Execution of Maintenance Works

• Execution of maintenance works can be carried out by

employing
– Private contractors;
– Directly employed labour
– A mixture of above

• Private contractors
– A firm from the outside the maintenance organization is brought in to
carry out the wok on a contract basis.
– Some nature of work may require the employment of specialists
 Private Contractor
• Advantages of employing private contractor
– Specialist personnel can be used when organization has insufficient
work to employ own men
– Can be used when expensive specialised equipment is required
– Can be used provide resources when work load is too great
– Work carried out will be guaranteed
– No need to provide back up facilities
– No responsibility for organizing work and staff
• Disadvantages of employing private contractor
– Possibility of work being more expensive
– Need inclusion of contingency sums to cover unforeseen problems
– May provide little detailed information regarding costs of work
– Little flexibility regarding movement of labours in event of emergencies
– Timescale for commencement of work may be extended
 Formation of Contract
• A contract is a legally binding promise between two or more
parties. It can be formed either orally, in writing or by
conduct.

• A valid contract normally contains the following elements:

 Offer and acceptance
 Existence of consideration unless under seal
 An intention to create legal relations
 Certainty of terms
 Genuine, not obtained by fraud or duress.
 Capacity of parties
 Legality of object. It must not be one of which the law
disapproves
 Possibility of performance
 Formation of Contract
• Failure to fulfil the bargain may result in damages for breach
of contract.

• Seeking damages is not without restrictions.

 First, the doctrine of privity prevents non-contracting

parties from enforcing contractual promises that benefit
them.

 Second, the Limitation Act provides time scales within

which action may be taken for breaches of the law.
 Limitation Act
• Simple Contract: no action can be brought after the expiration
of six years from the date on which the cause of action
accrued.

• Contract under Seal: no action can be brought after the

expiration of twelve years from the date on which the cause
of action accrued.
 Contract Documents
• Invitation letter
• Form of tender
• Article of Agreement
• General condition of contract
• Special condition of contract
• General specification
• Particular specification
• Schedule of rates / Bills of quantities
• Contract drawings
• Addendum Bills and Correspondence
 Lump Sum Contracts
• The contractor will carry out a defined work for a price that
has been agreed upon with the client.

• However, that price will be subject to possible increases or

decreases according to some strict conditions prescribed in
the contract.
 Lump Sum Contracts - Characteristics
• The contract sum is agreed upon in advance, subject to
possible increases or decreases as a result of variations.

• The sum agreed upon may be fixed, or adjustments may be

made to allow for fluctuation in material or labour prices.

• The scope or detail of the work should not be changed to a

great extent by either the client or the designer.

• Otherwise, the lump sum contract which intends to produce a

fully pre-defined work package, and to inform the client of his
financial commitment before the construction commences is
ineffective.
 Lump Sum Contracts - Characteristics
• There are two types of lump-sum contracts.

 Lump Sum based on Drawings and Specification

 Lump Sum Based on Bills of Quantities

 Drawings and Specification
• This is appropriate for maintenance projects. Tenderers are
supplied with complete drawings and full specification.
Tenderers have to prepare their own quantities from the
drawings provided.

• As the time allowed for tendering is usually rather limited, it is

difficult for contractors to establish accurate quantities for all
items needed in the project. They have to estimate the
quantities and also to price the contract at the same time.

• The tenderers may be required to provide some means of

valuing variations, such as daywork schedules, schedule of
rates or a price breakdown which may be incorporated into
the contract.
 Drawings and Specification - Advantages

• The time required for the preparation of tender documents by

the QS consultant is reduced, as is the time-consuming
process of preparing bills of quantities.

• The client’s risk in respect of errors in BQ is avoided because

the contractor prepares his own measurements and
quantities.

• Both parties can have a clear picture of their respective

commitments when signing the contract.
Drawings and Specification - Disadvantages
• Tenders are not as easily comparable to each other as are Bills
of Quantities.

• There are substantial risks imposed on the tenderers. Since

the contract sum will not be adjusted for any errors made in
the quantities, the contractors have to make their calculation
very carefully, being responsible for any errors they make in
the measurement.

• For the design team, the time-consuming process of BQ

preparation is eliminated. However, this means that tenderers
need to spend a lot of time and resources to estimate or
calculate their own quantities from the drawings.
 Measurement Contracts
• The contract sum is ascertained by measurement and
valuations related to bills of approximate quantities or to a
schedule of rates included in the contract.

• There are two types of measurement contracts, which are:

 Measurement Contract Based on Bills of Approximate

Quantities

 Measurement Contract Based on Schedule of Rates

 Schedule of Rates (SoR)
• The contractor carries out the required work, which is
measured and priced at the rates in a schedule of rates.

• The schedule consists of a list of items with “units of

measurement” but no quantities given.

• A set of preliminaries may be needed.

• The contractor executes the work solely on the instructions of

the employer, without knowing what the eventual outcome of
the project will be.
 Schedule of Rates (SoR)
• This type of contract is useful where the employer cannot
determine his requirements in advance, not even sufficiently
for approximate quantities to be prepared.
• It is suitable for use of “term contracts” or where there is a
limited range of repetitive work to be carried out, such as
external redecoration of housing estates.
• The contractor tenders on the basis of unit rates which are to
remain for the stated term.

• The ArchSD (Architectural Services Department) term

contracts are usually from 18 months to three years. During
this time, the detailed work orders are to be issued to the
contractor.
 Schedule of Rates (SoR)
• For private works, tenderers are normally required to
calculate their costs and insert rates for work items in the
tender.

• For public works, the ArchSD publishes a “Schedule of Rates

for Term Contracts for Building Works” which forms a part of a
term contract. For each work item in the Schedule, a unit rate
is estimated by the ArchSD.

• Tenderers are requested to indicate in the tender documents

“plus” or “minus” percentages for the individual sections of
the Schedule of Rates.
 Schedule of Rates (SoR) - Advantages
Tenderers using a particular schedule (Standard Schedule of
Rates) soon become familiar with both the item descriptions and
the rates and are able to assess percentage adjustments
relatively easy.
 Schedule of Rates (SoR) - Disadvantages
• In comparing and assessing a range of tenders, the QS has the
task of gauging the effect of a series of variables, making the
choice difficult.

• The parties are unable to have precise information about their

respective commitments.

• Because of the above, the contractor finds it difficult to quote

realistic tender prices. In the pricing process of the contractor,
the preliminaries cost is, to a certain extent, directly related to
the amount of the contract sum. The unit rates, as well, are
greatly influenced by the quantities required for each item of
work.
 Cost Reimbursement Contracts
• The price to be paid is determined on the basis of the
actual cost incurred by the contractor in carrying out the
work, plus an agreed upon amount to cover overheads and
profit.

• No tender sum is contained in the tender and it may be

very difficult for both the client and the contractor to form
any reliable estimate of the final cost.
 Cost Reimbursement Contracts
• They are seen as a last resort due to the high level of
uncertainty of the final costs.

• It is generally only suitable where time is the most critical

factor and an immediate start is necessary.

• Emergency projects are another example where this

method is desirable, for instance, to remove a risk to the
public or to repair a facility which is of critical importance.

• The contract may contain various provisions to assist in

keeping the expenditure of prime cost to a minimum and
yet provide a completed work on schedule.
Cost Reimbursement Contracts - Advantages
• The time required for preparation of tender documents and
for obtaining tenders is minimized, thus enabling an early
start on site. The contractor does not have to source
competitive prices for goods, materials, labour or specialist
items at the time of submitting his proposal.

• Work on site may proceed before the detailed design is

complete. It can begin as soon as the contract has been
signed.
 Cost Reimbursement Contracts -
Disadvantages
• Apart from the absence of quantities, the cost of labour
involves the estimation of productivity which is very difficult
to establish. Hence, the contracting parties have little
understanding of their respective commitments before the
project commences.

• The risk of unforeseen circumstances generally lies with the

client.

• The computation and verification of the total prime cost is a

long and tedious process.
 Cost Reimbursement Contracts
There are three variants of this type of contract, distinguished by
the way the payment to contractor is calculated.

• Cost Plus Percentage Fee

• Cost Plus Fixed Fee

• Cost Plus Variable Fee

 Cost Plus Percentage Fee
• The contractor carries out the work and is paid all costs plus a
fee, calculated as a percentage of whatever the total cost may
be, for overheads and profit.

• This is used for building work of an unusual nature, such as

experimental work, where requirements cannot be
ascertained before the contract is let, and where it is not
possible to make any estimate of the total cost.

• There is no financial incentive to encourage the contractor to

carry out the work economically. The contractor may even
make the cost as great as possible. This type of contract is
therefore not recommended.
 Cost Plus Fixed Fee
• This may be used where an accurate estimate of the
maximum total cost can be made.

• Since the fee is fixed and will not be affected by the costs, the
contractor may try to reduce the time, and thus the cost of
the construction.

• This method keeps the employer’s costs to a minimum.

 Cost Plus Variable Fee
• The employer’s requirements must be known in some detail,
and it must be possible to prepare a reliable estimate of the
probable cost. Under this arrangement, ranges of fee are
agreed relating to amount of work to be done.

• Then payment will be made according to the comparison of

the actual cost and the estimated cost.

• This provides some incentive to contractor to finish work and

maximize returns..
 Open Tendering
• Use of local, national or technical press to attract tenderers
• Small deposit for contract documents, refundable on
submission of genuine tender
• Thorough investigation of tenderers considered for work
• Lowest tender not always accepted
 Selective Tendering
• List of suitable contractors drawn up who are asked to tender,
these are chosen because of known quality of works
• Due to knowledge of contractors, lowest tender usually
accepted
 Negotiated Contracts
• Reputable contractor selected
• Negotiations determine terms under which work will be
carried out
• Often used when time is of the essence and an early start is
desired
 Directly Employed labour
• Maintenance operatives and organizers are employed by the
owners or tenants of a building
• Normal works section made up of tradesmen, supervisors and
administrators
• Outside contractors are brought in for specialist work and
when work load is too great
 Directly Employed labour - Advantages
• Greater degree of flexibility of workforce; a more rapid
response
• Tradesmen can be trained to necessary level of skills required
by organization
• Tradesmen are familiar with buildings, facilities and
requirements of organization
• Often a better degreed of control of work process
• If organized correctly, cost of maintenance can be reduced
due to removal of profit element
Directly Employed labour - Disadvantages
• No forms of redress for unacceptable work
• Costs of department can be increased by the need to provide
additional administrative facilities, welfare, storage, transport,
etc.
• Organization must bear cost of staff if work load falls below
required level