Contract Management

Contract Management:
A Way of Increasing Profit

in Construction Projects?
Learning from NCC International’s highway
construction project in Nicaragua.
CECILIA ANDERSSON
PHILIP GUNNARSSON
Department of Building Economics and Management

CHALMERS UNIVERSITY OF TECHNOLOGY
Göteborg, Sweden 2002
Examensarbete, M. Sc. Thesis 2002:1

Contract Management: A Way of Increasing
Profit in Construction Projects?
Learning from NCC International’s highway construction project in
Nicaragua.
Cecilia Andersson & Philip Gunnarsson
Göteborg, Sweden 2002
Chalmers University of Technology NCC AB

Department of Building Economics NCC International Projects
and Management Vallgatan 3
SE-412 96 Göteborg SE-170 80 Solna
Sweden Sweden
www.bem.chalmers.se www.ncc.se
Examiner: Supervisor:
Christine Räisänen, Ph.D. Håkan Broman, Senior vice
president, General Counsel
Supervisors:
Sven Gunnarsson, Tekn. lic
Christine Räisänen, Ph.D.
© Cecilia Andersson & Philip Gunnarsson
II
Abstract
Abstract
The construction industry is suffering from low margins and contractors have
difficulties making projects fully profitable. One of the reasons is that
contractors are not always properly compensated for all the variations and
additional work that occur during a project. In construction projects today the
contractor’s project management has to deal with a large amount of variations
and additional work. This has several causes, but a major cause is that parallel
design is becoming more and more common. Contractual documents such as
drawings and specifications are revised several times and changes in design
have become a fact. The contractor has to be aware of how to handle all these
changes in an effective way and the project management also needs to be aware
of all obligations and opportunities the contract states. One solution is to work
more actively and effectively with the contract by appointing a contract
manager.
The purpose of this report is to put focus on contractual issues and to discuss
and define the role of a contract manager for the Swedish construction industry.
What is the main responsibility of a contract manager?
What are the main work tasks of a contract manager?
In order to acquire knowledge of how a contract manager would work, a ten-
week case study of a quantity surveying team has been carried out in a highway
construction project in Nicaragua, in collaboration with NCC International. A
quantity surveyor is a British profession, the main work task being to ensure
that the contractor is rightfully compensated for all the work executed.
Based on the case study in Nicaragua an equivalent function as the quantity
surveyor, better adapted to the characteristics of the Swedish construction
industry, is defined. The role of a quantity surveyor is broadened to encompass
the strategic function of managing contracts. We have called this role a contract
manager.
The main responsibility for a contract manager is to follow up contractual
circumstances with client and subcontractors. The main work routines are to
establish contract administration systems, identify critical contractual
circumstances, handle variations and additional work and notify the client of
variations. A contract manager should establish understanding for and raise
awareness of contractual issues in the project organisation. These activities are
done today in NCC’s project organisation, but are not coordinated under one
function.
To conclude, a contract manager will ensure that variations and additional
work are taken care of in an optimum way. A contract manager will alleviate
the workload of project managers, strengthen the relation between different
actors and prevent conflicts and misunderstanding through better contract
knowledge. This knowledge is also beneficial for actors in the global
construction market where new standard forms of contracts are in use. A
contract manager should work preventively and strategically with contracts and
be an engineer who is interested in commercial and legal matters in order to
identify opportunities of making business.
III
Sammanfattning
Sammanfattning
Byggbranschen lider idag av små marginaler i byggprojekten och
byggentreprenörer har svårigheter att få dem riktigt lönsamma. En av
anledningarna är att byggentreprenörer inte rättmätigt blir kompenserade för de
ändrings- och tilläggsarbeten man utför under projektets gång. Idag handhar
byggprojektledningen en ansenlig mängd ändrings- och tilläggsarbeten. Detta
har flera orsaker, däribland att parallellprojektering blivit allt vanligare.
Handlingar som ritningar och specifikationer revideras ständigt och
kontraktsändringar har blivit legio. Entreprenören måste vara medveten om hur
alla dessa ändringar skall hanteras. Projektledningen behöver också vara
medveten om alla skyldigheter och möjligheter som kontraktet ger. En lösning
är att arbeta mer aktivt och effektivt med kontraktet genom att tillsätta en
kontraktsledare.
Syftet med denna rapport är att diskutera och definiera en kontraktsledares roll
i den svenska byggindustrin.
Vilka är de huvudsakliga ansvarsområdena för en kontraktsledare?
Vilka är de huvudsakliga arbetsuppgifterna för en kontraktsledare?
För att få en förståelse för hur funktionen kontraktsledare kan utformas, har vi
under tio veckor studerat en quntity surveyor-grupp på ett vägprojekt i
Nicaragua, i samarbete med NCC International. En quantity surveyor är en
brittisk profession, där quantity surveyor:ns huvudsakliga funktion är att
säkerställa att entreprenören får rätt ersättning för utfört arbete.
Med utgångspunkt från fallstudien i Nicaragua, finns intentionen att utforma
och anpassa en funktion som utgår ifrån quantity surveyor:n till Svenska
förhållandena. Funktionen är utvecklad till en mer strategisk funktion vars
huvudsakliga uppgift är att aktivt jobba med kontraktet. I denna rapport
kommer funktionen att refereras till en kontraktsledare.
Kontraktsledarens huvudansvar är att följa upp kontraktsfrågor mellan
entreprenör och beställaren, samt mellan entreprenör och underentreprenör.
Huvuduppgifter är att etablera system för kontraktsadministration i projektet,
identifiera kritiska delar i kontraktet, handha ändrings- och tilläggsarbeten samt
anmäla avvikelser till beställaren eller dess ombud. Kontraktledaren skall också
vara ansvarig för att kunskap och förståelse om kontraktet finns i projektet i
allmänhet och hos de som direkt berörs av det i synnerhet. Dessa olika
uppgifter utförs i dag inom projektorganisationen i NCC, men inte samlat
under en funktion.
Slutsatsen är att en kontraktsledare säkerställer att ändrings- och tilläggsarbeten
är optimalt tillvaratagna, avlastar platschefer, stärker relationerna mellan olika
aktörer och förhindrar konflikter och missförstånd genom en bättre
kontraktskunskap. Denna kunskap är också värdefull för entreprenörer som
verkar på den globala marknaden där nya kontraktsstandarder används.
Sammanfattningsvis är en kontraktsledare en kommersiellt intresserad ingenjör
vars uppgift är att jobba preventivt och strategiskt med kontraktet, samt att
identifiera de möjligheter att göra de affärer som kontraktet erbjuder.
V
Acknowledgement
Acknowledgement
Our trip to Nicaragua has not only given us a knowledge and understanding of
how important contractual matters are, but has also given us new visions and
understanding for other cultures. This Master of Science thesis has been done
in collaboration with NCC International and has been a real opportunity and a
memory for the rest of our lives.
The support we received from the project management and the understanding
from the quantity surveying team when we did our study was a great help to us
in the collection of information. During our ten week study we also had the
opportunity to get to know local people that became our friends in Ocotal,
Nicaragua.
We would like to thank the contract advisor Dan Palmgren, the project
manager Rolf Frii, the road production manager Bernard Lima and also
Hamilton Brown for his understanding and patience when we interrupted his
work. We also thank Angel Garcia for his enthusiasm in taking us with him on
road trips, which gave us an understanding of the practical work on site.
Thanks are also due to all the interviewees that have given us valuable time.
We would also like to thank our tutor Håkan Broman on NCC International and
our supervisors Sven Gunnarsson and Christine Räisänen at Chalmers
University of Technology for their support and for all the constructive feedback
during our work with this study.
Finally we would like to send a thought to our families and friends for their
support and understanding during this intensive period.
Cecilia Andersson & Philip Gunnarsson

Göteborg December 2001
VII
Table of content
Abstract ............................................................................................................................................III
Sammanfattning............................................................................................................................... V
Acknowledgement.......................................................................................................................... VII
1. Introduction .................................................................................................................................. 3
1.1 Background.............................................................................................................................. 3
1.2 The problem............................................................................................................................. 3
1.3 An old function with new competence....................................................................................... 4
1.4 Purpose and limitations ............................................................................................................ 5
2. Data collection and analytical methods ...................................................................................... 7
2.1 The research process............................................................................................................... 7
2.2 The empirical observations in Nicaragua .................................................................................. 8
2.3 Interviews with experts........................................................................................................... 10
2.4 Making a guideline ................................................................................................................. 11
3. Theoretical frame ....................................................................................................................... 13
3.1 Standard forms of contract ..................................................................................................... 13
3.1.1 FIDIC.............................................................................................................................................................. 13
3.1.2 AB 92 ............................................................................................................................................................. 14
3.2 A comparison between FIDIC and AB 92................................................................................ 15
3.3 Contractual factors................................................................................................................. 16
3.4 The quantity surveyor............................................................................................................. 17
3.5 Constructability....................................................................................................................... 19
3.5.1 Background of constructability .......................................................................................................................... 19
3.5.2 The objectives of a constructability approach .................................................................................................... 20
3.5.3 The dimensions of constructability .................................................................................................................... 21
4. Results from the case ................................................................................................................ 23
4.1 The case study in Nicaragua .................................................................................................. 23
4.2 Results from expert interviews................................................................................................ 25
4.2.1 The US ........................................................................................................................................................... 25
4.2.2 Sweden .......................................................................................................................................................... 26
4.2.3 Norway ........................................................................................................................................................... 27
5. Discussion.................................................................................................................................. 29
5.1 Definition of a contract manager ............................................................................................. 29
5.2 Constructability and the contract manager .............................................................................. 29
5.3 Contract manager and the invoice process ............................................................................. 31
5.3.1 Variations ....................................................................................................................................................... 32
5.3.2 Notification...................................................................................................................................................... 32
5.3.3 Documentation................................................................................................................................................ 32
5.3.4 Communication ............................................................................................................................................... 33
6. Reflections and conclusions ..................................................................................................... 35
6.1 Reflections ............................................................................................................................. 35
6.2 Conclusions ........................................................................................................................... 36
7. Recommendations ..................................................................................................................... 37
7.1 Further studies....................................................................................................................... 37
8. References.................................................................................................................................. 39
8.1 Articles and Books.................................................................................................................. 39
8.2 Web sites ............................................................................................................................... 40
8.3 List of interviews..................................................................................................................... 40
Appendix: Guideline ...................................................................................................................... 43
1. Introduction
1. Introduction
“…OH NO! The surface is cracking, again! After an inspection, by the
supervisor, of the sub-grade layer on road section 1213 it is seen that the
measures that were undertaken by the contractor were not sufficient. As stated
in the contract the supervisor now has to notify the engineer. After an
inspection done together it is decided that there has to be a further excavation
of unsuitable material, 0.40 m under the sub-grade layer. This because there is
a suspicion that the materials are damp, which causes instability and makes
the layers crack. The engineer issues a variation order, which explains how
much excavation that is necessary. Also a pay item is specified that the
engineer thinks is suitable as compensation for the work. The supervisor is not
convinced that this is the appropriate compensation so he makes a reservation
to the pay item on the variation order. Regardless of this they decide that the
excavation will start the same afternoon, when the excavation group has
finished road section 1010.
The quantity surveyor in the contractor’s office then evaluates the variation
order to decide whether the compensation is reasonable and if the specified
pay item is correct. In accordance with the schedule the excavation group
should have continued on road section 0915 instead of 1213, according to the
variation order. The quantity surveyor has to consider a time compensation for
the remobilisation of the excavation group.”
1.1 Background
The construction business today suffers from low margins and has difficulties
making projects profitable (Harris & McCaffer 2001). Many projects
undertaken have a profit of approximately 5% (Ashworth 1999). Of course this
has many causes and consequently also many possible solutions. One cause,
according to interviewed project managers, is that the contractor handles a
large amount of variations e.g. changes in design that the contractor is not fully
compensated for.
When unforeseen situations occur on site it is of importance that one takes the
time to analyse the situation and comes up with a solution that forecasts
consequences. Today there is a tendency to solve problems in haste so the rest
of the production can continue. A stop in production means loss of time, and
loss of time costs money. This type of fire fighting was recognised during a
case study in Nicaragua. The problems were mainly due to parallel design,
which caused a large amount of variations and additional work consequently
leading to remobilisation of labour and machinery from ongoing work. This
resulted in time delays and re-planning every time it occurred. The use of
contracts to make proper valuations of additional work, so that adequate
compensation is paid out, could help management to handle the fire-fighting
syndrome.
1.2 The problem
Due to parallel design the project in Nicaragua had to handle a large number of
variations in the design. All these variations had to be treated and carefully
evaluated by the quantity surveying team in order for compensation in time
and/or money to be adequately paid out. With all additional work the situation
3
1. Introduction
became untenable and the quantity surveying team was provided with a
contract advisor who had more experience with contract negotiation and
contract issue correspondence.
The situation observed in Nicaragua can be generalised to the Swedish
construction industry. In the last few years the trend in the construction
industry has moved toward shorter construction time. One cause is when
clients are eager to optimise their use of finance, they want a short project time
so the object can be taken in use and start to generate money as quick as
possible, e.g. rent (Murdoch & Hughes 2000). As a result of early start-ups on
site, the design is often not completed and has to be done in parallel with the
production i.e. parallel design. This situation causes problems in planning the
work on site and creates additional work that has to be valued and charged. The
value of additional work is in most cases stated in the contract. The problem is
to ensure compensation for all the variations and additional work that occur,
e.g. included re-mobilisation of equipment and machinery.
1.3 An old function with new competence
According to interviewees in Sweden the consequences of parallel design and
the fire-fighting solutions on site are similar to the situation in Nicaragua. The
measures taken to handle these situations are also identified in Swedish
construction projects, but they are not gathered under one function as in
Nicaragua. The purpose of the quantity surveying team in Nicaragua was to
ensure that the contractor was rightfully compensated for executed work
including all the variations and additional work that arose. Traditionally a
British quantity surveyor documents all the quantities produced and ensures
compensation for these. To be able to handle situations where variations and
additional work cause re-planning, extra costs etc. there is a need of quantity
surveying services and strategic work with the contract also in Swedish firms.
Based on the case study in Nicaragua, the intention is to define an equivalent
function better adapted to the characteristics of the Swedish construction
industry. That is why the role of quantity surveying has been broadened to
encompass the more strategic function of managing contracts. This function
will, in this report, be discussed under the name of contract manager.
In order to develop a contract manager function we have drawn on the theory
of constructability. McGeorge and Palmer (1997) explain constructability as a
concept that manages deployment of resources to their optimum effect by
having a holistic approach to the project and its actors. A holistic view is the
core issue when describing the contract manager function. A constructability
view also increases construction cost effectiveness by improving the
contractual relationships among the actors (McGeorge & Palmer 1997). The
concept of constructability together with contract and quantity surveying
theories constitutes the scope of a contract manager.
This research project has been carried out in collaboration with the Swedish
contractor, NCC AB, and has partly been a case study performed at their
project site in Nicaragua. The NCC International project in Nicaragua was a
rehabilitation and improvement project of the northern part of the Pan
American highway. This part had been heavily damaged after the hurricane
Mitch had hit Central America in November 1998. The project was contracted
with a FIDIC contract and was based on a bill of quantities. In this type of
4
1. Introduction
contract the client or a representative has to submit all the produced quantities
and the contractor is paid regularly for what has been produced and submitted.
The measuring and the making of a statement for payment are traditionally
done by a quantity surveyor (Kwakye 1997).
1.4 Purpose and limitations
The purpose of the study in Nicaragua was to identify and characterise all the
activities that a quantity surveyor is involved in. The question is how a
guideline for this function can look like? The objective with the guideline is to
provide NCC International with a tool to improve the mobilisation of a quantity
surveyor function in a project start-up.
The main objective with this report is to highlight the importance of contractual
matters for the Swedish construction industry. This study focuses on how to
handle contractual demands, variations, contractual documents and additional
work by instituting a new function, a contract manager. The purpose of this
report is then to discuss and define the role of a contract manager for the
Swedish construction industry. The questions to answer are:
What is the main responsibility of a contract manager?
What are the main work tasks of a contract manager?
In this study, when discussing the implementation of a contract manager,
organisational matters have not been considered. The contract manager
presented in this study is from a contractor's point of view. The guideline is
based on the FIDIC 4th edition - Red Book and is based on the existing quantity
surveyor role in the NCC International project organisation.
5
2. Data collection and analytical methods
The study has been carried out in three major phases. First a case study in
Nicaragua, then interviews in the US, Norway and Sweden and finally defining
the function of contract manager and designing a quantity surveying guideline.
This chapter describes the research process, the case study and the interviews
that have been made. The different survey phases are not independent of each
other. The case study has not only been of importance for creating a guideline,
but also for understanding contractual questions that have been of value when
defining the function of a contract manager.
2.1 The research process
Ashworth (1999) explains the research wheel as an ongoing process that
considers different phases that are repeated over time to establish validity and
reliability in research. The most common entry point is usually an empirical
observation. This can be based on an identified problem that the researcher
wants to find a solution for. Figure 2.1 illustrates the research process used in
this study.
Data collection
Research questions
Data analysis
Empirical
observation
Theory &
literature review Proposition
Conclusions
DOCUMENTATION
Figure 2.1: The adapted and modified research process from Ashworth (1999) used in this
study.
This iterative process started with a research question that was based on a
proposal from NCC International to make a study of the quantity surveying
function at their project in Nicaragua. The first general research question
formulated for this was "How can NCC International create a work description
for a quantity surveying function?". This question is based upon the need for a
management system for quantity surveying at NCC International. Already at an
early stage we realised that creating a management system would be too broad.
We lacked the knowledge for doing this, lacked experience in the field of study
and the time limitation, ten weeks on site in Nicaragua and 13 weeks in
7
Sweden, would not be sufficient. The empirical observation is the base of

knowledge for this study and has constantly been built upon by theory and
literature reviews and also by data collection through expert interviews. The
propositions have been revised several times and the iterative process wheel
has been rolling.
This research process has helped us in our progressive advance in
understanding the role of quantity surveying. During the whole study we have
taken notes and documented our observations.
The search of relevant literature and articles has been an ongoing process.
Keywords such as Quantity Surveyor, Quantity Surveying, FIDIC,
Construction law, Contract, Contract Management, Construction Management,
Contractual arrangements, Contract Administration, Standard forms of
contract, Purchasing, Cost Management, Value Management, Risk
Management, Risk Allocation, Construction Conflicts and Disputes have been
used when searching for interesting and relevant information for this
evaluation. The continuous search has given us several approaches to the
research problems.
2.2 The empirical observations in Nicaragua
The nature of the survey was to follow a quantity surveying team at the
Yalagüina – Las Manos road project in Nicaragua in order to identify and
characterise all the related work routines for the team. In this survey the case
study approach was used to collect information about how the quantity
surveying team worked. Observations and interviews were done in order to
identify all the work routines connected to the team. Using the case study in
this way made it possible to present a wide range of different sources of
evidence and also understand complex organisation problems (Remenyi et al
1998; Ashworth 1999).
In this particular project the quantity surveying function was not performed by
chartered quantity surveyors. Three local engineers constituted the team and
the Swedish management who had experiences from working with chartered
quantity surveyors put the team’s work routines together. There were several
other professionals that interacted with the quantity surveying team. Examples
of this interaction were surveyors that provided the team with quantity data and
supervisors that communicated information that enabled treatment of
variations, additional work and contracted work.
These factors made it complex to map the role because no work description
was defined and several factors affected the quantity surveyor's work. Using
the case study combined with a phenomenological approach gave us a solid
platform to work from. According to a phenomenological approach one defines
factors, events and other related processes that affect the studied object: in this
study the quantity surveying team. This was done through several interviews
with the team in order to get knowledge about events and related processes that
affect the work of the team. These interviews and observations were done in
order to understand how processes were correlated to the team (Remenyi et al
1998).
The ten-week survey of the quantity surveying team was pursued with the help
of contract reading, observations and interviews. To get an understanding of
the project and all the parties involved, we started our research by reading the
8
contract. This was done in order to get knowledge of the interdependency

between the internal functions and external actors. Another reason for reading
the contract was to get an understanding of what the requirements were in the
contract. We wanted to identify the requirements stated in the contract that
regulate what the quantity surveyor had to do, should do and could do
according to the contract. Figure 2.2 illustrates the quantity surveyor's relation
to the contract.
All the details in the contract could not
be identified or fully understood, so site
The contract observations were done. We went on
several field trips along the 46 km long
road with different people in the project,
such as the quantity surveying team, the
Has to be done surveyor, the asphalt supervisor, the
crush plant supervisor, the engineer and
Should be done
the project manager. These different trips
Can be done gave us a better idea on how the different
functions were connected to each other
and how the work was performed in
practice. Several questions arose leading
us to a better understanding of the
Figure 2.2: The quantity surveyor’s different functions in the project, thus
relation to the contract establishing comprehension of the
different problems.
With the knowledge and questions that had arisen from reading the contract
and from the field trips, interviews were made with the head quantity surveyor
and the contract advisor. This in order to get better knowledge of how the team
worked and which demands they had. When a process was recognised it was
identified where in the whole context it was performed. To get a better
understanding of the relationship between the different processes and a better
overview of the whole working team, process flowcharts were created. A
process flowchart illustrates how different activities are connected to each
other. When work processes are unfamiliar or complexity increases it becomes
more important to use tools such as process flowcharts and they can help a
process run more efficiently (Allee 1997).
The flowcharts were constantly discussed with the head quantity surveyor and
the contract advisor in order to locate any misunderstandings. We then revised
the guideline and a new discussion was scheduled and so on. When a process
chart was confirmed, a written description was made explaining the detailed
routine. Each routine has a general description of: its process, responsibility
allocation, data collection, procedures and resulting documents.
Knowledge and understanding for quantity surveying and other contractual
issues were thus assimilated. This has been the basis for our continued interest
to penetrate further the research of quantity surveying, contract administration
and contract management.
The case was built up during ten weeks and the results consisted of process
flowcharts and describing routines for the quantity surveyor in Nicaragua. For
a more detailed description of the guideline, see Appendix.
9
2.3 Interviews with experts

After the study in Nicaragua and the creation of the first draft of the guideline,
we started to interview non-Nicaragua project-related persons. The intention
with the interviews was to get more knowledge about quantity surveying and
the processes that were connected to this function outside NCC. How are they
performed, who are responsible for them, why are they performed in the way
they are?
The main purpose with the interviews in the US was to get knowledge of the
construction industry there and especially how the companies work with
quantity surveying related tasks. We also wanted to know what the trends are
in the quantity surveying field today in the US. The US market is larger than
the Swedish one and therefore we assumed that several management trends in
the construction business arise there, like other management concepts in other
industries.
The interview questions discussed how the US construction business works
with contract administration. Before we left Nicaragua we sent out e-mails to
each person to be interviewed, containing the following three questions:
• How does the US construction industry work with quantity surveying
today?
• What are the trends in the quantity surveying field in the US today?
• What type of research is performed on quantity surveying today?
A total of six interviews were performed in the US and they were all semi-
structured. This means that we had some general questions to open up
discussions around our main purpose for the interviews. The first interview was
done with a professor in Construction Management at the University of
Florida, who gave us a good introduction to the US construction industry. The
following interviews did not focus on quantity surveying since this function
does not exist in the US as it does in the UK, but rather on the processes related
to quantity surveying, such as:
• Contractual arrangements in the US
• Estimating and evaluating changes and variations
• Communication between production and administration
• Relations between clients and contractors in the procurement process
The purpose of these discussions was to find out how contract administration is
performed in the US and we were also attentive for ideas for further studies.
The other interviews were done with:
1. The vice president for a construction management department of a world
leading Entertainment Company with several amusements parks world-
wide.
2. An estimator at the above mentioned company.
3. A quantity surveyor from Ireland, working as a quantity surveyor for an
Irish contractor.
4. A senior estimator working for one of the largest contractors in the US.
10
5. A former British quantity surveyor who is vice president for a large

construction consultant firm.
The four interviews done in Sweden were more structured, but still they opened
up for discussions. The questions were more precise and the main purpose was
to identify where quantity surveying related processes were performed in
Swedish NCC project organisations. This in order to see whether the specific
project organisation in question had located resources for dealing with the
issues we recognised in Nicaragua. The objective with these interviews was to
get our hypothesis confirmed or denied that contractors are not sufficiently
compensated for all variations and additional work and that there is a need to
work more actively with contract administration.
Two company lawyers were interviewed at a Swedish construction company
and the purpose was to see how the company is working with legal project
issues in the company. These lawyers work with construction law support in
tendering processes and for project managers who need help in their daily
work.
Two interviews have been done with an Englishman who is a chartered
quantity surveyor and works for NCC International with contract
administration. These two interviews were done in order to discuss his role as a
quantity surveyor and his work with contract management within NCC
International.
In addition to these interviews we have spoken to several people
knowledgeable in the industry on contractual issues. During one of these
conversations it came up that the Norwegian construction industry works with
contract engineers in their organisations. Therefore an interview with a
planning manager with contract engineering experience working for NCC
Norway was performed. The purpose of this meeting was to investigate how
and why NCC Norway works with this function. The interviewee is a Swede
working for NCC Norway.
Finally, we had a workshop with two persons working at the Development
Department for NCC International, to get more knowledge and understanding
of how their management system (NIMS) works and how they describe
different functions. This in order to create a guideline that can be useful when
defining the quantity surveyor in their manual. The quantity surveyor function
is included in NIMS but not yet explained in the section Controlling and
Supporting Processes.
In total, the 14 interviews took place at each person's office and they lasted for
about one hour, the workshop lasted four hours. Both of us were present at
each interview, except for the one in Norway. We both asked questions and
were active in the discussions, and both of us took notes.
2.4 Making a guideline
The idea of making a guideline came out of the first research question, where
the intention was to create a work description and a management system for a
quantity surveyor. Several organisations use the process flowchart for
illustrating processes and routines in order to get a better understanding and
overview of the work. After discussion with the contract advisor on site we
decided to do this as well. A process flowchart displays sequences of events,
11
activities, stages and decisions in a form that is easily communicated and

understood. It also helps the understanding of the work process and is useful
when improving the work process (Harris & McCaffer 2001).
The guideline describes the work for the whole team. First a main overview
was created, see figure 2.3, then each process was described with several
routines and more detailed flowcharts, see figure 2.4.
Order
2. Collect Quantities
1. Work according to the contract

Collected
Survey the area Reports
2. Collect from LP
Quantities
Quantities from
Surveyor
3. Process
Quantities
No All Quantities?
4. Monthly Statement 5. Progress Report & Forecast
Yes
6. Monthly Payment Certificate Planning 3.Process Quantity
Figure 2.3: Process flowchart for quantity surveyors Figure 2.4: Detailed process flowchart
When a process chart was confirmed, a written description was made

explaining the detailed routines. The written routine is supposed to work as
guidance and a more detailed description than the process flowchart for the
process. See Appendix for the whole guideline.
12
3. Theoretical frame
From the empirical observation and expert interviews four activities have been
recognised. These are the handling of variations and additional work,
notification, documentation, and communication between production and
administration, which all have importance for the outcome of the invoice
process. All these activities are identified in Swedish projects as well, but not
as co-ordinated as in the Nicaraguan project. To be able to define the contract
manager function for the Swedish construction industry, a theoretical frame has
to be drawn up.
The role of a contract manager is not defined or evaluated in the literature.
Therefore four important issues have been taken into consideration when
building up the theoretical frame for a contract manager, 3.1 Standard forms of
contract, 3.2 A comparison between FIDIC and AB 92, 3.3 Contractual
factors, 3.4 The quantity surveyor and 3.5 Constructability. The chosen areas
of knowledge will guide the reader to the understanding of the core issues of a
contract manager.
3.1 Standard forms of contract
The purpose of standard forms of contract is to facilitate the contractual
arrangements between actors in a project. Standard forms of contract are ready-
made terms and conditions when making a contract (Kwakye 1997). The
standards vary from country to country and from one type of project to another.
These standards are generally used and accepted by different contracting
parties. It would be practically impossible to devise a standard form of contract
that would take account of all eventualities that might occur in a construction
project. Standard forms of contracts are often criticised as being a compromise
containing some defective aspects. However, the advantage of their adoptions
is that with the passage of time, persons using them become familiar with their
overall content as well as their particular strengths and weaknesses. (Kwakye
1997)
FIDIC and AB 92 are standards that will be presented below, where FIDIC is
an international standard while AB 92 is the Swedish counterpart.
3.1.1 FIDIC
FIDIC (Federation Internationale Des Ingenieurs-Conseils) is the French
acronym for the international federation of national associations of independent
consulting engineers. It is an international association for engineering-based
consulting companies. The association was founded in 1913 and represents
professionals from 65 different countries. The association prepared its first
contractual standard in 1957, to be able to work uniformly overseas (Corbett
1991; www.FIDIC.org, 2001-10-18). The main users of the standard are
engineers and contractors working internationally. Among financiers that
demand the FIDIC contract for their projects are the World Bank, the Asian
Development Bank and different UN bodies.
There are four different types of contracts in the FIDIC family: the green, red,
yellow, and silver book. The green book is for smaller projects and will not be
presented here, while the other three are applicable for bigger and more
complex projects.
13
The Red Book - is used when the contract is of the measurement or bill of
quantity contracts (Corbett 1999). In these types of contracts there is a
separation of construction and design. There is a designing team, which is
contracted by the client, and they shall provide the contractor with a complete
design (Ashworth 1991). This form of contracting goes back to the mid
nineteenth century and is widely used, however it is decreasing in popularity
(Murdoch & Hughes 2000). This is because more and more lump sum contracts
are being used where the risk is allocated to the contractor
(www.foreningenbbk.org, 2001-10-22).
The Yellow Book - is used when the contract is of the Lump Sum or Design and
Build type (Corbett 1999). This procurement method has been in use for a long
time. The contractor gets an assignment from a client to design and build a
construction. The assignment is based on a list of requirements from the client.
One of the benefits for the client is that the client does not have to be so active
during the project, because most of the responsibility of the project is allocated
to the contractor (Söderberg 1993). A Design and Build contract combines all
the fundamental tasks in construction projects like design and production into
one package (Kawakye 1997).
The Silver Book - is used when mainly private institutions finance a project and
is an EPC project (Engineer Procure Construct) (Corbett 1999). The hallmark
of these kinds of contracts is that the client does not want to deal with the day-
to-day work. The contractor is responsible for the design, procurement and
construction. The EIC (European International Contractors) are critical to this
type of contract arrangement, because it makes the contractor take
responsibilities for risks that are not possible to calculate
(www.eicontractors.de, 2001-11-05).
3.1.2 AB 92
In Sweden there is a specific contract standard called AB 92 that regulates
conditions in construction contracts such as measurement- and general
contracts. For Lump Sum and Design and Build contracting the regulation is
called ABT 94 (Nordstrand 2000). These standards are accepted in the Swedish
construction industry and they were first developed at the beginning of the
twentieth century (Söderberg 1993; www.föreningenbbk.org).
AB 92 is produced by BKK (Byggandets Kontrakts Kommitté), the Swedish
building contract committee. This committee consists of client, contractor,
municipal and private representatives. BKK is a body for negotiation about
general directions within the industry. The committee has the main
responsibility for updating and making the standard functional for the industry.
The AB 92 standard has a reputation among the different actors in the business
of being rational and cost saving compared to other standards where the
responsibility/risk allocation may vary from case to case. One aspect that can
be questioned in AB 92 is whether the interface between the responsibilities
and risks are in balance (Söderberg 1993). The different parties are familiar
with the AB 92 standard today as it facilitates the risk analyses and
identification of the rights and obligations for the involved parties.
Today, according to BKK, there is a trend of making departures from the AB
92 and this is becoming more and more common. Mainly this is due to the fact
14
that professional clients, who are mostly public clients, want to make their own
requirements and deviations in the specifications. The main purpose of this is
to locate the risk to the contractor. According to BKK this might be the
beginning of the end for the AB 92, an era that has prevailed in the Swedish
construction business during a long time (www.foreningenbkk.org, 2001-10-
22).
3.2 A comparison between FIDIC and AB 92
Activities that have been identified during the case study are the handling of
variations and additional work, notification and documentation between
production and administration. In FIDIC contracts there is a need for a function
that manages the contract during the project. Here a comparison is done to see
if there are similar needs in AB 92.
Variations – Both FIDIC and AB 92 contain clauses of how to regulate
variations, which occur when (Liman 1991):
• Clients change their demands before the work is complete.
• Designers have not finished the design and specifications are not
complete before construction starts.
• Changes in legislation and other external factors may force changes
upon the project team.
Contracts do not have to be re-negotiated every time changes are made in the
specification because there are clauses that regulate how changes shall be
handled (Murdoch & Hughes 2000). The types of variations presented above
differ considerably from each other. Still both FIDIC and AB 92 tend to treat
all different types of variations equally (Corbett 1997; Lindsö 1996). Both
FIDIC and AB 92 state that it is the contractor’s duty to execute variations on
the order of the client or the client’s representative. If a variation concerns a
type of work that is not defined in the contract it has to be negotiated separately
to enable compensation (Murdoch & Hughes 2000).
Variations come in two different types: measurable work and non-measurable
work, e.g. a re-planning activity (Murdoch & Hughes 2000; Lindsö 1996).
Measurable work is work that is unambiguously defined in the contract and
also possible to value, using the contract as reference. In cases with non-
measurable work the contractor has to submit an offer to the client or client's
representative that can be negotiated if they find it unacceptable. All variations
ordered by the client or the client’s representative entitles the contractor to
compensation. This can be in the form of time and/or money. This is valid in
both FIDIC and AB 92.
Notification – both the client and the contractor are obliged to leave notice to
each other when either of them discover deviations of any kind. The deviations
are regulated in both FIDIC and AB 92 (Corbett 1991; Lindsö 1996). This
obligation demands close communication between the parties and is of
importance for the project (Liman 1991). In FIDIC most activities have to be
notified to the different parties, this so the responsible part has the chance to
explain his or her intention or/and adjusts the notified variation. Most of the
different notifications also include a time limit. If the one who is obliged to
leave notice does not do it within the time stated in the clause, he or she risks
15
not to get any compensation for what he or she was going to leave notice about
(Corbett 1991). The reason for leaving notice is the same in AB 92: to keep the
parties informed, because this is important for the advancement of the project.
Even in the AB 92 there are different time limits and the consequences of not
following them can result in absence of compensation. The difference between
the two standards is that in AB 92 there are not so many demands on
notifications (Hedberg 1996).
Documentation – are records that tell what has happened in the project. These
records are kept as evidence in a possible claim situation and they can
constitute the basic data for decision-making. The FIDIC contract states that
several of its activities shall result in documents, but it does not state in what
form these records shall be. AB 92 contracts demand of the parties that they
shall keep daily records called diaries. These are not standardised, but they
contain information about what kind of work was undertaken, how many
people were involved, how long time it took and whether something particular
happened (Liman 1991).
3.3 Contractual factors
The nature of a construction project is complex and a standard contract can not
cover all the details in a project, so there is a need for specific contracts. The
different types of contracts take their starting point in a contractual standard
that correspond with the circumstances of a project (Kwakye 1997). The choice
of contract arrangement can have major effects on the outcome of a project in
terms of financial responsibilities. The main differences in construction
contracts are the extent to which the client is responsible for the management
of the project, risk allocation and the internal responsibilities of project
members (Kodeda 1992; Söderberg 1993). The more responsibility the
contractor has the greater the risk. As a result the contractor can increase the
contract sum, hence risk allocation is closely connected to contract
arrangement (Kodeda 1992; Liman 1991; Söderberg 1993). According to
Murdoch & Hughes (2000) it is not only the commercial risk that is most
significant when defining the characteristics of projects and project strategies,
but also the involvement of people. Figure 3.1 illustrates the relative risk
allocation between different types of standard contracts. The contract
arrangement chosen by the client is connected to the risk allocation in a project.
Risk Allocation
100
80
Risk [%]
Red FIDIC AB 92 Yellow FIDIC Silver FIDIC

60
40
20
0
C
al
um
t
EP
en
er
ity
pS
en
m
nt
re
G
ua
m
su
Lu
fQ
ea
ll o
M
Bi
Type of Contract
Figure 3.1: Risk allocation for contractors and the types of contracts included in different
standard forms of contract.
16
From a contractor’s point of view there is less risk in projects that are regulated
by measurement contracts where the client takes responsibility for the co-
ordination of the project. The characteristics of a measurement contract are that
quantities are not specified and the contractor gets paid for all the running
expenses. In a measurement contract the client practically takes the total risk.
This contractual arrangement can be used when the client's requirements are
not known in advance, when they are insufficient for the creation of bills of
approximate quantities, or when the client wants a rapid start of the production.
An experienced client in these contract arrangements may wish to retain
responsibility for certain risks. This is also the case for a client in projects that
are not complex. By handling the risk and responsibility the client does not
have to pay for these services to the contractor. The client keeps financial
benefits of taking this risk (Murdoch & Hughes 2000).
In contrast, in a measurement contract the contractor is responsible for design,
procurement and construction. Examples of these contract arrangements are
EPC projects (Engineer, Procure and Construct), BOOT (Build, Own, Operate
and Transfer) and PFI (Private Financial Initiative). These contract
arrangements are complex and demand careful organisation in terms of
handling different risk factors (Ashworth, 1991). The lowest common
denominator for these different arrangements is that the contractor takes total
responsibility for the whole process from design to occupation. In these types
of arrangements the client does not wish to get involved in the daily work. It is
the contractor's responsibility e.g. that the required performance is complied
within time and at the agreed price. A client in this type of project may be
fortunate enough to avoid some or even all of the risks involved (Murdoch &
Hughes 2000). The one who can manage risks can also handle high-risk
projects and make a profit (Kodeda 1992; Kwakye 1997).
The traditional contractual arrangement sets out the legal relationship the
parties wish to establish and the rights, obligations and procedures for resolving
contractual disputes (Kodeda 1992; Kwakye 1997). There are several factors
that affect what type of contract is suitable for a certain project, e.g. the amount
of involvement from the client, the location of the project, technical
complexity. In an initial stage of the design phase, the client has to adopt a
suitable contractual arrangement for the project and a corresponding standard
form of contract.
3.4 The quantity surveyor
The quantity surveyor profession developed in the late seventeenth century in
the British construction industry. It was agreed that the various tradesmen had
to pay each master craftsman for the quantity of work that was performed and
built into the building. This could only be done by measuring the amount of
masonry, brickwork, roofing etc and then pricing these quantities (Bishop
2001).
In the beginning of the eighteenth-century the work was measured and valued
as it proceeded. A final bill of measurement, where all the produced quantities
were recorded, was established and it had to be submitted by the architect who
was responsible to agree and price the final bill of measurement. In time the
tradesmen became dissatisfied with this arrangement and employed their own
measurers to look after their interests, which resulted in two quantity surveyors
17
doing the same work. It was realised that this was a waste of resources. As an
answer to this problem an independent function of quantity surveyor was
created. To preserve secrecy in tendering, the architect became responsible for
appointing the quantity surveyor on behalf of the client. This improved the
quantity surveyor’s status and confirmed the quantity surveyor’s independent
position (Nisbet 1961).
A quantity surveyor working for a contractor works on site. A quantity
surveyor is responsible for ensuring that the right measures are taken so the
project becomes a financial success. To be able to do this the quantity surveyor
on site has to be business minded (Kwakye 1997).
The role of the quantity surveyor has developed from a specialist in measuring
to a generalist in contractual matters. The quantity surveyor of today has a
strategic role in the analysis, forecasting and accounting of costs (Ashworth
1999; Kwakye 1997). Four to five years of university studies is needed to
achieve a quantity surveyor degree and at least two years of working
experiences to become a chartered quantity surveyor in the UK
(www.rics.org.uk, 2001-12-16). The profession is seen both with contractors
and with clients in all kinds of construction projects.
In short, the role of quantity surveying today is about optimising and
controlling the charging activities that are connected to the work on site (Harris
& McCaffer 2001). The strategy for charging is how to make invoices, what to
invoice and when to do it. According to Kwakye (1997) a way of working with
quantity surveying is to:
• Undertake measurements, estimate and negotiate new contracts.
• Prepare and agree on measurements, interim valuations, final accounts
and contractual claims with sub-contractors and the client’s
representative.
• Collect or record cost information on site, operations for use in the
preparation of contractual claims, settlement of final account or for use
in the preparations of future estimates/tenders.
• Identify variations to the construction work and request the client’s
representative to issue formal instruction to cover varied work.
• Provide assistance in the procurement and evaluation of sub-contractors’
quotations and preparing sub-contractor documentation.
• Prepare and compare costs of alternative production methods of various
site activities to enable the selection of the most economic method.
• Prepare periodic financial reports, e.g. monthly reports, and cash flow
reports for management.
• Attend site meetings with client representatives and sub-contractors and,
when necessary, clarify and ensure that the contractor’s contractual
position is protected.
The above mentioned tasks are independent of what type of contract is
regulating the project.
18
3.5 Constructability
Constructability is described with three dimensions. All three have to interact
with each other to get an overall understanding for a construction project. If an
understanding of the intersection of the three dimensions can be achieved a
holistic approach can be reached. A holistic view is important in all phases of a
project, as it enables awareness of all parameters among participants in a
construction project (Mc George & Palmer 1997).
The concept of constructability helps to frame the function contract manager.
Contract manager can exist without the notion of constructability, but it is an
effective concept to enable understanding of contract management. The
theoretical base of the notion of constructability corresponds with the core idea
in contract management: that it is essential to adopt a holistic approach towards
a construction project to achieve good results of the same.
3.5.1 Background of constructability
In 1983 the Construction Industry Research and Information Association
(CIRIA) focused attention on the concept of constructability. They wanted to
highlight the problem of the separation of the design and construction
functions, which have characterised the UK building industry over the last few
centuries, probably because of the isolation of many designers from the
practical construction process (McGeorge & Palmer 1997). CIRIA defined
constructability as “…the
extent to which the design
Design of the building facilitates
the ease of construction,
Impact of design Influence on subject to the overall
decisions design decisions requirements for the
completed building.” This
means that CIRIA limited
Construction
the focus on the
relationship between
Figure 3.2: The scope of constructability with narrow design and construction,
boundaries (McGeorge & Palmer 1997). see figure 3.2.
The CIRIA model views constructability as a purely design and construction
oriented activity with narrow boundaries, which means that the model does not
consider other related factors. According to McGeorge & Palmer (1997),
researchers as Griffith and McGeorge have discussed the difficulty in
concluding what constructability shall include, what are the boundaries for
constructability?
Another pioneer of the Constructability concept was the CII, Construction
Industry Institute, in Texas USA in the middle of the 80´s. According to the
report, Pub 3-1 – Constructability: A Primer, CII published in 1996
“Constructability means better projects – lower cost, better productivity,
earlier project completions, and earlier start-ups”. The institute wanted to
seek ways of increasing construction cost effectiveness by improving the
contractual relationships of the client and the contractor (www.construction-
institute.org, 2001-10-26). The aim when CII was founded was not only to
improve the cost effectiveness, but also TQM and international competitiveness
of the construction industry in the USA. According to McGeorge & Palmer
19
(1997 p 55) the CII definition of constructability is wider in scope than the
CIRIA approach and defines constructability as:
“A system for achieving optimum integration of construction knowledge and
experience in planning, engineering, procurement and field operations in the
building process and balancing the various project and environmental
constraints to achieve overall project objectives.”
3.5.2 The objectives of a constructability approach
There are several factors that affect the construction industry and its core
business, i.e. design, construction and maintenance processes of an object. The
different boundaries that affect the processes are therefore difficult to define as
they differ in all projects. According to McGeorge & Palmer (1997), several
researchers have discussed the difficulty in defining the appropriate boundaries
for the constructability
External Factors Other project goals
model. Further, McGeorge
and Palmer claim that wide
Project funding boundaries create a model
Stake holding
Political objectives with too many uncertain
Design Documentation factors, which have very
Form of contract little prospect for a
External Factors Budget
practical implementation of
Internal Factors
Site factors constructability.
Management
Construction Internal relationsMcGeorge & Palmer
Resources (1997) argue that, to get a
Weather
Internal Factors workable concept of
External Factors constructability it is
Accessibility
Durability
important to recognise the
Maintenance Obtainability many factors in a project
Obsolescence environment, which have
Function
an impact on, and links
External Factors Other project goals between the design and
construction and the
maintenance of the object.
Figure 3.3:Framework for managing constructability These factors and the
adopted from McGeorg & Palmer 1997 p. 57.
relation between the
different phases create a performance framework for managing
constructability. This is illustrated in figure 3.3, where the factors influencing
the design, construction and maintenance process and the link between these
where the quality and performance of the finished product are described. To be
able to achieve the full potential of constructability the different factors and
boundaries have to interact with each other. This is done in a complex pattern
of all the factors. It is important to mark that constructability is holistic where
everything from design to the finished object and all factors in between matter.
The holistic approach also includes the maintenance or termination activities
such as installations, replacement and removal of materials, services and
equipment. All these activities are equally important throughout the object's
lifetime, just as constructability is important throughout construction phase
(McGeorge & Palmer 1997).
20
The importance of taking of all activities into account during the object's
lifetime means that decisions that are made upstream without any roots
downstream may have a negative influence on later decisions in the process.
For example, a decision which may not have been made by the designer
concerning intermediate functions between design and construction such as
documentation, contractor selection, choice of contract and so on, can have a
significant impact on the construction process. Further the maintenance
manager who is regarded to be downstream of the design and construction
decision ladder may be affected by upstream decisions. As seen in figure 3.3 all
stages that are influenced by different forces may affect the ongoing processes,
but also future processes. The whole construction process is a complex issue
and if it is not acknowledged from the beginning and throughout the whole
project it is likely that constructability leads to average level strategies. If the
complexity is acknowledged in the project start, constructability is suitable for
a construction project (McGeorge & Palmer 1997; Nima et al. 2001).
3.5.3 The dimensions of constructability
McGeorge and Palmer (1997) describe three dimensions of constructability, the
participants, the constructability factors and the phases in the construction
procurement process.
I. The Actors: This dimension consists of two groups: stakeholders and decision-
makers. The stakeholders have interest in the outcome of the project. The
decision-makers impact on the outcome of the project.
II. The 12 Constructability Factors: These factors are important to consider when
constructability is to be achieved. Each factor plays a role in all stages of the
construction process and they altogether contribute to create the holistic
approach that is so fundamental in constructability. They are:
1. Integration of constructability in the 7. Realistic project program
project plan
2. Construction knowledge 8. Construction methodology
3. Matching team skills 9. Construction innovation
4. Corporate objectives 10. Feedback
5. Considering available resources when 11. Considering construction efficiency in
choosing technology specifications
6. Awareness of external factors’ impact 12. Considering accessibility in the design
on costs and construction phase
III. The Phases in the construction procurement process: these are feasibility,
conceptual design, detailed design, construction, and post construction. All
stages have impact on each other and none can be isolated from the other. It is
important for the complete understanding of constructability to see these
relationships since constructability is about getting an overall picture of the
procurement process.
Essential when working with constructability is that the participants in the
project team, designers, client, contractor, suppliers are willing to connect to
the other two dimensions. The concept of constructability is that all participants
in any phase of an object's lifecycle have to consider all the constructability
factors. The construction participants have also to consider other global
participants, factors and stages. Figure 3.4 illustrates how a single participant
21
can be influenced and has to consider all factors from the global environment
to the single individual at project level. Figure 3.4 also considers the time
aspect, how or what is affecting the procedure from history to future.
Taking all factors into account during the whole process will optimise the
constructability concept.
Actors
The Global Environment

History Present Future
Phases
The Industry
The Company
The Project
Factors
Figure 3.4:The concept and the three dimensions of constructability.
22
4. Results from the case
This chapter will outline the results from the study in Nicaragua and the
interviews with experts. First we describe how the quantity surveying team
worked in the project in Nicaragua. Then the results of the expert interviews
are presented. All this combined with the theoretical frame will later constitute
the basis for our discussion of a contract manager function in the Swedish
construction industry.
4.1 The case study in Nicaragua
The quantity surveying team in Nicaragua consisted of three persons: a head,
an operative and an administrative quantity surveyor. Their mutual relations
and work routines were mapped. They worked respectively with:
• Valuation of additional work and variations* and the letter
correspondence with the engineer* that followed the handling of
variations. Preparation and creation of the monthly statement, i.e. the
invoice processes. Creation of cash flow reports and forecasts.
• Collecting quantities and reports from line production such as daily
reports* and site instructions*. Documentation such as document
activities for use in a possible claim process.
• Processing quantities collected by the operative quantity surveyor.
The identified processes illustrated in figure 4.1, start with an order, which can
be a project start or a variation order. (1) Work according to the contract
describes what different types of documentation and surveying is demanded in
connection to the work. (2)
Information is then collect
Order about quantities and
documentation from line
1. Work according to the contract production. (3) These
quantities are later
2. Collect
Quantities
processed and compiled,
and approved by the
3. Process engineer's representative*.
Quantities (4) The monthly statement
is a compiled document
4. Monthly Statement 5. Progress Report & Forecast that consists of seven
subjects that represent
6. Monthly Payment Certificate Planning
different activities, which
are regulated in the
contract, see Appendix: 4.
Figure 4.1: Process flowchart for quantity surveyors
Monthly Statement.
The creation of the monthly statement was the main objective for the quantity
surveying team in Nicaragua. (5) A progress report was then compiled of the
data gathered. This data together with project planning are the base for
forecasting future payments. The monthly statement then results in a (6)
* See Appendix: Definition according to FIDIC 4 th edition - Red Book
23
monthly payment certificate, issued by the engineer's representative, which

entitles the contractor to get paid for executed work.
If there are disagreements between the engineer and the contractor about the
monthly statement submission, it often concerns:
• The quantities of a pay item and measurement methods of these
quantities.
• Which pay item to use when compensating for additional work.
• The time compensation for additional work.
All types of variations of the contract are regulated in different clauses. These
clauses can handle for example how to notify the client or how to value
variations. Much of the head quantity surveyor time was used for
correspondence with the engineer in order reach an agreement. The reason for
these work procedures is that the monthly statement serves as the basis for the
monthly payment certificate.
The processes identified in the flowchart, figure 4.1, resulted in routines that
describe:
- The scope of the process. - What is required in the contract?
- What the responsibilities are. - Descriptions of different procedures.
- Data that shall be collected. - The resulting documentation.
For a detailed presentation of the processes connected with the quantity
surveying team see Appendix.
One of the main reflections when observing the quantity surveying team was
how important close co-operation between production and administration was.
This was important because the quantity surveying team was dependent on the
information from line production to enable e.g. notification, and correct
valuation of additional work. This was mentioned by managers on site who
also pointed out the importance of creating routines for communication
between these units. A Swedish production manager said "...to have daily
communication with the men on site is one of my most important tools for
managing the production, as it is there that all important information is."
As pointed out earlier the situation in the project in Nicaragua was that the
design was not complete when the project started and the engineer had to
perform parallel designing. This caused several variation orders every day,
which made it hard for the contractor to plan the work. It made the allocation of
resources difficult when labour and machinery from ongoing work had to be re-
mobilizing to execute the different variation orders. As a consequence there
were time delays and re-planning on a day-to-day basis. The effects for the
quantity surveying team were that they became overloaded with additional
work that had to be valued. The situation became really difficult when the
contractor and the engineer interpreted the contract differently when
negotiating for compensation of time and/or money.
It is essential to document activities on site to have records for a possible claim
situation. In the project, routines for documentation have been developed
because of the needs during the project. The commencement of photo
24
documentation was such a need, which made it possible to proof e.g. how a box
culvert looked like before forces from nature e.g. extremely heavy rain, had
destroyed it or clogged it with mud. Whose responsibility is it? Is it lack in
design or is the work wrong executed? Who shall take care of it? There had to
be records on how the closest surroundings looked like before and after an
activity took place. Having routines for documentation were also essential for
ensuring that revised contract documents, as drawings, were distributed to the
line production. One manager pointed out the importance of making these
routines, in the initial phase of the project, together with the engineer, "...if all
parties in a project have agreed on how to revise drawings at project start we
all save time and it will eliminate misunderstandings later in the project."
Documentation routines not only help when negotiating and in claim situations
but uniform routines may also facilitate communication.
According to several supervisors at the project in Nicaragua a better knowledge
of the FIDIC contract would also have helped them in negotiations with the
engineer on site. This in order to, as mentioned above, supply the quantity
surveying team with correct information that facilitates the work such as
valuing and notifying variations and additional work. Some misunderstandings
arose between supervisors and the quantity surveying team and several times
the team had to renegotiate pay items for variations and additional work when
supervisors lacked the knowledge of how compensation were stated in the
contract. Having experience of the FIDIC contract was essential and the
engineer’s representative was superior in some cases.
4.2 Results from expert interviews
Here the results from the interviews done in the US, Sweden and Norway are
compiled. A brief summary of the most interesting issues from the interviews
are given.
4.2.1 The US
A conclusion from the interviews in the US was that the American construction
industry is rather similar to its Swedish counterpart. When discussing relations
between different actors and how to become profitable in a construction
project, one interviewed client expressed it "…everyone is here to make
business". As a client he wanted to highlight that clients cannot press
subcontractors too much if good relations are to be maintained. The actors must
respect that all delivered services in the process has a value, which must be
properly compensated for. One essential factor to achieve business thinking is
to have clear communication between the parties. Further relations and the
importance of building these to become successful in the projects were
discussed. As one interviewee said, "…the lead star is to build relationships
and not projects". The positive impact of good relations in the project was a
topic that all interviewees came back to. There were several recipes on how to
achieve good communication, but they all came down to create conditions for
understanding between the parties in a project, for example routines on how to
handle variation orders. One interviewee said "Having standardised routines
are good for avoiding disputes, when they just lead to costs and bad mood".
As mentioned in the previous chapter, there is no quantity surveying function
in the US, as in Britain. Still quantity surveyor tasks are performed in the
American construction organisation. When discussing these tasks the
25
interviewees at the amusement park talked about the importance of

visualisation, where the term "imagineering" was introduced. This was
explained as having the ability to imagine and prevent a likely event before it
occurs. A skill like this was seen as valuable when working with contractual
matters on site. The visualisation skill was important both for estimators in
order to make good cost and planning estimations, but also for construction
management. This in order to be more observant of difficulties, such as
changes in design at an early stage i.e. working preventively. All actors need
information and have to be aware of changes as early as possible.
The interviews in the US showed how similar the construction business is
whether it is in Sweden or in the US. Of course there are differences and it is
important to be attentive for these in order to find inspiration to solve problems
in another way than one is used to do. The interviewees represented all the
different parties in a construction project and they all pointed out the
importance of having good relations in projects. The discussions of this
confirmed our own thoughts of the importance of good communication.
4.2.2 Sweden
In the identification of the quantity surveying related processes in the Swedish
NCC projects, we observed several interesting issues. First of all, even though
the Swedish industry does not work with functions as quantity surveyor or
contract manager, the tasks still exist. The interviews became more discussions
about the importance of really taking the contract into consideration during
production in order to ensure that the contractor is fully compensated in
accordance with the contract. The interviewees point out the importance of
doing correct valuations of additional work and documentation among other
things. Having these different activities gathered under one function in the
organisation however does not exist. Different responsibilities are spread in the
organisation where nobody has the overall co-ordination for execution of the
activities. Examples of these activities are handling variations and additional
work, notification of deviation from the contract, routines for documentation
and communication.
In the interviews with the company lawyers it was confirmed that a more
actively work with the contract might help a specific project to better become
fully compensated for executed work. Sometimes the lack of time and
knowledge about construction legal matters made it difficult to handle a
contract in a more effective way. If a contract function was to be implemented,
both the interviewees said that it should be done by a person with experience of
construction production, who is business minded and also interested in legal
matters. They also mentioned the importance of maintaining good relations
between clients and contractors in the Swedish construction industry. The
interviews lead to discussions about the importance of taking the contract into
consideration during production. This in order to ensure that the contractor is
fully compensated for everything the contractor produces, including additional
work.
In the two interviews with the British quantity surveyor working for NCC
International with contract administration several issues were highlighted. On
the question on how to define quantity surveying, he said that today the role of
a quantity surveyor has developed and that the title is obsolete, "…today
26
quantity surveyors work more with managing contracts and as commercial

managers". He described the scope of contract management in general-,
internal- and external areas. According to him the quantity surveyor has the
responsibility to inform the project organisation of obligations stated in the
contract. "…one must help everyone do their job so you can do yours". This
means that one has to motivate people in the internal organisation to share
information in order to enable one’s own work.
Further he thought that one important part of managing contracts is to work
preventively with the contract i.e. to identify risks and critical parts in the
contract that can have effects for the project. Working preventively with the
contract and the work with valuation of variations and additional work are
inherent parts of the core of contract management, as he states "…contract
management is a way to maximise the profit for the contractor".
When discussing the creation of various routines he pointed out the importance
of defining these in the project start-up. These concern both internal- and
external documentation- and notification routines in order to avoid later
conflicts with client or subcontractors. Finally he discussed the importance of
avoiding conflicts i.e. get all the decisions confirmed and to have routines for
this. "…one should not have to deal with problems that occur just because one
has not worked actively to prevent misunderstandings", that is what preventing
work is about.
4.2.3 Norway
The Norwegian standard form of contract is called NS (Norwegian standard).
One characteristic of this standard is that it demands an extensive final
settlement in each project. The preparation for this settlement demands
documentation and preventive work along the whole project in order to avoid
problems of not getting compensation for executed work in the final settlement.
In Norway a contract engineer does the continually backup documentation for
the final settlement. According to the interviewee the contract engineer is a
good investment in all large projects in order to identify all the demands and
responsibilities stated in the specification. The interviewee in Norway could
not see why these relations would be hurt if implementing a similar function in
Sweden. He said: "No client would react negatively on a rightful claim"
meaning that if the parties have agreed in the beginning of the project on how
routines e.g. notifications, are to be handled then there would not have to be
any disagreements during production. Finally he said that due to a lot of
information in contracts, such as specifications and drawings, it is necessary to
have a function that has extensive knowledge of the contract and what happens
in a legal matter in unforeseen situations.
27
5. Discussion
5. Discussion
Several interviewees mentioned the importance of co-ordinating the related
activities identified in Nicaragua, since they are relevant to Swedish
construction industry. These activities: handling variations, notifying clients,
and making documentation, are all part of the invoice process.
This chapter will discuss how the function contract manager can improve the
co-ordination of these activities and how it could serve the Swedish
construction industry. First, section 5.1 will present our definition of a contract
manager working on site for NCC AB. This definition is the outcome of
observations from the case study combined with theory. Then, section 5.2 will
discuss the connections between constructability and contract management.
Finally, section 5.3 presents the result of this discussion and how the identified
activities, effectively performed, can have a positive impact on the outcome of
a project.
5.1 Definition of a contract manager
Main responsibility of a contract manager:
Ø The follow-up of contractual circumstances with client and
subcontractors.
Main work tasks of a contract manager:
Ø Establish a contract administration system, i.e. revising the guideline for
each project, concerning variation-, notification-, documentation- and
communication activities.
Ø Identify critical contractual circumstances in co-operation with the
production management.
Ø Be responsible for the handling of variations, notifications and
communication with client and subcontractors.
Ø Establish understanding for and consciousness of contractual issues in
the organisation.
Area of authority of a contract manager:
Ø Negotiate contractual matters with client and subcontractors.
5.2 Constructability and the contract manager
In the theoretical frame the constructability concept was presented. McGeorge
and Palmer (1997) describe constructability as a managing tool for "…the
deployment of resources to their optimum effect". To do so means establishing
good communication between members of the building team, which further
means the breaking down of traditional barriers. In this discussion
constructability is used to justify a contract manager. This means that the core
issue in constructability, which is an accepted management philosophy, is a
support when defining a contract manager function. Constructability is about
adopting a holistic view when managing construction projects, this holistic
view is the core when defining the contract manager as well. Practical
examples follow here.
29
5. Discussion
In construct management one example of the holistic view in constructability is

the issue of life cycle analysis. In a life cycle analysis one takes into
consideration how a construction material may effect the environment. The
analysis starts with the production of the material, how it can be used in design,
how it shall be treated in production, how it affects the maintenance of an
object, and finally how it can be recycled.
One example of the holistic view in connection with a contract manager is the
consideration of material supplies. In a road project the contractor needs to
know where supplies of filling materials will be located when doing the
estimation for a tender. This is essential knowledge when signing the contract
to ensure that there are enough supplies for filling materials. Later in the
production, shortages of materials can occur and it is important for the contract
manager to notice this in time so there can be a proper planning of future work.
A strategy for future work has to be established if the contractor has to re-plan
the work. The contract manager then needs to assess compensation for
increases in costs and time delays. If an additional quarry is established, the
contract manager has to estimate what it would cost to restore the quarry when
the production is completed.
The meaning of a holistic view is to understand the correlation between the
three dimensions i.e. phases, actors and factors in a project. Communication is
required to obtain understanding between these three dimensions. Several
interviewees mentioned the importance of good communication between the
different actors. As an interviewed client in the US expressed it, "…keeping a
continual dialogue between actors in a project is the key to success".
Communication is also important in the establishment of constructability. The
contract manager is an important link between all phases, actors and processes
and the tool to establish a good relationship is communication.
At each level and in every phase it is important with communication and
knowledge about the correlated factors in the other dimensions. Figure 5.1
illustrates that
ACTORS
Client no matter in
Suppliers what phase the
Designers
Contractor Project level project is all
Subcontractors actors affect
Public authorities Design Production Maintenance the different
PHASES processes to
Human resources some extent.
Environment Construction
Quality
Planning
Budgeting Contract
Management
Invoice
Legal
Finance
Administrativ
Estimating e
Purchasing
PROCESSES
Figure 5.1: The three correlating dimensions in constructability.
30
5. Discussion
Shen and Walker (2001) argue that constructability facilitates the integration
between the different construction phases. The integration is important to
obtain understanding of different activities that occur in different phases. This
understanding can eliminate problems in later stages.
5.3 Contract manager and the invoice process
The activities identified in Nicaragua, the handling of variations, notification,
documentation and communication, are all part of the invoice process. These
activities as mentioned before have been identified in Swedish construction
projects as well, but not co-ordinated by one function. Several interviewees can
see the advantage of having all invoice related activities co-ordinated, when
they acknowledge that contractors are not always compensated for the work
executed. As one Swedish production manager put it "…there is no tradition of
ensuring right compensation for executed work".
The invoice process together with budgeting, planning and legal processes are
identified as important in the case study. Figure 5.2 shows the intersection
between the identified activities and the contractor in the production phase. Our
study is based on experiences from the production phase, which is why we
concentrated the discussion of a contract manager in this phase.
ACTORS
Contractor
Production
PHASES
Invoice
Actors
Trends
Globalisation
Contract
History management Future
PROCESSES
Strategies
Market
Processes
Relations
Figure 5.2: The outcome of contract management from the intersection of the
invoice process and the contractor in the production phase.
Apart from the above mentioned activities and actors, there are several factors
that, in a holistic perspective, have to be taken into consideration for a contract
manager. Examples of these, such as company strategies, politics and
globalisation are seen in figure 5.2. However, we have concentrated this
discussion on how the handling of variations, notifications, documentation and
communication influence the Swedish construction business and how a
contract manager might handle these.
31
5. Discussion
5.3.1 Variations
The increase in variations and additional work is a reality in today’s
construction industry, which is mainly due to parallel design. This is the
consequence of clients wanting an early start on site, which from a client’s
perspective seems cost effective. According to interviews in the US the trend of
parallel design has become a fact in the construction industry and it is up to the
contractor to handle the situation. Another consequence of early starts is the
concentration of project time. According to Swedish interviewees the lack of
time might result in poor revision of contractual documents e.g. drawings. One
interviewed production manager identified not updated drawings as a problem
in the production phase, when a fundamental assumption of contracts is that
drawings are valid. Since variations are so frequent in contractual documents
there is a risk that this fundamental rule is neglected because there is no time
and/or routines to update drawings and responsibility is spread among different
functions.
Today it is difficult to make a detailed planning in the initial phase of the
project, since the conditions for the production changes from day to day. In a
hectic environment maybe important contractual issues can be overlooked. A
contract manager could be a way of handling the changing conditions in a
constructive way.
5.3.2 Notification
Both FIDIC and AB 92 demand notification if and when a deviation is
discovered. A notification has a time aspect i.e. the notification has to be done
during a specific period of time, which is of importance when neglect can lead
to absence of rightful compensation in time or money. In the Nicaraguan case
study it was recognised that the time aspect was of essential importance and
demanded attention. The head quantity surveyor ensured that this was done
correctly. According to one Swedish interviewee contractors do not notify
clients when variations occur in full extent and hence rightful compensations
are lost. Sometimes this is caused by insufficient contractual knowledge or lack
of time can be another reason. Therefore there is a need for a resource that has
profound contractual knowledge, a contract manager.
5.3.3 Documentation
Both FIDIC contracts and AB 92 contracts demand documents and
documentation. In FIDIC contracts there are several procedures that demand
documents while in AB 92 contracts there are direct requirements on how to
perform certain documentation as keeping daily records, referred to as diaries.
Routines for documentation are necessary for several reasons e.g. to have valid
documents in a possible claim situation and time records for labour when doing
estimation in a tendering process.
Both in Nicaragua and in the interviews it become clear how important it is
with proper documentation. Not only because a quality management systems
demand it, but also because proper documentation enable the contractor to
prove what has really been produced and how it has been produced. A way of
knowing what to document is to identify parts in the contract that demand
documents and from this information create project-specific routines for a
contract administration system. This proper documentation is essential for a
32
5. Discussion
contract manager when the function shall ensure right compensation for all the
work executed including variations and additional work.
5.3.4 Communication
Good communication is seen as the most fundamental factor to succeed, but it
is experienced that this is not always easy to practice. The need of good
communication was observed in Nicaragua and was mentioned in several
interviews in the US as one of the most important factors. As an interviewee
said; "the lead star is to build relationships and not projects", that is the key to
a successful project. People seem to believe they express themselves in a clear
way and that they are understood. However, this might not always be the case.
Making routines for communication is of importance for all parties involved in
a construction project, both internal and external. This is also confirmed in
constructability theories, where the whole concept is built on good
communication among all actors. According to the work description of a
contract engineer in Norway, the main responsibility is to follow up contractual
circumstances with client and subcontractors. In this context a contract
manager would act as the information link between the different parties. Acting
as this link would be a prerequisite for the contract manager to do his or hers
job, since correct information from line production constitutes the basic data
e.g. making right valuation of additional work. Communication is not only a
tool for getting knowledge it is also a tool for the contract manager to inform
other parts of the organisation about legal matters.
33
6. Reflections and conclusions
The main purpose of this thesis has been to discuss and define the role of a
contract manager within the Swedish construction industry. The purpose in the
following reflection is to justify the role of a contract manager and to place the
function in a Swedish context. The reflections and the definition are based on
observations from the case study in Nicaragua, interviews and from discussions
with people we have met along the journey of this Master of Science thesis.
6.1 Reflections
Interviewees noted that there is a cultural aspect involved in the
implementation of a contract manager function in the Swedish construction
process. They argued that the Swedish industry is built upon trust and strong
relationships and that the use of a contract manager could hazard the Swedish
way of working. The interviewees also expressed fear of a more formal
relationship in the process where legal issues would create suspicion among the
different actors. Spokespersons for a contract manager function claimed that
this would not be a risk because the main purpose with a contract manager is
that the function would create better awareness of the contract and better
understanding of legal matters among the actors. A holistic approach enables a
contract manager to visualise the construction process and identify obligations
and opportunities that are of a legal nature. This way of working could prevent
unnecessary disputes and increase profit among all parties.
Through the Swedish membership in the European Union and the overall
globalisation, the market has automatically opened up for greater international
competition in Sweden. With international actors on the Swedish market it is
likely that international standard forms of contracts will be introduced and local
customs will not longer be applicable. For example, in larger Swedish
infrastructure projects, such as Arlandabanan, the Öresund link and the
Götatunnel project, international standard forms of contracts are being used
because several international actors are involved. International partnering in
joint ventures is to allocate risks among all actors. This results in the Swedish
construction industry having to adapt to international working processes and
organisation, both clients and contractors, to be competitive. Knowledge of
contractual and legal matters will become more important for all actors in order
to know how to act in the globalisation process. A contract manager type of
function could be a way to meet and prepare for this development.
Production managers today are heavily overloaded with work, they are in
charge of everything that happens on site. According to Grossi (2000) this is a
serious problem that he discusses in his article Byggchefers arbetsmiljö och
personliga hälsa (The work environment of production managers and their
personal health). As mentioned before the activities identified in Nicaragua
were also identified in the Swedish production organisation, but they were
spread out among several functions. However, the production manager has the
overall responsibility for the execution of the activities. A contract manager
function that gathers the responsibility for activities related to contractual
matters could be a way of alleviating the pressure on the production manager.
35
6.2 Conclusions
Today parallel design is a fact and is due to investors and clients wanting to
speed up and shorten the total time of the process, from planning and design
through construction to maintenance of an object. One major consequence of
parallel design is that the amount of variations and additional work has
increased. In order to get rightful compensation in both time and money the
contractor has to make valuations of all the variations and additional work. In
connection to variations and additional work it is important to make
notification, which is specified in the contract i.e. when, to whom and how the
variation shall be notified. In connection with variations, additional work and
notification the contractor needs to identify which parts of the executed work
that has to be documented, in order to have proof when claming compensation
for the work and to have back-up in a possible conflict situation. To avoid
conflicts and misunderstandings it is essential to know what has been specified
in the contract, which are the agreements and having an open dialogue and
good communication with all actors in a project.
In Nicaragua the contractual work was done by a quantity surveying team, but
we discuss and define a single function. Depending on the complexity and size
of a project, we see one single contract manager for several small projects,
while larger projects may demand a contract management team.
It is important to not see the increased focus on contractual matters as an
aggressive action. The meaning is not to violate the trust culture that exists in
Sweden, but rather to see the increased focus on the contract as an action for
preventing conflicts and misunderstanding by a better contract knowledge,
which would benefit both clients, subcontractors and the contractor.
There is no question that an additional function in a construction project would
demand resources and extra costs of increased wages. But a contract manager
would pay off since gathering the invoice related process under one function
would make the invoice process more efficient. The contract manager function
would also work preventively with the contract in order to identify critical parts
in the contract, would remedy these and by that save money and time for all
actors in the project.
To summarise the contract manager, would be a function that works
preventively and strategically with contracts in order to identify obligations and
opportunities. The contract manager should be an engineer interested in
commercial and legal matters in order to identify the opportunities of making
business that most contracts give. As our title indicates, Contract Management:
a way of increasing profit in construction projects? We believe working with a
contract manager function will increase profit for construction projects.
36
7. Recommendations
7. Recommendations
A first step towards working with a contract manager type of function in
Swedish project organisations is to become more aware of how contractual
matters can affect the outcome of a project. We do not say that the industry
today neglects contractual issues, but we believe contractors need to focus
more on what contracts have to offer.
We recommend NCC International to continue to develop their knowledge of
international contracts and make sure that all functions in the project
management have a basic understanding and knowledge of the contract.
We believe that NCC Sweden can learn from NCC International how to work
with contractual matters in Swedish construction projects.
7.1 Further studies
It is well known that there is a general resistance in organisations for costly and
comprehensive management re-organisations. An implementation of a contract
manager in a project would add a resource to the organisation. Further studies
are necessary before implementing a contract manager function in the Swedish
construction industry. For example, to map and evaluate all variations in a
project and compare these with the ones that is notified to the client. Questions
that need answers are:
• What are the financial benefits with a contract manager?
• How would a contract manager affect a project organisation?
37
8. References
8. References
8.1 Articles and Books
Allee, V., (1997), The Knowledge Evolution -expanding organizational
intelligence, Butterworth-Heineman, Newton.
Ashworth, A., (1991), Contractual procedures in the construction industry, 2nd
edition, Longman, London.
Ashworth, A., (1999), Cost studies of buildings, 3rd edition, Longman, London.
Bishop, M., (2001), A crisis of the identity for the quantity surveyor,
www.rics.org, 2001-10-10.
Calvert, R.E., Bailey, G. and Coles, D., (1995), Introduction to building
management, 6th edition, Laxton’s, Oxford .
Chen, S.E., McGeorge, D. and Varnam, B.I., (1991), Report to the Government
Architect, New South Wales, Buildability Stage 1, TUNRA, University of
Newcastle.
CII, (1986), Constructability: a primer. CII University of Texas, Austin,
Publication 3-1.
Corbett, E.C., (1991), FIDIC 4 th – a practical legal guide, Sweet and Maxwell,
London.
Corbett, E.C., (1999), FIDIC's New Rainbow, The Red, Yellow, Silver and
Green 1 st Editions, Corbett & Co., London.
Grossi, G., (2000), Byggchefers arbetsmiljö och personliga hälsa,
www.ledarna.se 2001-10-01.
Harris, F. and McCaffer, R., (2001), Modern Construction Management, 5 th
edition, Blackwell Science Ltd., Oxford.
Hedberg, S., (1996), Entreprenadkontrakt – Fällor och fel, Svensk Byggtjänst,
Stockholm.
Kodeda, F., (1992), Byggherrens val av genomförandeform för
byggnadsprojek. Göteborg: Institutionen för byggnadsekonomi och
byggnadsorganisation, Chalmers University of Technology, Gothenburg.
Kwakye, A.A., (1997), Construction Project Administration in practice,
Longman, London.
Liman, L-O, (1991), Entreprenad- och konsulträtt, En Introduktion, AB
Svensk Byggtjänst Litteraturtjänst, Solna.
Lindsö, Å., (1996), Juridik för byggbranschen Svensk Byggtjänst, Stockholm.
McGeorge, D. and Palmer, A. (1997), Construction management new
directions, Blackwell Science Ltd., Oxford.
Murdoch, J. and Hughes, W., (2000), Construction Contracts – Law and
Management, SPON PRESS, London.
39
8. References
Nima, M.A., Abdul-Kadir, M.R. and Jaafar, M.S., (2001), Evaluation of the
role of the contractor’s personnel in enhancing the project constructability,
Structural Survey, vol. 19, no. 4, 2001, pp. 193 – 200.
Nisbet, J., (1961), Estimating and cost control, Batsford, London.
Nordstrand, U., (2000), Byggprocessen, Liber AB, Stockholm.
Nordström, K.A. and Ridderstråle, J., (1999), Funky business – Får kapitalet
att dansa, Bookhouse Publishing, Stockholm.
Raftery, J., (1994), Risk analysis in project management, E & FN Spoon,
London.
Remenyi, D. et al, (1998), Doing Research in business and management,
SAGE, London.
Shen, Y.J. and Walker, D.H.T., (2001), Integrating OHS, EMS and QM with
contract manager principles when construction planning - a design and
construct project case study, The TQM Magazine, vol. 13 no. 14, pp. 247-259.
Söderberg, J., (1993), Att upphandla byggprojekt, Studentlitteratur, Lund.
Yin, R.K.,(1989), Case study Research – Design and Methods, SAGE,
Newbury Park, CA.
8.2 Web sites
www.construction-institute.org (2001-10-26), Construction Industry Institute
(CII)
www.eicontractors.de (2001-11-05), European international contractors
www.foreningenbkk.org (2001-10-22), Föreningen för byggandets
kontraktskommité
www.rics.org.uk (2001-12-16), The royal institution of chartered surveyors
8.3 List of interviews
Axelsson Johan, Engineer’s Inspector, Joint Venture Hifab-KM, 2001-06-26
Blitch Jack, Vice President, Project Management, Walt Disney Imageenring,

2001-08-16
Boman Erik, Company Lawyer, NCC AB, 2001-10-03
Dahl Jan, Project Manager, NCC AB, 2001-09-13
Ellis Ralph E., Dr. and Associate Professor Engineering Management,

University of Florida, 2001-08-15
Håkansson Per, Company Lawyer, NCC AB, 2001-10-12
Johnson Martin, Chief Surveyor, Nicaragua, NCC International, 2001-07-20
Karlsson Hasse, Planning Engineer, NCC Norway, 2001-10-09
Kruså Bengt, Quality Manager, NCC International, 2001-07-11
40
Landgren Göran, President, NCC International, 2001-09-20
Lima Bernard, Road Production Manager, NCC International 2001-07-26
Lundgren Peter, Chief Supervisor Asphalt Work, NCC International,

2001-07-06
Lundin Tord, Production Manager, NCC AB, 2001-09-25
McKeown Nicky, Quantity Surveyor, Mivan Inc., 2001-08-17
Ohlson Bo, Chief Supervisor Rock works/Crush plant, NCC International,

2001-08-01
Persson Lars, QA Engineer, NCC International 2001-09-26
Quant Anders, Project Manager, NCC AB, 2001-09-18
Rilea Stephen, Senior Estimator, Turner Construction Inc, 2001-08-21
Simmons Denis, Vice President, Hanscomb Inc, 2001-08-20
Wise Harry, Senior Estimator, Walt Disney Imageenring, 2001-08-16
Ågren Lennart, Project Manager, NCC AB, 2001-10-10
41
Appendix: Guideline
Appendix: Guideline
Guideline for quantity surveying1)
I. Introduction
II. Definitions
3. Process Quantities
4. Monthly Statement
5. Cash flow report & Forecast

1)
Observe that this page is meant to represent the title page in a folder
43
Appendix: Guideline
I. Scope of the guideline

The main purpose of this guideline is to help NCC International in the mobilisation of the
quantity surveyor function in a project start-up. The guideline consists of process
flowcharts with supporting routines, for work with FIDIC contracts - Red book.
Content
• This manual contains process flowcharts and supporting routines.
• Each routine contains a general description, responsibilities, data collection, procedures
and resulting documents
• Each process flowchart shows the activities in the specific process. This might be a
help to visualise the whole work process. Each process ends with a reference to the
following process.
Responsibility
It is each quantity surveyors responsibility to update this manual for the specific project. It
should be considered as a vivid document that shall strive for Continuous Improvements.
This means that it shall be revised if necessary for each and every project.
How to work with the manual

The manual should be read in conjunction with the contract to enable adaptation to the
specific project.
• Each process demands supporting documentation
• Each process is supported by clauses in the contract
• Each process is done because of demands in the specification
Process Flowchart
Order
1. Work according to the

contract
2. Collect
Quantities
3. Process
Quantities
4. Monthly 5. Progress Report &

Statement Forecast
6. Monthly Payment Planning

Certificate
45
Appendix: Guideline
II. Definitions according to FIDIC 4th edition – Red

book
Bill of Quantities –the priced and completed bill of quantities forming part of a tender.
Contractor - the person whose tender has been accepted by the employer.
Daily written reports –a written report from the line production that states what has
been done and what resources have been used.
Daywork – löpande räkning (sw. translation)
Employer - the person named in Part II clause 1.1 in the conditions of the contract.
Engineer –the person appointed by the employer to act as engineer for the purposes of
the contract and named in Part II clause 1.1 in the condition in the contract.
Engineer's representative – the person who has the authority and responsibility to take
economic decision up to a specified sum, stated in the contract. This person is impartial
and shall co-ordinate the project both technically and economically.
Monthly payment certificate –a submission from the engineer that states the
compensation the contractor is entitled to.
Site Instruction –an instruction from the engineer issued on site.
Subcontractor –any person named in the contract as a subcontractor of part of the
works.
Variation Order –a change of or an addition to the specifications of the contract issued
by the engineer.
46
Appendix: Guideline

There are four major types of work, 1.1 Contracted work, 1.2 Daywork instructions, 1.3
Site instructions and 1.4 Variation issues.
1.1 Contracted work

Contracted work is the work that is stated in the contract and in the bill of quantities. It is
the work that the tender and the contract are built upon.
1.1.1 Responsibility
1.1 Contracted Work
The quantity surveyor is
Documen-
responsible
Survey & Scaling tation
• For the documentation and
Yes
calculation of the produced
Subcontractor Tender Tender
quantities in order to make a
correct invoice.
No No
Tender OK? Negotiation
• Together with the line
Yes production he/she has the
Tender OK
Reports Execute Work Agreement responsibility for designing
the routines that concern
2. Collect Quantity Contract communication and
information transfer between
them.
• For contracting subcontractors.
1.1.2 Data collection
Surveying the area: For calculation the quantity surveyor needs data of produced quantities
and theoretical quantities of work according to the contract.
Execute work: Documents and information from the line production.
Contract a subcontractor: First a document that constitutes the base for a tender, tenders
from the subcontractor and finally a contract.
1.1.3 Procedure
Make routines for collecting information from line production, e.g. site instruction, oral
instruction, dayworks and variation order.
Contracting subcontractors: prepare basic data that enable the subcontractors to submit an
appropriate tender. Invite subcontractors to leave tenders. Evaluate the tenders and sign the
contract.
1.1.4 Resulting documents
• Documents from surveying and scaling operation e.g. photo documentation and
measuring data.
• Tendering documents consisting of basic data that enable subcontractors to estimate the
work.
• Making contract after agreement with subcontractor
• Daily work report - written report from the line production that states what has been
done and what resources have been used.
47
Appendix: Guideline
1.2 Daywork instruction

A daywork is executed on the demand of the engineer
1.2 Day Work Instruction Instruction or by request from the contractor. The daywork is
demanded when an unexpected event has occurred; it
Survey the area Reports is often a minor task.
Daily Report DR
The quantity surveyor is responsible:
Execute Work Reports • For compiling a daily report when the engineer
issues a daywork instruction
2. Collect Quantity • For sending the daily report each day of the
continuance of the daywork to the engineer.
Survey the area: necessary scaling and surveying for making a daily report.
Performing lists: list that states how the work is going to be performed, resources in terms
of machinery labour and time.
Execute work: documents and information from the line production, daily reports.
1.2.3 Procedures
The extent of the surveying depends of the character of the daywork. In some cases a
simple ocular inspection of the area is sufficient, in other cases there might be need of a
full scaling operation.
The daily reports shall be sent to the engineer the same day as the work is going to take
place for approval.
Daily reports shall be kept and handed to the engineer every day of the continuance of a
daywork.
The daywork issued by the engineer or requested by the contractor results in a daywork
instruction
A daily report consists of estimated daywork together with corresponding daywork items.
It describes, how the work is going to be performed and lists of resources, see clause 52.4.
48
Appendix: Guideline
1.3 Site Instruction

A minor change in design is called site instructions and is issued by the engineer on site,
see 1.2 daywork. The engineer has the authority to issue supplementary drawings and
instructions that are necessary for the completion of the work and the correcting of any
defects therein. The contractor shall carry out and be bound by these instructions, clause
7.1.
1.3 Site Instruction
Survey the area
No
SI In Writing Letter
Write Letter
Yes
Yes Confirmation
No
Reports Execute Work Letter => Instruction
Acceptance/Agreement
2. Collect Quantity
The quantity surveyor:
• Ensure that the signed site instruction is correct and fairly estimated.
• Documents and administers the site instruction.
Survey the area: The site instruction becomes the documentation. In addition to the written
site instruction the quantity surveyor might have to do some additional photo
documentation and measuring data.
Execute work: Documents and information are collected from the line production. When
the site instruction is issued, the execution of the work is considered as contracted work.
1.3.3 Procedures
If any reason the instruction is given orally, the contractor shall comply with such
instruction, see 1.3.4 oral instruction.
Survey and scaling the area are done together with the engineer on site when signing the
site instruction, or after receiving the site instruction if a representative from the contractor
was not present when the engineer wrote the instruction.
If there is no agreement concerning the pay item between the engineer and the
representative from the contractor, the contractor still has to execute the instruction.
Negotiation about pay items is done when the quantities are to be submitted in routine 3.
process quantities.
49
Appendix: Guideline
1.3.4 Oral instruction

If for any reason the engineer considers it necessary to give instructions orally to the
contractor when surveying the area, a letter from the contractor shall always confirm the
instruction within 7 days, clause 2.5. The letter is a confirmation from the contractor that
tells how the oral agreement was interpreted. The engineer has 7 days to voice any
objection and to confirm the contents. If the engineer agrees with the letter in writing
within 7 days, the letter shall be deemed to be an instruction from the engineer. However,
the contractor needs a confirmation from the engineer that the letter received.
• Site instruction.
• Letters to the engineer in an oral instruction procedure.
• Reports from line production.
50
Appendix: Guideline
1.4 Variation issue

A variation issue is a variation of
1.4 Variation Issue form, quality or quantity of work
issued by the engineer. A variation
Survey the area
can also be a request by the
No No
contractor. In addition it can be a
Instruction? Request?
request from the engineer for
Yes Yes
additional work negotiated and
VO Variation Order Quotation
agreed in a quotation for the
variation. The requests are
Reports Execute Work
considered as and are turned into
variation orders, stated in clause 51
2. Collect Quantity
and 52.
• Processes the different kinds of variations the engineer requests.
• Makes a quotation when the engineer sends a request for a variation.
Survey the area: There shall be a document from the survey, which notes the calculations
of quantities and the purpose of the variation.
Execute work: Documents and information are collected from the line production. When a
variation order is issued the execution of the work is considered as contracted work.
1.4.3 Procedures
In order to submit an appropriate request, the contractor should acquire knowledge of the
area and possess all the measures so the quantities can be correctly calculated. This
demands a survey of the area.
A quotation is done when there is no suitable pay item in the bill of quantities and when it
is necessary to create a new item.
The work can be executed when the engineer and the contractor have agreed upon a new
pay item for the request of a variation order.
If there is no agreement, the engineer has the right to set a fixed price that the engineer
considers fair and reasonable, clause 52.2. If the contractor does not consider the fix price
being appropriate, the contractor can start a claim procedure.
1.4.4 Resulting Documents
• Quotation that contains the estimated compensation for the request.
• Variation orders signed both by the engineer and the contractor, which form the request
and the background for the compensation.
• Reports from the line production
51
Appendix: Guideline
The purpose of this process is to collect information of
2. Collect Quantities all quantities produced, which are the basis for the
monthly statement.
Reports
Survey the area from LP 2.1.1 Responsibility
Quantities from The quantity surveyor:
Surveyor
• Surveys the area and collects quantities needed for
the monthly statement.
No
All Quantities?
• Measures executed work by subcontractors.
Yes
• Collects daily written reports from line production
3.Process Quantity
and surveyors.
• Makes routines for the collection of all quantities, such as how the documentation
should be done in the line production and how the surveyor should report the
quantities.
• Acquires accurate quantities
2.1.2 Procedures
The quantity surveyor has to provide the documentation before and after things are
produced in order to have knowledge how the area or the specific object looked like in an
eventual conflict. The collection of quantities includes photo documentation, measuring,
collecting reports from the line production and if needed making interviews with workers.
Photo documentation is done
- Before work is executed in cases when agreements are not reached, for example,
agreements about pay items or how to execute the work.
- When work is executed and there is an unexpected occurrence, for example,
unexpected material is found when excavating.
Interviews are made when reports are missing from the line production or when work is
executed without the quantity surveyor's knowledge.
• Compiled document of all produced quantities
• Sketches of special items or work executed in the line production. Sketches are made
if photo documentation has not been done before the work was executed.
52
Appendix: Guideline
3. Process quantities
The processing of quantities is done in order to compile
3. Process Quantities all the quantities collected. The processed quantities are
submitted to the engineer. This has to be done in order
Compile Data to include the quantity in the monthly statement.
Loop #1
Submission Negotiation
No Data • Processes compiled data needed for a monthly

OK? statement.
Yes
• Negotiates with the engineer.
4. Monthly Statement
3.1.2 Procedure
All the quantities should be sent to the engineer for approval.
If the data is not approved it has to be processed again. In a new process the data has to be
changed in some way and errors corrected. If the disapproval concerns a disagreement on a
pay item it demands a different strategy. There are at least three types of strategies to
choose from:
1. If the process is in the end of the month and the monthly statement is to be prepared, it
might be wise to exclude the quantity in question and process it separately. So the
monthly statement procedures can continue without disturbance.
2. If time is critical, the quantities can be supported by documents that explain the
quantity in question and then submitted again, a so-called retained payment.
3. If the engineer disapproves of any part of the compiled data it needs to be negotiated.
3.1.3 Negotiation
The first step in the negotiation loop is to see if there are documents that are not supported
by any quantities or the pay items. If so the necessary documents that support the actual
quantity shall be provided.
The claim procedure is stated in clause 53. The first thing to do is to give notice according
to clause 53.1. This shall be done within 28 days after the event giving rise to the claim.
This means that it is important to be observant of the date for notification when suspecting
that the quantity will result to a claim. If the notice is not sent within the 28 days the right
to claim is used.
• Compiled list of all the quantities produced during a specific month. The list shall be
completed with documents that support the quantities.
• Documents that are needed for a claim procedure, stated in clause 53.
53
Appendix: Guideline
4. Monthly statement
The Contractor shall according to the
4. Monthly Statement Contract, "…submit a statement in
five copies to the Engineer at the end
Monthly Summary of each month, in a tabulated form
approved by the Engineer, showing
Monthly Statement the amounts to which the Contractor
considers himself entitled." This is
No Yes 5. Cash flow Reports called the monthly statement and is
Negotiation Approval?
& Forecast the formal way for the contractor to
Yes
invoice the employer, clause 60.
6. Monthly Payment
Certificate
• Compiles the monthly statement.
• Gets approval from the engineer.
The backup and the documentation for the monthly statement is the monthly summary.
This summary consists of summaries of the different specifications, listed below:
1. Work executed, clause 60.1(a-c) - the produced quantities according to the contract
2. Variations, clause 52 - the executed variation orders
3. Daywork executed, clause 60.1 (e) - all the executed daywork
4. Material and pant, clause 60.3- charged debit of the material and plant that are received
as a credit and which are incorporated in the permanent works.
5. Other payments due under the contract, clause 60.1 (j).
6. Price escalation, clause 70
7. Repayment of advanced payment, clause 60.1 (i).
4.1.3 Procedure
The quantity surveyor shall first summarise all pay items according to the bill of quantity,
variation orders and daywork orders.
The statement shall include several Items, which are here called specifications 1 to 7.
These specifications include the above mentioned items and orders, see clause 60.
The quantity surveyor makes the invoice for each specification. The invoices are sent to the
engineer for approval. The procedure of getting the interim payment certificate is described
under clause 60.2, monthly payments.
4.1.4 Resulting document
• A monthly statement
54
Appendix: Guideline
5. Cash flow reports & Forecast

A progress report is compiled of gathered
5. Cash flow Reports data. This data together with project planning
& Forecast is the basis for a cash flow report and Forecast
Information from for future payments. The contractor makes the
Prepare the data Production forecast, which describes how much the
Planning
contractor intends to produce during the next
Compile to reports period and how much this will cost the
employer. This is done so the employer can
plan how much money the employer needs to
Cash flow Reports have access to. Both these reports are done
& Forecast
according to clause 14.
5.1.1 Responsibilities
• Makes a cash flow report and forecast.
Information has to be collected from both production planning and from the monthly
statement.
5.1.3 Procedure
The cash flow report shall be given to the engineer 14 days after the end of the month, in
five copies.
The report describes the progress made during the previous month. It also describes if there
has been any kind of problems, the nature of these and how to resolve them.
• Cash flow report and forecast
55

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Contract Management:

A Way of Increasing Profit

Department of Building Economics and Management

Examensarbete, M. Sc. Thesis 2002:1

Cecilia Andersson & Philip Gunnarsson

Göteborg, Sweden 2002

Chalmers University of Technology NCC AB

© Cecilia Andersson & Philip Gunnarsson

Cecilia Andersson & Philip Gunnarsson

Sweden, would not be sufficient. The empirical observation is the base of

contract. This was done in order to get knowledge of the interdependency

2.3 Interviews with experts

5. A former British quantity surveyor who is vice president for a large

activities, stages and decisions in a form that is easily communicated and

1. Work according to the contract

6. Monthly Payment Certificate Planning 3.Process Quantity

When a process chart was confirmed, a written description was made

Red FIDIC AB 92 Yellow FIDIC Silver FIDIC

The Global Environment

Figure 3.4:The concept and the three dimensions of constructability.

* See Appendix: Definition according to FIDIC 4 th edition - Red Book

monthly payment certificate, issued by the engineer's representative, which

interviewees at the amusement park talked about the importance of

quantity surveyors work more with managing contracts and as commercial

In construct management one example of the holistic view in constructability is

Figure 5.1: The three correlating dimensions in constructability.

Blitch Jack, Vice President, Project Management, Walt Disney Imageenring,

Boman Erik, Company Lawyer, NCC AB, 2001-10-03

Dahl Jan, Project Manager, NCC AB, 2001-09-13

Ellis Ralph E., Dr. and Associate Professor Engineering Management,

Håkansson Per, Company Lawyer, NCC AB, 2001-10-12

Johnson Martin, Chief Surveyor, Nicaragua, NCC International, 2001-07-20

Karlsson Hasse, Planning Engineer, NCC Norway, 2001-10-09

Kruså Bengt, Quality Manager, NCC International, 2001-07-11

Lima Bernard, Road Production Manager, NCC International 2001-07-26

Lundgren Peter, Chief Supervisor Asphalt Work, NCC International,

Lundin Tord, Production Manager, NCC AB, 2001-09-25

McKeown Nicky, Quantity Surveyor, Mivan Inc., 2001-08-17

Ohlson Bo, Chief Supervisor Rock works/Crush plant, NCC International,

Persson Lars, QA Engineer, NCC International 2001-09-26

Quant Anders, Project Manager, NCC AB, 2001-09-18

Rilea Stephen, Senior Estimator, Turner Construction Inc, 2001-08-21

Simmons Denis, Vice President, Hanscomb Inc, 2001-08-20

Wise Harry, Senior Estimator, Walt Disney Imageenring, 2001-08-16

Ågren Lennart, Project Manager, NCC AB, 2001-10-10

Guideline for quantity surveying1)

1. Work according to the contract

5. Cash flow report & Forecast

I. Scope of the guideline

How to work with the manual

1. Work according to the

4. Monthly 5. Progress Report &

6. Monthly Payment Planning

II. Definitions according to FIDIC 4th edition – Red

1. Work according to the contract

1.1 Contracted work

1.2 Daywork instruction

1.3 Site Instruction

1.3 Site Instruction

Survey the area

Reports Execute Work Letter => Instruction

1.3.4 Oral instruction

1.4 Variation issue

No Data • Processes compiled data needed for a monthly