SPECIFICATION,

QUANTITY AND
COSTING OF BUILDINGS
MODULE -2
SPECIFICATION, QUANTITY AND COSTING OF BUILDINGS

BOQ: A bill of quantities (BOQ) is a document used in tendering in the construction industry /
supplies in which materials, parts, and labor (and their costs) are itemized. It also (ideally)
details the terms and conditions of the construction or repair contract and itemizes all work to
enable a contractor to price the work for which he or she is bidding.

Steps in BOQ

Measured works:-

 These are the record of actual works executed on site.

 Materials Procured r entered and Materials consumed are recorded.

 The Running Account/Running bill r paid according to measurement book.

 Final contract sun would b the sum of all running account payment plus preliminary etc..

Preliminary:-

 Advance payment to contractor.

 Payment to workers.

 House keeping during work in progress.

 Site surveying and fencing.

 Cost toward project management services.

 All other indirect cost but vital for commencement.

Why is BOQ Required:

1. to provide sufficient information on the quantities of Works to be performed to enable
bids to be prepared efficiently and accurately; and when a contract has been entered
into
2. To provide a priced Bill of Quantities for use in the periodic valuation of works executed.
3. Save the cost and time of several contractors measuring the same design in order to
calculate their bids for competition.
4. Provide a consistent basis for competitive bids so that the contractor who is the most
efficient and least expensive in providing the items of work is likely to be commissioned
for the job.
5. Provide an open basis for the contract; the client provides an extensive and clear
statement of the work he/she requires and the contractor states the price at which
he/she is prepared to undertake the job.
SPECIFICATION, QUANTITY AND COSTING OF BUILDINGS

6. Provide a very strong basis for financial administration of the contract.

7. It provides basic idea of the project by giving the quantities to tenderers.
8. It defines the extent of the work. (But it should be identified in line with drawings &
specification as well).
9. It gives estimated or anticipated contract sum. (very important to client)
10. It provides a basis for valuation of variation. (Variation is to be discussed in detail).
11. To provide a co-ordinated list of items with identifying descriptions and quantities, that
comprise the works to enable contractors to prepare tenders efficiently and accurately;
and
12. When a contract has been entered into; to
13. - provide a basis for the valuation of work executed for the purpose of making interim
payments to the contractor; and
14. - provide a basis for the valuation of varied work
15. It saves considerable time and cost of several contractors measuring the same design in
order to calculate their bids for competition;
16. It provides a consistent basis for obtaining competitive tenders from contractors;
17. It provides an extensive and clear statement of the work to be executed;
18. It provides a very strong basis for budgetary control and accurate cost reporting of the
contract including:
19. - the preparation of cash flow forecasts,
20. - a basis for valuing variations, and
21. - a basis for the preparation of progress payments (ie. interim payments)
22. It allows, when BQ items are codified, reconciliation and any necessary transfers and
adjustments to be made to the cost plan;
23. When priced it provides data to support claims for grants;
24. It provides one of the best sources of real-time cost data, which can be used for
estimating the cost of future building projects

Advantages of BOQ at pre contract phase:

Database - The pricing details within the BOQ provides a cost database for future estimating.

Fee calculation - The BOQ provides an absolute basis for the calculation of consultants' fees.
Asset management - The BOQ provided readily available data for asset management of the
completed building, life cycle costing studies, maintenance schedules, general insurance and
insurance replacement costs.
Taxation - BOQ provide a basis for quick and accurate preparation of depreciation schedules as
part of a complete asset management plan for the project.
SPECIFICATION, QUANTITY AND COSTING OF BUILDINGS

Disadvantages of BOQ at pre contract phase:

Cost and time - The preparation of a BOQ tends to increase the cost and lengthen the
documentation period.
Estimating practice - Tenderer's may ignore the specification (e.g. workmanship requirements),
pricing only according to the BOQ. This may lead to under pricing and the consequent risk of
unsatisfactory performance as contractors try to avoid losing money.
Procurement - The use of a detailed design and associated BOQ discourages contractors from
submitting alternative design solutions, as alternatives will amend quantities. The BOQ is only
suitable (if at all) to the traditional procurement system

Advantages of BOQ at post contract phase:

Certainty of progress payments - The BOQ provides a post-contract administration tool and
becomes a basis for the evaluation of progress payments. The calculation of these progress
claims is straightforward and reliable. This certainty offers contractor, principal and financiers
peace of mind in the knowledge that all work is being carried out at prices fair and reasonable
to all involved.
Variation management - The BOQ provides a sound, common basis for the valuation of
variations. Also, the prices for variations are reduced by the use of BOQ unit rates. Without a
BOQ, the pricing of variations leads to more protracted negotiations.
Risk management - The prices in the BOQ can be used as a basis for comparing a contractor's
price with current trends in the marketplace. This provides a basis for management to
determine the likely manifestation of risk factors.
BOQ errors - Errors are not a major cause of variations. Choy (1991) found the average change
order to be 7.7 per cent of contract value with BOQ errors representing 4.5 per cent of total
variations.

Disadvantages of BOQ at post contract phase:

BOQ errors - Because of the amount of detail required in a BOQ, there is a significant chance of
finding errors, omissions and discrepancies between drawings and the BOQ, with consequent
disputation. This risk of disputation arising from misinterpretation and error outweighs the
advantages of BOQ.
SPECIFICATION, QUANTITY AND COSTING OF BUILDINGS

Unit rates - The cost data obtained from contactor-priced BOQ is often used by QSs for cost
management, such as valuing interim valuations. This data can be suspect for reasons such as:
contractors increase rates on early trades above their real cost, and reduce the cost of later
trades, to improve cash flows; some contactors may load later trades to gain benefits from rise
and fall.
Responsibilities - BOQ involve a shift in, or "risk blurring" of, the contractor's responsibility that
results in claims and disputes.
Standard Method of Measurement - it is often said that the SMM is much too complex and
many disputes arise from its language and how it is interpreted by the contractor and QS.

Advantages of Having BOQ’s for a Project

A comprehensive detail of the work: As already said the BOQ contains descriptions of the
various components required for the work. Thereby the contractor willing to quote for the work
will get a comprehensive detail of the work involved and also the material required for taking
up the work. The BOQ would specify the quantity of the material required, the specific quality
of the material along with all other details relating to the material. This would give a complete
picture of the material needed for the work and this also helps the contractor to quote for the
work.
No guess work: In the absence of BOQ, the contractor would have quoted for the work by
guess-work. But it does not allow any guess work because every component needed for the
work is described with abundant clarity. They contain various details like the preliminary
description of the work, the preamble which provides details of the work involved. Thereafter,
the comprehensive list of the materials needed is also provided. All these will enable the
Building contractors to quote for the work with crystal clear clarity.
Comparison: As you know, when a BOQ is announced, several contractors would quote for the
work. They will quote on the standard format provided by the owner of the building. The
contractor is required to quote for the work in the same standard format. As a result, it helps to
compare the rate quoted by different contractors. It also helps to make a cost analysis by
adding up overheads and other unforeseen expenses.
Time limit: The building owner calls for tenders or quotes from various contractors and he will
also stipulate the last date by which the quotes should be received by him. At the same time,
the building owner may also prescribe certain standards for evaluating the quotes.
For example, the building owner may say only contractors who have taken up particular nature
of works alone should quote. There are also instances where the building owner may restrict
the BOQ only to contractors who have taken up works costing more than a particular sum of
money.
SPECIFICATION, QUANTITY AND COSTING OF BUILDINGS

CONTRACTS

Following four forms of contract are found in common use:

(l) Lump-sum contracts

(2) Unit-price or item rate contracts

(3) Cost-plus or percentage contracts

(4) Basic price contracts.

We will now discuss these contracts in detail.

1 . LUMP-SUM CONTRACTS

In this form of contracts, the complete work as per plans and specifications is carried out by the
contractor for a definite amount of money. The owner Supplies the required information to the
contractor and on the strength of this data, the contractor arrives at a certain amount. It is evident that
this form of contracts will be useful only when it will be possible to work out the exact quantities of the
items to be executed and also. when the number of the items is limited e.g. a sanitary block for school
building or for public, a compound wall, a small room for watchman, a septic tank, a soak well, a
manhole, a typical tenement for a housing society consisting of identical tenements, etc.

Sometimes, miscellaneous items which cannot be ordinarily carried out under any other form of the
contracts are given on lump-sum basis e.g. ornamental door, demolishing existing structure, making an
opening in an existing wall, designs in plaster work, ornamental grillwork, etc.

(1) Advantages of lump-sum contracts:

(i) Low cost: Each contractor works out the lump-sum at his own rates with a certain profit. Due to
competition among the contractors, the percentage of the contractor’s profit may go lower, resulting in
the low cost of the work to the owner.

(ii) Definite amount: The definite amount to be spent on the work is know1 to the owner as soon as the
contract is given. Thus, the owner is in 21 position to arrange beforehand for the required amount of
money. Early completion of the work: The contractor is eager to complete thi work as early as possible,
mainly for two reasons:

(a) His materials and equipment’s engaged on the work will be relieved earlier and can be effectively
used on some of his other works. As the work is on a lump-sum basis, the speed in construction will
naturally increase the contractor’s profit.

(iii) Early completion of the work: The contractor is eager to complete the work as early as possible,
mainly for two reasons:

(a) His materials and equipment’s engaged on the work will be relieved earlier and can be effectively
used on some of his other works.
SPECIFICATION, QUANTITY AND COSTING OF BUILDINGS

(b) As the work is on a lump-sum basis, the speed in construction will naturally increase the contractor’s
profit.

Disadvantages of lump sum contracts:

l) Conflicting interests: The interests of the owner and the contractor will always be conflicting under
this form of the contract. The owner will be interested in taking the maximum advantage of the
contractor for the amount that he is giving to him. The contractor, on the other hand, tries to execute
the minimum that is required under the contract and thereby intends to increase his profit.

(ii Extra work: It is quite clear that the plans and the specifications of the work should be completely
ready in all respects before the work is allotted to the contractor. It is very difficult and sometimes
annoying to adjust the changes in the plans and the specifications at a later stage. The extra work takes
away the essence of a lumpasum contract.

(iii) High cost due to uncertainties: In case the plans are indefinite and the specifications are not clear,
the contractor filling the tender for the work will gamble on the uncertainties and in doing so, he may
increase the amount of his tender to meet the worst situation. This will result in the increase in the cost
of the work.

UNIT-PRICE OB ITEM-RATE CONTRACTS

In this form of the contracts, the contractor quotes his rate per unit of each item of the construction.
The approximate quantity of all the possible items of the construction are worked out and put up in the
tender form. Against each item, every contractor fills up his own rate and arrives at the final total
amount of the work. This procedure is adopted so that the different tenders can be easily compared.

The rate of the contractor for unit of item includes materials, labour, overhead cost and profit. This form
of the contract is very much useful especially when the quality of the work, but not the exact quantities
of the items to be executed, is previously known. Most of the public works are carried out under this
form of the contract. These are also known as the measure and value contracts or simply measured
contracts

Advantages of unit-price contracts:

(I Elasticity: This form of the contract is elastic in nature and it is possible to make reasonable variations
in the quantities of the tender items during the progress of the work. The difference in cost due to such
variations can easily be worked out by the contractor’s rates for the corresponding items.

(11) Economical: As the payment to the contractor is to be made on a unit basis, only the amount for the
actual work done by the contractor shall be paid by the owner and thus, it may prove to be economical.

(II) Absence of uncertainties: The contractor is not worried regarding the uncertainties in the plans and
the specifications of the work as his rate is on a unit base and hence, he will not unduly increase his rate
for the items.

(1v) Starting of the work: The work can be started as soon as the contractor is fixed and it is not
necessary to wait until the final plans and ths specifications of the work are ready.
SPECIFICATION, QUANTITY AND COSTING OF BUILDINGS

(2) Disadvantages of unit-price contracts:

(1) Conflicting interests: Naturally, the owner will be interested in getting such items to be executed by
the contractor for which his prices ars lower while on the other hand, the contractor will be willing to do
more quantity of such items for which his rates are comparatively higher or in which he is getting more
profit. However, such situation seldom arises,

(ii) Classification of the materials: Sometimes, the classification of the materials results into the dispute
between the owner and the contractor e.g. if earth is met with in the excavation, the contractor may
classify it as loose rock and charge the owner accordingly. However, in all such cases, the engineer’s
decision is treated as final.

(iii) Final cost: Under this form of the contract, it is practically impossible to know exactly the final cost
of the work previously. It may be lower or higher than the estimated amount and can be known only
when the work is completed in all respects. If the final cost exceeds considerably than the estimated
cost of the work, the owner is put in a financial difficulty, which may even lead to the suspension of the
work.

(iv) Damage due to changes: If the work is started before the final plans and the specifications of the
work are ready, the demolishing of some work shall have to be done to accommodate the subsequent
changes in the plans. This demolishing work shall be carried out at the owner’s cost and thus, the
damage due to such demolishing may increase the cost of the work.

3. COST-PLUS OR PERCENTAGE CONTRACTS

In this form of the contracts, the contractor agrees to complete the structure for a certain fee for his
services. This form of the contract becomes very much useful when the quality as well as the quantity of
the various items of construction are not known previously and also in times of unsettled market
conditions when no contractor is coming forward to carry out the work on unit-price basis.

The various methods, as discussed below, are found out to adjust the fee of the contractor for his
services in relation to the total cost of the work.

Advantages of cost-plus contracts:

(i) No conflicting interests: The contractor is guaranteed for a certain fixed profit even in an unstable
market and hence, normally, he will act 1n the best interests of the owner. On the other hand, the
owner will also be free to spend on the works as much as he likes.

(ii) Extra work: The disputes arising due to extra work will be totally eliminated since the rates of such
extra work are not to be decided

(iii) Early completion of the work. The framework of this form of the contract is such that the decisions
can be taken earlier and hence, it reduces the time of completion.

(iv) Starting of the work: The work under this form of the contract can be started even before the final
plans and the specifications of the work are ready and hence, this type of contract becomes useful for
SPECIFICATION, QUANTITY AND COSTING OF BUILDINGS

exploratory or urgent work, where it is not possible to spare time for the detailed design and estimate of
the project.

Disadvantages of cost-plus contracts:

(0 Final cost: As in case of unit-price contracts, here also, the final cost of the construction cannot be
predicted. It may, therefore, put the owner into financial difficulty.

(ii) Inferior work: The work of inferior quality is demolished and replaced at the owner’s cost and also
subsequent changes in the plans are incorporated at the owner’s cost. This results in unnecessary
increase in the final cost of the work.

(iii) Illegal for public bodies: In cases where the owner is a public body, this form of the contract
becomes illegal under ordinary circumstances.

(iv) Checking of the contractor’s accounts: The contractor maintains an account of the materials
purchased by him, labour employed, miscellaneous expenditure, etc. It is troublesome and sometimes
difficult to check all such amounts. Thus, the owner is likely to pay more for the contractor’s mistakes
which may either be intentional or by oversight.

BASIC PRICE CONTRACTS

When the market IS unstable and the prices of essential materials are fluctuating to a great extent, it is
quite likely that no contractor will come forward to carry out the work or if the contract is already in
existence, the owner and the contractor will come into conflict quite often.

Hence, a slight modification of unit-price or item-rate contract is made. The contractor mentions in his
tender the basic prices of some of the essential engineering materials such as cement, steel, bricks, etc.
It is thus understood that the rates of various items mentioned by the contractor are based on these
basic prices. Hence, if there is rise or fall in the prices of these materials, the same is adjusted without
any serious conflict between the owner and the contractor.

For instance, if in a particular contract, with basic price of cement, there is say a rise of Rs. 4/per bag of
cement and the total number of cement bags purchased and utilized by the contractor is 250, the
contractor will claim from the owner an extra amount of (4 X 250) = Rs. 1000/a. Similarly, on the other
hand, if there is a fall in rate of bricks to the extent of say Rs. 20/per 1000 nos. of bricks and the number
of bricks consumed works out to 50000, the contractor will give to the owner a rebate of (20 x 50) = Rs.
1000/-.

TYPES OF CONTRACTS:

Types of contracts are found in common use:

Labour contracts

Negotiated contracts
SPECIFICATION, QUANTITY AND COSTING OF BUILDINGS

Schedule of prices contracts

Package deal contracts

Demolition contracts

Implied contracts.

Labour contracts: Sometimes, the owner IS in a position to purchase the materials himself. In such cases,
he invites tenders only for the labor requiring contractors put up their rates for the labour required per
unit execution of each item.

It is absolutely necessary to state that these rates include:

(i) use of the contractor’s plant and equipment; in now discuss these types of contracts in detail.

(ii) all necessary falsework;

(iii) contractor’s supervision;

(iv) contractor’s profit.

The overall responsibility of the work is of the contractor and he has to arrange Insuch a way that proper
rate of progress is maintained for the work. The owner gas to see that the necessary materials are
brought on site as and when required. The owner has also to watch that there is no wastage of the
materials since the COntractor is to be paid only for the labour work. Usually, the work done by the
labOUT contracts is of superior quality since materials of better quality are used and [here is no mischief
in the proportions of mortar, etc. The rate for extra work is adjusted in labour contracts as usual.

As an alternative to the labour contract, the owner can employ the labour directly for different trades of
the project without entering into any type of contractThe owner engages his own labour and he also
supplies all the necessary plant, equipment and materials. Thus, there is absence of contractor in this
arrangement and as the work is carried out directly under the supervision of the owner, he is
responsible for all the risk involved in the construction. This arrangement 0f employing direct labour is
usually adopted by large organisations such as heavy industrial units, big factories, large institutions, etc.
who have their own departments and staff to provide the necessary technical services.

(2) Negotiated contracts: When a contract is awarded simply by negotiation, it is known as a negotiated
contract. It may be of any form of the contract as discussed . previously. In case of negotiated contracts,
there is no open competition and the Owner carries out negotiations with selected contractors after
studying their previous Experience, financial status, general reputation, etc. Thus, there are less chances
0f dispute in a negotiated contract because the competition is restricted to a small number of equal
ranking contractors and any one from this group can be relied upon to respect the engineer’s
interpretation of the specification. It is quite clear that negotiated contracts cannot be awarded for the
public works due to absence Of open competition. However, in case of emergency period or under
Special circumstances, when time of completion is a major consideration, the negmiated contracts for
the public works can be given by special laws.
SPECIFICATION, QUANTITY AND COSTING OF BUILDINGS

(3) Schedule of prices contracts: In this type of contracts, the tender contains only descriptions of all
possible items of construction. The tenderers simply fill their prices for unit of items and thus a schedule
of prices of each competing contractm is obtained. In another form of this type of contract, the engineer
quotes his rates in the tender and the competing contractors are simply asked t0 qu0te a higher or a
lower percentage to the rates mentioned by the engineer.

This form of contract is useful for the simplest type of work such as maintenance works. But it creates
difficulties for construction works. The contraCtOI‘ 18 not given enough information to quote correctly
for each item and on the other hand, it is not possible by the engineer to compare correctly the tenders
received by him as final estimated cost is not known to him.

(4) Package deal contracts: In this type of contract, the owner gives his requirements in broad outline to
the contractors together with the srte data. The contractors then proceed to prepare their own design
of the project and finally submit the same to the owner with the estimated cost of the project as per
their design on a lump-sum basis. Thus, the owner receives a number of competitive designs or
alternatives for his project and after studylng the details, financial aspect and various other factors, the
owner decides the design most suitable to him. The construction work of the project is then given to the
contractor whose design is accepted by the owner. This type of contract is suitable only under certain
circumstances, especially when the project demands special considerations for its design and successful
completion e.g. oil-refineries, nuclear power stations, important bridges, sewage treatment plants,
chemical factory, engineering workshop, etc. This type of contract is also referred to as all-in contract
and it is usually not suitable for majority of ordinary common civil engineering works.

(5) Demolition contracts: This is the simplest type of contract in the sense that the owner invites tenders
for the demolition of an existing structure so that the land on which such structure is standing can be
developed in the best lucrative manner. As such, there is no construction activity and the successful
tenderer has to take away all the materials of the old building and to hand over the site in the form of an
open plot of land. The contractor in turn pays a specified amount to the owner.

Following points should be noted:

(i) The contract is given to the contractor quoting the highest amount and not the lowest one as in case
of ordinary building contracts.

(ii) The owner should take the entire amount from the contractor before handing over the building to
him for demolition.

(iii) The Contract must clearly state that the contractor is responsible for making necessary
arrangements for cutting off the existing serv1ce connections of water supply, drainage and electricity.

(iv) The contractor should be asked to take out insurance policies for labourers, third party risks, etc. and
to keep the owner free from all such claims.

(6) Implied contracts: An implied contract is said to be created when there are no expressed terms of
contract. But the circumstances and the actions of the parties concerned are such that a reasonably
prudent man would believe that the parties anticipated mutual obligations. It is thus clear that no
SPECIFICATION, QUANTITY AND COSTING OF BUILDINGS

particular procedure is required to establish an implied contract. It should only be proved that the
parties acted with full knowledge of mutual obligations.