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PROFESSIONAL PRACTICE I [QSD 289

]

Mohammad Nasharudine Shuib

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SECTION 1 2 3 4 5 6 7 8

DESCRIPTIONS INTRODUCTION GENERAL MATTERS STANDARD FORM OF CONTRACT METHOD OF PRICE DETERMINANTION CONTRACTOR SELECTION & APPOINTMENT PROCUREMENT OPTIONS CONTRACT STRATEGY CLIENT PROCUREMENT NEEDS

LINKS

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Client organizations are divided between those in private and public sectors although this distinction is becoming more difficult to define since the privatization of many national bodies. The private sector includes industrial, commercial, social, charitable and professional organizations, and individuals. The public sector is taken to mean government departments, nationalized industries, statutory authorities, local authorities and development agencies. The experience which a client has of building procurement ranges from extensive, in the case of a client with a project management team, to none, where a private individual may want a development only once in a lifetime.
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compare bids and maintain financial management during construction. 5 . Other specialists may be needed. prepare bills of quantity.The traditional method of organizing construction work starts with appointing a consultant designer. or both. in particular a quantity surveyor is appointed to provide cost information. usually an architect or engineer.

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CONTRACTUAL ARRANGEMENT BASE ON CONTRACT PRICE Fixed Price Cost Reimbursement BASE ON CONTRACTOR’S OBLIGATIONS Conventional Design and Build Management Contracting Others 15 .

BILLS OF QUANTITIES MEASUREMENT CONTRACT @ CONTRACT PRICE SCHEDULE OF RATES BILLS OF APPROXIMATE QUANTITIES DRAWINGS & SPECIFICATIONS 16 .

FIXED PRICE LUMP SUM (contract sum pre-determined) Bills of Quantities (BQ) Drawing and Specifications RE-MEASUREMENT (contract sum to be ascertained on completion) Schedule of Rates (adhoc/std) Approximate Bills of Quantities 17 .

FIXED PRICE CONTRACT .

FIXED PRICE LUMP SUM (contract sum pre-determined) Bills of Quantities (BQ) Drawing and Specifications RE-MEASUREMENT (contract sum to be ascertained on completion) Schedule of Rates (adhoc/std) Approximate Bills of Quantities 19 .

20 . He takes the risks of calculating approximately how much work is involved & its cost. Contract sum is predetermined & stated in the contract.The contractor contract to do the work at a price he estimated in advance. Traditional contracts are usually fixed price contract.

LUMP SUM CONTRACT .

LUMP SUM (contract sum pre-determined) Bills of Quantities (BQ) Drawings and Specifications 22 .

Example: PAM. CIDB etc. Advantages: client is able to define the works & prepare documentation. 23 . Drawbacks: Documentation must be complete before tender. PWD. The contractor is responsible for carrying out all the works shown in BQ or Drawings and specifications.The contract price is agreed at time of the formation of the contract.

24 . For civil engineering works. tender comparison & financial administrations.Prepared by QS Subject to adjustment for variations. Drawback: provide the best basis for estimating. the whole work subject to re-measurement. All the contractor tender on the same measurement data. the BQ are based on estimated quantities (Provisional Quantities).

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26 .The contractor is responsible for carrying out all the works as shown on drawings & specifications. The contractor must submit & priced the schedule of rates in order to value variations. drawback: does not provide for easy comparison of tender sums. The contractor must calculate his TENDER SUM based upon the CONTRACT DRAWINGS & SPECIFICATIONS. The contractor will calculate his own quantities.

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RE-MEASUREMENT CONTRACT .

RE-MEASUREMENT (contract sum to be ascertained on completion) Schedule of Rates (adhoc/standard) Approximate Bills of Quantities 31 .

Sometimes described as dayworks contract or contract with approximate quantities.The parties do not pre-agree any price for the works as a whole. But they do pre-agree the rates of payment to which the contractor shall be entitled. 32 .

Alternatively. The contractor is paid for the actual workdone according to the schedule of rates. 33 . The schedule is similar to a BQ but without the quantities. Contractor is required to insert his price against the items in the schedule.The cost of the works is calculated by applying an agreed schedule of rates to the work actually done. a priced schedule is prepared & the contractor is asked to quote a percentage adjustment (plus @ minus) to the rates. The total cost the project is unknown until the works is completed.

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All the works would be re-measured upon completion. Example: Civil Engineering Works 35 . Approximate quantities are prepared & the contract price is based upon the actual quantities of works executed which are re-measured during the course of construction.

COST REIMBURSEMENT .

COST + % COST REIMBURSEMENT COST + FIXED FEE COST + FLUCTUATING FEE 37 .

of using & hiring plant & employing labours to carry out construction works.Also known as PRIME COST / COST PLUS because the method of payment is by reimbursement to the contractor of his prime cost plus management fee. 38 . Prime cost means: the total cost to the contractors.

The computation & verification of the total prime cost is a long & tedious process. Cost of construction to the client is greater. 39 . Work on site may proceed before the detailed design is complete. Early start on site to be made.Advantages The time required for preparation of tender document & for obtaining tender is minimized. Disadvantages The parties have least indication of their commitments.

Cost Plus Fixed Fee c. For example: where cost is less important factor than time. 3 types:a. Cost Plus Percentage Fee b. Cost Plus Fluctuating Fee 40 .Most uneconomical type of contract & should only to be used in certain circumstances.

COST PLUS PERCENTAGE COST REIMBURSEMENT CONTRACT COST PLUS FIXED FEE COST PLUS VARIABLE FEE 41 .

to cover his overhead & profit. May provide schedules to determine the prime cost. 42 .Contractor is paid actual cost of the work incurred plus a percentage of the actual cost. No incentive to contractor to make good progress or to save money because his fee rise with the total cost of the job.

The fee paid to the contractor is a fixed sum which normally vary with the total prime cost. 43 .The contractor is paid a fee equal to an agreed % of the prime costs.

000 – RM7. the higher fee paid to the contractor. the greater waste of resources.00. 44 . The contractor’s overhead still RM7.500 but the profit would be RM3.000.Due to uneconomic organization of the contract.500 [RM11.500] More inefficient contractor’s operations. inefficiency & excessive waste. the total prime cost was RM55.

The contractor has more incentive to finish quickly & minimize his profit as percentage turnovers. The contractor does not profit by increased expenditure unless the nature of the work is substantially altered.The fee is a fixed lump sum. The fee remains constant even when cost vary. 45 .

46 .The fee paid to the contractor is a fixed sum which normally does not vary with the total prime cost.

then the total cost would be:- 47 . inefficiency & excessive waste.Due uneconomic organization of the contract.000 (excess RM10.000). the total Prime Cost RM60.

An estimate is made of the total cost. 48 . The amount of the fee received by the contractor varies inversely to the costs actually achieved – a sliding scale.Similar to fixed fee.