Project Measurement & Costing 2

1. Project Measurement & Costing 2 Site Quantity Surveyor

2. Project Quantity Surveyor • Represents Client • Prepares BoQ • Estimator • Represents the contractor • Prices each item in BoQ and prepares tender • Site Quantity Surveyor • Measures actual amount of permanent work undertaken • Prepares monthly valuations • Prepares claims valuations • Monitors contractors costs

4. CESMM3 - Class A The CESMM divides the work in a construction contract into 26 classifications; 25 of these relate to temporary or permanent works the contractor has to undertake to complete the contract. The first classification – CLASS A covers the general items which are not part of the construction process This Class, which may account for 10 – 40% of the tender total is divided into 5 divisions

5. A1-- Contractual Requirements Requirements under the ICE General Conditions of contract. Common to all contracts • Performance Bond • Effectively an insurance against the contractor failing to complete the contract – approx. 0.25% • Insurance of Works • The contractor ‘owns’ the works until completion of contract – up to 1% • Third Party Insurance • Approx 0.2%

6. A2– Specified Requirements • Requirements specific to the particular contract • Not part of ICE General Contract requirements • Must be fully described and specified in the tender documentation • Note that A.2.7 – Temporary Works is only for temp. works expressly required by the Engineer and not the contractors own temp. works

7. A3– Method Related Charges • This is the only Class where items are inserted and priced by the contractor • Construction contracts are prone to variation, but some contractors costs do not vary in proportion to quantity • Tenders are given the opportunity to define items which are not part of the permanent works but are necessary for the construction processes • Method Related charges must be identified as ‘lump sums’ or ‘time related’

8. A4– Provisional Sums • Inserted by Employer to cover work that is not measurable at tender stage • Dayworks for small works. Rates are abstracted from ‘Schedule of dayworks’ and contractor given option of adjusting • labour Sum £5000 Percentage adjustment % • Monies payable to 3rd parties as directed by the Employer • Site investigation Sum £10,000

9. A5– and A6– Prime Cost Items • Monies paid to a nominated specialist sub contractor selected by the Employer • The contractor pays the nominated sub contractor and gets reimbursed through monthly valuations • Contractor is given the option of adding his charges for any support work required

10. Front Loading • Cash flow is very important to the Contractor and the Client • Interest payments • Overdraft limits • There is an advantage to the Contractor, and loss to the Client, if contract payments can be artificially increased early on in the project

11. Front Loading • This can be achieve in 2 ways • By increasing the BoQ rates of items used early on in the contract and decreasing rates for items to be used later • By use of Method Related Charges • Note that this does not alter total payments unless quantities change, just the timing of cash flow

12. Front Loading Example Contract requires 10, 000 m3 of concrete to be produced over a 20 week period Contractor costs Raw materials £40 / m3 Deliver batching plant & assemble £5000 Running cost of batching plant £1000 / wk Dismantle plant & return to yard £5,000 Tender price could be (10,000x40)+5,000+(20x1,000)+5,000 = £43 / m3 10,000

13. Alternative Billing Use Class A for batching plant and Class F for concrete Class A Supply & erect batching plant F sum £5,000 Operate batching plant TR wk £1,000 Remove batching plant F sum £5,000 Class F Provide concrete grade ? M3 £40

14. Comparison 10,000m3, 20 weeks • Class F only 10,000 x £43.00 = £430,000 • Class A and Class F Supply £ 5,000 Operate 20X£1,000 £20,000 Dismantle £ 5,000 Provide concrete 10,000 x £40£400,000 = £430,000

15. Effect on cash flow • If Class F only is used, the contractor does not recover batching plant set up costs until concrete is poured • If Class A + Class F is used, the contractor can claim for batching plant set up as soon as it is done

16. Contract Variation Contract was 10,000m3 over 20 weeks, now 5,000 over 15 weeks • Class F only 5,000 x £43.00 = £215,000 • Class A and Class F Supply £ 5,000 Operate 15x£1,000 £15,000 Dismantle £ 5,000 Provide concrete 5,000x£40 £200,000 = £225,000

18. Advantages of Class A • Class A method more accurately reflects cost to contractor • By using Class A the contractor benefits if quantities reduce, but looses if quantities increase

19. Interim Payments/Valuations • All ICE contracts have provision for interim payments (normally monthly) to be made to the contractor • The Contractor must submit an interim account / valuation to the Engineer for checking and approval • After approval the Client has 28 days in which to make the payment • A percentage of each valuation is retained by the Client as a security against default. The retention is normally 5% up to a maximum of 3% tender value.

20. Preparing a Monthly Valuation • The valuation should include • A percentage of preliminaries, ie Class A • A valuation of permanent works completed to date • Dayworks ordered to date • Materials on site (normally 60% of value) • Contractor submits valuation with priced BoQ with quantity column amended to show work to date • Engineer checks, deducts value of work to last month and certifies, then submits to Client

21. 12 month Contract Tender Class A General 120,000 Provisional Dayworks 50,000 Class D Demolition 50,000 Class E Earthworks 880,000 Class R Roads & Paving 950,000 Sub total 2,050,000 Adjustment (2.44%) -50,000 Tender Total 2,000,000

22. Month 4 Valuation Class A General (4/12) 40,000 Dayworks to date 15,000 Class D Demolition (complete) 50,000 Class E Earthworks (40%) 360,000 Class R Roads & Paving(12%) 190,000 Sub total 655,000 Adjustment (2.44%) -16,000 Contract total to date 639,000 M.O.S. at 60% 32,000 Month 4 Valuation 671,000

23. Construction Project Cash Flow 12 month contract MonthContract wages + plant hire 10,000 120,000 Suppliers 6,000 72,000 on site' costs sum 15,000 off site' costs sum 10,000 TOTAL COST 217,000 O/head & profit 23,000 TENDER TOTAL 240,000 Income/month 20,000 Valuation submitted end month 1 Agreed mid month 2 Paid mid month 3 Suppliers paid mid month after delivery

25. Conclusions • A contractor’s tender includes sums not directly related to the permanent works • These sums may be included within item rates and/or Class A • The location of these sums: • Affect total payment due if quantities alter • Affect monthly payments even if quantities remain the same • Can be used to improve the contractors cash flow.