nadia slattery revision document - at 06.11.08

Nadia Slattery

APC Revision Document

November 2008

Nadia Slattery APC Revision Document

November 2008

Contents

Definitions 1

M001 – Accounting Principles & Procedures (Level 1) 6

M002 – Business Planning (Level 1) 7

M006 – Conflict Avoidance, Management & Dispute Resolution (Level 1) 8

M007 – Data Management (Level 1) 14

M009 – Sustainability (Level 1) 16

M010 – Team Working (Level 1) 21

M003 – Client Care (Level 2) 22

M004 – Communication & Negotiation (Level 2) 25

M008 – Health & Safety (Level 2) 26

M005 – Conduct Rules, Ethics & Professional Practice (Level 3) 33

T013 – Construction Technology & Environmental Services (Level 3) 46

T017 – Contract Practice (Level 3) 49

T022 – Design Economics & Cost Planning (Level 3) 79

T062 – Procurement & Tendering (Level 3) 90

T067 – Project Financial Control & Reporting (Level 3) 108

T074 – Quantification & Costing of Construction Works (Level 3) 109

T010 – Commercial Management of Construction (Level 3) 113

T016 – Contract Administration (Level 3) 114

Topical / Current Issues 115


November 2008 1

Definitions

Adjustment of Completion Date

Extension or reduction to Date for Completion stated in the contract due to one of the Relevant Events. Provides relief to contractor for breach of contract and liability of LAD's

All Risks Insurance Insurance for physical loss or damage to work executed, site materials and reasonable cost of removal and disposal of debris which results from such loss (with exceptions).

Annual Turnover Income or revenue that a company receives from its normal business activities, usually from the sale of goods and services.

Assignment The transfer of rights under a contract to another party i.e. Developer to Tenant.

Balance Sheet A snapshot of a company's financial condition used to determine its net worth (assets - debts).

BCIS Subsidiary of RICS, providing cost data for construction cost, operation and maintenance and rebuilding. Based on tender analyses submitted by members.

Benchmarking The use of historical data from projects of a similar nature as a comparison or cost check of the cost of project.

Bond Arrangement whereby obligations of one party are financially guaranteed by a third party.

BREEAM Method of assessing environmental performance of a building. Brown Roof Planted with sedum, soil and stones to replace habitat lost

during construction bringing with it wildlife friendly space and benefits to biodiversity.

Building Cost Index Measures movement of basic labour and materials costs to the Builder. Used to forecast inflation during the construction phase.

Building Regulations Legislation ensuring compliance of reasonable, adequate, appropriate functional requirements regarding the built environment.

Capital Allowances Tax relief on capital expenditure for acquiring, constructing, refurbishing or fitting out a property. Plant and machinery, land remediation.

Cash Flow Forecast Graphical representation of anticipated expenditure during project. Used to assist client in assessing timing and amount of future payments.

Category A Fit-Out Fit out of functional areas. Including raised floors, suspended ceilings, M&E installation beyond risers.

Category B Fit-Out Further specific fitting out for end user. Including internal partitions, underfloor power, IT and data.

CDM Regulations A code of practice which places statutory duties on clients, CDM co-ordinator, designers and contractors to plan, manage and co-ordinate health and safety throughout project.

Clerk of Works Appointed by the Employer to act solely as inspector on his behalf under the directions of the CA.

Collateral Warranty Side agreement which establishes a contractual link that would otherwise not exist due to privity of contract. A separate contract.

Conflict of Interest Where members’ interests conflict with a clients or where two or more clients’ interests conflict

Contract at Large The fixed completion date ceases to apply due to interference, prevention or continuation after breach of contract.

Contingency A sum of money used to fund unknowns, risks etc. May be construction, design reserve, risk or client contingency. Construction contingency may be included as an undefined provisional sum or held ‘below the line’.


November 2008 2

CPI Co-ordinated project information. Dayworks If works cannot be properly valued by measurement then

dayworks are used as a fair and reasonable measure of works. Defects Defects, shrinkages or other faults in the works due to materials

or workmanship not in accordance with the contract. Dispute Resolution Methods of dealing with conflict between parties. Disruption Regular progress of the works is materially affected by a

Relevant Matter. Contractor is entitled to L&E which he would not be reimbursed by payment under any other provision in the contract

Dutch Auction Also known as reverse bidding. Tenderers in auction situation in knowledge of lowest/required sum.

Early Use by Employer Employer may, with consent of Contractor, use or occupy site (or part thereof) before PC. Insurers must confirm policy not prejudiced. Contractor cannot unreasonably delay or withhold consent.

Employers Agent Employer’s representative who may perform the functions of the employer.

Employers Requirements Brief which outlines what the employer requires in the form of an outline specification and drawings.

Energy Performance Cert Gives an energy efficiency rating to a building. Enhanced Capital Allowances

Enhanced rate of tax relief for energy saving and ‘green’ plant and machinery.

E-Tendering Electronic, paper-free form of tendering process. Ethics Standards of what is right and wrong in terms of obligations,

fairness and benefits to society Excepted Risks Insurance clauses. Contractor not required to indemnify

Employer under All Risks insurance for injury, death or damage resulting from Excepted Risks. Excepted Risks include radiations, contamination by radioactivity etc.

Expert Witness A professional that can be called into a dispute by a party to give expert evidence of their opinion to support a dispute.

Extension of Time Adjustment to Completion Date due to delay caused by a Relevant Event.

Facilities Management Management of the operation and maintenance of a property. Force Majeure A Relevant Event. Acts of God or man-made events beyond

the control of the parties i.e. war, strike, riot, crime, flood, earthquake. Note: Exceptionally adverse weather, civil commotion and strike are all covered as separate Excepted Risks therefore coverage of force majeure actually very limited.

Green Roof As brown roof but planted. Heads of Claims Prolongation, disruption, loss of profit, head office overheads,

finance charges. Health & Safety File Record of information for client or end users which focuses on

H&S. Alerts readers to key health and safety risks that need to be dealt with during maintenance, repair and construction work. Compiled by CDM Co-ord (or Contractor under D&B).

Indemnity Guarantee, compensation. Insurance Method of providing indemnity. Equitable transfer of risk in

exchange for a premium. Joint Names Policy Insurance policy in names of both parties. Removes

opportunity for subrogation.


November 2008 3

KPI Used to benchmark projects against set of standards. Latent Defect Any defect which becomes apparent after the end of the

Rectification Period / issue of Making Good Defects. Letter of Intent Letter outlining intention to enter into contract. Life Cycle Costing Consideration of costs over the whole life of a building – not just

the capital costs i.e. understanding both capital and running costs. The 3 R’s: running, repairs, replacement.

Liquidated Damages Genuine, pre-estimate of loss to be suffered in the event of non-completion.

Loss and Expense Any loss suffered or expense incurred by the contractor due to a Relevant Matter for which he would not be reimbursed by payment under any other provision in the contract.

New Civil Procedure Rules Reforms to civil justice system proposed by Lord Woolfe. Improved the speed of litigation, reduced the cost and improved chances of early settlement.

Novation The transfer of rights and obligations under a contract from one party to another, under a separate contract.

Parent Company Guarantee

Alternative to a Performance Bond. Parent Company guarantees fulfil obligations at own cost in the event of non-performance or insolvency.

Partial Possession Employer may take possession of part of site in advance of PC. By mutual consent, not previously agreed. PC deemed to have occurred on the Relevant Part.

Performance Bond Guarantee of performance. Guarantor pays for loss up to value of bond.

PFI Form of procurement. A long term service contract between a public sector body and private sector ‘operator’. Privately financed projects are repaid by government over a period of time. Much like a mortgage.

PPP Form of procurement where relationships formed between private sector and public bodies.

Practical Completion When, in the opinion of the CA, practical completion of the works is achieved.

Prime Cost Sum of money to be expended on works by nominated subcontractors or goods by nominated suppliers.

Prolongation Extended site presence due to a Relevant Matter for which the Contractor would not be reimbursed by payment under any other provision in the contract.

Provisional Sum Sum for work that the Employer may or may not decide to have carried out or which cannot be accurately measured at tender stage.

Defined – Where item can be described and approximately quantified to extent that Contractor can make allowances within their prelims and programme.

Undefined – Where scope of work is unknown and cannot be adequately described therefore Contractor not able to make allowances within their prelims or programme.

Profit & Loss Statement A financial statement that indicates how revenue is transformed into net income. Indicates whether the company has made or lost money in the period.

Preambles Preliminary introduction explaining the purpose and any implied points i.e. indicative list, not exhaustive.

Preliminaries Measured under SMM7. General and particular items relating to the project generally (site set up, location), the contract (bonds, insurance), employers requirements (security, safety, quality standards), contractors general cost items (management, accommodation etc)


November 2008 4

PII Insurance to indemnify client in event of financial loss due to professional negligence. Protect firm from loss it cannot meet due to a claim for professional negligence.

Quantum Meruit “As much as he has earned”. A claim for a reasonable sum as payment for services rendered. Used where there is no contractual basis for assessing amounts due.

Relevant Event Occurrences which entitle Contractor to extension of time should they affect regular progress of the works.

Relevant Matter Occurrences which entitle Contractor for Loss and Expense for which he would be not be reimbursed by payment under any other provision in the contract.

Retention Monies retained to fund rectification of any defective works which the Contractor fails to make good.

RIBA Plan of Work Breakdown of the processes for a project from inception to completion. Clearly describes key activities and deliverables.

RICS Rules of Conduct Set of professional parameters and expectations for member’s behaviour.

RICS Member Support Levy

A support fund to protect members who find themselves being sued personally and have no access to PII protection. Introduced following Merrret v Babb

Risk An uncertain event which, if it were to occur, would have an effect on the project.

Risk Management Identification, assessment and ongoing management of risks. Run Off Cover Continuation of PII cover for a further 6/12 yrs following ceasing

practice. RICS recommends 15 yrs. Schedule 2 Quotation Quotation to be provided upon request by CA. To include

adjustment to contract sum, completion date, any L&E, reasonable cost of preparing quote and, if requested, additional resources and method statement.

Site Materials All unfixed materials and goods delivered to and placed on or adjacent to the works which are intended for incorporation therein.

Step-In Rights Allow party to step-in and perform contract if original party is unable or unwilling to do so i.e. collateral warranties.

Subrogation The right to sue in the name of the assured any person who could have been sued by the assured in respect of the loss i.e. for loss caused as a result of negligence, breach etc.

SMM7 A recognised system of measurement utilising the CAWS. Defines precise nature and extent of works.

Specifications Produced by design team to detail scope, materials and workmanship required.

Specified Perils Insurance Option C = Joint Names Policy required for existing buildings and contents against loss or damage due to SP’s. SP’s are fire, lightning, explosion, storm, flood etc. Loss or damage caused by SP’s?:

- Contractor entitled to EoT (but not L&E) - Either party can terminate

If terminated due to SP caused by Employer negligence then contractor is entitled to L&E.

Star Rate Where a rate cannot be valued simply from contract rates, a star rate is derived using contract rates as a basis.

Sustainability Constructing with consideration for the environment and not at the detriment of future generations. Considering the long term social and economic implications of a development.

SWMP Records amount and type of waste produced on site and how it will be reused, recycled or disposed of.

Tender Price Index Analysis of accepted tenders to predict future movement in the market. Used to forecast inflation up to construction phase.


November 2008 5

Terrorism Cover Insurance provided by a Joint Names Policy to cover physical loss or damage to works, site materials or existing structures caused by terrorism.

Value Engineering REACTIVE. Providing required function, at required quality for lowest cost. Making most efficient use of resources.

Value Management PROACTIVE. Understanding what value means to the client, communicating that to the team and maximising the delivery of those benefits whilst minimising use of resources.

Variations Alteration or modification of the design, quality or quantity of the works and the imposition of obligations of restrictions regarding access to site, limits on working space, working hours or order of completing the works.

Variations in D&B Called “changes”. Any change in the ER’s which makes necessary the alteration or modification of the design, quality or quantity of the works etc as above.

Warranty Written guarantee of quality of a project WRAP Advises how to reduce waste and increase recycling, making

better use of resources and helping tackle climate change.


November 2008 6

M001 – Accounting Principles & Procedures (Level 1)

Annual Turnover - Income or revenue that a company receives from its normal business activities

- Usually from the sale of goods and services to customers

Balance Sheets - Assets – debt = net worth (value)

- A snapshot of a company’s financial condition

- Use to value a company

- Use to evaluate creditworthiness

- Use to evaluate the money a company has available in the short term

Profit and Loss Account - A financial statement that indicates how revenue is transformed into net income

- Shows whether the company has made or lost money during the period

Ratio Analysis - Evaluates relative strength or weaknesses of potential investment

- Return on equity – indicates firm’s profitability and potential growth

Taxation - CIS Scheme introduced from October 2007

- Verification service to address issue of counterfeiting of old style registration

- Sets out the rules for how payments to subcontractors for construction work must be

handled

- CIS can apply to all types of businesses that work in the construction industry in the

UK, including:

o Self-employed individuals working as sole traders

o Partnerships

o Companies

o Limited liability partnerships (LLPs)

Also: - Revenue and Capital Expenditure

- Credit Control

- Profitability


November 2008 7

M002 – Business Planning (Level 1)

- Principles of Law – Parliament, legislation, tort, common law etc

- Short/Long Term Strategies

- Market Analysis

- Five Year Plans

- Business Support Services – administration, secretarial, HR, IT etc

- Staffing Levels – recruitment/turnover

- Employment Law

- Employment Policy

- How does your business ensure it is making a profit?

o Timesheets

o Resource forward planners

o Financial management software

o Fee/cost reconciliation


November 2008 8

M006 – Conflict Avoidance, Management & Dispute Resolution (Level 1)

How Standard Forms Of Contract Deal with Conflict Avoidance and Dispute Resolution JCT

- Incorporates adjudication

- 2005 dropped arbitration in favour of litigation

o Not actually cheaper in practice as parties have to pay for arbitrator and

venue (court and judges are free in litigation)

o Litigation has improved, judges at the construction courts are often

construction specialists

o Civil Procedure Rules have improved the speed of litigation, reduced the cost

and improved chances of early settlement

o Greater use of adjudication has reduced number of cases going to court so

now quicker to reach court (not wait months to book a slot)

o Arbitration can still be selected if desired

NEC / ECC - Incorporates adjudication

- Early warning provisions

- Dispute resolution built into principle of contract

Conflict Avoidance How to avoid a dispute:

- Clearly state in all tender / contract documents exactly what is required of all parties

- Ensure continuous effective communication between all parties

- Put everything in writing to ensure there is always documented evidence should a

dispute arise

Negotiation General:

- Discussion that ends in agreement by both parties

- Suitable for simple matters, easily resolvable, compromises made

- Such as of conditions of contract etc.

- Requires the co-operation of both parties

- Quick and inexpensive

- The threat of more ‘formal’ proceedings should act as encouragement for an

agreement to be reached


November 2008 9

Process: - Agreement between parties to negotiate

- Set objectives

- Compile supporting evidence

- Establish what your non-negotiables are

- Identify areas of compromise

- Determine what the opposing parties targets are

- Give opposing party an opportunity to retract their position

- Demonstrate and emphasis that your target is reasonable

Facilitated Negotiation: - Neutral facilitator

- Requires co-operation of both parties

- Cost of facilitator can be high

Mediation General:

- Consensual process

- Most popular form of ADR

- Informal and reasonably inexpensive – fees split 50/50

- Private - Non-binding decision unless agreed otherwise by parties and no legal backing to

decisions

- Neutral party assists in settlement of dispute

Process: - Settlement negotiations in the presence of a neutral Mediator who will facilitate but

not make a judgment

- Mediator will make recommendations but resolution and the terms of such lies with

the parties

Conciliation General:

- Similar to mediation

- Conciliator is empowered to express his views and opinions but not make judgment

- Conciliator is independent and impartial - May chair an open discussion but this is not common

Process: - Conciliator talks to each party in private


November 2008 10

- Will make recommendations but resolution lies with the parties

Adjudication – Part II Housing Grants, Construction and Regeneration Act General:

- UK Statutory dispute resolution procedure

- HGCR Act 1996 introduced it into every construction contract

- Employer may delete adjudication clause but rights under Act will reinstate

- Adjudicator or nominating body (i.e. RICS) can be named in contract

- Decision is binding until referred to legal proceedings (arbitration / litigation)

- Decision cannot be appealed until PC

- Adjudicator must

o Act impartially

o Decide the matters in the dispute

o Provide reasons if requested

- Adjudicators fee is split equally unless adjudicator says otherwise

Process: - Referring party serves a Notice of Adjudication to other party

- Adjudicator must be appointed within 7 days of the Notice

- Referring party must serve their referral document within 7 days of the Notice

- Responding party have 7 days to respond to referral

- Adjudicator makes a decision within 28 days

- Can be extended a further 14 days if both parties agree

- Decision is binding until PC

- If losing party fail to comply, courts will enforce the decision (even is a mistake)

Arbitration – Arbitration Act 1996 General:

- Arbitration Act 1996 introduced to revive and improve the process

- Act reformed and clarified the process

- It must be a joint decision to arbitrate

- Parties must go to adjudication first

- Arbitrator appointed by nominated body i.e. RICS, RIBA

- Costs awarded at Arbitrators discretion

- Private

- Cheaper and faster than litigation

- Decision is binding

- Can appeal on point of law only

- Favoured over litigation due to privacy, flexibility etc


November 2008 11

Process: - Parties prepare a case

- Preliminary hearing in court in the presence of an Arbitrator

- Followed by agreed timetable of document submissions etc by the claimant, to which

the defendant can respond

- Concludes with a formal hearing

Power of Arbitrator: - Rectify contract so it accurately reflects the agreement of the parties

- Award any sum which ought to have been included in any certificate

- Open up, review and revise any certificate, notice, decision, requirement

- Determine matters in dispute as if no certificates or notices had been given

100 Day Arbitration: - Introduced by Society of Construction Arbitrators

- An attempt to resuscitate the construction arbitration procedure by introducing fast-

track procedure

- Applicable for all types of dispute

- Cheaper than traditional arbitration or litigation

- Places a duty on the Arbitrator to make his award within 100 days from service of the

defence

Litigation General:

- Very formal and adversarial process

- Long and expensive procedure

- Legally binding – can appeal

- Very public

- Parties often end up agreeing a settlement before reaching the courts

- Will inevitably damage relationships

Process: - Parties prepare a case to be heard in court in the presence of a judge

- Both parties present case to judge

- Decision is based on evidence presented

Expert Witness - A professional that can be called into a dispute by a party to give expert evidence of

their opinion to support a dispute

- Gives an unbiased and independent opinion


November 2008 12

- A party can seek an alternative expert witness should one provide them with an

unfavourable report

- The expert witness is entitled to a fee (unlike a witness of fact)

- Part 35 of the Civil Procedure Rules (CPR) & Civil Evidence Act 1995

Independent Expert Determination - Appointment of an individual professional

- The expert has the freedom to make decisions and investigate the background rather

than just reply on the evidence presented

- The experts decision is final and legally binding – no appeal process as parties agree

to be bound by the decision

- Informal

- More ideal for highly technical disputes

- Expert is liable for his decision

Pre-action Protocol for Construction and Engineering Disputes General:

- Objectives are to:

o Encourage exchange of early and full information about prospective claims

o Enable parties to avoid litigation by settling a claim before proceedings

commence

o Support efficient management of proceedings where litigation cannot be

avoided

- General aim to ensure:

o parties have provided sufficient information to know the nature of each

other’s case

o each party has opportunity to consider, accept or reject the case against

them at earliest possible stage

o there is more pre-action contact between parties

o better and earlier exchange of information

o better pre-action investigation by parties

o parties have met formally at least once with a view to define and agree issues

and explore possible ways to resolve the claim

o that parties are in a better position to try to settle cases early without litigation

o proceeding will be conducted efficiently if litigation does occur


November 2008 13

Process: - Letter of Claim:

o Prior to commencing proceedings claimant sends a letter to defendant

containing:

Names and addresses of parties

Clear summary of the facts of the claims

Basis on which claim is made

Nature of relief claimed

Where claim previously rejected, why claimant believes wrongly

rejected

- Defendants Response:

o Acknowledge receipt of letter of claim within 14 days

o Notify any objections to the court’s jurisdiction or the named defendant within

28 days

o Send letter of response within 28 days identifying:

Which facts are agreed and which disagreed

Which claims are agreed and which disagreed

Which damages are agreed and which disagreed

Summary of facts if contributory negligence is claimed

Any counterclaim

Names of any experts instructed

o Claimant must respond to any counterclaim within 28 days

- Pre-Action Meeting:

o Parties should meet within 28 days of responses

- Limitation of Action


November 2008 14

M007 – Data Management (Level 1)

Building Cost Information Service - The BCIS is a subsidiary of RICS, established in 1962

- Collates and analysis data submitted by members of the service

- Incorporates material from other relevant sources

- Information available online and through several publications

- Provides information on:

o Construction costs

Used for early cost advice

o Maintenance and operating costs

For life cycle cost plans

o Rebuilding costs

Insurers use to quote more accurate premiums for buildings

insurance

BCIS 5 Year Forecast - Long term annual forecast of national average tender price inflation

- Published forecast in August 2008

Annual % change

1Q06

to

1Q07

1Q07

to

1Q08

1Q08

to

1Q09

1Q09

to

1Q10

1Q10

to

1Q11

1Q11

to

1Q12

1Q12

to

1Q13

Tender Prices +4.8% +2.9% +4.5% +3.9% +3.4% +4.3% +4.9%

- Summary:

o New work output expected to fall in 2008

o To remain static in 2009

o Return to trend growth in 2010

o Tender price rises are expected to be driven by input cost pressures

o As new work output moves ahead of trend in 2011 and 2012, tender prices

are likely to outstrip input cost rises, as contractors try to improve their

margins

Building Cost Index (BCI) - The BCI measures movement of basic labour and materials costs to the Builder

- The proportion of labour to material is assumed to be 40:60

- The labour element is based on the change in the cost of "all in hourly rates" for

building operatives paid in accordance with the Construction Industry Joint Council


November 2008 15

- The materials element is based on BERR (formerly DTI) material price indices

- Refers to contractors costs i.e. labour, plant and materials rates

- Used to forecast inflation during the construction phase

Tender Price Index (TPI) - TPI reflects changes in the level of pricing contained in the lowest accepted tenders

for new work

- The TPI measures movement of market conditions

o Labour

o Market

o Economic climate

o Inflation

- Data from prices tendered for construction projects

- Inclusive of labour, plant, materials, preliminaries and OH&P

- Used to forecast inflation up to construction phase

Pricing Books - Spons (by DL)

- Wessex (by BCIS)

- Laxtons

Other Information: - Data Base Use Generally

- Employer’s In-House Data Storage and Filing Systems

- Scheduling

- Libraries

- Data Protection Act


November 2008 16

M009 – Sustainability (Level 1)

Sustainable Development / Construction Definitions:

- Meeting the needs of the present without compromising the ability of future

generations to meet their own needs

- Constructing with considerations of the environment and not at the detriment of future

generations

- Three principles of sustainability are:

o Social

Developments should respond to needs of wider community

Provide public transport links

Amenities – schools, welfare, education etc

o Environmental

Prevent harmful and irreversible impacts on the environment

Careful use of natural resources

Minimise waste and energy

o Economic

Efficient use of resources

Value for money

Why It’s Important to Construction: - Critical global issue facing our generation

- Construction makes up 10-15% of world’s GDP

- 40% of global waste comes from construction

Environmental Concerns: - Climate change

- Carbon emissions

- Water management

- Waste management

- Depletion of fossil fuels

- Renewable energy sources

Sustainability Techniques: - Recycled materials

- Locally sourced materials (reduce waste and energy)

- Sustainable energy (solar, wind, geothermal)

- Passive energy design (building orientation, solar shading, daylighting)


November 2008 17

- Natural ventilation

- Produce less waste and recycle (landfill tax increase is encouraging this)

- Reduce consumption of energy during construction and end users

- Reduce carbon emissions during construction & end users

- Low or zero carbon technologies

Regulations and Codes of Practice for Sustainability - Building Regulations (Part L – conservation of fuel and power)

- Code for Sustainable Homes

- Energy certification of buildings

- Site waste management plans

- BREEAM assessment

Specific Legislation: - Landfill Tax

o Discourages disposal of waste in landfill sites

o Encourages recycling

- Aggregate tax sustainability fund

o Commercial exploitation of aggregates

o Encourages use of recyclable materials

- Part L of the Building Regs (conservation of fuel and power)

Energy Performance Certificates: - All sales and lettings to have EPC

- Assesses how energy efficient a building is

- Assesses estimated energy use, CO2 emissions and fuel costs

- Provides a summary of energy performance related features e.g. wall and loft

insulation

- Rated from A to G (much like white goods)

- Gives recommendations to improve the performance

Other Incentives:

- Capital allowances for the remediation of contaminated land

- Enhanced capital allowances

o tax relief on first year spending on qualified energy saving plant, machinery

and water conservation plant and machinery

- Grants for renewable energy sources


November 2008 18

Building Regulations How can you meet Part L?

- Wind turbines

- Photovoltaic cells

- Combined heat & power (CHP) – captures the byproduct heat for heating purposes

close to the plant rather than emitting into the environment

- Ground source heat pumps

- Geo-thermal energy

- Rainwater harvesting

- Solar thermal water heating

- Biomass boilers

BREEAM General:

- Building Research Establishment Environmental Assessment Method

- Assesses environmental performance of building

- Most widely used method for buildings

- Can be undertaken on all types of building and new, refurbishment or existing

- Gives a rating of pass, good, very good, excellent or outstanding

Areas of Assessment: - Management (considerate contractors, monitoring waste etc)

- Health and wellbeing (natural daylighting, ventilation etc)

- Energy (CO2 emissions, energy use etc)

- Transport (access to public transport, cycle racks and showers etc)

- Water (water saving, meters, leak detection etc)

- Materials (re-use existing materials, sustainable sources, recycling etc)

- Land Use and Ecology (remediation, managing existing ecosystem etc)

- Pollution (use of refrigerants, insulation spec etc)

Benefits: - Demonstrates level of achievement

- Lowers environmental impact

- Improves internal environment which increases productivity

- Reduces operating costs

- Improves marketability

New Developments: - Two stage assessment process (design stage and management stage)

- Mandatory credits introduced


November 2008 19

- New ‘Outstanding’ rating level introduced

Contaminated Land - New contaminated land provisions introduced to encourage recycling of brownfield

sites

- Capital allowances for remediation of contaminated land

Landfill Tax - Discourages disposal of waste in landfill sites and encourages recycling

- Finance Act 1996

- Licensed landfill sites

- Tax levied on owners of landfill sites

- Revenue raised is put back into waste minimisation initiatives

Aggregate Tax - Tax on every tonne of primary material extracted

- Introduced to discourage use of primary material and encourage recycled or

secondary aggregate

Site Waste Management Plan - Under Clean Neighbourhoods and Environment Act 2005

- Compulsory from 6 April 2008, for projects over £330k

- Different rules for projects over £500k

- To raise awareness of how much waste is being produced

- Contractors can then take steps to minimise

- Works shouldn’t commence unless SWMP in place

- Live and updated throughout project

- Early consideration made for waste reduction reusing and recycling site-gained

materials

SWMP includes: - Type/ description of waste removed

- Who removed

- Environmental permit or exemption held by site where material taken

Contractor Responsibility - Update at least every 6 months

- Obtain info from subcontractors

- Keep on site during project

- Allow access to it during project


November 2008 20

- Keep a copy for two years

- Level of detail depends on estimated contract value

WRAP General:

- Waste and Resources Action Programme

- To help identify how to increase recycled content through product substitution

- Identifies recycled content found in market for each product type

o E.g. roof insulation – Isowool Frame Batt HP 70%

- Promotes market for materials with increased recycled content

- Identifies 3 levels of recycled content – standard, good, best

- Aims to minimise and avoid waster and landfill use

- Makes better use of resources

Benefits: - Contributes to sustainable goals of clients

- Satisfies planning and development authorities

- Financial savings if recycling materials locally

- Diversion of waste from landfill

- Less demand on finite natural resources

- Possible to use equivalent products with higher recycled content with no negative

effect on cost, performance or availability

JCT Consultation Paper on Sustainability (January 2008) - Should construction contracts should include clauses which put requirements on

contracting parties with regard to sustainability?

- Specification of products

- Construction process

- Supply chain

Examples of Sustainability on My Projects - BREEAM on 7 Dials

- Rooflights on Stannary Street to introduce natural daylight

- Green roof on Stannary Street – roof top biodiversity through extensive planting

- Looking at prefabrication on phase 2 – minimise site waste


November 2008 21

M010 – Team Working (Level 1)

- Understand the Role of Team Members – client, design team, consultants,

contractors

- Appointing the Project Team

- Relationships with Other Team Members

- Communicating with Other Team Members

- Partnering and Collaborative Working

- Strategic Alliancing

- Supply Chain Management

- European Legislation for Selecting Project Teams – OJEU etc

- Construction the Team – Latham Report


November 2008 22

M003 – Client Care (Level 2)

Principles of Client Care - Identifying clients

o Consider existing and new clients

o Client care for existing clients is vital

o Requires active management

o How to identify new clients

o How to attract new clients

- Types of client

o Different industry sectors have varying structures

o This affects the nature of the client, their general objectives and interests

- Behaviours

o RICS guidance on ethics and conduct rules

o Delivering good client care includes behaviours such as:

Clarity of remit

Clear communication

Setting realistic expectations

Ensuring timely delivery

Ensuring quality of outputs

- Managing the process of client care:

o On projects:

Clear communication

Ongoing dialogue

Clear and defined deliverables

Timely delivery

Quality of outputs

o Generally:

Structured account management

Maintaining regular contact away from current projects

Understanding how can assist client’s business objectives

- Feedback o Formal and informal

o Client satisfaction surveys

o Use of KPI’s


November 2008 23

o Collecting and responding to feedback

o Project reviews

- Complaints

o Complaints handling procedure (RICS requirements)

o Appointed complaints handling officer

- Collect data to analyse and define the needs of clients

o Briefing process:

To ensure a clear scope of work is defined

o Job planning:

Internally planning how client’s requirements can be met

Example – Stannary Street: - Established who main contact within the client organisation was (Marc Seale)

- Established other stakeholders (i.e. Steve Hall and Charlotte Milner)

- Identified importance of Architect to this client

- Ensured I established a close working relationship with them

- Maintained client care by meeting the client’s expectations for deliverables, clear and

ongoing communication and feedback processes

- Developed relationship further by understanding the clients business and future plans

- As project progressed, obtained client feedback both formally (client feedback forms)

and informally (conversations with client)

QS Tendering - Terms and conditions

- Outline scope of services

- Services exclusions

o Detailed examination of financial claim

o Steps towards resolving disputes

- Fee breakdown

- Potential drawdown or expenditure cash flow

QS Appointment Documents - Deed of appointment (terms and conditions)

- Outline scope of services

o Develop budget

o Lead procurement process

o Lead tender process (inc prepare tender and contract documentation)

o Review tender returns


November 2008 24

o Lead post tender interviews

o Carry out and prepare cost reporting, valuations and FA

o Ensure delivery of best overall value for money

o Control costs in accordance with approved budget, cost plan, cash flow

projections

o Advise client on matters affecting cost, delays and advise measures to

reduce and avoid

o Communicate and report to the architect on client’s requirements

o Report to project manager

- Service exclusions (detailed examination of financial claim, steps towards resolving

disputes)

- Fee breakdown

- Potential drawdown or expenditure cash flow

Establishing Fees - Calculate on scope of services and resources required

Key Performance Indicators (KPI’s) General:

- Benchmarking a project / company against a range of performance criteria across the

industry

- Measure of performance that is critical to success

DTI’s Constructing Excellence KPI’s:

- Time

- Cost

- Quality

- Client satisfaction

- Health and safety

DL’s use of KPI’s:

- Client feedback forms which make use of industry standard KPI’s

- Enables us to measure our performance against DTI’s published KPI data for

consultants


November 2008 25

M004 – Communication & Negotiation (Level 2)

Oral Communication:

- Phone calls

- Reporting at meetings

- Facilitating/chairing meetings

- Client and bid presentations

- Staff presentations

- Contractor interviews

- Public speaking at seminars etc

- Listening skills

Written/Graphical Communication:

- Letters, memos and emails

- Report writing

- Compiling tender and contract documents

- Programming

- Using drawn information – checking scales and revisions

- Using CAD documents

Negotiation:

- Establishing negotiating position

- Setting objectives

- Compiling supporting evidence

- Establishing non-negotiable areas

- Identifying areas of compromise

- Assessing other side’s position


November 2008 26

M008 – Health & Safety (Level 2)

Health and Safety at Work Act 1974 - Primary piece of legislation covering occupational health and safety in UK

- Sets out general duties employers have towards employees and members of the

public

- Sets out general duties employees have to themselves and each other

- Law requires good management and common sense

- Penalties under the Act include:

o Enforcement notices

o Fines

o Prison

o Corporate manslaughter

o Director disqualification

The Management of Health and Safety at Work Regulations 1999 - Generally make more explicit what employers are required to do to manage health

and safety under the Act

- Main requirement on employers is to carry out risk assessments (and implement

measures identified within it)

Construction (Health, Safety and Welfare) Regulations 1996 - Set of modern and simplified construction regulations

- Explain detailed ways of working in construction activities

- Aimed at protecting health, safety and welfare of everyone who carries out

construction work

- Also give protection to other people who may be affected by the work

Construction (Design and Management) Regulations 2007 – CDM - Places statutory duties on clients, CDM Co-ordinator, designers and contractors to

plan, manage and co-ordinate health and safety throughout project

- A code of practice

- Advises on complying with HSE law

- Improves safety on site through design, planning and management

- New regulations require clients to be more involved in construction process

- Does not apply to domestic clients

Notifiable Projects: - More than 30 days or 500 person days


November 2008 27

The 3 C’s - Co-ordination

- Competence

- Co-operation

Roles, Responsibilities & Obligations All

- Ensure client is aware of his duties

- Provide information for the H&S file

- Co-operate and co-ordinate with others on project and neighbouring/adjacent projects

- Ensure works don’t commence until a suitable and adequate H&S plan is in place

Client - Appoint a competent CDM (in writing) before design starts and principal contractor,

consultants and contractors

- Ensures the CDM Co-ordinator carries out all his duties

- Responsible for pre-contract H&S

- Provide pre-construction information for designers and contractors

- Ensure mobilisation periods are adequate in relation to the size and complexity of the

project

- Retain and provide access to the H&S file

- Before construction phase begins ensure adequate welfare facilities and construction

phase plan are provided

- Allow sufficient time and resources to enable work to be carried out without H&S risk

Designers (now including QS) - Ensure work on projects doesn’t commence until CDM Co-ordinator been appointed

- Report obvious risks

- Ensure adequate resources and competence with regard to H&S

- Apply principles of eliminating hazards and reducing risks

- Consideration of the Workplace Regulations incorporated into design

CDM Co-ordinator - Advises and ensures client meets and fulfils his obligations of H&S matters

- Assist client with providing information

- Manage and co-ordinate the flow of H&S information

- Check suitability of information provided by designers for contractors

- Prepare H&S file (contractor in D&B)

- Give client advice on construction H&S risk matters


November 2008 28

Principal Contractor - Construction phase plan is prepared and received by employer before construction

work commences

- Welfare facilities are provided for duration of construction phase

- Provides info to CDM Co-ordinator for preparation of H&S file

- Plan and manage the construction phase to minimise risk

- Provide relevant information and training

- Develop and comply with the H&S plan

- Responsible for post contract H&S

- Prepare H&S file (D&B only)

- Consult the workforce on matters affecting their health, safety and welfare

- Ensure they and any s/c is competent and adequately resourced

- Monitor safety

- Site induction – site risks, how to report problems, respond to emergencies

Differences between CDM 1994 and 2007

- Further simplification and clarity of existing regulations

- Terminology changes

- Reducing paper work

- QS now a designer

- Focuses on managing risks on site

- Encouraging team work

- Getting the right people for the right job at the right time

- Less than 30 days, 500 man days and domestic projects not notifiable

- Suitable provision for welfare is made

F10 Notice - Notifies HSE of site, duration, location, numbers on site, when, local authority

- Client is only signatory

Pre-Construction Information Pack - Part of tender documentation

- Was pre-tender health and safety plan

- Includes:

o Description of works

o Client considerations and management requirements

o Environmental restrictions

o Design and construction hazards

o Format and presentation of the H&S file


November 2008 29

Contractor Mobilisation Responsibilities (Start on Site) - Prepare and develop a written plan and site rules

- Make sure suitable welfare facilities are provided and maintained throughout

- Check competence of who they appoint

- Secure site

- Liaise with CDM Co-ordinator

Health and Safety File - Document recording key H&S matters to advise owners and users how to manage

structure safely

- Prepared by CDM Co-ordinator

- Brief scope of works

- Remains with building at completion for use by tenant/ landlord

- Key risk and residual hazards and how dealt with e.g. surveys for asbestos,

contaminated land, soil investigations, existing services routes, etc.

- Structural information e.g. safe working loads of floors and roofs, pre or post

tensioning

- Hazardous materials e.g. lead paint, pesticides, asbestos

- Information regarding removing or dismantling plant or equipment

- Information necessary regarding use, maintenance, adoption of the building

- O&M information

Construction Phase Health and Safety Plan - Developed during construction phase by contractor

- Reviewed and signed off by CDM Co-ordinator and client at completion of

construction phase

Risk Assessment - To protect people as reasonably practicable from harm

- Process:

o Identify the hazards (anything that may cause harm)

o Decide who might be harmed and how

o Evaluate the risks and decide on precautions (different material, barriers,

PPE, site inductions)

o Record your findings and implement them

o Review risk assessment and update if necessary

Construction Skills Certification Scheme (CSCS) - Demonstrates vocational and H&S competence

- Employees of participating companies required to undertake H&S test


November 2008 30

- Card valid for 5 yrs – as legislation changes

Personal Safety Procedures When Visiting Site Site precautions:

- Slips, trips and falls

- Working at height

- Confined spaces

- Joint fire code

- Hot works permits

- Inadequate supervision

- Access and egress

- Handling, storage and transportation

- Contact with overhead lines

- Unintended collapse of part of a building

Accident Prevention on Site: - Accident book

- Visitors log (fire evacuation)

- First aid kit

- Fire extinguishers

- PPE

- Site security

- Handrails, ladders

- Signs/ posters

Personal Health and Safety at Work – RICS Publication ‘Surveying Safely’ - Guide to personal safety at works, published by RICS

Reporting of Injuries, Diseases and Dangerous Occurrence Regulations 1995 (RIDDOR) - Fatalities and major injuries – Notify HSE immediately

- Dangerous occurrences – Notify HSE immediately

- Off work for 3+ days – Report to HSE within 10 days

Considerate Constructors Scheme General:

- Aims to improve image of construction

- Promote delivering the best in considerate site practice

- Targets delivering standards and benefiting the neighbourhood, environment and

workforce

- Not regulated but committed, voluntary effort


November 2008 31

Code of Considerate Practice - Considerate

o Considers the needs of site personnel, visitors, general public

- Environment

o Awareness of environmental impact

o Minimise noise, light and air pollution

o Use local resources where possible

o Attention to waste management – reuse and recycle where possible

- Cleanliness

o Keep site clean and in good order

o Surplus material and rubbish not to accumulate on site

o Minimise dirt and dust

- Good neighbour

o Provide general information for all affected by work

o Communicate with neighbours regarding programming and site activities

- Respectful

o Respectful and safe standards of dress at all times

o No tolerance of derogatory behaviour or language

o Pride in management and appearance of site

- Safe

o No building activity should be a security risk to others

o Construction operations and site vehicle movements carried out with care

and consideration for safety

- Responsible

o Ensure all associated understand and comply with the code

- Accountable

o CCS poster to be displayed where visible to general public

o Contact details provided for those affected

Control Of Substances Hazardous To Health (COSHH) Hazardous Substances:

- Adhesives

- Cleaning agents

- Paints

- Fumes

- Grain dust

- Biological agents (bacteria)

- Asbestos (own regulations)

- Lead (own regulations)


November 2008 32

Effects: - Skin irritation

- Asthma

- Cancer

- Losing consciousness

Measures: - Assess risks

- Decide precautions

- Prevent or control exposure

- Ensure measures are used and maintained

- Monitor exposure

- Carry out appropriate health surveillance

- Prepare plans to deal with accidents, emergencies

- Ensure employees properly informed, trained, supervised

Control of Asbestos at Work Regulations - Asbestos found in:

o Cement (roofing)

o Insulation board (ceilings and walls)

o Coatings (steelwork fireproofing)

o Insulation (pipe laggings)

- Regulations prohibit the importation supply and use of asbestos

- Regulations include the duty to manage asbestos in non-domestic premises

- Asbestos must only be removed by licensed contractor

- ASB5 notice into HSE, 14 day notice period, must include method statement

- Asbestos can be sealed in if it is undamaged and won’t be disturbed in future


November 2008 33

M005 – Conduct Rules, Ethics & Professional Practice (Level 3)

General - Founded 15 June 1868

- Motto is “Est Modus in Rebus” – there is measure in all things

- International HQ in London (Great George Street)

- World regional offices in Brussels, Dubai, Hong Kong, New York and Sydney

- Members in 146 countries

- 34,000 students on 400 accredited degree courses

- 500 industry research and policy papers published every year

- 50 national associations

- 160 diverse specialisms represented across 17 faculties

- Levels of membership:

o Fellow o Professional Member o Technical Member o Honorary Member o Student Member

Key Roles of RICS - Regulate and promote the profession

- Maintain the highest educational and professional standards

- Protect clients and consumers through a strict code of ethics

- Provide impartial advice, analysis and guidance

RICS structure - Governed by a 70-strong International Governing Council, chaired by the President,

including RICS members from all world regions

- Who is President of RICS? Peter Goodacre ex-Principal of CEM

- Who is Senior Vice President? Max Crofts

- Who is the Chief Executive Officer? Louis Armstrong

- Who is the Chief Operating Officer? Sean Tompkins

- Who is Chairman of the const/QS faculty? Michael Sullivan

Faculties - 3 basic market groupings

Land

Property

Built Environment


November 2008 34

- Divided into 17 areas of specialisation - the ‘faculties’.

- Each with its own board and elected chairman.

- Can belong to a maximum of 4 faculties, although further subscriptions can be paid to

join more.

- The 17 faculties are:

1. Arts and Antiques

2. Building Control

3. Building Surveying 4. Commercial Property

5. Dispute Resolution 6. Environment

7. Facilities Management

8. Geomatics

9. Machinery and Business Assets

10. Management Consultancy

11. Minerals and Waste Management

12. Planning and Development

13. Project Management 14. Residential Property

15. Quantity Surveying and Construction 16. Rural

17. Valuation

What The Faculties Do:

- Primary role is to develop technical standards, generating professional guidance and

information

- Responsible for setting and maintaining APC/ATC competencies

- Provide technical advice to all other areas within RICS

- Contribute to RICS public policy agenda

- All but one are responsible for maintaining alternative designations e.g. chartered

quantity surveyor; chartered facilities management surveyor

RICS Rules of Conduct - Set out standards of professional conduct and practice expected of members and

firms

- Over and above obligations placed on members by general law, for example in the

areas of discrimination and employment

- Reduced to short bullet points within two separate documents for members and

firms.


November 2008 35

There are 9 Rules for Members, divided into two sections:

Part One: General 1. Interpretation

“Member” means a Fellow, Professional Member, Technical Member or Honorary

Member of RICS or a member of the Attached Classes.

2. Service of Documents Any notice or other document required by or for the purposes of these Rules to be

given or sent to a Member may be given to them personally or sent by post

Part Two: Personal and Professional Standards 3. Integrity

Members shall at all times at with integrity and avoid conflicts of interest and any

actions or situations that are inconsistent with their professional obligations.

4. Competence

Members shall carry out their professional work with due skill, care and diligence

and with proper regard for the technical standards expected of them.

5. Service

Members shall carry out their professional work in a timely manner and with proper

regard for standards of service and customer care expected of them.

6. Lifelong Learning

Members shall undertake and record appropriate lifelong learning and, on request,

provide RICS with evidence that they have done so. Exemptions for pregnancy,

redundancy, ill health and any other exceptional reason.

7. Solvency

Members shall ensure that their personal and professional finances are managed

appropriately.

8. Information to RICS

Members shall submit in a timely manner such information, and in such a form, as

the Regulatory Board may reasonably require.

9. Co-operation

Members shall co-operate fully with RICS staff and persons appointed by the

Regulatory Board.


November 2008 36

Firms are required to register for regulation. A regulated form is one that has 50% of more

partners or directors who are RICS members.

What is required for registration?

1. Type of business

2. Statutory regulated activities

3. Nature of clients

4. Complaints handling procedure details and records

5. PII details

6. Whether the firm holds clients' money

The 15 Rules of Conduct for Firms are divided into three sections:

Part One: General 1. Interpretation

Interpretation of the Rules

2. Service of Documents Any notice or other document required by or for the purposes of these Rules to be

given or sent to a Firm may be given or sent to the Contact Officer personally or

sent by post to the last address of the Firm notified to RICS.

Part Two: Conduct of Business: 3. Integrity

A firm shall at all times at with integrity and avoid conflicts of interest and any

actions or situations that are inconsistent with its professional obligations.

4. Competence

A firm shall carry out its professional work with due skill, care and diligence and

with proper regard for the technical standards expected of it.

5. Service

A firm shall carry out its professional work with expedition and with proper regard

for standards of service and customer care expected of it.

6. Training

A firm shall have in place the necessary procedures to ensure that all its staff are

properly trained and competent to do their work.


November 2008 37

7. Complaints handling

A firm shall operate a complaints handling procedure. The complaints handling

procedure must include a redress mechanism that is approved by the Regulatory

Board.

8. Clients' money

A firm shall preserve the security of clients' money entrusted to its care in the

course of its practice or business.

9. Professional indemnity insurance

A firm shall ensure that all previous and current professional work is covered by

adequate and appropriate PII cover which meets standards approved by the

Regulatory Board.

Part Three: Firm Administration

10. Advertising

A firm shall promote its professional services only in a truthful and responsible

manner.

11. Solvency

A firm shall ensure that its finances are managed appropriately.

12. Arrangements to cover the incapacity or death of a sole practitioner

A firm which has a sole principal (i.e. a sole practitioner or a sole director in a

corporate practice) shall have in place appropriate arrangements in the event of

that sole principal’s death or incapacity or other extended absences.

13. Use of designations

A Firm registered for regulation must display on its business literature, in

accordance with the Regulatory Board’s published policy on designations, a

designation to denote that it is regulated by RICS.

14. Information to RICS

A Firm shall submit in a timely manner such information about its activities, and in

such form, as the Regulatory Board may reasonably require.

15. Co-operation

A firm shall co-operate fully with RICS staff and any person appointed by the

Regulatory Board.


November 2008 38

RICS Core Values

Core values replaced by a set of standards in helpsheet entitled Maintaining Professional and Ethical Standards.

These standards replace the nine core values and supersede the guidance notes published

on professional ethics.

There are now 12 standards which members are expected to follow, both professionally and

personally:

1. Act honourably

Never put you own gain above the welfare of your clients or others to whom you have

a professional responsibility. Always consider the wider interests of society in your

judgements.

2. Act with integrity

Be trustworthy in all that you do - never deliberately mislead, whether by withholding

or distorting information.

3. Be open and transparent in your dealings

Share the full facts with your clients, making things as plain and intelligible as

possible.

4. Be accountable for all your actions

Take full responsibility for your actions and don’t blame others if things go wrong.

5. Know and act within your limitations

Be aware of the limitations of your competence and don’t be tempted to work beyond

these. Never commit to more than you can deliver.

6. Be objective at all times

Give clear and appropriate advice. Never let sentiments or your own interests cloud

your judgement.

7. Always treat others with respect Never discriminate against others.

8. Set a good example

Remember that both your public and private behaviour could affect your own, RICS'


November 2008 39

and other members' reputations.

9. Have the courage to make a stand

Be prepared to act if you suspect malpractice of any sort or a risk to safety.

10. Comply with the relevant laws and regulations

Avoid any action, illegal or litigious, that may bring the profession into disrepute.

11. Avoid conflicts of interest Declare any potential conflicts of interest, personal or professional, to all relevant

parties.

12. Respect confidentiality

Maintain the confidentiality of your clients’ affairs. Never divulge information to others

unless it is necessary.

LLL The RICS does not prescribe a set number of hours for lifelong learning. It simply requires the

learning to be effective, enabling members to do their work more competently. The outcome

of the learning is more important than the number of hours spent on it.

Disciplinary Procedures

First, there is a formal investigation by the Head of Regulation who then decides whether the

RICS will take any further action.

On completion of the investigation, if he considers disciplinary action is required, the Head of

Regulation can initiate one of the following three actions:

1. Serve a Fixed Penalty notice upon the member

2. Make a Consent Order

3. Refer to matter to the Disciplinary Panel

Fixed Penalty Notices: Administrative fines for minor/minimal breaches of the Rules, such as late return of a firm's

annual return.

Consent Order: Used for more serious breaches, such as for some minor breaches of the member’s accounts

regulations which could easily be corrected. A fine may also be levied.


November 2008 40

Action by Disciplinary Panel: Used in the most serious cases. Penalties available to the board are:

1. Issue a caution against repetition of the conduct in question

2. Reprimand or severely reprimand the member

3. Require an undertaking as to future conduct

4. Impose a fine

5. Impose conditions upon future continued RICS registration

6. Expulsion from membership or remove a firm

7. Require costs to be paid

8. Require publication of the results of the hearing in a local newspaper as well as RICS

website

On what grounds can a member be expelled from the RICS? 1. Failure to pay membership fees

2. Failure to renew PII

3. Failure to undertake LLL

4. Misconduct under Rules of Conduct

Professional Indemnity Insurance

Insures against breach of duty and negligence in professional role

Reasons PII is needed:

- Firm is protected from financial loss it cannot meet as a result of negligence claim

- To protect firm against any consequences of its inability

- The firms clients do not suffer financial loss which the firm cannot meet

Limit of Indemnity:

Firms Turnover in Preceding Year Minimum Limit of Indemnity £100,000 or less £250,000

£100,001 to £200,000 £500,000

£200,001 and above £1,000,000

Run off cover:

- Insurance against a claim arising from work previously undertaken

- Required for a minimum of 6yrs (under hand) or 12 yrs (under deed)

- RICS recommend should be purchased for 15 yrs

Compulsory Professional Indemnity Insurance (CPII) Regulations

- Set the requirements / benchmark for PI Insurance


November 2008 41

Merrett v Babb

- Employer went bankrupt so PII was cancelled

- Client sued employee instead (Mr Babb, a retired surveyor)

- In response, RICS set up Member Support Service Levy to protect members who find

themselves being sued personally and have no access to PII protection. RICS would

provide defence and advisory services

Starting a Practice

RICS Compliance 1. Register with the RICS for regulation of the firm

2. Appoint a Contact Officer for all RICS communication

3. Prepare a Complaints Handling Procedure to be sent to all clients with the Terms of

Business

4. Appoint a Complaints Handling Officer and Money Laundering Reporting Officer

5. Obtain PII and send details to RICS

6. Set up financial systems to comply with members' accounts regulations, if holding

clients' money

7. Members who practice as surveyors, who are directors of a limited or unlimited

company, must ensure that the Memorandum and Articles of Association of the

company include a clause confirming that the business will be conducted in

accordance with the RICS Bye-Laws, Conduct Regulations and Practice Statements

8. Obtain an up to date logo kit from RICS to use for the production of all practice

material to ensure compliance with the new designation 'Regulated by RICS'

Statutory Compliance 1. Display names of partners or company name on business stationary

2. Register with the Office of the Data Protection Commissioner

3. Fully comply with the requirements of the applicable legislation i.e. DDA, H&S

Fees - Fee calculation is an accurate assessment of resources required to carry out

professional duty on a project + OH&P

- Cannot submit a fee with prior knowledge of a competitors

- Cannot change a fee based on knowledge of a rival bid – could re-evaluate scope of

duties included in fee and resubmit

- If you run out of fee, must carry out works as per fee agreement but check if there is

any grounds for payment of additional fees


November 2008 42

Terms of Engagement - Fees

- Payment of expenses

- Manner in which expenses and disbursements are to be calculated

- Members complaints handling procedure

Members Accounts - Don’t accept cash – electronic payment only!

- All monies to be kept in separate account, clearly identifiable with ‘Client’ in name

- Inform client immediately of account name, bank/building society and whether the

account is accumulating interest

- The money must be available on demand

- Maintain accurate records of all transactions/dealings

Complaints Handling Procedure The firms Complaints Handling Procedure (Rule 5 of the Rules for firms) must include:

- Contact name/details

- Internal timescale of firms procedure

- Recognition of the right to complain

- Reference to the possibility of mediation

- Recognition to take complaint to an independent third party

Handling a complaint:

- Keep a written record of the complaint

- Investigate fully and firmly

- Ensure the client feels the matter is being taken seriously

- Give client a timescale for a response

- Face to face meetings often lead to more constructive and satisfactory solutions

- Solutions could include an apology, agreeing to waive fees, offer of compensation or

the agreement to go to dispute resolution

- Analysis is a vital form of client feedback

DL’s complaint procedure (referred to in our Standard Terms of Engagement):

- Contact Mark Hackett (who is appointed to deal with complaints)

- Where complain is initially made orally, client is requested to send written summary of

complaint

- Timescales for responding to the customer’s written complaint are:

o Initial response (DL’s understanding of complaint) – 14 days

o Full response (outcome of investigation) – 21 days from date of initial

response


November 2008 43

- If complainant is dissatisfied with the handling of the complaint, he may refer the

matter to the Senior Partner who will undertake separate review of complaint

- If complainant remains dissatisfied, despite the Senior Partner's intervention, then

further stages can be implemented, namely:

o the mediation procedure as per the Centre for Dispute Resolution Model

Mediation Procedure, or the mediation process adopted by the RICS

- If complaint still not resolved then refer complaint to Surveyors Arbitration Scheme

Conflicts of Interest Where members’ interests conflict with clients or where two or more clients’ interests conflict.

Examples of conflicts of interest:

- Acting for both a developer and contractor

- Acting for two competing developers/contractors

- Acting on behalf of a family member

Action to be taken:

1. As soon as you are aware, disclose to client in writing, the possibility and nature of

conflict

2. Advise client in writing that neither member nor members firm can continue to

represent unless:

a. unconditionally, the client requests you to do so

b. the client finds it acceptable and approves, in writing, the specific conflict

handling arrangement put in place

What is the Agenda for Change? In 1998, the modelling of the current structure of the RICS was initiated by the Agenda for

Change, led by Richard Lay in his role as President.

It aimed to shape the RICS' structure and policy in three main ways by responding to three

perceived needs:

1. The need to be perceived as a global organisation, not just in the UK

2. The need to become more relevant to its members in the 21st century

3. The public's desire to see more accountability and understanding as to the role and

duties of a Chartered Surveyor

Key changes included:

1. The introduction of new stringent educational threshold standards for uni courses

2. The establishment of world regions and national associations

3. The replacement of 7 divisions by 16 (now 17) faculties


November 2008 44

4. New criteria for attainment of Fellowship grade"

What is the Brooke Review? Following the outcome of the radical changes from the Agenda for Change, there was

widespread unease among members in respect of the new structure and workings of the

RICS.

The Brooke Review Committee was established by RICS President Nick Brooke in 2003 to

recommend:

1. Improvements in two-way communication between RICS and its members

2. How to encourage more awareness of, and involvement in, RICS affairs

3. Better arrangements for considering members' opinions and complaints

Following consultation, a report was published setting out more than 40 recommendations.

Key recommendations included:

1. More power and responsibilities should be devolved to national and regional boards

2. Composition of Governing Council should be reviewed

3. Greater representation of Matrics at all levels of decision-making

4. Communications with members should be more cost-effective, better co-ordinated

and more user-friendly

The recommendations were adopted by the RICS International Governing Council in June

2004.

Initiatives implemented include:

1. A new RICS website with a members' only zone

2. The production of a simple guide to the RICS

3. Streamlined and targeted email alerts and correspondence to members

What is the Carsberg Report? The RICS appointed Sir Bryan Carsberg in September 2004 to conduct a thorough internal

and external review of the regulation of the RICS.

Key recommendations included:

1. Regulation should continue to be carried out by internal bodies

2. RICS should develop a structure that separates regulatory functions from

representational functions

3. Establish a conduct board to operate disciplinary structures

4. RICS should regulate firms as well as members


November 2008 45

5. A review of CPD arrangements to better protect the consumer

Following the recommendations of the report, a new regulatory board was appointed to

deliver a more independent, fairer and more efficient means of regulation of the RICS.

Current RICS issues and initiatives

- Peter Goodacre wants to promote technical grade

- Lecture series ‘Surveyors in Society’ aims to highlight significance of the Chartered

Surveyor in business and the community

- Dealing with global warming and population growth

- Skills shortage – QS now added to list of skills shortage


November 2008 46

T013 – Construction Technology & Environmental Services (Level 3)

Construction Technology Substructures:

- Piling – Choice affected by ground conditions and site restrictions

o Bored

Casing driven in

Reinforcement cage

Concrete poured in

Casing removed

o Driven

Precast RC piles driven into ground

o Continuous flight auger

Auger driven in

Concrete poured in as auger is removed

Reinforcement placed in wet concrete

o Sheet piling

Corrugated metal sheets percussion driven into ground

- Foundations

o Strip

o Pad

o Raft

o Piled

o Measure

Excavate trench

Disposal of excavated material

Earthwork support

Compaction

Blinding

Hardcore

Formwork

Reinforcement

Concrete

Superstructures: - Concrete frame

o Precast

o In situ

o Cast off site or in situ


November 2008 47

- Steel frame

o Rolled sections

o Hollow sections

o Metsec systems

o Portal frames

- Comparison of concrete/steel frames

o Steel frame quicker from concept to completion

o Cost of steel governed by complexity and repetition

o Late variations not easily incorporated in steel frames due to long lead-ins

o Steel frame is lighter

o Steelwork is high quality as fabrication is controlled off site

o Steelwork can take greater spans, less intermediate columns

o Concrete does not require any additional fire proofing treatments

o Concrete can endure high temperatures from fire

o Outstanding resistance to explosion or impact = safer

o Concrete can use recycled aggregates

o Concrete more readily available (steel has high demand in China, ME)

- Types of fire protection

o Intumescent painting

o Sprayed vermiculite cement

o Sprayed mineral fibre

o Fire resistant boarding

- Brick size = 215 x 102.5 x 65mm

Cladding/Glazing: - Unitised curtain walling

- Semi-unitised curtain walling

- Stick and panel systems

- Ventilated facades

- Triple glazed facades

Services Technology - Electrical systems

o Modular wiring

- Mechanical systems

o Note: Air based systems require more ceiling/riser space for ducts

o Four pipe fan coil units

o VAV

o VRV


November 2008 48

o VRF

o Air displacement

o Chilled beams

o Chilled ceilings

- Internal/external drainage

- Mains services

- Fire safety systems

- Security systems

- Environmental controls

- Data systems

Building Regulations: - National standards applicable to all types of development

- Published by ODPM

- (Part A) Structure

- (Part B) Fire safety

- (Part C) Site preparation and resistance to moisture

- (Part D) Toxic substances

- (Part E) Resistance to the passage of sound

- (Part F) Ventilation

- (Part G) Hygiene

- (Part H) Drainage and waste disposal

- (Part J) Combustion appliances and fuel storage systems

- (Part K) Protection from falling, collision and impact

- (Part L) Conservation of fuel and power

- (Part M) Access to and use of buildings

- (Part N) Glazing - safety in relation to impact, opening and cleaning

- (Part P) Electrical safety

Disabled Discrimination Act 2005: - Imposed in December 2006

- No such thing as DDA ‘compliance’, about what is ‘reasonable’

- Building Regs Part B and Part M apply

- Increasing and creating rights rights for the disabled

Also: - Building Control

- Planning

- Party Wall Issues / Rights of Light


November 2008 49

T017 – Contract Practice (Level 3)

Construction Act – Housing Grants, Construction and Regeneration Act 1996, Part II - Key objective is to influence the culture of the construction industry

- Aim of reducing confrontation, and facilitating better cash flow and fair play

- Ensures contracts incorporate minimum provisions with regard to payment and

dispute resolution

- The main elements are:

o Contracts must contain payment provisions:

If project exceeds 45 days, contractor is entitled to stage or interim

payments

Contract must provide for a due date for payments and a final date

for payment

Paying party must serve a notice of intention to receiving party,

stating amount and basis

Payments cannot be withheld unless a notice of intention to withhold

is given, stating amount and grounds for withholding

Prohibition of conditional payment provisions

Clauses making payment conditional on payment from a third party

are unenforceable except in the case of insolvency

Contractor may suspend performance for non-payment (must give 7

days notice) and completion date is automatically extended

o Introduced the right to refer to a dispute to adjudication

Scheme for Construction Contracts Regulations 1998 - Where there is contravention of Construction Act, the statutory ‘default provisions’ in

this statutory instrument apply

- Contains a Schedule in 2 parts

o Part 1 – Provides rules for the selection of an adjudicator with the powers to

make enforceable decisions

Will apply where contract contains no adjudication provisions; or

Where the provisions do not comply with the Act

o Part 2 – Provides payment rules

Will apply where contract fails to make provisions; or

Where parties have failed to agree on details such as timing of

payments


November 2008 50

Principles of Contract Law - A contract is a legally enforceable agreement

- Components of a contract:

o Offer

o Acceptance

o Consideration

o Also:

Intention (to make the agreement legally binding)

Capacity (to enter into that type of contract – and mentally)

Legality (enforceable by the courts)

- Repudiation - an implied or express refusal by one party to perform their obligations

under the contract

- Statute of limitations – maximum period of time, in common law, after an event that

legal proceedings may be initiated

- Express terms

o those contained in the main contractual document

o those contained in other documents to which the main contract document

refers

- Implied terms

o those terms which are implied by law

- Also may incur legal liability under the law of tort

- Tort – a civil wrong

o Negligence

o Nuisance

o Trespass

Current Case Law - Amsprop sues Wilks Head & Eve for negligence over Regent Street disease

- Cleveland Bridge v Multiplex

Choosing a Contract - Consider client, project and approach

- Consider what tenderer’s are familiar and comfortable with to perceive lower risk

- Unfamiliar contracts may attract a risk premium

Standard Forms of Main and Sub Contract JCT Main Contracts

- Approximately 80% of contracts issued under JCT form

- New suite published in 2005

- Drafted by Joint Contracts Tribunal representing employer and contractor bodies


November 2008 51

- Risk allocation historically criticised by employer, thus often heavily amended

- Perceived as having an adversarial approach

NEC/ECC 2005 - Recommended by Latham

- Partnering style approach, avoids ‘blame and claim’ culture, less confrontational

- Suitable for all types of construction and engineering project

- Little case law to see how stands in court

- 3 main aims

o Clarity – clear and simple language in present tense

o Flexibility – can be tailored to suit specific requirements

o Stimulus to good management – less adversarial

- Available in 6 main options including:

o A & B – Priced contracts

o C & D – Target contracts

o E – Cost reimbursable

o F – Management contract

- No reference to QS or CDM Coordinator - PM assumes full authority on behalf of employer

- PM controls time and cost as an administrative function

- PM updates risk register and issues instructions

- Final account must be settled within 4 weeks of completion

- Widely accepted that it generates a large volume of paperwork and admin

- Programme is a contract document

- Requirement for parties to give early warnings (or risk penalty) for:

o Increase costs

o Delay completion

o Delay key date being met

o Impair performance of the works in use

- Compensation events give rise to variations and EOT’s

- LAD’s and retention are secondary options

- PM assesses amount due and certifies payment within one week of each assessment

date

- PM can withhold 25% of the valuation if contractor has not submitted first programme

PPC2000 - PPC200 Project Partnering Contract

- Latham called it “the full monty of partnering and modern best practice”

- Used on offices, housing, schools, hospitals, universities

- Just relaunched in October following feedback from users


November 2008 52

GC/Works/1 1998 - Originally established as a suite of contracts for government

- Risk allocation in favour of employer

- Rarely used now

- Four volumes:

o With Quantities General Conditions

o With Quantities General Conditions

o Single Stage Design & Build General Conditions

o Model Forms & Commentary

ICE Conditions of Contract (7th Edition) - Civil engineering construction works

- Suited to the scale and imprecise nature of civils projects

- Suits technically complex projects

- Re-measure on completion

- No reference to QS

Association of Consultant Architects – PPC2000, TPC2005 - PPC 2000 was first standard form for Partnering

- Direct result of Egan report ‘Rethinking Construction’

- Covers whole procurement process including design development

- Integrates the entire project team

FIDIC Conditions of Contract - International contract

Amending a Standard Contract - If not qualified to do so, DON’T

- Can destroy delicate balance of risk allocation

- Can create legal uncertainty created by amending individual clauses which form part

of a complex web of interacting cross-referred terms

- Amendments may fall foul of the Construction Act

- Can attract a cost premium to tenders

- Write “clause not used” rather than deleting and trying to renumber

- Amendments must be reasonable and comply contract legislation

- Courts can strike out amendments if contrary to good faith


November 2008 53

Bespoke Contracts - Expensive to draft (legal fees)

- May be badly drafted

- Not familiar to other parties including CA

- Untested in court

- Unappealing to contractor

Roles and Responsibilities of Parties Some implied …… some express

Employer

- Give site access

- Ensure any transfer of authority over and above what is normal within the contract is

communicated to the contractors

- Make payments in accordance with the contract

- Pay for any loss and expense incurred

- Take out any necessary insurance provisions (clause 6.7 B or C)

- Confidentiality

Contract Administrator - Supply information

- Give instructions

- Inspection and monitoring of the contract work

- Adjudication and certification

Employers Agent - Employed as a representative to exercise the powers and function of the Employer

- Administers contract

- Monitors execution of project

- Ensure all parties adhere to conditions of contract

- Not responsible for making qualitative or design judgements

CDM Co-ordinator - Prepare Pre-Construction Information document

- Assist client and ensure obligations are met

- Issue F10 notices

- Prepare health and safety file

- Amend health and safety file as works progress


November 2008 54

Quantity Surveyor (JCT) - Interim valuations

- Valuing variations

- Prepare statement of final account

- Ascertaining loss and expense (if so directed)

- Only use rates in priced document for purposes of the contract

- No role in D&B contract

Contractor - Construct works in accordance with contract documents

- Carry out works regularly and diligently

- Health and safety

- Take out any insurance, bonds and/or warranties

Project Manager (ECC) - Manages programme

- Manages risk and value registers

- Ensures client’s needs and duties are covered

Assignment - Transfer of contractual rights only (not obligations)

- i.e. developer may transfer rights for claiming defects to purchaser

Novation - Transfer of rights and obligations

- Common in D&B contracts

- Occurs when contract is being let

- IN D&B, stated in ER’s that consultants appointment is to be novated

- Possible conflict of interests:

o Consultant still has a duty of care to client

o Consultant may be influenced by contractor i.e. VE

- ER’s and CP’s must be clear and well prepared for novation to work effectively

Contracts (Rights of Third Parties) Act 1999 - Privity of contract

o The private relationship between those persons party to a contract

o A person not party to the contract cannot enforce it, nor acquire rights or

incur liabilities under it, even if the contract is intended to benefit a third party

- But, there are often ‘third parties’ with financial stakes in the project (i.e. funders,

tenants, purchasers) who are not party to the building contract


November 2008 55

- In the absence of direct contract, third parties can only sue in tort of negligence, but

this is limited in scope (can’t claim for pure economic loss)

- Rights of Third Parties Act and collateral warranties provide this link

- Contracts (Rights of Third Parties) Act

o Applies to contracts made after 11 May 2000

o Gives direct, enforceable contractual claims to a third party if:

The contract expressly provides that he may; or

The term purports to confer a benefit on him

o The third party must be identified in the contract by name or class (i.e. future

tenant, even if not in existence when contract executed)

o Provides an effective alternative to collateral warranties

o Only imposes benefits, not obligations

o Act can be excluded from a contract

Collateral Warranties - Side agreement which establishes a contractual link between two parties which would

otherwise not exist

- Provide third parties with contractual remedies against parties to original contract i.e.

o Employer to subcontractor

o Tenant to contractor

- Allows third parties to enforce the terms of the contract

- Many standard forms including JCT, British Property Federation and Construction

Industry Council

- Types:

o Contractor to Purchaser or Tenant

o Contractor to Funder

o Subcontractor to Purchaser or Tenant or Funder

o Subcontractor to Employer

Third Party Rights v Collateral Warranties - In JCT05 referral to Third Party Rights eliminates the need to collateral warranties,

although they are still included within the contract

- Advantages of Third Party Rights:

o Much simpler then executing collateral warranties

o Even small projects can generate large numbers of warranties

o Less administration

o Standard forms of warranty often amended and bespoke forms often used

o Warrantor (or their insurer) often seeks to insert limitation clauses


November 2008 56

o Collateral warranties can sometimes be difficult to procure

o Collateral warranties must be assigned every time tenant leaves

- Disadvantages of Third Party Rights:

o Little case law to rely on

o No ‘physical’ warranty which beneficiaries ‘feel more comfortable’ with

o Consultants and contractors wary of granting rights to unknown beneficiaries

o Difficult for developers to impose rights on subcontractors as they are not

party to the building contract

o No rights exist until developer and consultant or contractor agree and

complete the main contract

Party Wall Act - Prevents and resolves disputes relating to party walls, boundary walls and

excavations near neighbouring buildings

- Must give adjoining owners notice of intention, even where work will not extend

beyond centre line of a party wall

Contract Documents - Form of Contract

o Articles of Agreement

o Conditions of Contract

o Schedule of amendments

- Design information

o Drawings

o Specifications

o Work schedules

- Pricing document

o Option A – Priced specification or work schedules

Pricing schedule

BoQ

o Option B – Contract sum analysis or schedule of rates

- Information release schedule

o Programme for issuing design information so as not to impede works

- Pre-Construction Information

- In D&B or where there is a CDP:

o Employers Requirements

o Contractors Proposals

- In NEC – Contractors programme

- Relevant post tender correspondence


November 2008 57

Letters of Intent General:

- A letter outlining a clients intention to enter into contract

- Intention to create legal relations

- Not a substitution for a binding, executed contract

- Effect of the LOI depends entirely upon its wording

- Does not bind contractor to carry out any works

- If contractor carries out work on basis of LOI, a contract is created to pay for that

work

- Enables contractor to undertake work before formal contracts are exchanged

- Allows orders for long lead-in items to be placed

- No guarantee contractor will sign the contract (and he is under no obligation to do so)

- Financial limit may be reached before contract is signed

- Can be with limited or unlimited authority

o Limited

Use where still a number of outstanding matters to be agreed

Acknowledge certain items are still to be agreed

Maximum liability under letter is stated

o Unlimited

Use where all details of contract have been finalised

Confirm basis upon which contract docs will be prepared

Requesting and authorising contractor to commence works

Undertaking to pay for such work even if contract is not executed

(unless contractor goes back on matter previously agreed)

Only intended to apply for a few days whilst contracts are being

prepared

Should Include: - Works to be subject to LOI - Value of works

- Form of contract to be entered into, and key terms

- Contract sum (if agreed)

- Date for possession

- Date for completion

- Insurance provisions required

- Method of payment

- Expiry date of letter

- State intention to enter into formal contract

- State employers’ reservation of right not to award the contract for whatever reason


November 2008 58

Risks to Employer: - Tend to lead to execution of formal contract drifting

- Contractor may postpone agreement of contract and/or any outstanding matters

- Employer loses incentive in negotiations

- No protection if contractor becomes insolvent

- May not be binding in court if express terms are not agreed

Quantum Meruit - As much as he has earned

- Claim for a reasonable sum as payment for services rendered

- Where there is no contractual basis for assessing amounts

Bonds - Obligations / Contractual duties owed by one party to another are financially

guaranteed by a third party

- Provided by banks and insurance companies

- Typically 10% of contract sum

- Conditional or on demand

o Conditional

Only payable if condition has been met or event occurs

And loss has resulted

o On Demand

Can be called at any time

Not dependant upon conditions

- Types of bonds:

o Performance Bond

Guarantee of performance

Guarantor pays for loss up to value of bond

Normally activated upon insolvency or retention fund not sufficient for

making good defects

o Advanced Payment Bond

Used where contractor has high mobilisation costs

Security against the advance payment

o Payment for Off-Site Materials and/or Goods

Security against listed items which not yet been delivered to site

o Retention Bond

Employer calls on bond if defects arise

In lieu of retaining cash, helps contractors cash flow

Expires after Certificate of Making Good Defects is issued


November 2008 59

Difference between a Bond and Collateral Warranty - Bonds are contained within the contract

- Collateral warranties are a side agreement to the contract

Warranties - Written guarantee of quality of a project

- an assurance by one party to the other that certain facts or conditions will happen

- the other party is permitted to rely on that assurance and seek remedy if it is not

followed

- From a supplier, subcontractor

Parent Company Guarantee

- An alternative to a performance bond

- Contractors parent company guarantees to fulfil obligations at own cost in the event

of non-performance or insolvency

- Contractual performance is underwritten by parent company

- Not limited by value

- Free to obtain

Insurances General:

- Risk of damage and injury related to construction projects is high

- Therefore insurance provision an essential requirement of construction contract

- Two basic types of insurance

o Liability insurance – financial cover for legal liabilities owed to others

o Loss insurance – providing cover for losses, which fall directly on insured

parties

- Indemnity – guarantee, compensation

- Insurance – method of providing an indemnity

- Joint Names Policy o Policy in names of two or more parties (i.e. contractor and employer)

o Prevents insurer from using rights of subrogation against parties named in

policy

- Subrogation o The right to sue in the name of the assured any person who could have been

sued by the assured in respect of the loss

o Example, contractors negligence causes a fire in the existing building.

Insurer can pay out and then sue contractor for negligence to reclaim his loss


November 2008 60

Three main categories of risk: - Injury or death to persons

- Damage to property other than works

- Damage to works

Injury to Persons or Property: - Clause 6.1 – Liability of Contractor – Personal Injury or Death

o Requires contractors to indemnify Employer

o Injury arising out of, or in the course of, or caused by, the carrying out of the

Works

o Liability does not extend to injury or death as a result of an act or neglect by

any of the employers team

- Clause 6.2 – Liability of Contractor – Injury or Damage to Property

o Requires contractor’s to indemnify Employer

o Injury or damage to property arising out of, or in the course of, or by reason

of, the carrying out of the Works

o Includes non-physical injury to property but where enjoyment of a right has

been affected i.e. loss of light caused as a result of construction works

o Liability does not extend to injury or death as a result of an act or neglect by

any of the employers team

o Where a statutory undertaker is working as a domestic subcontractor, the

contractor is liable for injury or damage caused by them

o Excludes the Works, works executed and/or site materials

- Clause 6.3 – Injury or Damage to Property – Works and Site Materials Excluded

o Excludes Works, work executed and site materials from Contractors liability

to indemnify Employer under clause 6.2

Insurance against Personal Injury and Property Damage: - Clause 6.4 – Contractor’s Insurance of his Liability

o Requires contractor to provide insurance for indemnities in clauses 6.1

and 6.2

o For personal injury and death to third parties and damage to property

o Not less than the sum stated in the Contract Particulars

o Employer can request documentary evidence that insurance in place

o Employer can take out insurance and recover the cost from the contractor in

the event that the contractor defaults


November 2008 61

- Clause 6.5 – Contractor’s Insurance of Liability of Employer (optional)

o Non negligent damage insurance

o Excludes damages caused by neglect, default or omission

o Stated in Contract Particulars if it is required

o Cost of policy added to contract sum

o Contractor must take out joint names policy

o Insurance against liability of Employer for damage to any property caused by

collapse, heave, vibration, weakening or removal of support or lowering of

groundwater

- Clause 6.6 – Excepted Risks

o The contractor is not required to indemnify the Employer or insure against

injury, death or damage resulting from Excepted Risks

Insurance of the Works - Clause 6.7 – Insurance Options (A, B & C, set out in Schedule 3)

o All Risks insurance must be in joint names

o Must cover all subcontractors, or include a waiver by the insurers of their

rights of subrogation against subcontractors

- Option A – New Buildings – All Risks Insurance of the Works by the Contractor

o For construction of new buildings

o Insurance by Contractor

o If the contractor has existing All Risks policy, do not need to take out an

additional policy providing that the scope of the policy is sufficient

o If loss or damage occurs, the contractor must give written notice to the

architect and employer of the extent, location and nature of loss / damage

o No account is taken of loss or damage in calculating contractors’ payments

o Following completion of insurers inspections the contractor must reinstate the

loss or damage

o The contractor will be paid to reinstate work as certified by the architect

o The contractor authorises the insurers to pay all sums due under claim to

employer

- Option B – New Buildings – All Risks Insurance of the Works by the Employer

o For construction of new buildings

o Insurance by Employer

o Operates the same as Option A except Employers obligations

o If loss or damage occurs, the process is the same as Option A except the

reinstatement works are treated as a variations


November 2008 62

- Option C – Insurance of Existing Structures – Insurance of Works in or Extensions to

Existing Structures

o For projects involving work to an existing building

Refurbishment

Repair

Fitting-out

Extensions

o Arranged by the Employer

o Need to insure existing structure, its contents and the Works

CDP Professional Indemnity Insurance

- Clause 6.11 – Obligation to Insure

o Where there is a CDP, contractor must take out professional indemnity

insurance

o Contractor to maintain insurance for period stated in Contract Particulars

(provided it remains available at a commercially reasonable rate)

o If no longer available at commercially reasonable rates, contractor must notify

employer

All Risks Insurance - Insurance of physical loss or damage to work executed and Site Materials and

against reasonable cost of removal and disposal of debris arising from such loss

- Excludes cost of:

o Property which is defective due to:

Wear and tear

Obsolescence

Deterioration, rust or mildew

o Works or site materials damaged as a result of defective design, plan,

specification, material workmanship

o Loss or damage caused by or arising from:

War etc

Disappearance or shortage

Excepted risk (ionising radiations, radioactive contamination etc)

Joint Fire Code - Applies where Contract Particulars state so

- If Joint Fire Code is amended or revised, the cost is borne by the party named in the

Contract Particulars


November 2008 63

Specified Perils - Fire, lightning, explosion, storm, flood, earthquake, articles dropped from aircraft etc.

Interim Valuations and Payment Provisions General:

- Valuation of works completed

- Stage or periodic payments

- Usually monthly

- Up to date of Practical Completion

- Final valuation at end of Rectification Period or issue of Certificate of Making Good

Defects (whichever later)

- Interest payable on any overdue payment (at 5% above BoE base rate)

- Contractor may suspend works for failure to pay

Includes: - Total value of works properly executed

- Variations under val rules, prov sums, approx quants

- Variations valued under Schedule 2 Quotations (with confirmed acceptance)

- Value of any listed materials (off-site materials)

Items not subject to retention: - Additional insurance premiums

- Fees and charges not already included or relating to the CDP

- Royalties, damages and other monies for infringement of patent rights in complying

with CAI’s

- Costs of opening up or testing if result is in accordance with contract

- Cost for taking out and maintaining Liability of Employer insurance

- Loss and/or expense (including antiquities)

- Restoring, repairing or replacing any loss or damage or removing the disposal of

debris treated as variations under Schedule 3

- Amounts allowable to contractor under Fluctuation Option

Deductions: - Not amending errors arising from inaccurate setting out

- Defects, shrinkages or other faults instructed to be not made good

- Employer employing others to execute any work which contractor did not comply with

after notice given

- Work, materials or goods not in accordance with contract (which is instructed to

remain)


November 2008 64

Activity schedule: - Used to chart progress of works with lump sums against each activity to be included

in valuations

- Used in NEC contracts

Process: - Contractor may submit application 7 days in advance of issue of interim certificate

- Assess contractors submission

- Visit site to check progress, materials on site

o Look for defects, works not in accordance, security of materials on site

- View documentation regarding materials off site

- Assess preliminaries – fixed and time related

- Assess any additions which should not be subject to retention

- Ask CA to confirm any works not in accordance with contract

- Provide details of any adjustment to contractors application

- Issue recommendation to CA including retention statement and check last certificate

- Payment = 14 days after Interim Certificate

- Notice of Payment = 5 days after issue of Interim Certificate

- Withholding Notice = 5 days prior to final date for payment

Interim Certificate: - Certificate stating amount due to contractor from employer

- Identifies:

o Gross valuation

o Less retention

o Less any Advance Payment

o Less amount due in previous certificate

o Less any works not in accordance with contract

Materials On Site - Payable if:

o Not brought to site prematurely

o Adequately stored and protected

o Delivery receipts and invoices correspond

7 Days

14

5 5


November 2008 65

- Contractor can remove materials from site if:

o Damaged

o Contaminated

o Presents a security problem

o Safety hazard

Materials Off Site - Payable if included as a Listed Item in the contract

- Process:

o Check is a Listed Item

o Visit manufacturers / storage facility

o Ensure separately stored

o Clearly identified as for client

o Clearly identified as for works

o Vesting certificate in place

o Insurance provided

o Bond provided for uniquely identified items (if required in Contract

Particulars)

o Bond provided for not uniquely identified items

Retention - Percentage (3% default) of interim payment withheld for making good defects

- Alternative is a retention bond

- Half is released at Practical Completion, the remainder at end of Rectification

Period/issue of Certificate of Making Good Defects

Final Account (Adjustment of Contract Sum) General:

- Final payment due to contractor

- Includes all additions and omissions (including L&E)

Additions to contract sum include: - Variations

o CAI

o CVI

- Confirmed acceptance of Schedule 2 Quotation

- Provisional sums

- Variations to Prime Cost Sums

- Adjustment of provisional quantities

- L&E (including antiquities)


November 2008 66

- Fees and charges not already included or relating to CDP’s

- Royalties, damages and other monies for infringement of patent rights in complying

with CAI’s

- Costs of opening up or testing if result is in accordance with contract

- Cost for taking out and maintaining Liability of Employer insurance

- Restoring, repairing or replacing any loss or damage or removing the disposal of

debris treated as variations under Schedule 3

- Amounts allowable under Fluctuation Option

Deductions to Contract Sum include: - Not amending errors arising from inaccurate setting out

- Defects, shrinkages or other faults instructed not to be made good

- Employer employing others to execute any work which contractor did not comply with

after notice given

- Work, materials or goods not in accordance with contract (which is instructed to

remain)

- Employer employing others to carry out remedial measures for breach of Joint Fire

Code (after notice given)

- Amounts allowable to Employer under Fluctuation Option

Process: - 6 months after PC = Contractor must provide all information to QS

- 3 months after receipt of info = QS must prepare statement on FA

Valuing Change Definition of a Variation:

- Alteration or modification of design, quality or quantity of the works including:

o Addition, omission or substitution of work

o Alteration of materials or goods

o Removal of any works executed or materials or goods

- Obligations or restrictions regarding:

o Access to site

o Limits on working space

o Limits on working hours

o Execution or completion of works in a specific order (contractor can make

reasonable objection)

Valuation of Variations and Provisional Sums: - Value to be agreed by both parties or otherwise to be valued by QS in accordance

with valuation rules


November 2008 67

- Valuation Rules:

o Where work is of similar nature, use contract rates

o Where not of similar character, use fair rates and prices

o Make fair allowance for changes in conditions/quantities

o Make allowance for preliminary items

o If can’t be properly measured, use dayworks

o Same rules apply for CDP’s to be valued

o If, as a result of variation, there is change to conditions for other work, then

that work to be treated as if a variation and subject to valuation rules

Schedule 2 Quotation: - CA instructs contractor to provide quotation in accordance with Schedule 2

- Confirmed Acceptance provided

- Method of agreeing costs and identifying programme effects prior to instruction

- Provides cost certainty

- Speeds up final account

- Quotation must include:

o Amount of adjustment to contract sum

o Effect on any other work

o Any adjustment to time

o Amount of L&E to be paid in lieu of ascertainment under clause 4.23

o Fair and reasonable cost of preparing quotation

o If specifically required, any additional resources required and method

statement

Deferment of Possession - If applicable, for maximum of 6 weeks

- Entitled to EOT

Extensions of Time General:

- Contractor must always use best endeavours to avoid/minimise delays

- EOT is adjustment to completion date

- Relieves contractor of LAD’s and breach of contract

- Entitlement if regular progress of works affected by Relevant Event: o Variations

o Instructions for:

Discrepancy or divergence in the Contract Docs

Postponement of work

Expenditure of Provisional Sums


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Instructions on antiquities (and separate L&E provision)

Schedule 2 Quotation

Opening up for inspection or testing (excluding if in Contract Sum or

if shows to be not in accordance with contract)

o Deferment of possession

o Suspension by contractor due to non-payment (following notice given)

o Any impediment, prevention, default by employers team

o Carrying out of statutory undertaker, or failure to carry out such work

o Exceptionally adverse weather conditions

o Loss or damage by Specified Perils

o Civil commotion

o Strike, lock-out etc

o Exercise after Base Date by government of any statutory power

o Force majeure

Extraordinary event or circumstance outside control of parties

Prevents one or both parties from fulfilling their contractual

obligations

Such as war, strike, riot, crime, act of nature (floods, earthquake,

volcano)

Note: items above covered by separate Relevant Events so coverage

of force majeure actually limited.

- Concurrent delay

o Two different causes of delay affecting the project in parallel

o Such as adverse weather and failure of statutory undertaker

o Assessment methods

The devlin approach

The dominant cause

Burden of proof

Tortuous approach

- Float

o Time available in a programme in addition to planned duration

o Belongs to contractor

o Can be taken into account when EOT is evaluated

As contractor obliged to use best endeavours to mitigate or prevent

delay

- Acceleration

o Additional labour, plant, materials and preliminaries to advance works


November 2008 69

Process: - Contractor must give written notice

o Material circumstances

o Identify any event he considers a Relevant Event

o Give particulars of expected effects including estimate of expected delay to

Completion Date

o Notify CA of any material change in estimated delay or any other particulars

- If, on receiving such notice, CA is of opinion

o Is a Relevant Event; and

o Likely to be delay to Date for Completion

must give an extension of time

- In any event, CA must notify contractor of his decision:

o Within 12 weeks of receipt of notice (or earlier if PC within 12 weeks)

o State extension / or omission attributed to each Relevant Event

Loss and Expense General:

- To reimburse contractor for loss suffered or expense incurred which would not be

reimbursed under any other contract provision

- Entitlement if

o Deferment of site possession

o Regular progress of works affected by one of the Relevant Matters

- Relevant Matters are:

o Variations (excluding Schedule 2 Quotation)

o Instructions for:

Postponement of work or expenditure of Provisional Sums

Opening up for inspection or testing (excluding if in Contract Sum or

if shows to be not in accordance with contract)

Discrepancy or divergence in the Contract Docs

o Suspension by contractor due to non-payment (following notice given)

o Any impediment, prevention, default by employers team

- Disruption o Reduced efficiency

- Delay o Stopping of works

- L&E must be actual loss incurred

- Heads of claim can include any or all of the following:

o Prolongation

Site running costs for extended period

Increases in cost of labour, plant or materials


November 2008 70

Based on actual costs not contract rates

o Disruption

Inefficient use of labour and plant

o Loss of profit

o Head office overheads

Formula may be used

Hudson, Emden

o Finance charges

- Must be a direct consequence of matter referred to in claim

- Cannot claim for cost of preparing claim

- No automatic right of recovery solely because an EOT has been granted

- Conversely, can suffer L&E without EOT

- Duty of CA to determine liability and entitlement

- Duty of CA to ascertain amounts due (or QS if so directed)

- Causation Test

o But for the occurrence of the event, would the cost have been incurred

o Two or more causes of delay?

Is the head of claim dominant?

Are the causes concurrent?

- Remoteness Test

o Does loss arise naturally from ordinary cause of events?

o Do costs arise as a direct result of event?

- Loss must satisfy both causation and remoteness test

- Examine loss for evidence of mitigation

o Was action reasonable in circumstances prevailing at the time?

o Was the loss caused unnecessarily?

o Could it have been readily avoided?

Process: - Contractor must make written application to CA

- CA to form opinion that regular progress of works has been affected or if loss incurred

as a result of deferment

- CA shall ascertain amount or instruct QS to do so

- Contractor must:

o Make application as soon as apparent regular progress has been affected

o Upon request, submit information in support of application to enable CA to

form opinion

o Upon request, submit details of L&E to enable CA/QS to ascertain amount

being incurred

- Any amount ascertained as due must be added to Contract Sum


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- Must pay any amounts ascertained in interim valuations

- L&E not subject to retention

EOT but no L&E: - Carrying out of statutory undertaker, or failure to carry out such work

- Exceptionally adverse weather conditions

- Loss or damage by Specified Perils

- Civil commotion

- Strike, lock-out etc

- Exercise after Base Date by government of any statutory power

- Force majeure

Antiquities - Fossils, antiquities and other objects of interest or value

- Becomes the property of the Employer

- Contractor:

o Must use best endeavours not to disturb

o Cease work if continuance would endanger object, prevent or impede its

excavation or removal

o Take all steps to preserve object in exact position and condition

o Inform CA of discovery and location

- CA:

o Instruct action to be taken

o Only instruction contractor cannot refuse to comply with

o Ascertain any EOT and L&E due

Practical Completion General:

- When the works are practically complete and fit for purpose

- Defined in JCT05 as:

o CA is of opinion it has been achieved

o Contractor has supplied as-built info for CDP’s

o Contractor has provided all info for health and safety file

- CA must consider:

o Liable for loss of LAD’s if certifies too early

o Contractor may claim malicious delay if certifies too late

o Ensure there are no patent defects

o Works must be ‘practically’ complete


November 2008 72

Process: - CA issues Practical Completion Certificate

- Employer takes possession

- Rectification Period commences

- Contractors insurance obligations are relieved (employer must take out policy)

- Half retention is released

- LAD’s no longer apply

Sectional Completion - Pre-defined sections of work to be completed

- Separate Dates for Completion and LAD’s apply to each section

- Value of each section must be agreed for release of retention

Partial Possession - A voluntary agreement between employer and contractor

- Contractor must give consent

- Not agreed in advance (would be sectional completion)

- Practical completion deemed to have occurred for that section (and all associated

provisions occur)

- Remainder of works continues to operate as contract states

- LAD’s still applicable on incomplete areas (calculated pro-rata)

o LAD’s x ( (Contract Sum – value of relevant part) / Contract Sum)

Time at Large - Where no fixed completion date exists

- Contractor expected to complete works within a reasonable period

- Can occur when:

o No completion date fixed in contract

o Fixed time has ceased to apply by agreement or prevention

Additional works or employer beach but no EOT

o Contractor breaches contract but employer elects to continue with

performance of contract

o Employer has interfered with certification process to prevent proper

administration of the contract

o Project is beyond completion date with neither an EOT or Certificate of Non

Completion issued


November 2008 73

Rectification Period Defects:

- Defects, shrinkages or other faults

- Due to materials, goods or workmanship not in accordance with contract

- Failure to comply with CDP

- Must be made good at no cost to employer

- CA can instruct to remain and deduct sum from contract sum

Snagging: - Outstanding works of a trivial or minor nature

- CA considers should not prevent PC

- Do not affect use of building

- CA may issue a programme for completion of snagging items

Process: - Begins once Practical Completion has been certified

- Default is 6 months (usually amended to 12 months – seasons)

- Schedule of Defects to be issued 14 days after end of Rectification Period

- CA can issue instruction whenever considered necessary for making good defects,

shrinkage or other faults during the Rectification Period

- Contractor must make good within a reasonable time at no cost to employer

- CA can instruct not to make good and deduct sum from contract sum

- If contractor fails to make good, employer can instruct another and

- CA issues Certificate of Making Good Defects once all completed and accepted

- Remainder of retention is released

Latent Defects: - Those which occur after the end of the rectification period and after Certificate of

Making Good has been issued

Liquidated and Ascertained Damages - A genuine pre-estimate of loss suffered as a result of late completion of the works

- Not a penalty

- Quick remedy to avoid having to prove actual loss as a result of breach of contract

- Benefits both employer and contractor

o Employer knows he will recover his losses

o Contractor knows limit of his liability

- Client is to calculate (not QS)

- Can cover items such as:

o Loss or rent or other income


November 2008 74

o Additional fees

o Fines from statutory bodies

o Costs imposed by other parties

o Cost of not having facility (storage, rent, abortive costs etc)

- Rate stated in contract particulars

- If no sum stated in contract:

o Unliquidated

o Client claims loss through the common law

o If ‘Nil’ or ‘£0’ is inserted, then client has lost right to claim unliquidated

damages

- Applies upon issue of Certificate of Non-Completion

- Client deducts LAD’s from payment (not QS or CA)

- Employer must inform in writing before date of Final Certificate that may withhold

LAD’s

- Employer must also give notice not later than 5 days before final date for payment of

withholding or deducting from payment due

Insolvency Definition:

- Insolvency – the inability to pay debts

- Liquidation – the closing down of a company in order to use assets to pay debts

General: - Insolvency practitioner appointed

- Contract can be terminated immediately (not automatically terminated)

Signs of contractor insolvency: - Slowing down works

- Supply of materials drying up

- Increase in defective work

- Changes in management

- Requests for payments

- Complaints from subcontractors

Actions following rumours of contractor insolvency: - Maintain professionalism

- Keep it confidential

- Get credit check

- Monitor situation closely – any reductions in site labour etc

- Ensure utmost accuracy of forthcoming valuations


November 2008 75

- Speak to subcontractors

Contractor insolvency: - Identify insolvency practitioner

- Inform parties involved

- Inform bondsman (bank / insurance company)

- Stop any pending payment (can defend on grounds of counter claim for costs)

- Secure the site

- Take ownership of materials off site (if paid for in valuations)

- Schedule all plant and materials

- Value works competed and value any defects

- Arrange insurances

- Monitor L&E incurred by employer

- Establish programme and costs to complete works

- Establish employers preferred way forward:

o Terminate contract and employ others to complete

Novation

New contract

o Terminate contract and do no further work on project

o Allow contractor to continue to complete works

- Insolvency practitioner may novate contract to new contractor

Employer insolvency:

- Inform contractor (to enable termination)

- Secure site

- Assess contractors final account

- Contractors works suspended

- Contractor goes on list of creditors

Termination By Employer For default by Contractor:

- If contractor continues to default from 14 days of CA’s notice, or repeats default

- Defaults are:

o Without reasonable cause wholly or substantially suspends works or design

of CDP

o Fails to proceed regularly and diligently with the works or design of CDP

o Refuses or neglects to comply with instruction to remove work not in

accordance with contract and as a result works are materially affected

o Fails to comply with clause 3.7 (sub-letting) or 7.1 (assignment)

o Fails to comply with clause 3.25 (CDM Regs)


November 2008 76

For insolvency of Contractor: - Client can terminate immediately

For corruption: - If contractor, or any persons employed by him, commits an offence under the

Prevention of Corruption Acts

Consequences of Termination by Employer: - Employer may employ others to complete works (and use site, temporary buildings,

plant, materials etc)

- Contractor must remove all temporary buildings, plant, tools etc (once instructed by

CA)

- Contractor must provide 2 copies of all CDP documents

- Contractor must assign benefits of any agreements for supply of materials and goods

within 14 days of termination

- Provisions for payment and retention release cease to apply

After Completion of Works: - Account must be prepared for:

o A = Expense incurred by employer

o B = Amounts paid to contractor

o C = Total amount which would have been paid in accordance with contract

- If A + B is greater than C, then difference is a debt payable to due to employer (or

vice versa)

Employers Decision Not to Complete Works: - If 6 months after termination employer decides not to complete works then:

o Notify contractor in writing

o Prepare a statement setting out:

Total value of work executed at termination/insolvency

Aggregate amount of expenses incurred

o Payments then due for difference between the two

Termination By Contractor For default by Employer:

- Failure to make payment

- Interferes with or obstructs issue of any certificates due

- Fails to comply with clause 7.1 (assignment)

- Fails to comply with clause 3.25 (CDM Regs)

- Continues to suspend works for 14 days from contractors notice for suspension for:


November 2008 77

o CAI for discrepancies, variations or postponement

o Impediment, prevention or default by employer or his persons

o Note: default suspension period in contract is 2 months

For insolvency of Employer: - Contractor can terminate immediately

Termination By Either Party Either party may terminate if works are suspended for a further 7 days after notice of

suspension for:

- Force majeure (acts of God)

- CAI for discrepancies, variations or postponement

- Loss or damage due to Specified Perils (fire, flood, lightning etc)

- Civil commotion or terrorism

- Exercise after Base Date by government of any statutory power

- Note: default suspension period in contract is 2 months

Consequences of Termination by Contractor or by Either Party - Provisions for payment and retention release cease to apply

- Contractor shall remove all temporary buildings, plant, tools etc

- Contractor must provide 2 copies of all CDP documents

- Contractor (or maybe Employer where terminated by either party) must prepare an

account within 2 months for:

o Total value of work executed at termination

o Any sums for loss and expense incurred for antiquities or relevant matters

o Reasonable cost of removing items from site

o Cost of materials or good the contractor has paid or is legally bound to pay

o Any direct L&E caused by the termination (only if due to default or insolvency

of employer or specified perils due to negligence of employer)

After taking into account pervious payments, Employer must make any payments due

within 28 days

Fluctuation Clauses - Passes risk for change onto client

- Items are paid for on a cost-reimbursement basis (not fixed price)

- Does not apply to a Schedule 2 Quotation

- Three options:

o Option A (Default) – Contribution, levy and tax fluctuations

o Option B – Labour and materials costs and tax fluctuations


November 2008 78

o Option C – Formula adjustment – uses a price adjustment formula

Named / Nominated Subcontractors - Nomination no longer in use under JCT 05

- Can still list contractors under clause 3.8

- select from list at discretion of contractor

- not less than three subcontractors

- can add additional persons to list with consent of other party

- appointed subcontractor becomes a domestic subcontractor

Executing Contract - Affects limitation period for instituting proceedings

- Under hand

o 6 years

- As a deed

o 12 years


November 2008 79

T022 – Design Economics & Cost Planning (Level 3)

The factors that influence the construction costs of a particular design.

General Investment Appraisal – aid to decision-making with the objective of achieving the maximum

return from an investment

Project Appraisal – exploring the benefits of a project and evaluating the need in comparison

with the costs involved

Shell and Core - Frame and external envelope

- Finished core

o Reception

o Toilets

o Circulation

o Plant rooms

o Fit out of landlords areas

- Internal partitions separating landlords from tenant areas

- Plant / services installations to landlords areas

Category A (Developer Fit-Out) - Fit out works to the functional areas

- Works to tenant areas

o M&E beyond risers

o Raised floors

o Suspended ceilings

o Floor, wall and ceiling finishes

Category B (User Fit-Out) - Further specific fitting out executed by tenant

- To make functional areas work for tenants business needs

o Internal partitions to tenant areas

o Decoration and branding

o Installation of below floor power distribution and data cabling

o Tenant standby generators and UPS

o IT and telecommunications installation

o Fittings and furnishings and office equipment


November 2008 80

RIBA Outline Plan of Work 2007 A – Appraisal

B – Design Brief

C – Concept

D – Design Development

E – Technical Design

F – Production Information

G – Tender Documentation

H – Tender Action

J – Mobilisation

K – Construction to Practical Completion

L – Post Practical Completion

Economics of Design Cost drivers are things which influence or affect costs:

- Abnormals – ground conditions (remediation, water table), basements, special

architectural features

- Atria – these affect nett:gross ratios and also additional foundations, atrium roof

(solid/glazed), atrium roof/wall cleaning system, floor edge details, balustrades etc

- Structural grid – the cost of a structural frame (whether concrete or steel) is

governed by extent of abnormal spans and loadings

- Structural design loads – i.e. plant room areas require significantly higher load

capacities; abnormal stiffening requirements associated with core design; cantilever

structures

- Wall : floor ratio – the complexity/intricacy of the façade will have a direct effect on

the wall:floor ratio. This is a significant cost issue as external walls usually form 20-

25% of overall cost. A reasonable ratio would be in the order of 0.40, with 0.35 being

regarded as very efficient. Significant articulation/indentation can push the ratio to

0.50.

Example:

A 0.05 increase in the wall:floor ratio of a 100,000ft2 building, with a façade cost of

£450/m2 will result in a circa 4% increase in the total shell and core cost.


November 2008 81

- Type of façade – the type of cladding system specified will determine the cost of the

external walls i.e. unitised curtain walling -v- panel system with strip windows

- Storey height – Affects the overall cost, particularly with regard to external walls and

structure. Made up of two dimensions 1) the “sandwich” of the suspended ceiling,

structural floor and raised floor and 2) floor-to-ceiling height of the office space

between.

Example:

Each additional 100mm on the storey height can add between 0.50 and 0.75% to the

total shell and core cost, and conversely for each reduction.

- Services – Services form 15-25% of the total shell and core cost. Type of air

conditioning system specified is a significant key cost driver.

o Types of air con system:

Chilled beams and ceilings

Four-pipe fan coil

Variable Air Volume

Variable Refrigerant Volume

- Nett : Gross Ratio / Planning efficiency – the higher the ratio, the more efficient the

building (best achievable approx. 85%)

- Plan shape – This relates to wall:floor and nett:gross, the most efficient shape being

circular with a central core i.e. doughnut shape

Definition of an Estimate - An accurate assessment of the cost of a project

- Ensuring that:

o the clients objectives are met

o the teams aspirations are achieved

o value for money is maintained

Who Needs Estimates? - Developers

o Purchase of land

o Development appraisals

o Tenant agreements


November 2008 82

- Funders

o Security of investment

- Tenants

o Cost of occupancy

o Cost of tenant enhancements

o Cost of fitting out

- Designers

o Surety of scope

o Design within budget

o Quality check

Types of Estimate - Feasibility Estimate

o Indicative cost of future project

o Based on £/m2 GIA or £/unit rate

o RIBA Stage A/B

o Largely based on historical data (benchmarking)

o High dependence on assumptions

o Stated as a cost range in £/m2 or £/functional unit

- Initial or Preliminary Estimate

o Early stage cost plan

o Based on £/m2 elemental breakdown

o RIBA stage C/D

o Largely based on historical data (cost analysis)

o Medium dependence on assumptions

o Stated as an order of cost

- Cost Plan

o Detailed anticipated cost of work

o Based on detailed measure items (quantities) £/m2 per item

o RIBA stage D/E

o Based on subcontractor quotations and built up rates

o Medium dependence on assumptions

o Stated as an outturn cost

Cost Models - Considered estimate based on limited information and benchmarked information –

RIBA Stage A/B


November 2008 83

Components of an Estimate - Cover and contents

- Summary

- Basis

- Assumptions

- Exclusions

- Schedule of areas

- Detailed breakdown of estimate (element, quantity, unit, rate)

Important to:

- Communicate cost plan to client

o sit them down and talk them through the entire cost plan in detail

- Reconciliation

o ensure differences between cost plan revisions are identified and explained

to all parties

- Identify areas of uncertainty and risk and subsequent contingency allowances

- Managing contingencies

o As detail develops you replace contingencies and risk with firm costings,

where appropriate

Information Required to Prepare an Estimate (dependant on RIBA Stage) - Drawings

- Specification

- Area schedule

- Location

- Programme

- Demolition / enabling works required

- Services / infrastructure

- Budget

- Level of detail required

Items included within an Estimate - Build costs

- Preliminaries (usually a %)

- OH&P (usually a %)

- Design reserve / contingency

- Basis (information used)

- Assumptions

- Exclusions


November 2008 84

Exclusions from an Estimate - Any items not included within the estimate

o Items for which separate allowance should be made

o Items which may be required

o Items thought not to be required

- Must be relevant and logical (or will affect credibility of the estimate)

- Can include the following:

o Client costs

Site acquisition costs

Finance costs

Legal fees, professional fees, planning fees

Site investigations and site surveys

VAT

Any usual client direct costs

o Procurement risks

Inflation beyond price date

Exchange rates

Design responsibility

Changes in market conditions

o Building / Site risks

Abnormal ground conditions

Occupied sites

Accessibility

o Third party risks

Planning consent

Building control

Sources of Cost Data

- Market testing

- Benchmarking studies

- Previous estimates, rates from BQ’s and cost plans

- In-house database i.e. National Cost Database, Office Specialist Group

benchmarking

- BCIS database – subsidiary of RICS, member firms submit completed cost analyses

on tender returns which inform the database (in much the same way as DL’s NCD)

- Price books i.e. Spons, Laxtons

- Published cost data i.e. Building Magazine articles

- Client’s own cost data


November 2008 85

Considerations When Using Sources of Cost Data - Check basis of the rate

o Specification

o Economies of scale

o Special conditions

- Check the coverage of the rate

o Is it comprehensive

- Location factors

o Do you need to update for change in location

o Location factors published in Spons

- Market Inflation / Indexation

o Tender Price Inflation (TPI) Records and predicts market conditions (labour, materials, economic

climate, inflation)

Prices tendered for construction projects

Inclusive of labour, plant, materials, preliminaries and OH&P

Use TPI up to construction phase

o Building Cost Inflation (BCI) Actual costs

Monitors and predicts building costs considering labour, materials

and plant

Contractors costs i.e. labour, plant and materials rates

Use BCI during construction phase

Risk / Contingency in a Cost Plan How do you deal with risk in a cost plan?

- Provide contingency to cover unforeseen risks

- Analyse and cost each risk

- Include provisional sums or prime cost sums – explain these to the client

- As design develops, risk should be designed out or mitigated to a manageable level

- Contingency levels in estimates:

o 10% - 15% at feasibility

o 5% -10% during cost planning stage

o 2.5% - 5% at tender stage


November 2008 86

Contingency Post-Contract - Four categories:

o Design Reserve – to fund unavoidable design development from tender to

when design is complete

o Contract Contingency – to cover contract instructions emanating from

design team

o Project Risk Reserve – separate fund to cover any eventuality highlighted

within the risk register (where not covered in separate allowance elsewhere)

o Client Contingency – reserve purely to fund changes instigated by the client

- Not to be used for items incapable of pricing (prov sums are for this purpose)

- Level of contingency also needs to take into account:

o Type and complexity of project (new build vs. refurb)

o Information available for tender documentation

o Scope of unknowns which may affect the contract

Managing budgets If cost plan is over budget?

- Ensure you have explained cost plan in detail

- Approach matter positively

- Identify areas of potential savings i.e. materials specifications, buildability, re-design

- Value engineer alongside the rest of the design team

Risk A risk can be defined as an uncertain event or circumstance that, if it occurs, will have an

affect on the project‘s objectives.

Risk Management - PROACTIVE - Identification, analysis and effective ongoing management response to risks

- Manage, minimise, share or transfer

- Eliminate, reduce, insure, contain

- Design to avoid

- Opportunities reduce with time

Risk Analysis - Qualitative

o Based upon experience

o A subjective assessment in terms of impact and likelihood

o Use of risk analysis matrices i.e. high likelihood, low impact etc


November 2008 87

- Quantitative

o Potential to use probabilistic analysis i.e. computer simulation

o Monte Carlo simulation

Pre-Contract Risk Management Schedule / Risk Workshop - Identification

o Description of risk (cause)

o Consequence (effect)

- Analysis (Qualitative Assessment)

o Risk type (design, procurement, infrastructure)

o Likelihood

o Impact (cost, time, quality)

o = risk level/ status

- Allocation

o Party / individual responsible / in control

o Action planned or taken

- Response

o Mitigation method (reduce / mitigate / transfer / hold)

o Monitor of current situation

Value Management - PROACTIVE - How?

o Define what value means to client

o Communicating it clearly to project delivery team

o Maximising delivery benefits

o Minimising use of resources

- Maximising performance

- Understanding project objectives

- Efficient use of resources

- Minimising cost / waste

- Process of refining the performance and cost so as to produce optimum value for

money

Value Engineering - REACTIVE - Deliver required function at desired quality for least cost

- Specific technique to optimise cost-effectiveness of an existing design


November 2008 88

- How?

o Use resources more efficiently (people, time, money)

o Establish lowest cost whilst retaining function

o Drive out unnecessary cost

Life Cycle Costing General:

- Consideration of costs over the whole life of a building – not just the capital costs i.e.

understanding both capital and running costs

- Consideration of capital cost against maintenance costs / replacement costs

- Understanding the clients requirements in terms of capital and lifetime costs

- The 3 R’s – Running, Repairs, Replacement - Example: uPVC -v- metal rainwater goods

Process: - Identify capital cost of alternative systems

- Examine long term costs i.e. maintenance and replacement cycles

- Speak to manufacturers or other specialists

- Prepare recommendation

Whole Life Costing - The consideration of all relevant costs and revenues associated with the construction

and ownership of a building

Main Cost Headings to Consider: - Capital costs

o Cost of the building

o Associated site works

o Infrastructure costs

o Project on-costs i.e. fees, decanting costs etc

- Life-cycle costs

o Asset replacement for building and associated prelims and management

costs

- Operational costs

o Utilities

o Cleaning

o Administration

o Security

o Support services

o Business costs i.e. rent, salaries and income


November 2008 89

- Maintenance costs

o Planned service maintenance

o Building fabric maintenance

- Disposal costs

o Including decommissioning the building at the end of its useful life

Capital Allowances - Incentive to encourage investment

- Tax relief on capital expenditure for acquiring, constructing, refurbishing or fitting out

a property

- Capital expenditure for qualifying items can be deducted from companies taxable

profit therefore reducing the tax bill

- Who can claim?

o Investors

o Owners

o Tenants for fitting out

- Who can’t claim?

o Charities

o Developers – although can be used as an incentive to sell the building

- Rate of deduction depends on nature of allowance

- Plant and machinery

o Asbestos removal

o Blinds, carpets, suspended ceilings, raised floors

o Demountable partitions

o Loose furniture

o Air con, hot water installation, BMS, lifts, security, fire

o Door handles!

- Enhanced capital allowances (100% first year allowance) for energy saving ‘green’

plant and machinery

- Land remediation

o 150% relief

o hydrocarbons, asbestos, fuel storage tanks, contaminated ground water

VAT - All building works subject to 17.5% VAT but………

- 0% on new build residential, alterations to existing, conversions to residential and

charity work

- 0% on demolitions related to 0% rated construction, otherwise standard rate applies

- 5% on refurbishments, conversions and renovations


November 2008 90

T062 – Procurement & Tendering (Level 3)

Procurement General:

- Procurement – The way in which a project is bought.

- Procurement strategy can have a major impact on the time and cost of a project.

- Procurement routes are traditional, design and build etc

- Tender options are single stage, two-stage, open, negotiated etc

Key Procurement Considerations - Cost

o Cost certainty

o Importance of budget

- Time

o Is timescale worth a cost premium?

o How important is commitment to programme?

- Quality

o Importance of quality

o Control over subcontractors

- Risk and Responsibility

o Pay premium to avoid risks / risk profile of client

o Single vs. multi point responsibility

- Are client changes likely?

- Level of design information

- Contractor input

- Complexity

- Clients experience / knowledge

- Clients required involvement

- Life cycle costs / costs-in-use

i.e. end user client more concerned with buildings functionality and cost-in-use with quality

being primary concern …………………

whereas, developer client more influenced by market conditions and being able to get best

product to market as quickly as possible with time being primary concern

COST + QUALITY = TRADITIONAL (↓ TIME)

COST + TIME = D&B (↓ QUALITY)

TIME + QUALITY = MANAGEMENT (↓ COST)


November 2008 91

Risk Transfer

Employer Shared Contractor

Management Traditional D&B

Types of Procurement Traditional

- Contractors tender based on a complete design produced by consultants

- May include provisional sums where there are gaps in the information

- Assuming no significant changes, construction costs can be determined with

reasonable certainty before work begins

- Pricing documents provided (i.e. BoQ, spec and drgs, schedule of rates)

- Two variants are:

o Sequential – contractor submits tender once design is fixed

o Accelerated – contractor appointed at an early stage in design process

Advantages Disadvantages - Design led so high level of design

quality

- No overlap between design and

construction

- Reasonable price certainty at contract

award

- Design risk is with client (he directly

employs team)

- Single point of contractual contact - Relative lack of flexibility

- Contract has strong commitment to

complete on time (LAD’s apply)

- Often adversarial relationships –

dependant on culture of team

- Contractor assumes financial risk - Poor info can lead to conflict

- With BoQ, vo’s easy to price - No buildability input from contractor

- Contractor carries programme and

financial risk

- Reasonable price certainty from outset

- Contractor has strong commitment to

complete on time

- Single point of contractual contract

- If BoQ, variations can be priced easily


November 2008 92

Design and Build - Contractors assumes the risk and responsibility for designing and building the project

in return for a lump sum

- Design team appointed to compile clients brief and produce set of ER’s

- ER’s must be sufficiently comprehensive to explain precise needs of client

- ER’s must give contractors freedom to make use of their design, technical and

management expertise

- Tenderers return their Contractor’s Proposals (CP’s)

- In standard contract CP’s take precedence over ER’s, unless amended (as DL do)

- Tender return should include a Contract Sum Analysis to aid tender evaluation and

future valuations

- Employers Agent appointed to represent the Client’s interests

- Original design team may be novated or contractor may appoint his own team

- Variants include:

o Direct – a designer/contractor is appointed without competition

o Competitive – limited nr of contractors submit tender in competition

o Develop and construct – contractors develop and complete the design

o GMP – contractors offer a GMP and share any savings

Advantages Disadvantages - Single point of responsibility - Client changes can be difficult to value

and expensive

- Design and construction risk rests with

contractor

- Client has to commit before detailed

design is complete

- Inherent buildability is achieved - Bids may be difficult to compare

- Price certainty achieved before

construction starts

- No design overview process unless client

appoints consultants to do so

- Design and construction overlapped - May be difficult for client to prepare an

adequate brief

- Client as less control over

aesthetic/quality

- Tenders are costly to prepare so needs to

be of reasonable value to interest

contractors

- Novation

o the contractor accepts responsibility for whole project, including the initial

work carried out prior to novation

o client may employ another designer to examine the scheme from his

perspective


November 2008 93

Construction Management - Client employs services of a Construction Manager as a member of the design team

- All individual trade package contracts are placed directly with client

- CM has no contractual links with the trade contractors

- No single point of responsibility for risk

- CM programmes and coordinates the design and construction activities and offers

buildability advice

- CM offers professional expertise without assuming financial or programme risk

- Suitable for large and complex projects

Advantages Disadvantages - Design and construction overlapped so

programme reduced

- Price certainty not achieved until last

package placed

- Allows for buildability and programme

advice

- Requires an informed and proactive client

to be successful

- Tendered contracts should achieve

more competitive prices

- Client (not CM) is responsible for cost or

time

- Breakdown of traditionally adversarial

barriers

- Strict time and information control is

required

- Trade packages can be let

competitively or negotiated

- Interfaces between packages must be

managed carefully

- Open book procedure for tendering

packages

- Flaws in design may not become

apparent until a later date

- Decision on appointments of TC’s made

jointly by designers and CM

- Multi point accountability

- Changes can be accommodated later

i.e. tenant fit-out

- CM prime costs (e.g. prelims) must be

controlled due to risk of duplication of

costs with TC’s

Management Contracting - Client employs services of a Management Contractor as member of the design team

- MC sits contractually between the Client and trade contractors

- MC takes responsibility for the works without actually carrying out the works

- Suitable for medium/large projects where design information is not available at start-

on-site

Advantages Disadvantages - Single point responsibility - Price certainty not achieved until last

package placed

- Design and construction overlapped so - Requires an informed and proactive client


November 2008 94

programme reduced to be successful

- Allows for buildability and programme

advice

- Client and design team are remote from

trade contractors

- Breakdown of traditionally adversarial

barriers

- Less open book than CM

- Trade packages are let competitively

and transparently

- Client (not MC) is responsible for cost

- Changes can be accommodated later

i.e. tenant fit-out

- Unlike CM, MC carries out most of

administrative work

- Facility to agree a lump sum for MC’s

organisation costs

- MC responsible for time (LAD’s apply)

Guaranteed Maximum Price (GMP) - A lump sum contract under which there are no adjustment of tender price except for

client variations

- Contractor allows for design development risk in his tender

- Can be single or two-stage

- Savings made on packages are shared on an agreed basis – pain/gain share – but

extras are the contractors responsibility

- Client variations are a cost to the client.

Advantages Disadvantages - Price certainty and control - Risk client pays too much

- Contractor carries design development

risk

- Risk of high tender value as client is

paying for contractors risk allowance

- Pre-agreement of changes - Scope changes tend to be exploited

- Greater control of overspending

- Quicker settlement of final account

Design and Manage - Combination of design and build and management contracts

- A single firm is appointed to design and manage the building but construction work is

tendered to specialist contractors

- Contractor-led design and management is more common than consultant-led

- Client will normally employ an independent Architect and QS to protect their interest

in terms of quality and cost


November 2008 95

Turnkey - One company appointed to deliver building (the ‘product’) from inception to

completion right up to the client moving in

- A one-stop shop solution

- Design-build-finance-operate (DBFO)

- Build-operate-transfer (BOT)

- Build-own-operate-transfer (BOOT)

Measured Term - Used on major maintenance projects

- Contract will apply loosely to predefined work

- Often limited to a fixed timescale

Serial Contracting - Development of the system of negotiating further contracts where a firm has

successfully completed a contract for a project of a similar type

- Initially contractors tender competitively for a single project, on the legal

understanding that a number of other similar projects will be automatically awarded

using the same prices

- Only adjustment would be for fluctuations in price to cover inflation

- Conditions usually included to prohibit awarding of further work in case of poor

performance

- Should result in lower prices for client

- Suitable for school building projects, restaurant chains etc

Prime Cost / Reimbursable - Contractor carries out works and is paid actual cost of labour, plant and materials

plus either a pre-agreed percentage or fixed fee to cover his establishment costs and

OH&P

- Suitable for maintenance or refurbishment works where extent is unknown until

exposed or emergency work or resolution of a difficult project

- Can be carried out as ‘target cost’ (see below)

Advantages Disadvantages - Enables early start on site - No time or cost certainty

- No premiums for abnormal risks in

tender

- No incentive for efficiency

- Flexibility to alter design, programme

and quantum of work

- Difficult to monitor true costs


November 2008 96

Target Cost - Contractor receives a bonus if contract completed under the target but a penalty if its

over

Public Private Partnership – PPP - Generic term for relationships formed between private sector and public bodies

- Often with aim of introducing private sector resources/expertise in order to help

deliver public sector assets and services

Private Finance Initiative – PFI - A form of PPP

- Also a form of contracting or procurement the hallmarks of which are:

o A long term service contract between a public sector body and private sector

‘operator’

o Provision of capital assets and associated services by the operator

o A single ‘unitary’ payment from the local authority which covers investment

and services

o The integration of DBFO into the operators proposals

o Allocation of risk to party best able to manage and price it

o Service delivery against performance standards set out in an ‘output spec’

o A performance related ‘payment mechanism’

o An ‘off balance sheet treatment’ for the LA so any investment delivered

through the project does not count against borrowing consents

o Support from central govt delivered through ‘PFI credits’

- The objectives of PFI can be described as:

o Risk transfer – risk transferred from public to private sectors

o Value for money – greater level of innovation and entrepreneurial input by

the private sector should improve quality and value for money

o Funding – transferring financial risks to private sector reduces impact on

public sector borrowing requirements

Advantages Disadvantages - Risk transfer - Scope for inappropriate allocation of risks

- Value for money - Loss of control

- Funding requirements reduced - Definition of functional/service

requirements is crucial

Partnering - Project partnering – one-off project - Strategic partnering – series of projects, long term relationship


November 2008 97

- Structured management approach to enable team working across common

contractual boundaries

- Mutual aims and objectives

- Requires transparency and openness in matters such as cost and performance

- Agreed method of problem resolution

- The agreement requires commitment

- Search for continuous measured improvement

- Ideal when there is a flow of future projects

Framework Agreements - Preferential costs and rates for long term delivery arrangement - Repeat work - Only negotiate once, rates secured

- Guarantee of work stream for contractor

- Non-adversarial

- Doesn’t always deliver value for money

----------------------------------------------------------------------------------------------------------------

Tendering General:

- Tendering – The way in which a contractor is selected.

- Procurement routes are traditional, design and build etc

- Tender options are single stage, two-stage, open, negotiated etc

Key Tendering Considerations - Nature, size, complexity of project

- Value of main contract

- Public or private client

- Time period allowed

- Competition is desirable

- Negotiation involves a premium cost (of 5%-20%) - Tender documents must be

o The most detailed possible

o The most accurate possible

o Have the least amount of items unresolved

o The best basis for contract management

o The best basis for cost control

- Published codes of procedure (NJCC, CIB, JCT)


November 2008 98

Types of Tendering Open / Competitive Tendering

- Client wants to obtain unrestricted tenders

- Seldom used today as recognised it is a wasteful practice

- Tenders attract a premium due to low success rate

Advantages Disadvantages - Cheapest tender available (in theory)

but high tendering costs due to low

- No control over suitability and

competence of firms who tender

success rate - Most reputable contractors avoid it

- Generally accepted that large time and

cost overrun

Single Stage Selective Tendering - Competitive tenders sought on basis of completed design

- Contractors selected for their competence and interest in job

- Ability to select appropriate nr of tenderers (4 to 6)

- Costs reduced as higher success rate

- Employer ought to be able to accept lowest bona fide tenderer

Advantages Disadvantages - Tenderers selected on competence and

interest

- Longer programme as design must be

completed first

- Costs reduced

Two-Stage Selective Tendering

- Competitive tenders first sought on basis of preliminary tendering documents,

covering preliminary design information

- Contractor selected on basis of cost of prelims and OH&P and a pre-construction fee

based on provisional sum allowances for works

- Works are then packaged and tendered during pre-construction phase

- Contract sum agreed at an appropriate time

- Potential for GMP

- Allows early appointment of contractor to work in parallel with design team

- Ideal for achieving buildability

- Premium paid for negotiations

- Nr of tenderers at first stage – 4 to 6


November 2008 99

Advantages Disadvantages - Early appointment of contractor, to work

alongside design team

- Cost premium as invariably preliminary

tendering document is inadequate or

circumstances change significantly

- Risk premium can occur as certain items

are not tied down until contract sum is

agreed

Negotiated - Single contractor selected to negotiate price with

- Can negotiate with more than one contractor for competitiveness

- Early contractor involvement

- Allows flexibility of design development as construction proceeds

- Less cost certainty prior to commitment

- Main contractor competition eliminated but subcontractors tendered in competition

Advantages Disadvantages - Early contractor involvement - Less cost certainty before commitment

- Allows flexibility for design development - Cost premium to be paid

- Possibility of developing better

relationships with team

- Main Contractor competition is eliminated

but up to 80% of tender can be obtained

in competition from sub-contractor

- Possibility of delay if contract negotiations

are protracted

Dutch Auction (also known as reverse bidding) - Tenderers in an auction situation, in knowledge of lowest tender / required sum

- In competition against one another

- Offering lower tender sums with no change in scope of works

- May have a detrimental effect on quality of finished building

- No method behind cost cutting

- Can make contractors claim conscious during contract period

E-Tendering - Electronic exchange of tender documents

- Reduces admin

- More sustainable and streamlined process

- Quicker

- Cheaper RICS guidance note exists


November 2008 100

Joint Venture Tendering - Partnership between two or more companies

- Each participating company has joint and several liability for the contractual

obligations to the employer

Serial Tendering - Series of contracts let to a single contractor

- The individual projects tend to be of same size

- Where possible cost benefits should be established during competitive stage of

tender process

- Disadvantage can be when projects differ in scope requiring cost effect of differences

to be ascertained

Term Contract - Employer agrees to order and indefinite amount of work during a fixed period

- Useful of maintenance contracts where employer has large amount of property

requiring periodic renovation

- Gives employer a simple method of procurement for individual projects

- Contract can be terminated without incurring sanction

o Employer can cease to issue fresh orders for work

o Contractor can refuse to accept further work orders

OJEU (Official Journal of European Union) - For public works / services / supplies

- Contracts awarded on basis of ‘lowest price’ of ‘most economically advantageous

tender

- Requires publication of contract notice in the OJEU is estimated value:

o €5,150,000 for public works (central govt bodies)

o €133,000 for public services / supplies (central govt bodies)

Tendering Codes and Practice Notes NJCC Codes of Procedure for Single Stage Tendering

- Produced by National Joint Consultative Committee for Building

- NJCC voluntarily dissolved in 27 June 2006 but code still used

- Recommends that, irrespective of the size of the contract, tender list should contain

not more than six names

- Recommends the lowest valid tender is recommended to employer for acceptance


November 2008 101

Construction Industry Board Code of Practice for Selection of Main Contractors - Published by CIB in May 1997

- Not as widely adopted as NJCC code

- CIB ceased to exist on 29 June 2001 but code still published

Both publications codify the principles of good practice relating to selection of contractors

from preliminary enquiry to notification of results.

JCT Practice Note 6 - Produced by Joint Contracts Tribunal

- Intended to be successor to NJCC

- Primarily concerned with main contract tendering procedure

- Identifies procedure for tendering

- Recommends that:

o Construct only – maximum of 6, ideally 3 or 4 tenderers

o Design and Construct – maximum of 3 tenderers

- JCT recommends that the lowest or best value, valid tender is accepted should be

recommended to employer for acceptance

Tender Process - Preliminary enquiry (by letter) to proposed tenderers to confirm their interest

- Prequalification

- Tender procedure:

o Tender documents and invitation

o Tender period

o Tender compliance

- Tender assessment

o Opening tenders

o Examination and adjustment of the priced document

o Negotiation

- Tender report

- Notification of results

Compilation of Tender Lists Points to consider when selecting contractors to tender:

- Experience of similar contracts

- Experience of chosen procurement / contractual route

- Past experience

o Past projects (type, size and complexity)

o Past performance (on time / on budget / approach)


November 2008 102

- Competence

- Reputation for quality / QA policy

- Reputation for timeous completion

- Reputation for claims

- Financial stability (credit check / accounts / turnover)

- Size of company

- Age of company

- H&S policy and record

- Current workload

Compilation of Tender Documents Traditional:

- Invitation letter

- Instructions to tenderers

- Form of tender

- Certificate of bona fide tender

- Design information (drawings / specification)

- Pre-construction information

- Preliminaries

- Pricing document

o BoQ

o Schedule of works

o Mini bill (an abbreviated summary of descriptions and quantities)

- Conditions of contract

o Amendments

o Bonds

o Warranties

- Return envelope / label

Design and Build:

- Invitation letter

- Form of tender

- Certificate of bona fide tender

- Employers requirements

- Concept design information

- Programme

- Pre-construction information

- Preliminaries

- Contract sum analysis for contractor to price

- Return envelope / label


November 2008 103

Action during Tender Period - Withdrawal

o Refer to client

- Extension

o Refer to client

- Queries

o Keep a record

o Notify all tenderers of response to prevent any unfair advantage

- Correspondence

o Keep a record of all correspondence with tenderers

- Mid-Tender Interviews

o Relatively common in tendering CM/MC trade contract packages

o Less common (or necessary) on lump sum tenders

o Record meeting

o Communicate any questions/answers in writing to all tenderers

o Any variations made to tender documentation during the tender period must

be sent in writing to all tenderers

o Each tenderer must confirm in writing that the variation has been reflected in

their tender

- Pre-Tender Estimate

o Can take two forms

Adjust cost plan to reflect cost checks on the tender docs

Price the tender pricing document (particularly where BoQ or

schedules)

- Late Tenders

o Compromise tender procedure

o Should not be accepted

Opening Tenders - Open in front of client representative and/or design team

- Record results on tender opening form and all present must sign

- Circulate to design team

- Check forms of tender

- Check certificate of bona fide tender

- Carry out tender analysis

Examining Tenders - Check all necessary information has been submitted

- Check documentation has been completed correctly

- Check amendments notified to tenderer have been made


November 2008 104

- Check no unauthorised amendments have been made

- Check all items have been priced

- Check total in pricing documents equals total on form of tender

- Checking pricing document is mathematically correct

- Check everything priced in sufficient detail

- Check rates and prices are reasonable and sensible

- Check pricing is consistent throughout document

- Check daywork percentages are reasonable

- Check allowance for bonds are reasonable

- Resolve qualifications

- Check proposals for contractor designed work

Tender Analysis - Arithmetical errors:

o Alternative 1 – Correction not permitted

Stand by original figure or withdraw

o Alternative 2 – Correction is permitted

Stand by original figure, withdraw or amend (genuine error)

- Front loaded tenders:

o Not a pricing error

o Request contractor removes front loading

o If refuse, tender is not bona fide

o Could use Advanced Payment Bond as an alternative

- Tender evaluation

o Comparison of tenders

o Check for errors / inconsistencies

o Compare with PTE

o Check for qualifications

o Include plugs where tenderers not priced element so comparing like-for-like

- Contractor advises an error in clients favour?

o Inform client

o Generally don’t accept as seen as an extension to tender period

o Check if genuine

If yes, extend to other contractors tender period

If no, recommend rejection

- Assessing D&B tenders:

o Check CPs meet ERs

o Interview tenderers to fully establish their proposals


November 2008 105

Reasons to Re-Tender - Not enough tenders returned

- Procedure was compromised in some way

- Significant design changes

- Note: NJCC does not recommend re-tendering price alone

Tender Reports Should be completed without delay, taking account for:

- Tender acceptance period

- Clients procedure for authorising acceptance of a tender

- Project programme

Content should include:

- Basis of tender

o Brief description of works

o Form of contract

o Pricing documentation

o Tender period

o Extensions / addendum to tender

- Tenders invited

o Original list

o Substitute tenderers

o Returned tenders

o Alternative tenders

- Review of tenders

o Lowest valid tender

o Reasons for rejecting lowest tender

o Errors / qualifications

o Resolution / outstanding issues

o Comment on pricing level

- Anticipated contract sum

o Adjustments to tender

o Contract sum build up

- Reconciliation with PTE

o Calculation of comparable sum

o Comment / explanation of variance


November 2008 106

- Recommendation

o Project teams view

o Issues to be resolved

o Risks

- Also maybe:

o Potential savings

o Financial status of tenderers

Best Value - Concept that has come out of the Local Government Act (1999)

- Sets out requirements that are expected

- Concept being managed by the Audit Commission

- It is a challenging performance framework placed on Local Authorities

- Four C’s of best value:

o Challenging

o Comparing

o Competing

o Consulting

Supply Chain Management - No commonly accepted definition of supply chain management

- Linkage of companies to turn series of basic materials, products or services into a

finished product for the client

- Parties in the supply chain have a long-term objective to work together to deliver

added value to the client

- Benefits of a well-managed supply chain include:

o Simplification

o Swifter project / product delivery

o Risk reduction

o Cost savings, sometimes significant

o Improved visibility of the workload

o Economies of scale for all parties

- Traditional forms of procurement rely on choosing from a large number of suppliers,

with the aim of maintaining supplier competition and driving down costs

- Supply-chain management has aim of setting up long-term relationships with

suppliers to develop leaner, value-adding and more efficient ways of working

- Suppliers are encouraged to adopt similar “managed” relationships with their

suppliers, and so on – ideally – down the tiers of supply


November 2008 107

Lean Construction - A derivative of the lean manufacturing process

- A philosophy that is about managing and improving the construction process to

deliver profitably what the customer requires

- Concerned with elimination of waste activities and processes that create no added

value

- Doing more for less - Lean thinking – delivering what clients want, on time and with zero defects

- Lean principles:

o Elimination of all kinds of waste

o Specify value from the perspective of the ultimate customer

o Identify the process that delivers what the customer values - the value stream

o Eliminate all non-added value steps

o Make remaining added value steps flow without interruption by managing

interfaces

o Let the customer pull i.e. manufacture when needed – adopt philosophy of

JIT management

o Pursue perfection through continuous improvement

- Lean construction techniques have been successfully applied in other industries


November 2008 108

T067 – Project Financial Control & Reporting (Level 3)

All Covered Elsewhere: - Post Contract Cost Control

- Change Control Procedures / Change Control Forms

- Cost Reporting / Cash Flows

- Final Accounts

- Loss & Expense

- Risk Management

- Value Management

- Benchmarking / Best Value


November 2008 109

T074 – Quantification & Costing of Construction Works (Level 3)

Methods of Measurement Why do we have SMM7?

- Recognised method of measurement

- More detailed

- Less risk of omitting an item

- Clarity as to what is deemed to be included

Code of Measuring Practice

- Produced by RICS

- Definitions for GEA, GIA, NIA

- Recognised definitions

- Clarity as to what is deemed to be included

Measurement from first principals

- Quantify labour, plant and materials required to complete the works

Star Rate

- Where works cannot be valued simply from contract rates, a star rate is built up using

contract rates as a basis

Bills of Quantities BoQ consists of:

- Preliminaries

- Preambles (description of materials and workmanship to be employed)

- Measured works

- Provisional sums

- PC sums

- Dayworks

- Appendices (bonds, warranties etc)

Advantages Disadvantages - Easier post-contract cost control - Expensive

- Easier tender analysis - Time consuming

- Good for large, complex projects -

Schedule of Rates

- Nature and full extent of works unknown


November 2008 110

Preliminaries - Measured in accordance with SMM7

- Consists of:

o Description of the nature of the works

o Project particulars

o Details of documentation

o Contract details / bonds / warranties

o Management procedures

o QA procedures

o Health and safety

- Fixed costs

o Paid when expended

o Site set up and establishment, hoardings etc

- Time related costs

o Paid proportionate to contract period

o Site staff and management, plant hire etc

- Normally 8% - 15% of construction cost

- Send to architect and client for verification

Prime Cost Sums - Presentation in accordance with SMM7 clause A51 (cross refers general rule 10.3)

- Sum of money to be expended on works by nominated subcontractors or goods by

nominated suppliers

- Contractor to add for profit and attendance

- The following information shall be provided:

o The nature and construction of the work

o A statement of how and where the work is fixed to the building and what

other work is to be fixed thereto

o Quantities which indicate the scope and extent of the work

o Any specific limitations and the like in section A35

- CA authorises expenditure

Provisional Sums - Work that cannot be accurately measured at tender stage (SMM7 rule 10)

- Defined and measured in accordance with SMM7 clause A54 (in accordance with

general rule 10):

o Defined Provisional Sum

where the item of work can be described and approximately

quantified to the extent that the contractor can make allowances


November 2008 111

within their prelims and programme for the work

Items of Defined Work, accurately described in accordance with

SMM7 rule 10.3-4

Where execution differs from bill description, the effect on prelims and other

work will be treated as a variation

o Undefined Provisional Sum

where the scope of work is unknown and cannot be adequately

described therefore the contractor is not able to make allowances

within their prelims or programme

SMM7 rule 10.6 states that contractor is deemed to have made no

allowance for programming and prelims in his tender

Expenditure results in EOT with prelims.

- When calculating prov sums, allowance should be made for fluctuations up to point

work is carried out

- CA authorises expenditure

Contractor Designed Portions - Where items of work to be designed by contractor

- Contractor assumes design responsibility for those works

- ERs set out criteria contractor must satisfy

- Normally where there are interacting items of work

- Tender return to include contractors proposals

- CPs take precedence over ERs

Performance Specified Works - Sets out criteria contractor must satisfy

- Only suitable for works of a simple nature or where non critical to visual outcomes

- JCT05 omits separate clause for performance specified work

o But provisions for contractor designed works remain largely unchanged

o Just that now, all works requiring contractor design to be subject of full CDP

- Tender return to include contractors statement as to how PS will be met

- Statement takes precedence over PS

- Makes it difficult to compare tenders

- Increases tender period


November 2008 112

Post-Contract Financial Reporting General:

- Overview of clients current financial commitment to project

- Forecast of anticipated final expenditure

- Final costs v original and current approved budgets

- Used to outline, monitor and forecast project costs

Format: - Executive summary (including status of contingency allowance)

- Basis

- Exclusions

- Risks

- Adjustment of provisional sums

- Variations instructed

- Variations anticipated

- Loss and Expense


November 2008 113

T010 – Commercial Management of Construction (Level 3)

All Covered Elsewhere: - Estimating

- Establishing Budgets

- Cash Flows

- Reporting Financial Progress against Budget

- Procurement of Labour

- Procurement of Plant and Materials

- Procurement of Sub-Contracts

- Financial Management of Sub-Contracts

- Financial Management of Multiple Projects


November 2008 114

T016 – Contract Administration (Level 3)

All Covered Elsewhere: - Standard Forms of Contract – JCT, GC Works, ICE, NEC/ECC, ACA (PPC2000) etc

- Roles and Responsibilities of Parties – client, contractor, designers, QS

- Roles and Responsibilities of Person Administering the Contract – e.g. CA, Architect,

EA, PM, Engineer etc

- Co-ordination of Parties

- Design Co-ordination

- Planning and Building Control

- Health and Safety – CDM

- Monitoring Progress

- Monitoring Quality

- Insurances

- Bonds / PCG’s

- Third Party Rights

- Payment Provisions

- Change Procedures

- Sectional Completion / Partial Possession

- Nominated / Named Subcontractors

- Extensions of Time / Loss and Expense

- Materials On / Off Site

- Determination

- Liquidated and Ascertained Damages

- Practical Completion

- Defects Liability Period


November 2008 115

Topical / Current Issues

Current Market Conditions - Credit crunch

o Difficult to get finance

o Less demand for office space

o UK housing market declining

o Schemes less viable

o Construction work slowing

Commercial orders 30% lower than same time last year

Predict activity to decrease 7% over next 3 years

o Increased competition for work

TPI reducing

BCI increasing

Squeeze on contractors profit but competition still high

o Lawyers predict increase in adjudication as a result

o Insolvency set to increase

- Emerging markets demand

o Growth forecasts only scaled back modestly

o Firm economic performance predicted

o Commodity prices increasing

o Demand for goods (i.e. steelwork) remains high

Current Materials Prices - Concrete

o £80 – 100/t to increase 10% in January due to increase in fuel and energy

costs

- Reinforcement

o Supply currently at £750 – £800/t, overall £1,300 - £1,350/t

o More than doubled in 2008

Increase in European scrap prices by 95%

Escalating demand from Middle East

o Prices predicted to drop by end of 2008

- Steelwork

o Prices increased by £60/t in April

o Further increase of £80/t expected in 3Q and again in 4Q

nadia slattery revision document - at 06.11.08

Documents

m009 sustainability

t017 contract practice

construction cost

m007 data management

m002 business planning

m003 client care level

m008 health safety level

cost data