. Superstructure (Frame, upper floor, roofs, stairs & ramps, external walls, windows, external
doors, internal walls and partitions, internal doors)
3. Internal finishes (wall, floor, ceiling)
4. FF&E
5. Services (sanitary wares, internal drainage, M&E, lifts)
6. Pre-fabricated buildings & buildings units
7. Works to existing buildings
8. External works (earthwork, hard & soft landscaping, external services, drainage)

What is construction shell and core?

• The basic structure, services and envelope of the building.

• And fit-out of landlord / common areas e.g. toilets, reception, cores, lifts
• Base services are terminated at break out points to floors but life safety services infrastructure
are fully provided.

What is CAT A fit out?

• Developer fit out

• Provide generic finishes and requirements suitable to suit most developers
• E.g. life safety elements and basic elements- suspended ceiling tiles, raised floor, carpet,
lighting, power distributed to floor plates.

How to estimate preliminaries?

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Order of costs estimate: apply % based on similar projects

Cost plan:

• Carry out cost checks on cost significant items based on the program
• Add allowances for unusual requirements/abnormal (traffic management, work sequence, site
access, scaffolding, work by others…)

What should be considered when assessing preliminaries levels?

• Length of the contract

• Location- accessibility, space restrictions, accommodation
• Type of project- new build/ refurb/ tower
• Need for temporary works
• Need for security
• Limitation method and sequencing of works, working hours
• Sectional completion
• Availability of services
• Level of contractor’s designed works

What is traffic management?

TM aims at segregating pedestrians and vehicles from construction works affecting carriageways and
footpaths.

How to estimate OH&P?

Apply % based on recent market conditions taking into account market trends and attractiveness of
project.

How to estimate risk and contingencies?

• Order of cost estimate: percentage circa 10%

• Cost plans: risks to be assessed as per group 14 in NRM
• The risk allowances (contingency) must be adjusted as design is being developed.

Contingency of risks include:

• design development risks (contractor’s risk in D&B)

• construction risks
• employer change risks
• employer other risks

How can risks being controlled?

• Avoidance
• Reduction
• Transfer
• Sharing
• Retention

How would you identify risk within the cost plan?

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Start by discussing the contingency sum which covers unforeseen events within the contract. For
specialist works, you need to explain PC sums to the client and the importance of going to tender as
soon as possible to eliminate the risk of any cost plan increases.

Stress the importance of continuous cost checks to identify design team change not included in the cost
plan.

Mention the risk register and the importance of completing the register and mitigating the risk as much
as possible.

How to estimate professional fees?

It can be either % of works cost estimate or actual costs.

What are sources of cost data?

• Pricing books such Spons and RSmean

• BCIS
• Cost models published in building magazine
• Internal database
• Cost management software
• Quotations from supply chain
• Benchmarking

What factors should be considered when a previous project data in the current project?

• Location: different market conditions, different costs of materials and labor wages.
• Time
• Abnormal and special requirements for the project

What BCIS stands for?

Building Cost Information Service

What is value engineering?

An organized approach aimed at providing the necessary functions at the lowest cost without
detrimental affect to quality, reliability, performance or delivery.

What is value management?

• Concerned with making explicit what value means to the client.

• Concerned with early stage of design e.g. to ensure the need to build is verified.
• VM aims to ensure that the right decisions are made the first time.
• VE used to correct decisions when things go wrong.

When does the VE/VM process occur?

• Concept- VM workshop 1
• Feasibility- VM workshop 2
• Scheme design- VE
• Detailed design- VE
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What happens during the VE process?

• Design team brought together: QS, Arch, Eng, contractor

• Pool expertise; guided by a team leader
• Higher chance of identifying and solving problems at an earlier stage to achieve better value
for money
• Not a cost cutting exercise, this leads to reduce quality and value.

What are the phases of the VE process?

• Information phase: functional analysis of component

• Speculation phase: thinking techniques, brainstorming
• Evaluation phase: evaluate solutions (cost and feasibility) list of options
• Development phase: detailed development of surviving ideas and interfaces: LCC techniques.
• Presentation phase: best solution identified and recommendation made

What is VM process?

• Workshops held where client must make important decisions.

• VM 1-concept: the need to build clear objectives set that are structured in a value tree
• VM 2-feasibility: outline brief complete, outline brief costed
• Review schemes and score against weighted objectives
• Assess capital cost to determine options for best value for money

Can you give me some benefits of VM?

• Need for a new investment is always verified and project goals are clearly identified.
• Objectives and decisions are openly discussed and explicitly stated.
• The evaluation and re-evaluation frameworks are structured, rigorous and rational.
• Decisions are supported by data and made on the basis of defined performance criteria.
• Alternative solutions are always sought and considered
• Business decisions are made with greater confidence
• Potential for increasing value for money

What are life cycle costs?

The costs that will be incurred over a defined period of operating and maintaining a building or an asset
e.g. repair, maintenance, replacement, cleaning, decorating, service provisions, disposal.

What is the whole life cycle?

• It is on a whole level rather than looking at individual elements.

• The collation of all capital and life cycle costs for individual elements plus either end of life costs
and the related project non-construction costs (site / finance) as well as the revenue associated
with the project.

What are the advantages of life cycle costing?

• Allows consideration of long term implications of a decision.

• Enables informed decisions to be made on material selection.
• This can result in lower operational, maintenance and replacement costs
• Can be used to plan future maintenance requirements
• Can be used to judge sustainability in money terms
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What are the disadvantages of life cycle costing?

• Future costs are optional and the costs of maintenance can always be deferred.
• Components are not always replaced due to end of life- almost impossible to assess this at
design stage
• Cost of defects caused by had workmanship/design faults cannot be predicted
• Uncertainty of available data- hard to predict life span, future inflation and maintenance
requirements over long periods.

What costs should be considered in life cycle costing?

• Capital costs
• Operational costs
• Maintenance costs
• Replacement costs
• Disposal costs

If this information is not available, what advice can you give your client?

They can obtain an indicative order of costs by benchmarking with similar buildings- preferably within
their portfolio as they would have best understanding of the building- but this is a very inaccurate method
and should be avoided whenever possible.

Where can you get information about maintenance costs?

• From subcontractors and suppliers

• In-house data

What techniques can be used to evaluate life cycle costs of different materials?

• Net present values

• Payback period

What is net present value?

Where the future costs are discounted to present values.

What are variables would affect the outcome of the NPV method?

• The time assumed for replacement

• The assumed maintenance and replacement costs
• The discount rate used

How does the payback period method work?

• It judges the investment in terms of the time period over which the invested sum is returned in
revenue.
• The increased expenditure on a higher quality component is viewed as the investment and the
savings provided in the form of future costs is viewed as the revenue.
• Often used to evaluate the options for incorporating sustainable technologies.
• Generally, for elements that have a very high initial capital costs but will pay back this initial
investment over a period of time in terms of reduced running costs.
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How accurate is life cycle costing?

• A lot of assumptions have to be made- on time periods, costs, trends, inflation

• Its accuracy relies on the accuracy of the assumptions
• As time period considered grows, the accuracy is likely to fall

Can you adopt any techniques to improve the accuracy?

Sensitivity analyses- adjust the different variables- time periods, costs, discount rates

What are the key cost drivers when preparing cost plans? What are the factors affecting the
overall cost of a building?

• A higher net: gross ratio which mean the building is more profitable and the client can gain
maximum sales values.
• Wall: floor ratio. The lower this figure is better, as you have less wall to floor spacing generating
less cost as the façade cost takes up a large portion of the overall build cost. That is why façade
choice is so important.
• Floor to ceiling
• Floor plate density
• Building plan/shape
• Building height/size
• Group of buildings
• Buildability
• Construction details/methods

What is value management?

How would you carry out a value management workshop?

Stages of value management:

• Developing a value hierarchy: The value hierarchy is a method of taking primary objectives and
breaking these down into their own sub objectives. Each sub objective means to achieving the
main objective.
• Developing the value tree: this involves a process of weighting the objectives and sub
objectives of the value hierarchy that produces an ordering of priorities between all conflicting
demands in the project. The weightings are arrived at by group consensus during the workshop.
• Develop a decision matrix: once the weighting to a various project objectives and sub objectives
have been set then it is necessary to decide which of the options will provide the best value
when set against the objectives, that is, how well they meet the targets that have been set.

What is value engineering?

How would you carry out the value engineering workshop?

Value engineering is normally undertaken in a facilitated workshop environment covering typically five
stages as follows:

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 • Information gathering
• Speculation or brainstorming
• Evaluation
• Development
• Presentation

A value engineering exercise is more rigorous than a typical project review. It should seek to bring
together an impartial team of professional with the common purpose of improving the project design.

Similarly, a value engineering exercise is not a cost cutting approach. In a proper value engineering
exercise, cost cutting is achieved by making a design more efficient without reducing essential
performance, reliability or maintainability. Conversely, traditional cost cutting exercises will focus on
material substitutions and reducing or eliminating specific elements. This approach frequently results in
reduced quality or performance.

What has been you experience with value engineering in projects?

How does a cost plan assist in the financial control of a project?

It gives an estimate of the final out-turn cost of the project. It assists in financial control of a project as
it elementally breaks down the costs associated with the element. It can also be broken down into trade
package breakdown.

How do you carry out market testing?

I first contact the relevant supplier’s trades and inform them of the information that I require. I then send
across any design information I have and some form of a pricing document. The suppliers then have a
time-frame by which they must respond with cost information.

How do you check the accuracy of cost plans?

I will compare the different elements in cost per m² against similar projects and compare the differences.
The variance in cost shall be explainable.

I would also check against previous versions to ensure that the costs have only changed in line with
new design.

What are the components of a cost plan?

• Executive summary- reconciliation to previous

• Summary of construction costs
o High level-reconciliation to previous
o Low level- reconciliation to previous
• Area schedule
• Benchmarking analysis
• Basis, assumptions and exclusions
• Risk and opportunities
• Measured work sections

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What are the typical assumptions in a cost plan?

• Assumed retail units are tenant fit out

• Project is competitively tendered
• Risk and contingency allowances

What are the typical exclusions?

• Land acquisition costs

• Client finance costs
• Survey and investigations
• Marketing costs
• Legal costs
• Professional fees, local statutory fees, site surveys, environmental audits, wind studies, third
party fees/costs
• Inflation
• Global market fluctuations and shortage of key materials
• Currency fluctuations
• VAT

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PROJECT FINANCAIL CONTROL AND
REPORTING

Page | 62
What is the purpose of a financial report?

• To report against budgeted values and act as working check on the project budget.
• To give the client an understanding of any savings or additional monies required.
• To report on contract progress against pre-contract predictions.
• Usually monthly reports to match with valuation dates.

What is the difference between financial reporting and CTC?

Both are very similar, but their format will be suited for internal reporting while financial reports are for
external reporting.

What is the format of financial report/cost report?

• Executive summary
• Contract sum
• Instructed variations (valued and estimated)
• Potential future variations as advance warnings
• Claims
• Fluctuations (if applicable)
• Provisional sum and prime costs
• Contingency / risk allowance
• Anticipated final account total
• Changes from previous period
• Cash flow forecast
• Total certified payments

Cost-plus contracts

• Actual reimbursable costs (incurred and accruals)

• Forecast of reimbursable costs to be incurred

Target costs

• Actual reimbursable costs (incurred and accruals)

• Forecast of reimbursable costs to be incurred
• Forecast of the pain and gain share

Measurement contracts

• Adjustment of quantities / re-measurable work

• Adjustment of variable costs

Construction management contracts

• Construction management fee instead of contract sum

• Adjustment to the construction management fee
• Adjustment to the trade contracts (mini-cost report for each trade)

Other costs the PQS may report on:

• Construction costs
• Professional fees
• Statutory fees and charges (services, planning...)
• Direct work costs

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 • Land costs
• Finance cost
• Legal fees

How would you control costs in the project?

• Proactive risk and contingency management

• Implementing a robust change control process
• Management of provisional sums within the budget
• Regular cost reporting which is also forward looking
• Rolling final account with closure process for financial impact of change

How would you implement a change control procedure in your project?

• Establish the change control strategy

• Define the change control process
• Document the process (change control forms)
• Establish a change control log
• Monitor and log changes
• Agree with client as to whether the changes are acceptable or should be rejected.
• Formalize the change through an instruction
• Update the financial report

What is the change control strategy?

• Provide an overview of the process

• State the key principles adopted
• Define who is accountable and responsible
• Prescribe who will approve changes
• Define the financial authority limits within the organization
• Define the process in detail and provide worked examples
• List the forms and logs to be used
• Define change control reports
• Provide guidance on the system tool to manage change

The QS needs to work with the planner, the design team and the project manager

The strategy depends on:

• The contract terms with client and subcontractors

• The type of the project
• The size of the project
• The complexity of the project
• The tool available (software solution!)
• The length of the project
• The availability of resources

What is the change control process?

• Change request by one of the parties

• High level assessment to be made of proposed change (optional)
• Detailed assessment of potential cost and program impacts
• QS completes and returns change request form to EA
• EA review completed change request form and prepare and issue overall summary change
request form for client approval

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 • Client representative discuss the proposed change with the project board and either approve
or reject
• EA to issue instruction if approved
• Designer to complete the design work where necessary

What is the purpose of change control forms?

• Alert the parties to the existence and nature of any potential change
• Provide a structured means of reporting the potential implications of that change on cost,
program and other relevant criteria
• Provide a basis for the decision to approve or reject the proposed change
• To trigger the issue of the relevant instruction to cover any approved changes

What is the structure of the change control forms?

• The change request number and date raised

• A description of the change and justification of the change
• The cost and time implications
• Any risk attached to the proposal
• Implications of functionality, quality, buildability and HSE issues
• Description of the documentation, drawings etc. used and attached the CPF
• Implication to the project team fees and resource levels
• Source of funding of change control
• Date required for approval and implications of late approval
• An approval or authorization section

What is the prime cost?

• The contractor is asked to price an item based on a stated unit cost for materials
• Once the material is specified, the contractor adjust the material rate only

What are provisional sum?

Provisional sum is a sum of money included in the contract for:

• Work by a statutory authority

• Work that cannot be fully defined at time of tender
• Work that may or may not be required

What type of provisional sum are there?

Defined and undefined

Defined provisional sum

• A sum included in the contract for work that has not completely designed at time of tender but
which certain specified information can be given.
• The contractor is deemed to have make a proper allowance in their tender for carrying out the
work (both program and preliminaries)
• This means that they are not entitled to an EOT or extra prelims for carrying out, whatever the
delay or cost of doing so.

Undefined provisional sums

• A sum is included for work for which there is minimal information at time of tender
• The contractor is not deemed to have allowed for anything in their tender submission.
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 • They may be entitled to actual costs of the works plus additional preliminaries and an extension
of time if relevant.
What if the actual work does not closely resemble the provisional sum?

• The description must be amended and this will be treated as a variation

• This will entitle the contractor to an EOT and extra prelims if appropriate

How can a provisional sum be expended?

The architect/CA has to issue an instruction for its expenditure

How are they valued?

The same way as a variation

How are provisional sums dealt in the final account?

The provisional sums included in the contract are deducted and the actual amount is substituted.

What shall you include in the risk register?

• Design development risks

• Construction risks
• Employer change risks
• Employer other risks

What is contingency?

• Contingency may be monitored as a percentage of the program elapsed and the payments
certified to date.
• Contingency may be expended as and when required and in accordance with S curve
• Ideally, contingency is based in a risk register and you will know when it appropriate to adjust
specific allowances

How would you advise a client if the contingency is expended at a greater rate than anticipated?

• Check the risk profile- most risk occur below ground

• Raise additional funds
• Put in place a more robust cost control strategy: find out why costs are raising unexpectedly!
• Value engineering
• Scope reduction

Why do we need a cash flow forecast?

• Obtain loans
• Bank / fund monitoring
• Balance the contractor’s cash management
• Measure project performance
• Manage resources and supply chain

How would you create a cash flow forecast?

• Need to know the construction program and contract value

• It depends on the valuation schedule (milestone, stages, work done to date?)
• At high level, use a cash flow computer program (S-curve)
• Whenever possible, attribute BOQ costs to a construction program.
• Adjust for payment terms, retention, holidays, fluctuations, advance payment, etc.

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 • Update the cash flow forecast as often there is a significant change:

o Variation and claims

o Late/ early payments
o Loss of productivity
o Unforeseen events / delays
o Expenditure of provisional sums and risk allowances
o Nominated sub-contractors
o Materials on site and off site
o Re-sequencing / acceleration
o Liquidated damages

What are the benefits of cash flow forecast?

o Allows employer to gain an understanding of financial requirements over duration of the project
duration.
o Also acts as a check against valuations- early indication of delay or financial difficulties… but
not always!
o The cash flow may have been incorrect in the first place or it may have not been updated to a
factor in changes.

What is the purpose of change control on a construction project?

What measures can be taken to effectively control costs during the construction phase of a
project?

What is the purpose of a financial report?

Where you have initiated a change yourself, can you tell me the information that you included
on the Change Proposal Form (CPF) prior to presenting to the client?

How would you deal with a cost plan that is over the client’s budget?

Before approaching the client, identify the areas where possible savings could be made. This would be
carried out by first meeting with your design team and through value engineering identify a list of
potential savings that can be made.

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COMMERCIAL MANAGEMENT

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What are the items to be included in the unit price?

• Labour
• Material
• Plant
• Sub-contractors
• Preliminaries
• Overheads

May be built in rates or separately:

• Profit
• Inflation
• Risks

How would you deal in pricing of incomplete design information?

• Provisional sums
• Contingency / risk allowance
• Qualifications

What would you consider in analysing the materials cost?

• Quantity required for the works

• Wastage allowance
• Allowance for cutting out (if relevant)
• Delivery costs
• Minimum production or delivery batch
• Handling costs
• Storage costs

What would you consider in analysing the labour costs?

• Direct staff (including holidays, sick leaves, training, pensions…)

• Indirect staff (including agency fees)
• Anticipated production rate (man hours/quantity of work item)
• Adjusted productivity rates for site conditions
• Adjusted productivity for skills/experience of staff
• Idle time (i.e. awaiting deliveries)

What would you consider in analysing the plant costs?

• In-house cost allocation (including depreciation, storage, insurances…)

• Time-related hire costs
• On/off hire costs
• Idle time
• Fuel, oil, tires
• Repairs and maintenance costs
• Transportation and setting out to site

What would you consider in analysing sub-contractor costs?

• Quotations / purchase orders

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 • Attendances
• Provision of preliminaries items
• Qualifications and exclusions
• Minimum visit charge
• Payment terms (impact on cash flow)
• Inflation / expiry date of quotations
• Allocation of risks

How would you capture cost data in a project?

• Labour: timesheets
• Materials: PO, delivery notes, invoices and stock control
• Plant: hire orders, on/off recording, plant timesheets, plant swap and breakdowns.
• Sub-contractors: PO, accruals, application for payment, invoices
• Other: indirect costs such as utility bills, stationary, photocopier costs and other ancillary site
overhead purchases

All costs must be clearly allocated to the correct code

Most companies use a ledger software such as COINS

Invoices and site records should always be reconciled!

What is the liability statement?

• Liability statement summarize the contractor’s total liability for each sub-contractor package
(accruals + commitments)
• The total liability is the total cumulative amount that would be due to a subcontractor for work
done up to the period end-date, if no further work was to take place (=value of work done)
• It can include variation not yet agreed, but for which a prudent allowance should be made in
the liability
• An accrual is an accounting function: it is the difference between the total liability and the
amount already paid to the subcontractor = amount due / invoiced but not yet paid
• A commitment: is a forecast of costs / invoices to come from orders placed but where the
goods or services have not yet been received

What is Cost Value Reconciliation (CVR)?

Comparison of the overall cumulative project cost versus the overall cumulative project value taken to
the same point in time (snapshot)

The purpose:

• Analysis of reasons for cost movements in the period

• Measure the project profit
• Analysis of deviance against the tender estimate
• Take into account any risk, contingency or commercial adjustments contained within tender
rates. If the risk did not materialize, it may be released as profit margin.

How would you prepare CVR?

• CVR is comparison of the overall cumulative project costs versus the overall cumulative project
value taken in the same point of time

Cumulative project costs

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 • Internal valuations: actual costs incurred for work done to date
• Liability statement for each work package (accruals + commitments)
• Variations/changes are reported separately
• Costs are allocated to appropriate work breakdown (activity, package) and cost element (labor,
material, plant, subcontracts)
• Company overheads are captured centrally and allocated to the project as a percentage.

Cumulative project value:

• External valuations: interim valuations of work carried out by a contractor for the purposes of
applying for payment to the client
• Works completed to the EA satisfaction
• Material on site
• Material off site
• Less retention
• Variations/ changes
• Claims

What is the earned value analysis (EVA)?

It compares what value of work would have been done and what costs would have been incurred at the
same point of time. If the works had been on program.

• The scheduled or planned costs at any time on project

• The actual costs have been expended to date
• The value of the actual work achieved to date

What is cost performance index (CPI)?

Represents the amount of working being completed on a project for every unit cost spent.

CPI is computed by earned value/actual cost. A value of above 1 means the project is doing well against
the budget.

What is schedule performance index (SPI)?

Represents how close the actual works is being completed compared to the schedule.

SPI is computed by earned value / planned value. A value of above 1 means the project is doing well
against the schedule.

What is cost to complete report?

It is a forecast of the cost required to complete the project from specified point of time from which the
forecast profitability of the project is calculated.

Different from project financial control and reporting:

• Internal report only

• Much more detailed against each cost heading
• Report forecast revenues (valuations) against forecast costs
• Use tender breakdown / estimate as the baseline
• Take into account actual revenues and costs incurred based on CVR reports
• Take into account project liabilities (accruals + commitments)
• Variations are reported separately with a suitable risk adjustment if not yet agreed.

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 • Forecast costs required to complete the works
• Forecast the resulting performance/profitability of the project
• Regularly updated
• Labor: estimated man days required to complete an activity using current rates, adjusted for
wages increases or identified productivity variances
• Plant: estimated number of hire days required to complete an activity at current rates, adjusted
for price increases (hire) or depreciation (in-house) + fuel
• Materials: estimated or taken-off quantities, using estimated rates or current buying rates,
adjusted for price increases, bulk discounts and rebates
• Subcontract packages: forecast using the order value to the subcontractors as the basis for
plus or minus contract variations
• Preliminaries: estimated based on tender allowance vs. actuals to dates (trends)

The forecasted costs must take into account:

• Any changes to the works methodologies

• Any changes to site conditions
• Any changes to the program or sequence of works
• Risks and opportunities register
• Trends in productivity, wastage, defects…
• General costs increase (inflation)

Using historical cost data as a benchmark of the project performance.

Capture cost data for future estimates.

How would you manage the negative cash flow?

• Increase sources of funding: borrowing, check variations accounts and payments, materials
on/off site, advance payments
• Reduce outgoings:

o Negotiate the payment terms with supply chain

o Review procurement schedule
o Reduce resources on site without affecting the program
o Increase productivity / review work methodology

What would your advice the client if the cash flow was behind / ahead of forecast?

o Not necessarily in delay / ahead of program

o Check if activities have been re-scheduled in the program
o Late payments
o Check variations account
o Materials on site / planned deliveries
o Impact of EOT
o Giver consideration for client’s potential funding issues

What would you do to minimize the costs in a project?

o Review of preliminaries and local overhead costs

o Review of hire equipment: lease vs. purchase?
o Review of the levels of stock materials
o Change of construction methodology for more efficiency
o Just in time delivery to reduce storage and avoid storage and handling
o Change to cheaper materials specifications
o Paying up front for off-site materials or unfixed plant to avoid price fluctuations

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 o Consider re-tendering subcontracts and material packages
o Utilities: temporary vs permanent power?
o Can the plant and equipment be used more effectively and efficiency?
o Review of programing to deliver improved efficiency of resources
o Review of staffing and supervision levels: productivity levels, direct labor vs. agency?

How would you maximize the value in the project?

• Re-measurement
• Change control management

• What is CVR?
• How does a contractor measure profitability?
• What would you do if you noticed your project was becoming over budget?
• What do you include in your monthly cost report?
• What are the variable items in that report?
• How do you measure if profit is made or not in the project?
• What is a cash flow? What it is used for?
• What would you advise if the cash flow shows negative in the future? What can you
do to prevent that?
• What are the solutions available when cost is over the budget, except value
engineering, de-scoping?
• How would you show the provisional sums in the cash flow?
• How would you show the risk in the cash flow?

What is the main difference between the cash flow prepared by the contractor for the client and
a cash flow prepared by the PQS for the client?

The contractor will not be interested in design team fees whereas they will be an automatic inclusion in
the PQS cash flow forecast.

You could expand your answer in terms of how a cash flow is put together and the significance of the
S-curve.

What is the role of the commercial manager?

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QUANTIFICATION AND CONSTRUCTION
WORKS

Page | 74
What are standard method of measurements you are aware of?

• SMM7
• NRM
• CESMM4
• POMI

Why is it important to measure according to industry standards?

• To provide consistency and greater accuracy of pricing

• To ensure that all parties price on the same basis and reduce the risk of dispute

What is SMM7?

• Standard method of measurement edition 7

• Now officially superseded by NRM but still widely used
• SMM7 identifies the unit to which the work is measured and the requirements of measuring the
works
• SMM7 is authorized by agreement between RICS and construction confederation

What are NRM (New Rules of Measurement)?

• NRM1 first published on 1st May 2009

• NRM1: Order of cost estimating and cost planning for capital building works (2nd edition, 2012)
• NRM2: detailed measurement of buildings works (1st edition 2012)
• NRM3: order of cost estimating and cost planning for maintenance building works (1 st edition
2014)

Why were the NRM introduced?

• SMM designed for production of bill of quantities for tender purposes

• Use of SMM for cost estimates and cost plans has led to lack of uniformity and consistency
among quantity surveyors and employers were never certain of what was included in the cost
plan
• NRM provide common consistent basis for order of cost estimates and cost plans and give
confident to employers

Why should you use the NRM?

• NRM provide common and consistent basis for order of cost estimates and cost plans and give
confident to employers
• If a QS is being sued for negligence or subject to RICS disciplinary procedure, the use of NRM
provides partial defense as it represents best practice
• QS are not required to follow the NRM if they judge it is unsuitable to their specific project but
they must have a good reason.

What is the structure of the NRM1?

• Part 1: general introduction

• Part 2: measurement rules for order of cost estimate
• Part 3: measurement rules for elemental cost planning
• Part 4: tabulated rules of measurement for elemental cost planning

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 • Appendices: GIA, functional units, NIA, elemental breakdown, templates, information required
for cost plans

What is the structure of the NRM2?

• Part 1: general introduction

• Part 2: rules for detailed measurement of buildings works
• Part 3: tabulated rules of measurement for buildings works
• Part 4: appendices: guidance to prepare BOQ and templates

What is CESMM4?

• It is the standard method of measurement published by the institute of engineers (ICE)

• Civil Engineering Standard Method of Measurement- since 1976
• CESMM3-1991
• CESMM4-april, 2012
• Main difference is that CESMM3 made reference to ICE conditions of contract and British
standards. These references have now removed which makes CESMM4 compatible with most
contracts and can be used internationally.
• A number of new items have been added or removed to reflect new technologies, mainly under
road and paving but the structure of CESMM is unchanged
• The rail section is the one that has been the most revised

How should a bill of quantities be structured according to the CESMM4?

• List of principal quantities (to quickly assess the scope and scale of works)
• Preamble
• Daywork schedule
• Work items (grouped into parts)
• Grand summary

What is included in the preamble?

• Description of items not measured in accordance with CESMM4

• Reference to the selected form of contract
• The completed CESMM4 schedules cross referencing the CESMM terms with clauses within
the selected form of contract (contract administrator, provisional sums, interim payment, valuing
changes…)

What is GEA?

• Gross External Area

• This is the area of the building measured externally at each floor level

What is GIA?

• Gross Internal Area

• This is the area of the building measured to the internal face of perimeter wall at each floor level
• Excluded external open sided balconies, fire escapes, canopies, external walls, fuel stores.

What is NIA?

• Net Internal Area

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 • This is the rea of usable space measured to the internal face of perimeter wall at each floor
level
• Excludes the above and internal structural walls and columns, spaces with headroom less than
1.5m, corridors and circulation space used in common, permanent lift lobbies, toilets, cleaners’
cupboards, plant rooms.

Where are all of these defined?

• The code of measuring practice, 6th edition published by the RICS

• IPMS for offices and residential

What is the purpose of the code of measuring practice

Provides precise definitions to permit the accurate and consistent measurement of buildings.

What would you expect the percentage of NIA to GIA/GEA to be?

• it depends on the type of project being undertaken (school, hospital office…)

• if it were an office, I would expect the NIA to GIA to be in the region of 70-85% where 70% is
not good and 85% is excellent.

What is a star rate?

A rate that is based on the bill rates but includes a fair allowance to take into account the differences
with works of similar character.

What is dayworks?

The prime (actual) cost of all the materials, labor and plant used in carrying out the work long with %
additions to each category as set out in the contract.

What information is necessary to able to assess the dayworks?

• Vouchers showing the amount of time spent on each activity (dayworks sheets)
• Name of workmen
• Plant used
• This information should be given to the architect at the end of the week following that in which
the work was carried out for verification

Can the QS alter hours which considers to be excessive on a dayworks sheet that authorized by
the architect?

No

What would you include the interim valuation?

• Works properly executed

• Variations / changes
• Expenditure of provisional sums/prime costs/dayworks
• Adjustment of provisional quantities (measurement contracts)
• Site materials / materials on site (if applicable)
• Materials off site (if applicable)
• Contractor’s design fees
• Loss and expense (claims)
• Acceleration costs (if applicable)
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 • Overheads and profit

Plus, adjustment in respect of:

• Advance payment (if applicable)

• Work not properly executed (i.e. not in accordance with the contract)
• Fluctuations (if applicable)
• Retention
• Amount previously paid

How would you value preliminaries?

• Included in works properly executed

• Must be split between fixed and cost related
• Cost related are usually paid as a percentage of the time elapsed
• Best practice would be to estimate the resources used to date and make adjustments if the
contractor is in delay

What are payments on account?

• If a change has been formally instructed and the associated works executed but the value
has not yet been agreed, this item can be paid on account
• The PQS should never allow payment for changes that have not been formally instructed

What is the final account?

Detailed statement of all the adjustments to the contract sum and therefore the total amount that
employer is liable to pay together with the basis on which it was calculated

What must the final account statement state?

• Total adjusted contract sum

• Total of all additions/deductions
• Total o all previous payments made to the contractor in interim certificates
• The difference-expressed as a debt due from one party to the other

What shall you include in the final account?

• The original contract sum

• Any omissions and adjustment of provisional sums and/or dayworks
• All additions and omissions as a result of instructed variations
• All additions and omissions as a result of agreed re-measured of quantities (in measurement
contracts only)
• Any additions for loss and expense due to EOT
• Any adjustment for LD/delay damages
• Total final account sum

What are the constituents if it a measurement contract?

• Summary
• Bill of re-measurement
• Preliminaries (which may be a fixed lump sum)

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 • Claims
• Fluctuations (if relevant)

• How many sections in CESMM?

• What are the different types of rules in CESMM?

• What is the difference between preliminaries and overhead
• Does SMM7 describe defined and undefined provisional sums?
• Does CESMM describe defined and undefined provisional sums?
• What is the difference between POMI and SMM7. How will you propose?
• How would you advise your client about the appropriate standard method of
measurement?
• What are the standard method of measurement you are familiar with?
• Your client need to prepare a BOQ and he has a team who did not use standard method
of measurement for long time. How will you advise to your client and what are the
challenges and risk you identify?

How would you advise your client about the appropriate standard method of measurement?

The various standard method of measurement and indeed the forms of contracts have been designed
to accommodate the wide range of building project types. A good starting point is to look at the nature
of the project- and the cost significant items that needed to be priced. CESMM deals with large
quantities generally of a homogenous nature (concrete retaining, walls, roads and so forth) which you
could argue are simple- but also hugely complex infrastructure components like bridges via ducts and
tunnels- where the method of construction is more important than the measurement of quantities down
to the last 5 millimeters.

Bespoke method of measurements I think are a bit of a myth- largely because when it is created- if
successful it becomes a standard- but when you link it with the procurement requirements of the client.
If I were going to advise the client which to use- I would ask what their procurement requirements are
first-time, cost, quality, accountability? The answer will usually tell you which method of measurement
is appropriate.

For example, NRM is suitable for buildings works, CESMM is for civil works such as infrastructure
projects and bespoke method of measurement is more suitable for oil and gas projects.

What are the methods of quantifying and pricing of construction works?

Quantification by standard measurement methods and pricing by tendered rates, quotations,

dayworks…

What are the different types of pricing documents?

BOQ, schedule of rates, schedule of activities/works

Defined and undefined provisional sums are coming under SMM7. CESMM explains format of BOQ but
SMM7 does not give BOQ format. In SMM7, the quantity should be accurate. In a BOQ, provisional
sums should be in the preliminaries.

What are the rules of CESMM?

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 • Measurement rules: set out how to measure works
• Definition rules: set out meaning of terms used in CESMM
• Coverage rules: explain what items are included but not specifically stated in the description
• Additional description rules: state whether additional descriptions are required over and above
standard phases.

What is the structure of BOQ under CESMM?

• List of principles quantities (this helps the tenderer to make a rapid analysis)
• Preamble
• Daywork schedule
• Work items
• Grand summary

What is the structure of BOQ under POMI?

• Rates and measurement clauses

• General requirements
• Works (site work, concrete, masonry…)
• Dayworks
• Provisional sums
• Main summary

What is the purpose of standard method of measurement?

• To get a universal approach

• Pricing for tendering
• For post contract financial control

if there is no time to prepare a detailed BOQ before tendering, what are the possible options?

• Bill of approximate quantities

• Ask the tenderers to take off quantity from drawings and specs
• Procurement thru management contracting
• Two stage tendering

What is the work classification and coding under CESMM?

In SMM7, the BOQ shall be fully described and accurately represented the quantity and quality of the
works to be carried out. More detailed information that is required by these rules shall be given where
necessary in order to define the precise nature and extend of the required work.

What is the difference between SMM7 and CESMM?

SMM7 is a document for measurement. It does not set out the rules for the production of a BOQ but the
object of CESMM is to set forth the procedure according to which BOQ should be prepared and priced
and the quantities of works should be expressed and measured.

SMM7 requires more detailed items of BOQ (i.e. excavation is excavation, earthwork support, working
space…) but CESMM consider all items deemed to be included in one item.

SMM7 is suitable for building projects (where items are more and quantities are less) CESMM is suitable
for civil engineering works (items are less and quantities are more)

CESMM is based on ICE conditions of contracts

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What are the objectives of BOQ as per POMI?

• To assist in the preparation of tenders by providing measurement of quantities in a uniform

basis
• To provide a basis for the financial control of a project in accordance with the conditions of the
contract.
What is the discounted cash flow?

It describes a method of valuing a project, company or asset using the concepts of the time value of
money. All future cash flows are estimated and discounted to give their present values.

Discounted cash flow analysis is widely used in investment finance, real estate development and
corporate financial management. It is very similar to the net present value.

What is the difference between building works and civil engineering works?

Building works: all types of buildings such as house, flats, shops, hotels, hospitals…

Civil engineering works: water supply schemes, irrigations schemes, surface drainage scheme,
highways, railways, culverts and bridges, retaining walls…

Why the standard method of measurement has been introduced?

For the purposes of providing a uniform basis for measurements, two types of standard method of
measurement have been established namely:

• Standard method of measurement of building works (SMM, NRM)

• Civil engineering standard method of measurement (CESMM)

What are the common features of the standard method of measurement?

• General approach
• Unit of measurement
• Certain items of work which can be measured by any of the standard method of measurement

What are the advantages of using standard method of measurement?

The following are some advantages that can be gained by studying and referring to standard methods
of measurements and incorporating same in the contract documents:

• Avoidance of disputes in measurements between parties

• Gaining familiarity in standard method of preparation of BOQs
• Gaining familiarity in the standard method of presenting item description in BOQs.

What is on-account payment / part payment?

This can be defined as an advance payment made for work already performed and effected before bills
submitted, checked and certified.

This type of payment is not incorporated in the contract but made only based on a mutual understanding
and special agreement with relevant approval.

In this type of payment only a percentage is certified therefore they are called part payments.
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What are then mostly used standard method of measurements?

POMI

Principles of measurement (international) for works of constructions (POMI) published by RICS

originally in 1979 and re-printed in 1988, 1991, 1994, 2001, 2002 and 2004. POMI is a popular standard
method of measurements to measure building works but it has provisions for measuring site works.
POMI has a section for general principles (GP) and 18 work sections named A to R. section GP includes
principles to be used including all inclusions and exclusions in measuring the works.

CESMM

Civil engineering standard method of measurements well known as CESMM published by Institute of
Civil Engineers originally in 1976. CESMM is prepared for measuring civil works. CESMM has 8
sections and the 8th section has 26 classes to measure different categories of work. Class Z of CESMM
could be used to measure simple buildings works incidental to civil engineering works.

SMM7

Standard method of measurement of building works 7th edition was published by RICS originally in
1988. SMM7 consists of 25 work sections from A to Y detailing all building works. It also has section D
for measuring ground works related to the building.

What is the difference between CESMM3 and CESMM4?

CESMM4 retains many of characteristics of CESMM3, but can be used across a range of contract types
including NEC, FIDIC and ICC. Other changes have been introduced to bring it into line with industry
practices and to reflect the emergence new technologies. In addition, references to the British standards
have been removed, making the method more applicable to a global audience (the only exceptions
being road construction and concrete mixture)

What are the rules of CESMM?

• Measurement rules: set out how to measure works

• Definition rules: set out meaning of terms used in CESMM
• Coverage rules: explain what items are included but not specifically stated in the description
• Additional description rules: state whether additional description are required over and above
standard phases

What is method related charges in CESMM?

Amounts included by the contractor in the general items for his intended method of working which is
not proportional to the quantities in the BOQ i.e. not re-measurable and will be paid in installments as
agreed between the contractor and engineer. However, the amount can be varied only in such situations
where the engineer specifically instructs to change the method of working the contractor allowed for.

Advantages of method related charges:

• Contractor can recover the moneys he spent at the beginning for site establishment.
• Contractor can recover his normal overheads (site) if BOQ quantities get reduced by re-
measurement.

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 • Client can easily assess the preliminary items for calculating prolongation costs on any time
extensions.

What are the types of charges other than work related charges under CESMM?

• Method related charges

• Time related charges
• Fixed charges

How to incorporate the nominated subcontractor under CESMM BOQ?

Section 5.16 in CESMM states that the estimated price of work to be carried out by a nominated
subcontractor shall be given in the BOQ as a prime cost item. Each item shall be followed by:

• An item for a sum for labors in connection therewith which in the absence of any express
provision in the contract to the contrary shall include only:

➢ In any case in which nominated subcontractor is to carry out work on the site allowing him to
use temporary roads, scaffolding, hoists, messrooms, sanitary accommodation and welfare
facilities which are provided by the contractor for his own use and for providing space for office
accommodation and storage of plants and materials, for disposing of rubbish and for providing
light and water for the work for NSC
➢ In any case in which the NSC is not carry out work on site for unloading, storing and hoisting
materials supplied by him and returning packing materials
or an item expressed as a percentage of the price of the prime cost item in respect of all other
charges and profit

Does provisional sums are explained under CESMM?

Section 5.18 states that provision for contingencies shall be made by giving provisional sums in the
BOQ and not by increasing the quantities beyond those works expected to be required. Provisional
sums for defined work shall be included where work is known to be required but the scope of the work
cannot be completely designed but the scope can be defined. A provisional sum for general contingency
allowance shall be given in the grand summary.

Explain classification and coding as per CESMM?

The work classification structure is made up to four levels. First level of 26 classes identified as
alphabets A to Z. most classes are divided into 8 features in the first division as 1 to 8. Classes are
again divided into second and third divisions again identified as numbers 1 to 8.

For Example:

I412

I: pipework-pipes

4: steel pipes

1: nominal bore: not exceeding 200mm

2: in trenches; depth: not exceeding 1.5m

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What is the content of preamble under CESMM?

• The preamble shall state the method of measurement other than CESMM.
• The method of measurement is designed to be contract and therefore it is necessary to ensure
that there is compatibility between the method of measurement and the conditions of contract
used on the project. To achieve this, a schedule of cross referencing between the CESMM
section reference and contract provisions.
• Unit of measurement
• Abbreviations
• Prices and rates

What is the inflation?

Upward movement in the average level of prices and costs.

What are preliminaries?

Preliminaries are items that cannot be allocated to a specific element, sub-element or component. Main
contract preliminaries include the main contractor’s costs associated with management, staff, site
establishment, temporary services, security, safety and environmental protection, control and
protection, common user mechanical plant, common user temporary works, the maintenance of site
records, completion and post-completion requirements, cleaning, fees and charges, site services and
insurances, bonds, guarantees and warranties. Main contractor’s preliminaries exclude costs
associated with subcontractor’s or work package contractor’s preliminaries.

What is the defined provisional sum?

A provisional sum for defined work is a sum provided for work that is not completely designed but for
the following information shall be provided:

• The nature and construction of the work

• A statement of how and where the work is fixed to the building and what other work is to be
fixed thereto
• A quantity or quantities which indicate the scope and extend of work
• Any specific limitations identified

Where provisional sums are given for defined work, the contractor will be deemed to have made due
allowance in his or her programming, planning and pricing preliminaries.

Provisional sums shall be exclusive of overheads and profit. Separate provision is to be made in the
BOQ for overheads and profit.

What is undefined provisional sums?

Where any aspect of the information required for defined provisional sums cannot be given, work shall
be described as undefined provisional sum.

Where provisional sums are given for undefined work, the contractor will be deemed not to have made
any allowance in programming, planning and pricing preliminaries.

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Why shall a provision be made in BOQ for the contractor to apply their required percentage
addition for overheads and profit?

To apply this percentage for the following items:

• Preliminaries
• Measured work including contractor design works
• Risk allowances
• Work resulting from the expenditure of provisional sums (i.e. defined provisional sums,
undefined provisional sums and works to be undertaken by statutory undertakers)

What is overhead and profit?

Profit can be defined as the money the project makes after accounting for all costs and expenses. The
percentage of profit a contractor might apply to their tender price will vary according to risk, workload
and economic climate. It can also relate to the turnover of capital employed for each project; the more
times a contractor can turnover its capital on a project, the more it can afford to cut margins.

Overheads are often priced proportionately against the project and are calculated costs of running the
company contracted to carry out the project. Often these costs are described as head office
administrative costs including property costs, finance charges on loans, insurances, staff, taxes,
external advisors, marketing and tendering activities.

Most of contracting companies will calculate a percentage against the project costs to be set against
each project somewhere between 2.5% and 10% to cover overhead office services.

How would you produce a pre-tender estimate?

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CONSTRCUTION TECHNOLOGY

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What are the buildings regulations applied in MENA?

• International Building Code (IBC); by ICC, American

• NFPA; Building construction and safety code
• Dubai green building regulations and specifications
• Saudi Building Code (based on IBC)
• Gulf cooperation council (GCC) unified gulf building code to be based on Saudi Building Code
is under on-going development

What is International Building Code?

• Published by International Code Council; American

• IBC applies to commercial construction
• 35 chapters + appendices A to M
• Fully compatible with all other existing international codes
• International Residential Code (IRC) applies to residential buildings
• Chapter 27 electrical
• Chapter 28 mechanical systems
• Chapter 29 plumbing systems
• Chapter 30 elevators and conveying systems

What is Saudi Building Code?

• It is based on IBC
• 401 Electrical
• 501 Mechanical
• 601 Energy conservation
• 701 Sanitary
• 801 Fire Protection

What are the building regulations stages at KSA?

• stage 1: obtaining letter from main municipality

a letter from the owner is submitted to the main Riyadh Municipality along with a copy of the
land deed. The municipality checks the masterplan of the area to ensure the suitability of the
plot for the construction of the building. The municipality then writes a letter to the branch
municipality of the area where the plot is located.

• Stage 2: obtaining preliminary location permit from branch municipality

The owner submits a copy of letter obtained previously from the main municipality to the branch
municipality requesting an inspection of the plot to ensure that the plot length, width and total
area as indicated on the deed. The branch municipality then issues an approval to use the land.

• Stage 3: obtaining approval from the fire department

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 The branch municipality writes to the fire department or civil defense to obtain its approval of
the plan submitted by the owner for the fire alarm and fire fighting systems. The fire department
approves these plans and sends them back to the municipality.

• Stage 4: obtaining a final building permit

The branch municipality issues a building permit and sends it to the main municipality for
approval, which given dependent on the nature of the building. The owner can collect the permit
from the main municipality after one to three months.

What are the typical components of site investigations?

Should include anything on adjacent sites that may impact and:

• Boundary hedges/fencing
• Existing trees
• Size, depth and location of services-gas, telephone, electricity, water, drains
• Existing building
• Ground water conditions
• Soil investigations- trial pits…

What is the purpose of site investigation?

• To determine the suitability of the site for the proposed works and determine adequate and
economic foundation design (or route of an infrastructure project)
• To determine potential construction difficulties
• To determine any drainage or soil improvement requirements
• To prevent building failure due to subsidence, settlement or seismic activity
• To mitigate impact on environment
• To determine costs and duration of the project
• The method chosen will depend on type of building, anticipated depth of foundations and
expected type of sub-soil.

What are the outcomes of soil investigation?

• Type of soil: rock, made ground, organic

• Proportion of sand, clay and silt
• Water table, presence of gas, contamination
• CBR (California Bearing Ratio) which indicates the load bearing capacity of the strata--- higher
CBR = stronger

What are soil investigation methods?

• Direct methods: test pits, trial pits, trenches

• Semi-direct: drilling, deep boring
• Indirect: sounding or penetration tests, electromagnetic

No method is perfect; it is essential to cross-reference with several methods!

How would the soil be improved?

• Vibration
• Dynamic compaction

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 • Jet grouting
• Encapsulation
• Soil washing
• Vapour extraction
• Electrolysis

What are the main consideration of selecting the type and size of foundations?

• Soil conditions
• Structural loading
• Type of structure
• Nosie and vibration
• Cost
• Program
• Construction constraints

What are the types of foundations?

• Strip foundation (reinforced or not)

• Trench fill foundations
• Pad foundations
• Raft foundations (solid or with beams)

Explain strip foundation?

• Suitable for light structure and most sub-soils

• Width must allow for working space (450 to 660mm)
• Steel reinforcement is strong in tension
• Mesh = strength in both directions
• Other options would be bigger foundations but more costly

Measuring foundations

• Excavations, disposal on/off site

• Extra over for rock, contaminated ground, disposal of water, soft spots…
• Width must allow for working space (450 to 600mm)
• Compact bottom of excavation
• Earthwork supports
• Formwork
• Geotextile
• 50 to 75mm lean concrete binding (to provide a levelled base)
• backfilling

Explain trench fill foundation.

• Also called deep strip foundations or engineered foundations

• A trench (425mm minimum) is excavated and filled with mass concrete
• No need for working space or backfilling
• Excavation are faster and cheaper but it uses more concrete
• Can be uneconomical and unsafe to build over 2m deep

Explain pad foundation

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 • Provide a base for single-point loads such as concrete or steel columns or support ground
beams
• Rectangular, square or circular, constructed from reinforced concrete
• Generally shallow, but can be deep depending on the ground conditions
• The arrangement of pad foundation depends on the nature of the structure they are supporting,
the loads imposed, the bearing capacity of the ground below and the space available on site.
(separated pads, continuous pads, pads and continuous ground beams)

Explain Raft foundation

• Used to spread the load of the superstructure over a large base and reduce the load per m2 of
the area
• Useful in low bearing capacity soils and heavy individual columns loads
• Can be a solid raft slab or beam and slab raft-ground beam system and suspended PC concrete
ground floor
• A raft can be used for lightly loaded buildings on sites with poor soils
• Heavy loads to the raft have the potential to cause the raft to move sideways as a result of raft
foundations not being very deep

What is piling?

• Piles are a series of columns constructed or inserted into ground to transmit the load of a
structure to a lower level of subsoil.
• Used where no suitable foundation conditions near ground levels or high water table

What are the different ways that the piles transfer their load to surrounding ground?

• End bearing piles

• Friction piles
• Combined end bearing and friction
• Compaction

Piling

Materials: steel, concrete, timber, composite

Load transfer: end bearing piles, friction piles, combined

Method of installation: driven piles, driven cast in-situ piles, bored and cast in-situ piles, screw piles,
jacked piles

Use: load bearing piles, compaction piles, sheet piles, fender piles, anchor piles

Displacement of soil: displacement piles, non-displacement piles

What are method of installation of piles?

• Bored piles: an auger is used to excavate the soil and then concrete is poured in once complete.
• Driven/pre-cast piles: pre-cast piles are brought to site and hammered into the ground.
• Sheet piles: a deep trench is excavated and concrete is poured in situ. The piles can be used
to form basement walls or act as retaining walls.
• Secant piles: interlocking piles (male and female) are bored to provide a combination of
foundation and basement walls.

What are advantages and disadvantages of driven/pre-cast piles?

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Advantages

• Any size or shape of piling can be built off site

• Fast, neat and clean installation
• The hammering compacts the soil, increasing the ground bearing capacity
• Ideal where risk of encountering ground water and in marine works

Disadvantage

• Create noise and vibrations

• Requires heavy transportations and piling equipment
• As depth of bearing strata is never certain, piles are oversized and end cut off
• Costly to add length if piles are too short

What are advantages and disadvantages of bored piles?

Advantages

• Any size or shape of piling can be built on site

• No risk of damage during handling
• No vibrations and less noise
• Ideal in soil of poor drainage with risk of heaving

Disadvantages

• Requires very careful supervision on site

• Requires a lot of space on site for storage of materials
• Does not improve the bearing capacity of the strata so may need to pile deeper

What are the problems to the PQS regarding the cost control with piling?

The end depth of the piles is never a certainty

Whose risk is the piling?

The procurement route used determines who takes the risk (traditional/D&B = the main contractor,
management contracts = employer)

What are the types of the basement construction

• Retaining wall and raft: consists of a slab raft foundation (basement floor) that distributes the
building loads, the basement walls are the retaining walls.
• Box and cellular raft: similar to above but internal structural walls are used to transmit and
spread loads over the raft- divides the basement into cells.
• Piled- main superstructure loads are carried to the basement floor by columns and transmitted
to the ground via pile caps and bearing piles (i.e. your basement has a whole load of columns
going through it)

What is top down construction?

Top down is used to speed up the construction process of a building with basement levels. The ground
floor slab is cast with an access hatch. The ground below is excavated and another slab is formed. If
there is another level, the process is repeated. Piles are usually used as foundations and also act as
retaining walls. It allows the building above to be constructed at the same time as the basement.

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What is bottom up construction?

Bottom up forms the basement and then works upwards in a traditional manner. Simpler but a longer
program.

What are the main types of excavation?

• Open: used battered excavation sides cut back to a safe angle, eliminates the need for
temporary support work, can easily construct basement walls and fall but extra excavation costs
and need a lot of free site space.
• Perimeter trench excavation: trench dug wide enough to form basement wall, this is supported
as required- basement walls are constructed and then inside of the basement is excavated.
• Complete excavation- used in firm sub-soils. The center of the basement is excavated first and
then the basement slab cast while the sides of the excavation are supported by struts.

What are types of basement waterproofing?

• Dense monolithic
• Tanking
• Drained cavity
• N.B.

• What are ventilation systems you aware of?

• How does a cartelized ventilation system work?
• What are the main components in a centralized ventilation system?
• What are the different types of slab construction?
• What are the advantages of post tension slab?
• Can you explain the difference of a steel frame and a concrete frame?
• What types of frames have you been used in KSA?

Can you mention new developments construction industry at KSA?

• Improved construction materials and methods (pre-cast materials, 3D project modeling, global
positioning systems)
• Partnering and frame work agreements, project management techniques
• Quality standards, benchmarking, value management, team working, just-in-time delivery, total
quality management
• Eliminating waste (unnecessary meetings, repetitive process), sustainability

• What is the difference between end bearing piles and friction piles? Which type mostly
use in UAE?

When advising on use of different materials. What other factors than cost need to be
considered?

It depends on that material. However, I can look on strength, quality, suitability, aesthetics, life cycle
properties including operating and maintenance costs..

Give an example where you advised on materials/construction technique was implemented?

What are the factors to be considered on advising on choice of frame?

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 • Program, market conditions and supply costs
• Requirement for column free spaces within the office
• Complexity of design with steel providing greater flexiability
• Aesthetics and client aspirations
• Repetitiveness of design (impact on the cost of temporary work/formwork)
• Height of the building
• The M&E services strategies
• Technical performance requirements: floor loads, fire protection
• Site logistics

What are the technical advantages of steel frames?

• Quick to assemble
• 100% recyclable- inorganic- will not wrap, split, crack or creep
• highest strength to weight ratio of any building material
• dimensionally stable- does not expand or contract with moisture or temperature changes
• consistent material quality- produced in strict accordance with national standards, no regional
variations
• light steel components are always straight
• lighter therefore poor soil conditions will need steel over concrete

What are technical disadvantages of steel frames?

• Needs fire protection

• Parts may need replacing
• Price of steel is variable
• Need experienced builders- additional costs
• Even though components will not burn they will actually fail (collapse) before a wood a wood
component in a fire

What are the technical advantages of concrete frames?

• Examining the impact of steel price rises has found that the whole project costs for concrete
framed buildings are marginally less than for steel framed buildings
• Fire protection as part of structure
• Slower form of construction at early stage will reduce the cash flow early on
• Maintenance of an in-situ concrete frame is low
• Cladding can be fixed to it and replaced easily
• It also provides good sound and heat insulation
• In-situ allows for alteration at late stage of construction
• Can deal with complex geometry better than steel work

What are the technical disadvantage of concrete frames?

• More time consuming. Slower to construct

• Edges may not be as square and surfaces as flat as steel
• The need for steel reinforcement leads to some of the cost issues associated with steel
• Heavier so requires larger foundations

What are the different parts of a steel beam?

• A simple I beam is made up

• Flange (top and bottom of the vertical steel)

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 • Web which is the vertical steel part of the I
• Root which is where the flange and the web join

What is the weight of steel?

10mm cubed of steel weight is 0.0078kg

What is intumescent paint? How do you apply intumescent paint?

Fire resistant paint sprayed on the factory. Touched up by hand on site.

What are connections (in relation to steel) and what percentage would you expect them to be?

Plates, bolts or welding. Usually 5% by weight

What are concrete frames forming?

• Slip forming
• Jump forming

What is formwork?

Anything that holds fresh in-situ concrete in place until it hardens such as plywood shutters, steel pan
forms, fiberglass moulds or profiled decking as well as its supporting props, centering or false work plus
accessories like wedges and clips tightening joints and to make stripping easy.

Explain pre-cast concrete vs. in-situ concrete

• Consistent higher quality

• Repetitive production leads to cost savings
• Can be delivered on site when needed and installed in all weather
• But lack of design flexibility
• Site access may be an issue
• Large cranes may be required

What is post –tensioned concrete?

• In post-tensioning concrete, concrete is cast around ducts or sheathing in which the tendons
are to be housed
• Stressing is carried out after the concrete has cured by means of hydraulic jacks operating from
one of both ends of the member
• Anchors are required to hold the tendons in final position

What is pre-tensioned concrete?

The wires are stressed within the mould before concrete is poured

Explain pre-stressed vs. standard reinforced concrete

• Eliminate tension cracks and sheer stresses

• Ability to reduce size of the concrete and as a result weight
• Special alloy steel more expensive than standard reinforcement
• Extra quality control and safety control required during tensioning

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 • Cost efficient solution for spans over 9m
• Standard reinforced concrete is more economical for spans below 6m

What are the types of water supply systems?

• Mains pressure
• Mains pressure with storage tanks
• Mains pressure boosted
• Pumped supply

What are types of hot water systems?

• Instantaneous water heaters

• Storage water heaters
• Heat exchange- coil heaters
• Heat exchange- calorifiers
• Commercial water heaters (boilers)

Give some of heat sources?

• Boilers
• Solid fuel burners
• Combined heat and power (CHP) plant
• Electrical heaters
• Gas heaters
• Heat pumps

How can heat distributed within space?

• Fan coil units

• Air handling units
• Radiating panels
• Embedded pipes in thermal mass (underfloor heating)

How can temperature be controlled?

• Locally by manual or automated thermostats, switches, dampers

• Centrally by manual or automated thermostats, switches or dampers
• Building management system

What are types of air conditioning systems?

• Air cooling
Mechanical or natural ventilation
Outside air may be cooled using refrigerant or by natural mass
• Evaporative cooling
It can be a simple system such as spraying water over the roof of the building or by more
complex packages units by incorporating of heat exchangers by the use of cooling towers
• Water cooling
Chilled water is typically provided by chiller units using absorption refrigeration or compression
refrigeration. It can then be used to provide cool air in air handling units.

Explain chilled water cooling systems.

• It is a chilled water air conditioning system uses liquid water rather than air a cooling medium
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 • Water has 20 time the heat absorption rate than air which means that it stays cooler for longer
• Suitable to cool large buildings
• Components of chilled water systems:
Cooling towers
Chillers
Fans/AHU/chilled beams

What are common types of ventilation systems?

• Natural ventilation (process of air entering and moving around a building by natural means by
opened and powered windows)
• Mechanical ventilation (extract only- this is used if the air is contaminated because of some
activities)
• Mechanical ventilation (supply and extract- this contains a central air handling unit (AHU)
normally containing air filters along with separate supply extract fans. By adding heating coils
along AHU it will help to cool/heat up the air. A ductwork system is required to transport the air
around the building)
• Mixed mode ventilation (this mode contains both natural and mechanical ventilations)

Identify some of the issues to consider in the design of ventilation systems.

• Employer requirements (as per the functional requirement)

• Occupants’ requirements (as per the tolerance level of occupant)
• Cost
• External conditions
• Level of control required
• Space available for AHU and ducts
• Depth of the building
• Level of security required (natural ventilation with openings is not suitable for buildings which
require high security)
• Environmental issues (if a certain BREEAM or lead ratings may be desired, it will affect choice
of ventilation)

Identify the point to be considered while adapting mechanical ventilation

The mechanical system is an integral part of the overall building design and will have huge impact on
most other building elements like floor height, plant space requirements. Some issues to be considered
are:

• Ductwork distribution in the building

• Extend of builder’s work
• Fire strategy
• Exposed ductwork
• Plant at roof
• Type of insulation for ducts
• Avoiding over design and over load
• Type of ductwork profiles (rectangular, circular, oval)
• Avoiding unnecessary controls
• Coordinating with building fabric, structure and other services to reduce risk

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MANDATORY COMPETENCES

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ETHICS

Page | 98
What are the five professional and ethical standards?

• Act with integrity

• Always provide a high standard of service
• Act in away that promotes trust in profession
• Treat others with respect
• Take responsibility

Give us an example when you applied one of these 5 standards?

What is the difference between RICS ethical and professional standards and rules of conduct?

Ethics are a set of moral values while rules of conduct are a framework that we work to.

What is a bribe?

A bribe is the offering, receiving or soliciting of something of value in order to influence the actions or
decisions of someone in a business context.

Something of value could be money, a contract, a dinner, a holiday etc or some other form of advantage
such as an opportunity.

What are the 6 principles of the Bribery Act?

• Proportionality: the action taken should be proportionate to the risk and the size of the
organization.
• Top level commitment: those in senior positions are best placed to ensure the organization
conduct business without bribery
• Risk assessment: many organizations will have a little or no risk of bribery but a risk
assessment will show the nature or extent of exposure to bribery
• Due diligence: this is about having a risk based approach to business relationships with those
you deal with or who provide services for you
• Communication: employers will need to communicate their policies and procedures to staff and
others who perform services, additional training may help raise awareness and this would be
proportionate to the size and type of organization.
• Monitoring and review: risks to your organization may change, overtime you may want to carry
out regular reviews and re-assessments.

Gifts and hospitality

What is conflict of interest?

Where someone in a position of trust has competing personal or professional interests making it difficult
for them to fulfil their duties impartially.
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It also includes conflicting issues of confidentiality.

What are types of conflict of interest?

• Party conflict: a situation in which the duty to a client conflicts with a duty owed to another
client in relation to the same project.
• Own interest conflict: a situation in which a duty of an RICS member or firm to act in the
interests of a client conflict with the personal interests of that same RICS member/firm
• Confidential information conflict: a conflict between the duty to provide information to one client
and the duty to another client to keep that same information confidential.

Every RICS member and regulated firms must:

• Identify and manage conflict of interests

• Keep records of:
Decisions made in relation to whether to accept individual professional assignments
Informed consents
Any measures taken to avoid conflict of interest arising

What steps should be taken if there is a conflict of interest of two clients represented by the
same firm?

• Disclose to each client the possibility, nature and circumstance of the conflict, in writing
including if you are receiving any remuneration over and above your fee.
• Obtain written confirmation (=informed consent) from all parties concerned that you can act, or
inform them that you cannot accept the appointment.
• Template included in RICS Guidance ‘conflict of interests’
• Keep records of all decisions!
• Informed consent is not enough. Refuse to carry out the work if you are not comfortable with it,
if it is against any of the parties’ interests or against the law.

For informed consent to be established, you must be satisfied that all the parties understand:

• That there is a conflict of interest or a significant risk

• The facts that are material to conflict of interest
• What conflict of interest is or may be
• That a conflict of interest may affect the ability of the RICS member or firm to advise or act fully
in the interest of a client

What measures could be taken to protect commercially sensitive information?

Information barriers:

• Exclusivity of staff working for each of the clients, including support teams
• Staff confidentiality strictly enforced
• Physical separation of staff
• Security of stored information including locked filling cabinets etc

What are the 5 principles of better regulation- Rule of conduct?

• Proportionality
• Accountability
• Consistency
• Targeting
• Transparency

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What are RICS rules of conduct for members?

• Interpretation
• Communication
• Ethical behaviour
• Competence
• Service
• CPD (continuous professional development)
• Solvency
• Co-operation

Explain RICS CPD

• 20 hours CPD minimum each year

• at least 10 hours must be formal learning
• must complete ethical training at least once each 3 years
• must record CPD online

How do you keep up to date? What is your CPD strategy?

• Exchange information with colleagues on key topics

• I am on the mailing list for several CPD providers
• I attend RICS CPD events

What are the RICS rules of conduct for firms?

• Interpretation
• Communication
• Professional behaviour
• Competence
• Service
• Training and CPD
• PI insurance
• Advertising
• Solvency
• Arrangements to cover incapacity
• Use of designations
• Information to RICS
• Co-operation

Compliant Handling Procedure (CHP)

• It must be quick, transparent, impartial and free of charge

• The compliant must be investigated within 28 days
• All complaints, their progress and outcomes must be recorded
• Note the need to advise PI insurer of a compliant
• Must have two stage as a minimum:
Consideration of the compliant by a senior member of the firm oe the complaints handling
officer.
If not resolved, referred to an independent third party with the authority to award redress

Can you tell us about your company CHP? What is a compliant? What is an independent redress
scheme?

Client money:

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 • Separate designated back accounts
• Advise the client and they must agree to the account handling terms in writing
• Monies must be available to clients on demand
• Interest is to be paid to client unless otherwise agreed
• Signatories must be agreed, only authorized staff allowed and at least two required
• A bank reconciliation will be audited by RICS appointed accountants
• These firms are required to pay RICS an annual fee as monitoring costs

What practices should you be following when handling client’s money?

Money laundering

• Conduct a money laundering and terrorist financing assessment

• Implement systems, polices, controls and procedures to address money laundering and
terrorist financing risks and meet the requirements under the regulations
• Apply your policies, procedures and control across your firm group structure
• Adopt appropriate internal controls
• Provide training to staff
• Apply for approval if you are the beneficial owner, officer or manager of a firm
• Comply with new requirements relating to political exposed persons
• ensure your record keeping and data protection systems, policies and procedures meet the
requirements of the regulations
• comply with new obligations relating to record keeping and the provision of information about
beneficial ownership if you act as a trustee of relevant trust

What is professional indemnity insurance?

To provide financial cover in the event a client suffers financial loss as result of a breach of professional
duty e.g. neglect, error or omission

What are the requirements regarding PI by RICS?

• Must be made on an ‘each and every claim’ basis

• Sets out minimum levels of indemnity and maximum levels of uninsured excess
• Run off cover must be in place
• Should include cover for past and present employees, directors and partners

What are the minimum levels of indemnity/level of PI cover?

• If firm turnover is 100k pound or less: it is 250K pound

• If firm turnover is 100-200k: it is 500k pound
• If firm turnover is above 200k pound: it is 1m pound

What if the loss exceed the cover provided by the PI insurance?

The professional/firm is liable for the difference-in assets etc

If an estimate prepared by QS is incorrect, can the client claim damages?

The client must demonstrate that the QS warranted the accuracy of the estimate OR that it was incorrect
due to a lack of reasonable skill and care.

It could have been incorrect due to reasons outside their control e.g. market conditions.

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How can you limit your liability when agreeing terms of appointment with a client?

• Reasonable care and skill rather than fitness for purpose (apply caution if client’s requirements
are performance based)
• Run off cover- sign contract under hand whenever possible
• Request a net contribution clause- liability limited to loss you caused
• Request limit of liability to place a cap on your level of exposure

Which firms are regulated by RICS?

Those with 50% or over partners/directors that are members of RICS or those with less that have
applied

What procedures must you follow if you are starting up a new practice?

• Contact the RICS for guidance and to register for regulation

• Appoint a contact officer for all RICS communication
• Prepare CHP
• Obtain PI insurance cover
• Prepare training program for all employees (CPD requirements)
• Use the designation ‘regulated by RICS’ on all practice material

What insurances would you need if you were starting up your own firm?

• PII
• Employer liability
• Public liability
• Building insurance of own office

What information do registered firms have to send to RICS annually?

• Type of business and staffing

• Nature of clients
• Training provision
• Compliant handling procedures details and records
• PI insurance details
• Whether the firms hold client’s money
What are the main elements included in a fee proposal?

• Terms and conditions

• Scope of services
• Exclusions
• Assumptions

What is the fee proposal?

• Percentage of contract sum

• Time charge fee/hourly rate (scope cannot be defined)
• Lump sum (resources can be precisely estimated)
• Target cost (pain/gain)
• Expenses

If you put together a fee proposal, but couple of months into the job, you realize that you have
under forecast your resources, would you go back to the client and ask for money?

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 • If project requirements (services, scope, value) have increased, then would go back to client
for more fees
• But if remained the same, it is a mistake so deal with it and get it right next time
• Do not reduce level of service you offered originally

If a client came back to you and asked you to adjust your fees what would you do?

I can only lower my price if I lower my scope of services which may not be in my potential client’s
interest.

Never deviate from the ethical standards!

If you have to interview one of your good friends for an employment, how do you deal with this?

Declare the element of conflict of interest and keep away

For unprofessional practices by member, can apply penalty upon him? Can he dismiss from
membership?

After following the procedures by a disciplinary panel made up of members may apply. It has a range
of powers including:

• Cautions
• Reprimands
• Fines
• Expulsion and
• De-registration

Explain how to act in away to promote trust in the profession?

If you have to interview one of your good friends for an employment, how do you deal this?

• Frame the answer within ethic related competencies

• It should have understood that it is related to conflict of interest
• Manage the question in personal level; i.e. you can play a fair role although there is an element
of conflict of interest
• Declare the element of conflict of interest and keep away

For unprofessional practices by member, can apply penalty upon him? Can he dismiss from
membership?

After following the procedures by a disciplinary panel made up of members may apply. It has a range
of powers including:
• Cautions
• Reprimands
• Fines
• Expulsion and
• De-registration

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ACCOUNTING PRINCIPLES

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How is accounting principles are related to your pathway?

• For monitoring my own business

• For assessing my competition
• Assessing the financial strength of contractors in PPQ or initial signs of insolvency
• For assessing the financial strength of potential clients

What are the key financial statements that all companies must return annually?

• Profit and loss account

• Balance sheet
• Cash flow statement
Altogether they are called company accounts

What is the difference between management and financial accounts?

Management accounts are for the internal use of the management team

Financial accounts are the company accounts required by law

What is profit and loss statement?

• The incomes and expenditures of a company

• The resulting profit and loss
• Over the accounting period

What balance sheet shows?

• What a company owns (assets)

• What it owes (liabilities)
• At a given point in time

What does the cash flow statement show?

It is the summary of the actual or anticipated ingoing and outgoing of cash in a firm over the accounting
period.

It is broken down into:

• Operating
• Investing
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 • Financing activities
It measures the short term ability of a firm to pay off its bills!

How do you analyze company accounts?

• The client’s accountant will carry out the detailed analysis but I can look at the warning signs
by calculating ratios such as liquidity ratio, profitability ratios and gearing ratios.
• I should always calculate the ratios myself as those included in the company accounts may
have been manipulated

What is the liquidity ratio?

Measure the ability of the company to pay off his current liabilities by converting its current assets into
cash.

• Current (current assets/current liabilities)

Usually around 1.5 but it depends on the sector of activity. Less than 0.75 suggest insolvency.
• Working capital (assets-liability / turnover)
Measures how much more capital may be needed to finance the operations. A falling ratio may
mean that the company has taken on more work that it can finance and may be heading for
cash flow difficulties.

What is the profitability ratio?

Measures the performance of the company to generate profits.

• Return on equity (profit after tax/equity)

• Return on capital employed (operating profit/capital employed)- in the operating profit the
overheads deducted
• Trading profit margin (turnover-cost of sale/turnover)

What is the gearing ratio?

Debt/equity (capital in shares)

To measure the financial structure of a company which are crucial indicators for the external suppliers
of debt and equity as well as internal management.

• They help to measure solvency

• Highly geared companies rely mainly on borrowing
• The payment of interests reduces the profit

What are the signs of insolvency?

• Low credit rating

• A current ratio below 0.75 (current assets/current liabilities)
• Highly geared company (rely on loans)- debts/equity (capital in shares)
• A falling cash flow statement
• Low return on equity (profit after tax/equity (capital in shares))

What type financial criteria did you use in PPQ?

Financial and economical standing has usually 10 to 15% weighting:

• Operating profit margin

• Turnover in relevant sector
• Spare capacity

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 • Disclosure of any recent or anticipated events which would impact on the company’s accounts

How do you use accounting principles to check a supplier/contractor financial standing?

Answer A: I considered both group accounts and the company accounts. As credit rating was a bit low,
I calculated some key ratios and passed on all information to my client’s accountants for them to analyse
further.

Answer B: In project X, the two lowest bids also had the lowest credit rating and the key ratios were
below expectations. One of the bidders provided details of the recent company restructuration to explain
his accounts. I passed on the information to my client’s accountant who made further recommendations.

Why would you not recommend the appointment of a contractor with low credit rating?

• Risk of the contractor not performing satisfactorily

• Risk of contractor to restrict his resources on site
• Risk of contractor or supply chain insolvency

What measures would you recommend if your client wants to appoint a contractor with low
credit rating?

How do you deal with contractor’s cash flow issues?

• Request a bond
• Check that the tender is not excessively front loaded
• Make sure that work is accurately valued at interim valuations
• Consider opening a project bank account

Have you seen your company’s accounts?

They are published every year so get a copy

What is your company turn-over? profit margin? Annual growth?

What do you mean by insolvency and bankruptcy?

Insolvency: inability to pay debts

Bankruptcy: declared by courts regarding the inability to pay creditors

What is current assets?

Any assets which can be converted to cash within one year;

• Short term debts

• Stocks (material at site and off site)/ raw materials
• Cash in hand

What is fixed assets?

Any assets which last more than one year;

• Building
• Land
• Plant

What is current liability?

• Long term and short term loans

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 • Creditors

How do you assess the performance of a construction company by reviewing their financial
statement?

Structure:

• Why need financial assessment?

• What are the financial statement?
• Then explain how you going to assess the performance
Answer points:

• Cash in hand/bank
• Extent of liability
• Value of stocks
• Profits growth
• Value of fixed and current assets

In the contract administration process, how can you use the P&L accounts statement?

Structure:

• Elements of the P&L

• General use of P&L
Answer points:

• Sales-cost if sales = gross profit

• Gross profit-[admin+selling +other expenses]=net profit
• Admin expenses: salaries, rent, stationary, utility, depreciation of office furniture
• Selling expenses: marketing, depreciation of vehicles
• Other expenses: tax

How do you assess the performance of a construction company by reviewing their financial
statements?

Structure:

• Why need financial assessment?

• What are the financial statements?
• Then explain how are you going to assess the performance?

Answer points:

• Cash in hand/bank
• Extent of liability
• Value of stocks
• Profits growth
• Value of fixed and current assets

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BUSINESS PLANNING

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What is the business planning?

It is a logical decision-making process based on market analysis and forecasting to set a company’s
goals and objectives. The plan is continuously updated using a feedback system and measuring
performance.

• Logical decision-making process

• Market analysis/forecasting
• Business plan = goals + action plan
• Feedback system / information loop
• Measure the performance

What are the levels of the business plan?

Business plans are usually devised for 5 years but it depends on the nature of the business.

The business plan is typically declined in 3 levels:

• Corporate level: affect the entire company, is long term and in fairly board terms.
• Management level: affects each area of an organization, is broken down into monthly or
quarterly periods and quite detailed.
• Operational level: affects individuals in the organization, can be broken down into days or even
hours and will be very detailed.

What are the elements of business plan?

• The vision / mission

A general statement such as ‘to be regarded as the market leader in construction consultancy’
• Objectives and goals
The key objectives that will lead to achieving the vision such as;
Realize people potential
Create sustainable solutions
• Strategies and actions
The steps that are required to achieve each goal and objective such as;
- Create an environment that attracts the best people founded on development opportunity;
empowerment and access to both our knowledge/experience and the best processes for
the delivery of our projects.
- Continuous to develop the services that will help deliver the best projects in our industry.

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Market analysis:

SWOT Analysis

Used to formulate strategies that support the vision.

Internal analysis: Strengths and Weakness

External Analysis: Opportunities and Threats

- It is a structured analysis of the market (demand side). It is used to analyze internal

strengths and weakness and external threats and opportunities.
- The strategies should exploit strengths and opportunities and mitigate weakness and
threats.

PEST Analysis

It is a structured method of analysing the key factors influencing market (the demand side). These
factors are;

- Political and legal influence

- Economic influence
- Socio-demographical influence
- Technological influence
- (natural) environment

How to develop the business plan?

- The analysis of the market and industry are inter-connected and form the basis of the
business plan.
- The market analysis enables to identify: business opportunities and critical success factors
in the organization markets and industry
- The organization should focus its resources on developing competences that contribute to
these CSF
- Some organizations can even have a competitive advantage which is difficult for
competitors to imitate
- All these elements lead to the development of goals and objectives with their associated
strategies and actions.

How do you contribute to your company’s goals?

- Focus on safety
- Excellence in my work
- Sharing knowledge
- Keeping up to date with new technologies

What tools does your company use to manage its business?

- Time cards
- Project appraisals
- Client satisfaction surveys
- Lesson learnt workshops
- Service management tools/systems

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How do you think an up to date business plan can help an organization?

- To seek funding
- To gain new instructions, new clients, new customers
- To help focus on key priorities
- To allow the organization to respond to change
- For budgeting
- For setting targets for staff

What is meant by business strategy?

Determination of the long term goals and objectives of an enterprise and organization approach to
achieve its goals or objectives.

What is meant by strategic planning?

It is the managerial process of developing and maintaining a strategic fit between the organization
objectives and resources and its changing market opportunities.

What are the main items of business plan?

What is your understanding of mission and vision?

Vision is a long term goal and mission is a short term goals to reach the vision.

The mission statement articulates the company’s moral/ethical position, public image, the target market,
product/service, the geographic domain and expectations of growth and profitability.

Can you list the key elements of your company current business plan?

What are its core values?

How do your company core values relate to its business plan?

What are expectations of your current and potential clients?

How can you add value? How can you generate additional business?

What are the current threats to your company market? How may it affect future business
strategies?

What is meant by business strategy?

Determination of the long-term goals and objectives of an enterprise and organization’s approach to
achieve its goals or objectives.

What is meant by strategic planning?

Strategic planning is the managerial process of developing and maintaining a strategic fit between the
organization objectives and resources and its changing market opportunities.

What are the main items in the business plan?

• A detailed description of the proposed business including types of customers, competitors and
facilities needed for production
• Concept of the proposed business
• Vision and mission
• Analysis of the current market
• Present strategy
• Outline the projected development of the business

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 • Define capital needs and procurement
• Projected project financial performance
• Present management credentials

What are the business management tools which you are aware of?

What is your understanding on mission and vision of business?

Vision is a long term goal and mission is a short term goals to reach the vision.

The mission statement articulates the company moral/ethical position, public image, the target market,
products/services, the geographic domain and expectations of growth and profitability.

• Mission: reason to be and why we exist

• Values: the values we believe in and how we will act
• Vision: what we want to become and achieve

CLIENT CARE

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Why is client’s care important in your organization?

- We provide advisory services and a high level of trust between ourselves and our client is
essential for a successful project delivery.
- We also heavily rely on repeat business and have our reputation to maintain.
- It is essential skill for those who may open their own practice in the future or may promoted
to a management role.

What is client care?

It is about providing a proper standard of service which takes into account the individual needs and
circumstances of each client. This includes providing client with the information they need to make
informed decisions about the services they need, how these will be delivered and how much they will
cost. This will enable you and your client to understand each other expectation and responsibilities. It
is also about ensuring that if clients are not happy with the service they have received, they know how
to make a compliant and that all complaint and that all complaints are dealt with promptly and fairly.

It is a continuous process or concept of understanding client requirements, suggestions, complaints

and analysing it to find a solution suitable to client requirements and to enhance our own business.

What is client care?

- Identifying your client

- Understanding your client’s objectives
- Listening
- Responding to your client needs (client brief)
- Building trust
- Loyalty/repeat business
- Handling complaint
- Managing client’s accounts
- Measuring client satisfaction

Who to identify your client?

- At company level: market research, client surveys and networking events

- At project level: key influencers and decision makers, by learning about their organization
and asking questions, may be internal client such as another department.

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How to build trust with the client?

- Be transparent
- Be honest at all time
- Learn about your client and their objectives
- Only act within your level of competence
- Always act in a professional manner
- Always provide a high level of service

When should you decline an instruction of new work from a client?

Describe duty of care?

The responsibility or the legal obligation of a person or organization to avoid acts or omissions (which
can be reasonably foreseen) to be likely to cause harm to others.

How to manage client accounts?

Develop service delivery plan / project delivery plan:

- Key client and project information

- Check that legal information/contracts/insurances are in place
- List deliverables and milestones/timescales
- Establish required capabilities and resources
- Identify risks and opportunities.

How to measure client satisfaction?

- Feedback forms
- Feedback meetings by project leader
- Feedback meeting by someone else
- External company feedback service

What are the key principles of client care?

- Identify clients & understand the different types of clients

- Identify their objectives and needs
- Offer suitable solutions/define the client brief
- Deliver the promised service and aim to exceed expectations
- Obtain continuous client’s feedback and act upon it
- Deal with complaints effectively
- Manage client accounts

Give an example when you provided exceptional client care?

Who is your client?

A client is a person or an organization that seeks the professional advice or service from you.

How will you identify and utilize the systems and processes for managing client care?

- Customer compliant procedures

- Quality assurance procedures
- Other policies such as sustainability, equal opportunity depending on the client
requirements
- Customer satisfaction questionnaires
- Client feedback meetings
- Lessons learnt workshops

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How do you confirm that your client is satisfied with your service?

- Impact on bottom line performance

- Positive feedback, reduced complaints
- Long term relationships with existing client
- Potential client approaches the organization based on reputation in the market

What do you do to exceed your client expectations?

- Beat the deadline

- As proactive questions: client appreciate it when you act as a though partner and
demonstrate your concern for the process and its result
- Know when to defer: deference is important but too much of its positions you as hired help.
Inspire confidence by acting collegial and providing yourself to be a competent expert.
- Give a feedback: every process can be improved, and you are in a unique position to
provide feedback.

Who is your client?

A client is a person or an organization that seeks the professional advice or service from you and
depends on you for the deliverance of it.

How will you identify and utilize the systems and processes for managing client care?

• Customer complaint procedures

• Quality assurance procedures
• Other policies such as sustainability, equal opportunities…etc depending on the client
requirements.
• Customer satisfaction questionnaire
• Client feedback meetings
• Lessoned learnt workshops

Explain complaint handling procedure (CHP)

• Consideration of the complaint by a senior member of the firm designated complaint handler
• If the complaint cannot be resolved, referral to an RICS approved independent authority to
award redress
• The responsibility or the legal obligation of a person or organization to avoid acts or omissions
(which can be reasonably foreseen) to be likely to cause harm to others.

What do you confirm that your client is satisfied with your client service?

• Impact on bottom-line performance

• Positive feedback; reduced complaints
• Long-term relationships with existing client base
• Potential clients approach organization based on reputation in the market
• Existing clientele brings in new leads

Explain how you would exceed the client expectation

• Beat the deadline: getting work done ahead of time gives the client flexibility and demonstrates
you are efficient and customer-focused. When agreeing to a deadline, choose one you know
you can beat.
• Ask proactive questions: client appreciate it when you act as a though partner and demonstrate
your concern for the process and its result.

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• Know when to defer: deference is important but too much of it positions you as hired help.
Inspire confidence by acting collegial and proving yourself to be a competent expert not a
lackey.
• Give feedback: every process can be improved, and you are in a unique position to provide
feedback. If the circumstances are right, tactfully give thoughtful and constructive criticism.

TEAMWORKING

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What is meant by team work?

A cooperative effort by a group of people to achieve a common goal.

Difference between committee and team?

• Teamwork: is a basic source of integrated activity. Fostering teamwork is creating a work

culture that values collaboration. Team is a group of people aiming for a common goal in good
spirit. Team success will satisfy everyone.
• Committee is a body of people appointed for a function. There may not be a unity in actions
and disagreement.

Teams do not just happen. They are developed through a deliberate and planned process

What are the advantages of team work?

• More efficient use of resources

• Better problem solving
• Better quality products and services
• Creativity and innovation
• Higher quality decisions

What are the stages of developing a team?

• Forming
• Storming
• Norming
• Performing

What are the factors in team development?

• Goals
• Roles
• Procedures
• Relationships

Different between leadership and management in team work?

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 • Leadership: is setting a new direction or vision for a group that they follow. A leader is the
spearhead for the new direction.
• Management: controls or direct people/resources in a group according to principles or values
that have already been established.

What are the stages of team development?

According to Bruce Tuckman, it consists of:

- Forming
- Storming
- Norming
- Performing
- Adjourning
- Forming: agree goals, individuals start leaning about each other
- Storming: opinions about the project and group members become stronger. Personality
clashes need to be overcome
- Norming: team members have understood conflict avoidance and focus on collaboration
- Performing: roles are established, people are motivated and autonomous. Goals are being
achieved
- Adjourning: end of the project. Progressing dissolution of the team.
What are the characteristics of efficient team?

- Good mix of skills and expertise

- Balance of personalities
- Great leadership
- Share common goals and objectives
- Appropriate allocation of roles

What is Belbin’s theory?

- 9 team roles with strengths and weaknesses

- need to balance the roles within a team for efficient teamworking

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HEALTH AND SAFETY

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You have noticed unprotected excavation going on at site, what action you will take?

Ask to stop the works immediately. Take out the people from the danger and unsafe work area. Then
have to inform HSE coordinator/engineer or safety officer of the site to take care about the unsafe
working conditions and ask to fix it.

What is the risk analysis process?

• Identify the hazards

• Decide who might be harmed and how
• Evaluate the risks and decide on precaution
• Record your findings and implement them
• Review your assessment and update if necessary

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SUSTAINABILITY

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How is sustainability is measured?

• LEED (Leadership in Energy and Environment Design) run under the auspices of US Green
Building Council. [Bronze, silver, gold and platinum]
• Pearl rating system under ESTIDAMA in UAE

What do the criterion look by the LEED?

LEED looks for improving performance across five key areas of environmental and human health:

• Energy efficiency
• Indoor environmental quality
• Materials selection
• Sustainable site development
• Water saving

How can you contribute in early design stage towards sustainability?

• HVAC design, efficiency of heating and cooling equipment, glazing type, thermal performance
of windows, lighting
• Life cycle costing
• Local material and source from nearby
• Natural lighting and ventilations
• Intelligent building

Explain waste management

• Waste minimization
• Recycling and re-use
• Storage, collection, transport and transfer
• Treatment
• Landfill disposal
• Policy and regulations
• Planning and implementation
• Education and implementation

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CONFLICT AVOIDANCE, MANAGEMENT AND
DISPUTE RESOLUTION PROCEDURES

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What is conflict?

In construction industry, conflict occurs when objectives are incompatible. Conflict arise among the
client, design/supervision professionals and contractors due to lack of communication with regards to
their needs, ideas, beliefs, goals or values.

How can conflict avoidance be managed in a construction contract?

Pre-contract stage:

Have carefully drawn up perfect set of contract documents at the beginning of a project to ensure that
there is no any ambiguity.

• Prepare tender documentation with proper coordination among various trades

• Use standard forms
• Allow sufficient time
• Appoint qualified professionals
• Chose the correct procurement path
• Provide proper answer for tender queries through tender addendum and distribute them to all
tenders
• Correct information should be given at the right time
• Carry out tender evaluation and award the project to a competitive bidder
Post-contract stage

• Administrate the contract as per the contract conditions while discharge liabilities in timely
manner be a fully competent contract administrator.

What is dispute?

When a conflict becomes an altercation, dispute will arise. These are more likely to arise when a
project is on-site because the differences of opinion are more contractually based.

What is the nature of dispute in construction?

• Enforceable promises (contract)

• Technical matters

• Legal matters
• Entitlement & magnitude of that

What are the factors to be considered when selecting dispute resolution procedure?

• Cost effectiveness
• Speediness
• Confidentiality
• Enforceability (by law/internationally)
• Business relationship

What are the method of dispute resolution available in condition of contract that you are
familiarized with?

FIDIC 1999 (clause 20)- dispute shall be adjudicated by a DAB- dispute adjudication board. (Failing
which arbitration/amicable settlement)

What are the alternative dispute resolutions available?

• Negotiation
• Mediation
• Conciliation
• Adjudication
• Expert determination
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Could you compare between dispute resolution techniques?

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DATA MANAGEMENT

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What is Data Management?

It is the development execution and supervision of plans, policies, programs and practices that
control, protect, deliver and enhance the value of data and information assets.

What are the sources of information to obtain data?

• Professional bodies
• Government publication
• Tenders
• Specialist suppliers/contractors
• Colleagues
• Internet

What data you use in your day to day work?

• Prices of materials/labour/plants
• Site information
• Tender prices
• Previous project cost information

What methodologies can be used to manage data?

• Develop log frame matrix

• Elaborate the matrix
• Record and collate the data
• Analyse
• Communicate the result
• Data sample collection
• Data collection
• Data collation
• Information, feedback and dissemination

What are the modern data management systems available?

• Building Information Modelling (BIM)

• Primervera Expedition
• Aconex
• E-Builder
• Doors
• I-Connect

What type of data needs to be protected? Why?

• Protecting a company critical information is a value proposition. Trade secrets, confidential

business plans, and operational security depend on it. Losing that kind of information can
mean any budgeting/pricing required for the project cannot be met on timely manner (unable
to meet the client requirement on time and possibility of unable to price the tender)

If you are working for a client, how do you ensure unauthorized issue pf project data to
others?

Ask consultants/Engineers/Contractors to enter into a non-disclosure agreement (confidentiality

agreement) with the client.

The major challenge in data management

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Organizations constantly replace out to date computers, servers, laptops, copiers and countless types
of other electronic devices to keep up with technology and enhance worker productivity. This rush to
upgrade however, creates a challenge: large number of excess electronics must be managed and
disposed of properly.

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COMMUNICATION AND NEGOTIATION

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Difference between effective and efficient communication

Efficient communication is just responding quickly, and effective communication is more considered
and actually reaches a satisfactory conclusion.

Efficient communication is to talk to people, so they can understand your meaning. Effective
communication is to talk to people and help them learn and objectively hear what you are telling them.

Various stages of negotiation.

Negotiation is discussion to reach a compromise or agreement- communication for persuasion a

number of stages for negotiation process:

• Establish the agenda

• Finalise the position to be taken
• Setting the objectives
• Compiling supporting evidence
• Exploring differences
• Find out areas of compromise
• Assessing other sides positions
• Narrowing differences
• Broad agreement
• Detailed agreement with win-win situation

What are the main characteristics of a good negotiator?

• A good negotiator would have total familiarity of the commercial and technical aspects of the
subject matter.
• A good negotiator would follow the below basic stages in a negotiation
o Preliminary introduction of the parties
o Agreeing objectives of negotiation
o Negotiation process properly
o Review and finalization of agreement reached
• Be well versed in the various tactics of negotiation
• Keeps the problem and people separate

What are the main barriers in negotiation?

• Die-hard bargainers
• Lack of trust
• Informational vacuums
• Spoilers
• Cultural and gender differences
• Lack of emotional intelligence
• Communication problems

If you chair a meeting, how do you make it effective with right strategy?

• Set an agenda
• Do prepare for it
• Communicate with all
• Be punctual for the meeting
• Take minutes of meeting
• Give chance to everyone to speak
• Understand body language and voice control

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Mandatory Competencies Various Questions

- What is difference between arbitration and expert determination?

- What are the most famous sustainability practices used in Middle East?
- How do you contribute to gain LEED points in Data Centre Project?
- What are the accounting matters you will consider during the pre-qualification?
- What is the current ratio?
- What were the historical data in your project?
- What is the three ‘R’ in sustainability?
- What is the core values of RICS?
- One of the core values is integrity, can you explain it?
- What are the situation you used in oral communication and written communication?
- How would you chair a meeting?
- The negotiation process looks lengthy, what is your suggestion to improve this?
- You agreed an amount with the subcontractor, after few days they came with new price
- What are the characters of effective team work?
- What is your advice on Electronic Data Management?
- Could you explain Copyright Law? UK Copyright law?
- What did you learn from RICS health and safety guideline?
- Do you know any regulations related to health and safety?
- What CDM regulations stands for and what it includes?
- At tender stage, how do you assess the financial stability of a project?
- What are the documents you would look at?
- What is the balance sheet?
- What is a profit and loss account?
- How do you conduct a business plan?
- Related to client care, how do you look for potential clients?
- What are the differences between conflict and dispute?
- What are the methods of communication? What is the best method of communication?
- Bruce Tuckman defines 5 stages of team developing. What is the aim/importance of going
through those 5 stages?
- What is confidentiality statement?
- If one of your friends, ask you to an estimate for him? What would you do?
- If he insists and ask you to do it within your own time? Is doing it on your own time makes a
difference?
- When you are working in height, what are the PPE do you need to wear?
- What is sustainability?
- What is conflict?
- What is the difference between conflict and dispute?
- What do you mean by negotiation?
- After submission a BOQ or cost plan to the client, you identify a mistake of it. How did you
behave in this situation?
- What is conflict of interest?
- What are the 5 ethical standards of RICS?
- You are working on a project where Atkins are the project management and you also
representing Atkins and providing services as engineer representative. How will you behave
on this situation?
- What do you mean by act with integrity?
- Why do you need rules of conduct?
- What was the advantage of using Aconex in your project?
- Why QS needs to know about sustainability?
- Why does QS need to have ethics?
- Why you need health and safety?
- What is the difference between business planning and business strategy?
- What is benchmarking? What about it in QS term?

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- What is the difference between efficient and effective communication
- What would you do if you come across a safety issue?
- List different types of dispute resolutions mechanisms?
- What would you do to make the decision binding?
- Explain dispute resolution as per your contract
- What is SWOT analysis? Give an example from your organization?
- Explain how to deal with client money?
- Explain CHP
- Is DAB decision binding?
- How would you avoid conflict?
- What are the dispute resolutions methods you are aware of?
- Can you give advantages of adjudication?
- What do you think is the best form of dispute resolution?
- What is sustainability?
- Can you name some sustainable materials?
- What rating systems are used in UAE
- How would you ensure that your cost plan allowed for the sustainability requirements?
- What is teamwork?
- What are the advantages of working in a team of people you are familiar with?
- Can you explain the difference between leadership and management?
- What would you do if a client was unhappy with your work?
- When would the RICS get involved?
- If you were to set up your own business, what would you have in place?
- What are the rule of conduct for members?
- How do you ensure you are giving good client care?
- What would you do if the client wanted to pay you upfront?
- What would you include in a fee proposal?
- What would you do if your client asked you to reduce your fee?
- Would you reduce your profit?

Accounting principles

- What would you do if you want to set up a company?

- What would you be looking in a set of account?
- How would you assess financial soundness from a set of account?
- What might you use ratio analysis?
- In current climate, there are contractors going into receivership, how would advise the client if
this occurred? (PCG were in place or not)
- What is the difference between management accounting and company accounting?
- Why does an RICS member need to understand accountancy?

Business Planning

- Describe a SWOT analysis

- What are the processes in place in your office to ensure profitability of a project?
- On business meeting, if your boss asks you to join a business planning meeting, what would
be discussed?
- What would you do when setting up business?

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Client Care

- How did you maintain the client relationship after the conclusion of the project?
- How did you manage fees and the client relationship on a project?
- What is the purpose of the client project feedback form? What is contained in the form?
- What is contained in your company compliant handling procedure?
- Client is unhappy with an element of your service. What do you do?
- How do carry out the client care? How do you manage client?
- On the feedback, how do you measure your performance?
- How do you identify how well you as a consultant is performing on your project?
- How do you arrange a client meeting?
- Would you reduce the fee if asked to?
- Is VAT applicable on the professional fees?
- Describe what is meant by KPIs and give some examples of KPIs?
- You have just won a contract for cost consultancy further to a meeting with the client. What
are the next steps you need to take?
- How do you prepare a fee proposal?
- If the client requests you to reduce the fee, what would you do?
- The client approaches you with an advance payment for your fees in cash. What do you do?
- A client approaches you and asks for a fee for your professional services. How do you
approach this?
- What are the client objectives?
- What would you do if a client wants to pay you upfront? What if they want to pay you in cash?
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