Professional Documents
Culture Documents
Summary
This chapter seeks to establish that a need exists for both the simplifi-
cation and the rationalisation of the bill of quantities (BoQ) cost
model. The present day uses of the BoQ are compared to those for
which it was originally intended. This comparison demonstrates
that, in practice, the BoQ and its current uses are at variance with, or
have exceeded, original intentions.
Having established the need for new improved cost models in
Chapter 2, this chapter looks at some of the methods used by academic
researchers and practitioners to, firstly, overcome the difficulties faced
by the BoQ and, secondly, to integrate cost with time. The methods are
compared and critically evaluated. The evidence supports the proposi-
tion that simplification using “significance theory” alone simplifies the
BoQ, but does not improve or enhance its role in the systematic quanti-
fication of delay and disruption claims. In short, simplification using
significance theory does not make the BoQ capable of fulfilling the
various tasks required of today’s cost model. Because most problems
associated with the conventional BoQ exist because it fails to model
work items and cost realistically, it is proposed that improvement and
increasing the realism within the BoQ can best be achieved by simpli-
fying the method of measurement or by a change from work items
towards “work packages” or “operational groups”.
3.1. Introduction
The BoQ has been in use for a number of centuries. Originating in the
UK, evolved significantly in the nineteenth century, mainly as a
result of the growth in transport such as canals and railways. The
evolution of the BoQ was accompanied by amendments to condi-
tions of contract, which were in turn revised in line with changes in
case law and statute. Case law at this time centred on liability for
Bills of quantities then took on more significant roles both as a vehicle for calcula-
tion of interim payments and doubling as the specification, under the Joint
Contracts Tribunal (JCT) with quantities forms of building contracts. These are
still lump sum contracts, but for the Institution of Civil Engineers (ICE) and other
types of contract, the bill of quantities later acquired full contract status, the work
becoming subject to “remeasurement”. In the past few decades both natural
evolution in forms of procurement and conscious policy have led to a move
against bills of quantities, towards milestone interim payments and lump sum
contracts of an increasingly turnkey nature. No one today wants to incur the cost
of interim measurements, nor to run the risk of interim payment disputes.
2 Are we all in the wrong job? Reflections on construction dispute resolution. Uff J. A
Society of Construction Law Paper based on the talk given to a joint meeting of the
Society of Construction Law and the Society of Construction Arbitrators in London,
3 July 2001.
3 The Contractor’s Use of Bills. Skinner DWH and Jepson B. Chartered Quantity
Surveyor, pp. 63–68, September 1980.
phases, and not at the tendering stage as was initially intended. This
is not surprising, since once the BoQ is used in the tendering stage, it
adopts its contractual purpose during the construction phase. The
contractual purpose of the BoQ appears to be to produce a cost
model for payment purposes during the construction contract.
However, because the BoQ is the only contract document concerned
with detailed financial issues, in practice it is often used in all
matters involving money and naturally becomes the central vehicle
for the financial control of civil engineering and building works.
In short, experience and academic surveys appear to indicate that
the BoQ is now used as a cost estimating model, tendering model,
planning model and a contractor’s site cost control model, lies at the
centre of most payments, and is used in the valuation of variations
and claims (including those for delay and disruption). The important
question involves an analysis of whether the BoQ adequately fulfils
the varied requirements of the industry. In other words, let us investi-
gate if the BoQ warrants improvement, total replacement or commen-
dation. As a starting point, the positive and negative aspects of the
BoQ are evaluated.
3.4.1. Estimating
10 See Footnote 5.
11 See Footnote 9.
Estimating accuracy
There is a correlation between the estimating accuracy and the value
of each BoQ item. More specifically, high-value BoQ items are, in
practice, estimated to a higher degree of accuracy than low-value
items, and as the relative value of the BoQ item falls so does the accu-
Accuracy level
Design process
–
Fig. 3.1. The relationship between estimating accuracy and the design process
13 Design Phase Estimating: State of the Art. Ogunlana O and Thorpe T. International
Journal of Construction Management and Technology, Volume 2, No. 4, pp. 34–47, 1987.
14 Probabilistic Approach to Estimating and Cost Control. Vergera AJ and Boyer LT.
ASCE Journal of Construction Division, Volume 100, pp. 543–552, 1974.
15 The Successive Principle, Procedures for a Minimum Degree of Detailing.
Lichtenberg, S. Sixth Annual Proceedings of the Project Management Institute,
Washington, pp. 570–578, 1974.
16 Civil Engineering Standard Method of Measurement. Third Edition. Barnes NML. The
Institution of Civil Engineers. Handbook, Thomas Telford, London 1992.
left behind when the contractor’s men and machines had moved
on”. The BoQ was originally introduced in a labour-intensive
building industry and did not take account of plant and temporary
works. As the industry developed, the use of plant increased but the
BoQ rates still compounded all the resource costs and relied on the
principle that quantity is proportional to cost. Barnes suggested that
this situation could be tolerated, so long as the “work was never
varied after tenders were accepted”. However, most practitioners
would agree that variations and delay and disruption claims are
simply inevitable. It is in the evaluation of changes, delay and
disruption that unit rates (compounding all costs) primarily fall
down; those BoQ items that are not quantity-proportional are often
evaluated on a totally unsystematic, inaccurate or unrealistic basis.
In 1971, Barnes found that 70 % of all claims required consideration
of the distinction between costs. Five years later in 1976, Barnes intro-
duced the concept of method-related charges (MRC) to the Civil Engi-
neering Standard Method of Measurement (CESMM). It was now possible
for contractors to price certain work items that they considered not to
be simply quantity-proportional. Three charges were available to esti-
mators: (1) the quantity-proportional charge, (2) the time-related
method-related charge and (3) the fixed method-related charge. It
was intended that the three types of charge would be more closely
related to the manner in which costs were intended to be actually
incurred on site. Accordingly, it was hoped that the MRCs would
allow the automatic evaluation of variations and increase the realism
of quantifying claims for delay and disruption. It was decided that the
MRCs were a function of each contractor’s own method of working
and therefore should not be set against predetermined items and the
MRCs were not mandatory. As a consequence, in practice, MRCs
were not commonly used in the UK, and in 1992 Barnes conceded that
the “three price bill does not model value perfectly because it does not
model all the many variables which can affect cost”. The problems
that MRCs were initially designed to overcome still remain today.
Client: Aid to define client’s requirements. Partial Drawings and specification may be more suitable.
Costing of alternative designs. Fail Unit rate does not link the design and costing exercises. Large variances between
work items rates and tender, therefore use by clients to estimate is questionable.
Valuation of variations and claims. Fail BoQ rates promote “cost is proportional to quantity” idea. No link to time
model, unit rate compounds all types of cost.
37
Work remeasurement. Partial Time-related and other charge are not acknowledged in payment.
Color profile: Disabled
Composite Default screen
Short (1970)18
At the Institute of Municipal Engineers’ conference, Short discussed
the concept of cost-significant items. He highlighted earlier research
conducted at the University of Manchester that had established that
90 % of total project costs were consumed by 10 % of the BoQ items.
Short concluded that it might be beneficial to tender only the 10 % of
significant items and negotiate a lump sum cost for the remaining
10 % of the project cost. He believed that this method would remove
the cost associated with estimating the abstract and low-value items
such as “fillets in manholes vertically downward”.
19
Barnes (1971)
Barnes used “Pareto’s law” and concluded that 20 % of the total cost
in a BoQ was occupied by 75 % to 95 % of the BoQ items. Neverthe-
less, Barnes suggested that the low-value items were necessary to
convey the detail of the proposed work. However, because his
empirical research had concluded that the low-value items had little
influence on the final account, Barnes concluded that they could be
eliminated from the financial control of the contract. Barnes noted
the inadequacy of the standard form methods of measurement used
to compile BoQs, stating, “It is one of the paradoxes of the contrac-
tual system that the BoQ contains prices for fixing components of the
work which are so small that their fixing cost cannot economically be
defined”. As discussed above, Barnes espoused the many advan-
tages of operational estimating and the need to adapt standard form
methods of measurement to encourage operational estimating.
20
Moyles (1973)
Moyles’s investigation into items in the BoQ “proved the existence
of a Pareto distribution”. Accordingly, he suggested that this 80/20
relationship be used to simplify BoQs. The method used by Moyles
to select the high-value items in the BoQ or the cost-significant items
18 Summing Up. Short GS. Second Conference on Contracting in Civil Engineering since
Banwell. EDC for Civil Engineers and Municipal Engineers, National Economic
Development Office, 1970.
19 See Footnote 9.
20 An Analysis of the Contractor’s Estimating Process. Moyles BF. M.Sc. Thesis,
Loughborough University of Technology, 1973.
was still laborious and involved pricing all the BoQ items and
ranking them in descending order. When 80 % of the total value was
reached, the corresponding items were selected.
21
Harmer (1983)
Harmer, with the Property Services Agency (PSA), also decided to
make use of Pareto’s law. The PSA developed an estimating system
using significance theory, basing it on the rationale that “by restricting
the measurement and pricing to significant items and using data
with reasonable sample sizes it was considered that the unreliability
of rates from the BoQ would be minimised”. Harmer reported that,
on average, 20 % of the BoQ items in a work classification (e.g. exca-
vation, brickwork, concrete) represented 69–89 % of the work section
total value.
22
Saket (1986)
Saket used an earlier finding that the cost-significant items were
those whose value was greater than the average value, and devel-
oped what he termed “iterative estimating”. This method of esti-
mating did not require all the BoQ items to be priced; instead,
attention was focused on the cost-significant items.
23
Allman (1988)
Allman, like Harmer, researched the simplification of the BoQ within
the PSA. Allman’s review of the significant items estimating system
highlighted that results analysed by the PSA and checked independ-
ently by the Building Research Station (BRS) “indicated significant
items estimating as being the most accurate method in use within
the PSA”. The PSA published a “significant items booklet” that set
out the estimating procedure and contained details relating to the
percentage cost of insignificant items in each trade. The PSA also
produced a computer programme that incorporated Monte Carlo
simulation to increase estimating accuracy.
21 Identifying Significant BoQ Items. Harmer S. Chartered Quantity Surveyor, pp. 95–96,
October 1983.
22 Cost Significance Applied to Estimating and Control of Construction Projects. Saket MM.
Ph.D. Thesis, The University of Dundee, 1986.
23 Significant Items Estimating. Allman I. Chartered Quantity Surveyor, pp. 24–25,
September 1988.
24
Betts and Gunner (1993)
Betts and Gunner reported undertaking similar research in Singapore,
which “revealed that the 80/20 relationship remains constant over a
wide variety of building functions”. They highlighted the growing
popularity of cost-significant item estimating worldwide and reported
that in Singapore, the Construction Industry Development had begun
issuing tender price indices based upon significant items.
25
McGowan (1994)
McGowan further refined the cost significance technique in order to
develop models based on the principle of “resource significance”. A
resource-significant item was identified as any item in a BoQ that had
a labour, plant or material resource value (cost and hours) greater
than the mean labour, plant or material resource value. McGowan
developed a model for reinforced concrete bridges and a model for
roads (flexible construction), which accounted for a consistent and
high (typically 80–90 %) proportion of the resources and costs. The
primary failure of such models was that they were project-specific
and extremely sensitive to change.
24 Financial Management of Construction Projects: Cases and Theory in the Pacific Rim.
Betts M and Gunner J. Longman Inc., White Plains, New York, USA, 1993.
25 Integrated Cost and Time Models for Measuring, Valuing and Controlling Construction
Projects. McGowan PH. Ph.D. Thesis, The University of Dundee, 1994.
26 Introducing Bills of Quantities (Operational Format). Skoyles ER. Current Paper 62,
Building Research Station, 1968.
27 Operational Bills: Users Comments. Abbot B, et al. The Architect’s Journal, pp. 617–620,
March 1970.
28 Practical Application of Operational Bills Two. Skoyles ER and Lear RF. Current
Paper Series, Building Research Station, 1968.
29 See Footnote 9.
Harmer (1983)
Saket (1986)
Allman (1988)