Construction Contracts

Schedule of Quantities

After the architectural / engineering design is determined, a schedule of quantities for all the proposed works will be prepared and to ascertain the true cost of the project by entry of estimated unit rate against each work item. For the sake of not changing the design, the cost of budget can only be fine toned by the change of building material or lower requirement of specification

Estimation / Cost Planning

An estimate of capital cost (direct cost and indirect cost ) and an estimate of capital expenditure ( plant , labor , material , temporary works , fixed overhead , subcontractors , suppliers , operation and maintenance ) will be well prepared in some kind of financial schedule to assess the economic viability . At the same time, an income schedule shall also be prepared to foresee the profitability and rate of return in case of a commercial project.

Financial Support

Financing of a project, particularly for a commercial project, may significantly affect the choice of size of project and type of contract to be selected by the client. In case the financial status mainly governs the size and sequence of the project, the client itself should know well about the financial schedule of its capital investment and expenditure. If short of funding, it should look for supports well in advance from outside parties or banks whence necessary.

Contingency

No matter how much time and efforts have been spent on preliminary investigations and in engineering design stage, there are always unforeseen problems encountered in civil engineering projects after the commencement of work. In order to eliminate the situation of running out of budget, the client or its engineer usually allows a contingent sum of money to cover the unexpected additional works.

Preparation of Contract Documents

During the design stage, the engineer should recommend to the client which type of contract will be used for construction and an early decision should be made for the engineer to prepare the right form of contract documents. Ample time must be allowed for careful preparation of contract documents or otherwise may lead to unexpected additional expenditure.
There are common forms of contract currently being used, namely: –

a) FIDIC Contract

Preparation of Tender Documents

At the time of calling for tenders, it is the best to portray the full design , detailed requirements , stage completions of works , contractor’s responsibilities , terms of payment and any other special conditions into tender drawings , specifications , bills of quantities , works programme and the contract documents . With more comprehensive indications, the renderers’ will more easily understand the entire scope of work such that they can submit a competitive but accurate quoted price to cover the whole of the work. Lack of adequate information in the tender documents will consequently lead to disputes and claims during and at the end of the contract.

The list of tender documents is generally as follows:

a) Instructions to tenderers
b) Form of Tender
c) General Condition of Contract
d) Special Condition of Contract
e) General Specification
f) Particular Specification
g) Bills of Quantities
h) Methods of Measurement
i) Tender Drawings
j) Additional appendices
k) Form of Agreement

Preparation of Bills of Quantities (BoQ)

The bill of quantities is a schedule of preset work items for individual portion of contract works. It lays out the brief description of the required work and with approximate quantity taken off from the tender drawings. The contract may contain a series of bills to cover the whole of the work.

These series of BoQ will form a part of the tender documents for the tenderers to quote against each item with a unit rate or unit price. The total tendered price will then be built up on basis of the provided quantity.

Valuation of the BoQ items will be based on the “preamble” and in accordance with the procedure set forth in the “Standard Method of Measurement (SMM)”. Absolute care must be taken to check whether there are typing errors in regards of the “BoQ unit” and the numerical figures of the “ BoQ quantity”