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Introduction
2

In countries like Ethiopia most construction projects didn’t

completed with the estimated project cost because of the
following reasons:
CHAPTER-FIVE  Change in scope of the project due to request from either of
the parties,
 Delay,
 Under estimated quantities,
Cost control and monitoring  Incompleteness of designs,

The method of cost controlling in PPA has been defined
from clause 37 up to 54 of General conditions of contract.

Cost Control …Continued

3
 Clause 37 : Bill of Quantities or activity schedule

Types of Contract
 Admeasurements contract » BOQ
 Lump sum » Activity schedule

The quantities set out in the Bill of Quantities are the estimated quantities for the
Works, and they are not to be taken as the actual and correct quantities of the
Works to be executed by the Contractor in fulfilment of his obligations under the
Contract.
 Clause 38: Change in bill of quantities

Option 1: Changes in the Bill of Quantities for Admeasurements Contracts
 If final qty >qty in BOQ by 25% provided that the change exceeds 5% of the
contract price, the engineer shall adjust the unit rate.
 The engineer shall not adjust the unit rate if the change exceeds 15% of the
contract price.
 The contractor shall submit the cost breakdown up on request


4 Option 2: Changes in the Activity Schedule for Lump Sum Contracts
 Prices in the Activity Schedule shall not be altered.
 Clause 39: Variations
 All Variations shall be included in updated program produced by the
Contractor
 Clause 40: Payment for Variations
 For both Admeasurement and Lump Sum Contracts, the Contractor shall
provide the Engineer with a quotation for carrying out the Variation when
requested to do so by the Engineer.
 For Admeasurement Contracts only, if the work in the Variation corresponds
with an item description in the Bill of Quantities and if, in the opinion of the
Engineer, the quantity of work above the limit stated in Sub-Clause 38.1 or
the timing of its execution do not cause the cost per unit of quantity to change,
the rate in the Bill of Quantities shall be used to calculate the value of the
Variation.

1

…Continued
5 6
 If the cost per unit of quantity changes, or if the nature or timing of the work in the
Variation does not correspond with items in the Bill of Quantities, the quotation by the
Contractor shall be in the form of new rates for the relevant items of work.
 For both Admeasurement and Lump Sum Contracts, if the Contractor’s quotation is
unreasonable, the Engineer may order the Variation and make a change to the
Contract Price, which shall be based on the Engineer’s own forecast of the effects of
the Variation on the Contractor’s costs.
 For both Admeasurement and Lump Sum Contracts, if the Engineer decides that the
urgency of varying the work would prevent a quotation being given and considered
without delaying the work, no quotation shall be given and the Variation shall be
treated as a Compensation Event
 For both Admeasurement and Lump Sum Contracts, the Contractor shall not be
entitled to additional payment for costs that could have been avoided by giving
early warning.
…Continued
7 8

The value of work executed shall comprise the value of:
a) The quantities of the items in the Bill of Quantities completed in the
case of Admeasurement Contracts; or
b) Completed activities in the Activity Schedule in the case of Lump
Sum Contracts.
 The value of work executed shall include the valuation of
Variations and Compensation Events.
 The Engineer may exclude any item certified in a previous
certificate or reduce the proportion of any item previously
certified in any certificate in the light of later information.
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…Continued

Clause 41: Cash flow forecast
 When the Program is updated, the Contractor shall provide the
Engineer with an updated cash flow forecast.

Clause 42: Payment Certificates
 The Contractor shall submit to the Engineer monthly statements
of the estimated value of the work executed less the cumulative
amount certified previously
 The Engineer shall check the Contractor’s monthly statement
and certify the amount to be paid to the Contractor.
 The value of work executed shall be determined by the
Engineer.
…Continued

Clause 43: Payments
 Payments shall be adjusted for deductions for advance
payments and retention
 If an amount certified is increased in a later certificate or as
a result of an award by the Adjudicador or an Arbitrator,
the Contractor shall be paid interest upon the delayed
payment as set out in this clause
 Unless otherwise stated, all payments and deductions will be
paid or charged in the proportions of currencies comprising
the Contract Price.
 Items of the Works for which no rate or Price has been
entered in will not be paid for by the Employer and shall be
deemed covered by other rates and prices in the Contract.
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…Continued …Continued
9 10

Clause 44: Compensation event
Clause 47: Price Adjustments

Clause 45: Tax  Price Adjustments formula
 Unless otherwise specified in the SCC, the Engineer shall not Ln Mn En
adjust the Contract Price if taxes, duties, and other levies are pn = A + b +c +d + etc .
changed that subsequently affect the Contract Price. Lo Mo Eo

Clause 48: Retention

Clause 46: Currencies

Clause 49: Liquidated damage
 Where payments are made in currencies other than Ethiopian

Clause 50: Bonus
Birr, the exchange rates used for calculating the amounts to be
paid shall be the exchange rates stated in the Contractor’s Bid.
Clause 51: Advance Payment

Clause 52: Securities

Clause 53: Day work

Clause 54: Cost of repair

FIDIC Works to be measured on site

Works to be measured on site (b) supply all particulars required by the Engineer.
11 12
Quantities55.1
The quantities set out in the Bill of Quantities are the estimated quantities for
Should the Contractor not attend, or neglect or omit to send
the Works, and they are not to be taken as the actual and correct quantities of
such representative, then the measurement made by the
the Works to be executed by the Contractor in fulfilment of his obligations
under the Contract. Engineer or approved by him shall be taken to be the correct
Work to be Measured56.1 measurement of such part of the Works. For the purpose of
The Engineer, shall except as otherwise stated, ascertain and determine by measuring such Permanent Works as are to be measured by
measurement the value of the Works in accordance with the Contract and the
records and drawings, the Engineer shall prepare records
Contractor shall be paid that value in accordance with Clause 60. The Engineer
and drawings as the work proceeds and the Contractor, as
shall, when he requires any part of the Works to be measured, give reasonable
notice to the Contractor’s authorised agent, who shall: and when called upon to do so in writing, shall, within 14
(a) forthwith attend or send a qualified representative to assist the Engineer in days, attend to examine and agree such records and drawings
making such measurement, and With the Engineer and shall sign the same when so agreed. ….
(b) ….

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Certificates and Payment

Works to be measured on site
13
…If the Contractor does not attend to examine and agree such
records and drawings, they shall be taken to be correct. If, after
examination of such records and drawings, the Contractor does not agree the
same or does not sign the same as agreed, they shall nevertheless be taken to
be correct, unless the Contractor, within 14 days of such examination, lodges
with the Engineer notice of the respects in which such records and drawings
are claimed by him to be incorrect. On receipt of such notice, the Engineer
Monthly
14
Statements60.1
The Contractor shall submit to the Engineer after the end of each month six copies,
each signed by the Contractor’s representative approved by the Engineer in
accordance with Sub-Clause 15.1, of a statement, in such form as the Engineer may
from time to time prescribe, showing the amounts to which the Contractor
Considers himself to be entitled up to the end of the month in respect of:
(a) the value of the Permanent Works executed,

shall review the records and drawings and either confirm or (b) any other items in the Bill of Quantities including those for Contractor’s
vary them. Equipment, Temporary Works, day works and the like,
Method of Measurement57.1 (c) the percentage of the invoice value of listed materials, all as stated in the

The Works shall be measured net, notwithstanding any general or

Appendix to Tender, and Plant delivered by the Contractor on the Site for
incorporation in the Permanent Works but not incorporated in such Works,
local custom, except where otherwise provided for in the
(d) adjustments under Clause 70, and
Contract.
(e) any other sum to which the Contractor may be entitled under the Contract or
otherwise.

Certificates and Payment

Certificates and Payment
Monthly Payments60.2
15 16

The Engineer shall, within 28 days of receiving such statement, deliver to the Employer
an Interim Payment Certificate stating the amount of payment to the Contractor which
Correction of Certificates60.4
the Engineer considers due and payable in respect of such statement, subject: The Engineer may by any Interim Payment Certificate make any
(a) firstly, to the retention of the amount calculated by applying the Percentage of Retention
stated in the Appendix to Tender, to the amount to which the Contractor is entitled under
paragraphs (a), (b), (c) and (e) of Sub-Clause 60.1 until the amount so retained reaches
correction or modification in any previous Interim Payment
the Limit of Retention Money stated in the Appendix to Tender, and
(b) secondly, to the deduction, other than pursuant to Clause 47, of any sums which may have
Certificate which shall have been issued by him and shall
become due and payable by the Contractor to the Employer.
Provided that the Engineer shall not be bound to certify any payment under this Sub
have authority, if any work is not being carried out to his
Clause if the net amount thereof, after all retentions and deductions, would be less than satisfaction, to omit or reduce the value of such work in any
the Minimum Amount of Interim Payment Certificates stated in the Appendix to
Tender. Interim Payment Certificate
Notwithstanding the terms of this Clause or any other Clause of the Contract no
amount will be certified by the Engineer for payment until the performance security, if
required under the Contract, has been provided by the Contractor and approved by
the Employer.

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17

Sample of payment certificate 18

and how to prepare ……

Earned Value Analysis

Introduction Introduction
19 20

 Earned Value analysis is a method of performance measurement. Earned Value is a

program management technique that uses “work in progress” to indicate what will
happen to work in the future. o Earned value is a highly appropriate technique for assessing and

Earned Value is an enhancement over traditional accounting progress measures. forecasting progress and performance of projects.

Traditional methods focus on planned accomplishment (expenditure) and actual o The technique of earned value enhances the cost performance analysis of a
costs. project through the application of a consistent methodology and by providing

Earned Value goes one step further and examines actual accomplishment. a uniform unit of measure.

This gives managers greater insight into potential risk areas. With clearer picture,
managers can create risk mitigation plans based on actual cost, schedule and
technical progress of the work.

It is an “early warning” program/project management tool that enables managers
to identify and control problems before they become difficult to correct it.

It allows projects to be managed better – on time, on budget.

Earned Value Management System is not a specific system or tool set, but rather, a
set of guidelines that guide a company’s management control system

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Basic Parameters for EVA Definition of terms

21 22

 Budgeted Cost of Work Scheduled (BCWS) or

Planned Value (PV),

 Budgeted Cost of Work Performed (BCWP) or

Earned Value (EV) and

 Actual Cost of Work Performed (ACWP) or

Actual Cost (AC) .

Definition of terms Definition of terms

23 24

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Project cost control: the EVA Example……

25
Status date Planned comp. Actual 26 Activity Cost ETB Month 1 Month2 Month 3 Month 4 Month 5 Month 6
date comp.date (x1000)
EAC Site clearing 22
Over budget VAC Fencing 10
cash flow Paving 18
BAC ACWP=AV ETC Excavation 30
Found. 50
BCWS=PV Concrete
Framing 40
SV=EV-PV Electric 6
CV=EV-AV Plumbing 16
Forecast time Walling 13
CPI=EV/AV
overrun
BCWP=EV Ceiling 4
SPI=EV/PV
Finishing 34
Time Carpentry 14

…cont’d
27

 After Three and half months the following works has been
accomplished
 Site clearing 100% Completed
 Excavation 100% Completed
 Foundation 100% Completed
 Fencing 100% Completed
 Electric 100% Completed
 Framing 50% Completed
 Plumbing 75% Completed
 Paving 50% Completed
 The Actual cost incurred till the date of reporting is 152,000 ETB.
 What is the status of the project in terms of schedule and Budget?
 Is the project behind the schedule or ahead of the schedule?
 Is the schedule under budget or over budget?