Specification and Quantity Surveying Dejene Dibaba

COLLEGE OF ENGINEERING AND TECHNOLOGY
DEPARTMENT OF CONSTRUCTION TECHNOLOGY AND

MANAGEMENT
Contract Specification and Quantity Surveying(Teaching Materail)
Dejene Dibaba Gorosha
Bule Hora University, College of Engineering and Technology, Construction Technology and Management
Department.
P.O.BOX 144, Bule Hora ,Ethiopia
E-mail:dejenedib06@gmail.com. Tel:+251906621897
SEPTEMBER, 2023
Impact of construction workmanship quality on building maintenance management practice .
BULE HORA, ETHIOPIA

Contract Specification and Quantity Surveying.
Contents
Chapter one 1
1. Stages of a Civil Engineering Project 1
1.1. Pre design stage activities ........................................................................................ 1

1.2. Preparation of conceptual (sketch) design. .............................................................. 1
1.3. Construction tenders processing............................................................................... 2
1.4. Preparation of bid document .................................................................................... 3
1.5. Preparation of Tender document .............................................................................. 4
1.6. Advertisement of the Tender .................................................................................... 4
1.6.1. The Evaluation Modalities................................................................................. 5
1.3. Construction site supervision................................................................................ 9
1.4. Specification and quantity surveying ..................................................................... 11

1.4.1. Purpose of specification ...................................................................................... 11
1.4.2. Types of specification ......................................................................................... 12
1.4.3. Specification writing ........................................................................................... 14
1.4.4. Useful references in Specification Writing ......................................................... 15
1.4.5. Specification language ........................................................................................ 15
1.4.6. Capitalizing the first letters is mandatory for the following expressions:........... 15
1.4.7. Method of measurement ...................................................................................... 16
1.4.7.1. Quantity surveying ....................................................................................... 16
1.4.7.2. Category of work in construction industry: .................................................. 17
1.8. Writing Bill of Quantity ......................................................................................... 23
Chapter Two 24
2.0. Construction Contract 24
2.1. Project Delivery Systems ....................................................................................... 27

2.1.1. The traditional design-bid-build (DBB) approach........................................... 27
BY DEJENE DIBABA AND YOHANNES TEDLA II

2.2. Builders .................................................................................................................. 32

2.2.1. Contractor’s Works Programme ...................................................................... 33
2.3. Designers ................................................................................................................ 33

2.4. Regulators............................................................................................................... 35
2.5. Users ....................................................................................................................... 36
2.6. The Nature of Professionalism in Construction ..................................................... 37
2.6.1 Professionalism defined .................................................................................... 37
2.7 Consultant Roles ..................................................................................................... 39

2.8 Professional Services Agreements .......................................................................... 40
2.9. ARCHITECT ......................................................................................................... 41
2.10 Typical Conditions in Professional Services ......................................................... 43
2.10.1. Agreements .................................................................................................... 43
2.10.2. Defining the appointment .............................................................................. 43
2.10.3. Definition of services..................................................................................... 44
2.10.4. General Contracting ....................................................................................... 46
2.10.5. Experience of the lead designer ..................................................................... 46
2.10.6. Complete design ............................................................................................ 47
2.10.7. Involvement of quantity surveyor.................................................................. 47
2.10.8. Price as the basis of selection ........................................................................ 48
2.10.9. Employer-selected sub-contractors................................................................ 48
2.10.10. Construction Planning & Scheduling .......................................................... 51
2.11. Contract Agreement ............................................................................................. 53
WITNESS 55
B. Performance Security ......................................................................................... 55
C. Advance Payment Security ................................................................................ 57
BY DEJENE DIBABA AND YOHANNES TEDLA III

2.5. Contract document ................................................................................................. 57

2.12. Description of the different Processes .................................................................. 60
2.12.1. General Works Management Processes ........................................................ 61
2.12.2 Works Supervision Management Processes ................................................... 61
2.12.3. Quality Management Processes ..................................................................... 61
2.12.4. Financial Management Processes .................................................................. 62
2.12.5. Evaluation and improvement ......................................................................... 62
2.12.6. Monitoring ..................................................................................................... 62
2.12.7 Methods Statement ......................................................................................... 63
1.13. Contract ................................................................................................................ 63
Chapter two 73
2.0. Claim and dispute management in construction industry 73
2.1. Introduction ............................................................................................................ 73

2.2 Contractor Claims ................................................................................................... 74
2.3 Scope Changes ........................................................................................................ 74
2.4 Acceleration, Delay, and Disruption Claims ........................................................... 75
2.5. Acceleration Claims ............................................................................................... 75
2.6. Disruption Claims .................................................................................................. 77
2.6.1. Payment Claims ............................................................................................... 78
2.6.2. Termination Claims ......................................................................................... 79
2.6.3. Owner Claims .................................................................................................. 80
2.6.4. Delay Claims ................................................................................................... 80
2.6.5. Cost of Corrective Work.................................................................................. 81
2.6.6 Termination Claims .......................................................................................... 81
2.6.7. Tort Claims ...................................................................................................... 81
BY DEJENE DIBABA AND YOHANNES TEDLA IV

2.6.8. Overview of Damages ..................................................................................... 83
2.6.9. Contractor's Damages for Delay ...................................................................... 84
2.10. Contractor's Disruption Damages ..................................................................... 85
2.6.11. Contractor's Acceleration Damages .............................................................. 86
2.12. Contractor's Damages for Differing Site Conditions ........................................... 87

2.6.13. Contractor's Damages for Changes in Scope................................................. 88
2.6.14. Termination ................................................................................................... 88
2.6.15 Contractor's Damages for Termination Claims .............................................. 89
2.6.16. Owner's Liquidated Damages Claims ........................................................... 90
2.6.17. Owner's Delay Damages ................................................................................ 91
Chapter Three 93
3.0. Cost estimation 93
3.1. Information required for cost estimation ................................................................ 93

3.2. Types of cost estimation......................................................................................... 96
3.3. Approximate Cost Estimate ................................................................................. 100
3.4. Detailed Cost Estimates ....................................................................................... 102
3.5. Disposition of the Cost Calculation .................................................................. 102
3.4.1. Indirect Costs ............................................................................................ 103
3.5. Execution of the Cost Calculation........................................................................ 104

3.5.1. Construction Material Costs .......................................................................... 104
3.5.2. Labor Costs .................................................................................................... 105
3.5.3. Required information for the calculation of labor cost.................................. 106
3.5.4. Equipment cost .............................................................................................. 107
3.6. Two approaches for cost calculation .................................................................... 110
Reference 114
BY DEJENE DIBABA AND YOHANNES TEDLA V

Course Objective: aspects of contracts and bidding; types of construction documents

including bonds; interpretation of technical building specifications and their
application to selection and installation of materials, equipment and systems.
Specific Objective of Course:
 Prepare tender documents
 Prepare take-off sheets
 Settle claim
BY DEJENE DIBABA AND YOHANNES TEDLA VI

Chapter one
1. Stages of a Civil Engineering Project
1.1. Pre design stage activities
Feasibility study ,Selection of suitable site, Preparation of tentative cost estimate, Selection of
designer, Preliminary soil investigations, Program Preparation and Allocation, Program
Preparation and Allocation of Space and Assign Budget.
(b) Quality-Based Selection (QBS): Complex or highly specialized assignments, Assignments

that have a high downstream impact and if and proposals will not be comparable.
(c) Least-Cost Selection: More appropriate for engineering design of non-complex works where
well-established standards exist, and in which works where well-established standards exist, and
in which the contract amount is small.
(d) Single-Source Selection: Used only in exceptional cases and when a new competitive
process is not practicable.
1.2. Preparation of conceptual (sketch) design.

A concept sketch is a simplified sketch illustrating the main aspects of a concept or system,
annotated with concise but complete labels that (1) identify the features, (2) depict the processes
that are occurring, and (3) characterize the relationships among features and processes. How does
sketching play a crucial role during the initial stages of design when the concept is being
conceived? Sketching is at the core of our design process. We use sketching as a way to explore
multiple design options quickly and efficiently and identify those ideas that work, and as
importantly.
Preparation of final design
Final design takes the concept and parameters established in preliminary design and develops
them into a detailed design, culminating in the construction plan set, designer's cost estimate, and
special provisions. A design brief is a document that outlines the core details and expectations of
a design project for a brand. This document should be an easy-to-understand plan of how the
BY DEJENE DIBABA AND YOHANNES TEDLA 1

project will be executed. An effective design brief aligns the company and designer's goals so
everyone is satisfied with the final deliverable. The FDP consists of a continuous succession of
interrelated activities that include scheduling, determining of design data requirements, design
data collection and analysis, conceptual designs, final design.
Figure: 1 engineering Design Process

1.3. Construction tenders processing
The bidding process is used to select a vendor for subcontracting a project, or for purchasing
products and services that are required for a project. Bid records contain the specifications of the
project or details of the products and services to be purchased. The construction bidding process
is broken down into five key steps: bid solicitation, bid submission, bid selection, contract
formation, and project delivery.

The Bidding Process
Step 1: Request for Proposals. Owners or project teams first need to issue a request for
proposal (RFP) or invitation to bid (ITB) to initiate the bidding process. ...
Step 2: Bid Preparation of Interested Parties. ...
Step 3: Bid Evaluation and Selection. ...
Step 4: Contract Negotiation and Awarding.
What Is The Bidding Process?
The bidding process (also known as the tender process) is a method to select the most suitable
service provider or supplier, by comparing proposals against specific criteria. There are times
when product owners, clients, or project teams need to outsource services or purchase goods to
fulfill project deliverables. When this happens, picking an organization or subcontractor to work
with can be crucial for a project’s success. The bidding process provides a thorough way of
evaluating a partner’s competencies before a contract is awarded. The process is essential for
organizations who want to work with the public sector, but is also common in industries such as
construction, game development and advertising.
1.4. Preparation of bid document

Consultants: are the professional bodies that design the project Turn client project idea into an
economical and buildable item Ensure design meets requirements [Usually] prepare BoQ and
contract documents If assigned to oversee: Duly review project execution Proof of payment proof
provide interim and final acceptance.
The needs and objectives of the Client are important to consider when selecting the method of
procurement and being clear of what these are will help to choose the most appropriate
procurement option. The triangle in Figure 1 illustrates the three priorities which will be
important to the Client. Therefore, it is important to discuss with the Client which of the three
objectives are most important to them to plan the appropriate procurement route.

Cost
Time cqqu Quality
Figure 4: Construction illustrates the three priorities
1.5. Preparation of Tender document

The preparation of tender and contract documents, including all survey and design work needed
to prepare quantities and guideline costings, should take place in good time. If funds are to be
sourced from international lending agencies or donors, their guidelines will have to be followed
and examples of advertisements and documents from such organizations should be obtained at
the beginning of this process. Preparation may require the application for land and water rights,
environmental impact assessments plus any needed compensation or resettlement plans. These
must be completed before the dam construction can be approved and allowed to proceed.
In many places, construction can only take place in the dry season when river levels are low,
access to the site easier and moisture control for compaction possible. Thus, the design and tender
process should take place in the rainy season and be timed to be completed by the beginning of
the next dry season in time for mobilization of plant and equipment as the ground begins to dry
out. Clearing access roads, felling and removing trees and stripping foundation areas is often best
begun before the ground has completely dried out. The end of one rainy season and the start of
the subsequent dry season are the best times for this.
1.6. Advertisement of the Tender

Always include a site visit in any tender advertisement and award procedure. The tender
advertisement period has to take into account the need for approval (usually at the advertisement
and award stages) from the lender or donor, the need to adhere to local or national government
regulations and bureaucratic procedures, whether it will be advertised internationally, regionally
or nationally and the scope of works. A tender for one small dam could be advertised nationally
and potential tenderers given 6 to 8 weeks to respond, including site visits and collection of
documents. Thus, the tender period for this, including advertisement and evaluation could be

around 12 weeks. A series of dams being funded by one or more donors may require international
advertisement with time for potential bidders to collect documents, make site visits and prepare
timetables and bids (in their home countries). Such a tender may require up to 20 weeks to
complete with further time required for the winning bidder to mobilize.
The more complicated the works and the size and number of dams to be built, the longer the
tender process will take. Guidelines to assist in the preparation of tender and contract documents,
and in the award of a contract for a simple project involving only one or two small dams, are
given below:
The evaluation modalities (see details hereafter) – or any modified equivalents – are to be
attached to every tender document to permit bidders to understand the proposed evaluation
process Always keep written records of significant events and always advise bidders in writing
of any matter that could have legal implications. Any specific information given to any tenderer
that is not in the documents should be passed on, in writing, to all other tenderers.
1.6.1. The Evaluation Modalities

Two options exist for tender, and the choice has to be indicated in the tender document.
In the first option, the technical and financial offer are combined and presented in a single
envelope. The second option, called staged tender, involves a two envelope system in which the
technical proposal (first envelope) is evaluated and bids ranked before the financial offer (second
envelope) is opened. It ensures that price does not influence the technical evaluation of the bid.
This approach should be preferred, in particular in the case of complex contracts. Where a two
envelope tendering process is used, it should be indicated in the tender document that tenderers
are to place the technical and financial components of their tenders in separate, clearly marked,
envelopes. These envelopes are to be placed inside a single envelope and normal procedures
apply for the lodging of the tender. A points system should be adopted, based on criteria that can
be adjusted according to country, individual dam sites, scope of work and other factors. All
tenderers must be made aware of the evaluation procedure to be followed and whether there are
any special conditions involved.

The following point system can be used as a guide:
Technical bid: 50 points
Experience – 20 Points maximum
This is calculated according to the personal evaluation of each team member and considers the
following: any experience (good or bad) with the contractor, experience of the contractor in the
area and in similar works.
Equipment and Staff – 10 Points maximum
Again individual team member evaluation is used. Factors such as numbers
and age of equipment, suitability of equipment for the works involved, experience of staff
(including operators and supervisors) and support the contractor has in country (including
provision of fuel supplies, site accommodation, mechanical backup and so on) should be
considered. Where labor intensive works are being promoted this category could be given more
points (20 perhaps and the experience category reduced to 10) and those contractors offering to
follow such procedures given the highest number of points.
Work Programmer – 10 Points maximum
Highest points are given to contractors who can complete the works within the already decided
project time frame or before the next rainy season begins.
Location of Contractor – 10 Points maximum
Based on mobilization distance rather than physical location of the contractor, this is also
determined at the judgment of each team member. As a guide, highest (i.e. 10) points should be
given to contractors located within the local area, then say 8 points for provincial locations, 4
points for nationally based contractors and 2 or less for contractors mobilizing from outside the
country.

The Bidding Process
Step 1: Request for Proposals
Owners or project teams first need to issue a request for proposal (RFP) or invitation to bid (ITB)
to initiate the bidding process. A tender manager then prepares a package that indicates specifics
about the project.
The package should effectively communicate the goals, priorities, and requirements of the project
so that bidders have a clear picture of what needs to be done. This should include deadlines,
expectations, specifications, supporting documents, and the list of requirements that the bidders
should submit. Due diligence is essential when evaluating bidders: it is typical to request the
bidding company’s profile, project portfolio, personnel resumes and financial statements. The
invitation to bid can be open to everyone, or strictly by invite.
Step 2: Bid Preparation of Interested Parties
Once an RFP is issued, interested parties will begin to evaluate the proposal. In this context, the
project manager who prepares the bid is called a bid manager. The bid manager communicates
with the project team to verify the availability of resources that they’re about to commit, as well
as liaising with the company that issued the RFP for clarifications. If the bidding party is a general
contractor, this process may include facilitating another bidding session with subcontractors or
third-party vendors. Once all details are compiled and organized, the bid can then be passed to
the requesting organization.
Step 3: Bid Evaluation and Selection
After collecting the bids, tender managers compare them against each other and their
requirements. Contrary to some beliefs, the lowest bid doesn’t always win. The most popular
way to pick the best vendor or service provider is the MEAT criteria (most economically
advantageous tender). Apart from the cost, MEAT criteria consider quality, accessibility, social
value, innovation, and more. Selection can be a two-step process where applicants are shortlisted
before the final tenders are selected. Communication between the buyer and bidders is expected
during this stage. The tendering organization can also request presentations or interviews for
more clarification.

Step 4: Contract Negotiation and Awarding
The final stage of bidding is negotiation and selection. After picking the preferred vendor or
service provider, the tendering organization will inform them of the final approved price and
additional requests if applicable. The management and administrative departments of the project
team’s organization can start getting involved at this stage. Legal terms, payment terms,
deliverable schedules, and other important details are documented and signed by the involved
parties to solidify the agreement.
What Is The Bidding Process for Project Managers?
While bid and tender essentially mean the same thing, tender manager and bidding manager are
used differently to distinguish a project manager’s role in the bidding process. Tender managers
are project managers who represent the organization seeking a vendor or service provider. They
collect information, evaluate requirements, and generate RFPs. They also relay important
information to bidders. Once bids are submitted, tender managers assist with communication,
selection, and negotiations. Bidding managers are the project managers who represent the parties
interested in providing the service or product. Their role is to communicate with the project team
and relevant stakeholders to ensure that all resources committed in the bid will be available if
they win the contract. They also facilitate brainstorming, planning, and documenting the
proposal’s specifics.
Conclusion
Project managers can take on the role of a tender manager or a bidding manager during the
bidding process. Selecting good contractors, subcontractors, outsourced services, and vendors is
crucial in project management. The companies and people you work with can determine the
success of your endeavor. Although it can be tedious, the bidding process provides an effective
way for organizations to vet suppliers and service providers. It’s also an effective way for project
teams to get clients whose requirements align with their expertise.

1.3. Construction site supervision

Works: All activities associated with the construction, reconstruction, demolition, repair or
renovation of infrastructure, including activities such as site preparation, excavation, erection,
building, installation of equipment or materials, decoration and finishing, as well as services
related to construction of works, such as design and Construction Supervision services,
exploratory drilling, mapping, satellite photography , topographic surveying, seismic
investigations and similar services.
This Construction Supervision Manual has been prepared to compile the general procedures
and guidelines to be followed by the construction supervision personnel in carrying out all
aspects of quality control during the construction supervision. This Manual mainly provides
procedures for carrying out tasks related to inspection, testing and reporting. However,
this Manual does not deal with day-to-day technical requirements, nor does it provide solutions
to technical problems, as these technical issues are usually administered by the Specifications
and other Contract Documents.
A concept of Levels of testing has been introduced in order to cover up elaborate

planning of testing of materials and products depending upon various factors related to each
material/product. Every effort has been made to design this Manual so that adherence to its
guidelines will result in efficient, safe and consistent supervision of the works in strict
conformance to the Specifications and other Contract requirements. This has led to the
basic framework of this Manual being based on construction supervision procedures
consistent with standard international practices for construction of important road and
bridge projects of this type, with specific guidelines and forms, where appropriate, being
generated based on standard practices in IRC standards and guidelines. In all cases,
however, it is important that all users of this Manual understand that the Contract Documents
including the Specifications are the controlling documents for the construction supervision
process.
It is to be noted that although the intention of this Manual is to provide efficient, high quality
construction and safety, adherence to the adopted guidelines does not necessarily guarantee
that these attributes are achieved. This points to the need, therefore, for all users to exercise
judgement based on good engineering practice in all cases rather than blind adherence to the

adopted guidelines. This also points to the urgent need to periodically review and update
relevant guidelines and procedures, and hence the Manual is to be seen as an evolving guide.
To ensure the Contractor’s strict contact compliance, it is mandatory that all personnel charged
with inspection responsibilities properly prepare themselves in advance through detailed study
and understanding of the Plans and Specifications. On-site observations of the field engineer’s
activities and procedures will be made by the RE to ensure compliance with plans and
Specifications.
Field engineers are authorized to inspect all work done and material furnished. Such
inspection will extend to all parts of the works and to the preparation, fabrication or
manufacture of the materials to be used. The field engineers are not authorized to alter or
waive any provision of the contract conditions or documents. The Highway Engineer is
responsible for keeping his Resident Engineer informed as to progress of the work and the
manner in which it is being done, and also to call the Contractor’s attention to any non-
compliance with the drawings or specifications. He is not authorized to approve or accept
any portion of the work, or to issue instruction contrary to the plans and specifications,
or to act on behalf of the Contractor.
The field engineers have authority to reject unsatisfactory workmanship, defective materials
and to recommend suspension of any work that is being improperly performed, subject to
approval by the Resident Engineer and or the Team Leader. The field engineers may
exercise such additional authority only as may, from time to time delegated to them by the
Resident Engineer and/or as approved by the Team Leader. Supervision primarily focuses on
checking staff competence, the quality of an operation, and the results for clients. Another
characteristic of supervision is that on site-visits have a central function as means for
collecting data, but also as an arena for negotiation and persuasion between inspectors
and those being inspected.
The supervision process may start with a couple of initial meetings during which the supervisor
and supervisees can test how compatible their framework and methods are before deciding the
continuation of the supervision process. In this stage, such theoretical knowledge that helps
understanding students’ growth, the group, school organization, and leadership practices is
essential. The supervisor has to be on first names terms with the philosophy of inclusion and be

aware of the opposition against it. Therefore, when supporting the development of inclusive
teacher hood, the supervisor has to, now and then, step aside so that the teachers can construct
their practical theory and method.
1.4. Specification and quantity surveying
The information that is needed for construction is usually conveyed by two basic communication
lines. They are Drawings (pictorial) and Specifications (written). Specifications are devices for
organizing the information depending on the drawings and they are written descriptions of the
legal and technical requirements forming the contract documents. The specification links the
drawings with the general conditions of contract. Specifications are written descriptions which
define quality. Together they express the designer's intentions. The specifications should clearly
specify: - Type and quality of materials and equipment’s, methods of fabrication, installation
and erection Standards, codes and tests , Allowance, submittals and substitutions , Cost included,
insurance and bonds ,Project records and site facilities, Specifications should be clear, concise,
and brief descriptions of what is required to execute the proposed trade of work. Drawings are
graphic descriptions which primarily define quantity, position and sometimes quality and It
complements, without duplication, the information in the drawings or the general conditions
of contract.
1.4.1. Purpose of specification

The purpose of specifications generally includes: Guide the bidder at the time of tendering to
arrive at a reasonable cost for the work, Provide guidance for execution and supervision of
Works, Guide the contractor for the purchase of materials, Serve as a part of contract document
to limit and describe the rights and obligations of each contracting parties, Guide the bidder to
identify his capacity to execute the work. Serve as fabrication and installation guide for
temporary and permanent works, Guide the contractor for the purchase and hiring of
equipment’s, Indirectly, the specifications are very much related to the legal considerations,
insurance considerations, bidding requirements, alternates and options, rights, obligations and
remedial measures for the contracting parties.
Note: In the events of conflicts between specification and drawings, the specification governs.

1.4.2. Types of specification

In general, specifications can be broadly classified into four categories as follows:
Manufacturer’s specification: Manufacturers prepare specification of their product for the

guidance of their users, which may include property description and installation guide lines.
Guide Specification: Specifications prepared by an individual or group of individuals based on

manufacturer’s specifications, established trends of workmanship, service and laboratory tests
and research findings to be used as guide lines for preparation of contract specifications.
Standard Specification: Specifications which are intended to be used as a reference standard in

the construction of a project. The guide specification which has been standardized by a
recognized authority is considered as standard specification.

Contract (Project) Specification: the specification prepared for a particular project to

accompany the drawings and other contract documents.
In addition, Specifications could be written in several ways, with the prime emphasis given to
either the producer company’s brand or the performance capacity of the material and so on.
Accordingly, there are the following types of technical specifications.
 Proprietary Specifications:
 Performance Specifications
 Reference Specifications
 Descriptive Specifications
 Cash Allowance Specifications
Proprietary Specifications
 This specifications call for desired materials, producers, systems, and equipment's by
their trade names and model numbers.
 Detailed descriptions reference should be made to manufacturer’s specifications.
Performance Specifications:
Specifications which define products based on desired end results which are performance
oriented;
Most appropriate when new or unusual products or systems are required or when
innovations necessary.
Reference Specifications:
Specifications which refer to levels of quality established by recognized testing authority

or standards set by quality control authorities.
These specifications are also used in conjunction with other
Descriptive Specifications
All components of products

their arrangements and methods of assembly,

physical and chemical properties,

Arrangement and relationship of parts and numerous so their details.
The specifier shall take total responsibility for the Function and performance of the
product.
Cash Allowance Specifications:
o Specifications meant to direct bidders to set aside a specified amount of money to be

applied to the construction work at the direction of the specifier.
Basically specifications are not to be created, specifications are prepared based on:-
 Existing standards,
 codes,
 guide lines ,and
 Laws.
1.4.3. Specification writing

Specification writing Specification writing contain certain methods of presenting information
and instructions. When specifications are to be written, the following shall be taken into
consideration:-
Visualization (having clear picture of the system)

Research (to know the legal impact correctly)
Clear thinking (understanding things directly without misleading)
Organizing (organizing what we know to write the specification)
The specification links the drawings with the general conditions of contract. It
complements, without duplication, the information in the drawings or the general
conditions of contract.
Drawings are graphic descriptions which primarily define quantity, position and
sometimes quality.
Specifications are written descriptions which define quality. Together they express the
designer's intentions.

The specification links the drawings with the general conditions of contract. It
complements, without duplication, the information in the drawings or the general
conditions of contract. Drawings are graphic descriptions which primarily define
quantity, position and sometimes quality.
Specifications are written descriptions which define quality. Together they express the
designer's intentions.
1.4.4. Useful references in Specification Writing

The following are useful references in Specification Writing: Codes and ordinances of
governments, cities, or municipalities. For example, Ethiopian Building Code of Standards
(EBCS) Standards prepared by distinct societies and government agents. For example, ACI
standards, ASTM standards. Standards or model specifications prepared by manufacturers,
professional societies, and government bodies, Master specifications and previously written
specifications, Information or experience acquired by personal observation and contact with
trained or experienced people in the construction industry.
1.4.5. Specification language

The specification writer should present his instructions regarding the particular work under
consideration in such a manner that: -
 The drawings are more clearly interpreted

 Clearly express the extent of works under consideration; therefore, the choice of words
used in this regard shall be:
 Judged by its quality not its length
 Should be concise ,short and written with commonly used words
 Punctuations are important but their usage shall be limited to few
1.4.6. Capitalizing the first letters is mandatory for the following expressions: -
1. Parties to the contract; e.g. Employer/Client /Contractor/ Engineer
2. Space within the building; e.g. Bed Room, Toilet, Living Room

3. Contract documents; e.g. Bill of Quantity, Working Drawing, Specification and Minimize
pronouns better to repeat nouns , Minimize the use of symbols ,Avoid the use of words which
have indefinite ,meanings or which are ambiguous in their meanings.
1.4.7. Method of measurement

Taking off
Is the process of measuring or scaling dimensions from drawings and recording all dimensions
in an easily understood format? This is coupled with the descriptions in the drawings and
specifications. The standard form used for entering the dimensions taken or scaled from
drawings to determine the accurate quantity in each trade of work, except reinforcement steel, is
called Take Off Sheet or Dimension Paper.
Column 1 is used for stating the number of times an item occurs and is called the timising
column.
Column 2 is called dimension column as it is used to enter the dimensions of the items of works.
The dimensions are entered in the order indicated below: Length, Width, Height or thickness.
Column 3 is called squaring column. The stated dimensions in column 2 are multiplied to
determine the quantity of the work either in m, m2, and m3or in Pcs. or No.
Column 4 is called description column and description of the work item is briefly stated. A
separate sheet (Bar Schedule) is used to prepare reinforcement quantities.
1.4.7.1. Quantity surveying

What is quantity surveying?
Quantity surveying is calculating the total amount of works in a building and estimating the
probable cost of executing them.
By quantity surveying:
The total construction cost of the project is approximately estimated.

The completion of time the project is fixed.
Bigger work are broken in to small units so that evaluation and control is sample.
The total amount of construction materials required by the project is calculated.

The types of equipment, tools and machineries are known ahead.

The number and qualification of workers required are known ahead.
1.4.7.2. Category of work in construction industry:

A. Substructure
This part of the building, which is located below the grade beam or ground floor level.it is usually
assumed as foundation work. Sometimes, in small scale construction projects, it is customary to
classify works phases.in a two phase construction, the substructure is regarded as phase one
construction and every evaluation of profits and loss is made at the end of this phase.
B. Superstructure
This part of the building, which is located above the grade beam or ground floor level.it is part
of building that is giving the service the building is designed.in most building the superstructure
starts by construction the ground floor columns after the ground floor.
What is the works in each category?
When estimation is carried for a building, all works in the buildings are first categorized in either
the substructure or the super structure of the building as follows.
A. Substructure
1) Earth work: the work that categorized as the substructures are:
This incorporate all works related with the earth work or soil.
It consist of the following primary works:
1.1. Site Excavation: before any construction is taken at hand, the construction site should be
cleared from debris, dirt collection, trees, bushes, and organic materials average depth of 20-
30cm from the natural ground level (NGL).
The main purpose of this work is
o To make the ground leveled for setting out works.
o To remove organic materials away from the construction site that may harmfully of react
with the cement.

1. Material take off preparation
Figure: 2 open channel plan and section part.

A, Based on the open channel drawing: - site clearance, let take free space for length and
width=20+2
=22m length including working space.
1+2(0.5) both side working space for width open channel =2m
Site clearance = 22m*2m
=44m2
B) Deep excavation =depth *width*length

= 1m*1(2*0.25) m*20(2*0.25) m
= 30.75m3
C) Quantity of stone masonry =2(depth*width*length of one side wall)
= 2(1m*0.3m*20m)
= 12m3 of stone for masonry wall for open channel.
D) Water bed concrete =width*length= 1m*20m
= 20m2 total area of concrete is needed for water bed and including under
open channel wall foundation.
E) Lean concrete = width *length = 1m*20m= 20m2 total area of lean concrete under wall
foundation and water bed concrete.
F) Back fill = space width * working space length for deep excavation
=2(.25m *20.5m) =10.25m3 total volume of soil back fill around the external of open
channel.
G) Cart way = site clearance +deep excavation –back fill
=44m2 *.20 depth of site clearance + 30.75m3 -10.25m3
=29.30m3 total volume of soil is cart way from site.

Figure: 3 floor plan

Timesing dimension quantity Description

1 13 A) Earth work
9 Total area of site clearance with depth
117m2 of 20cm and 12m+2*.5m length with
working space and 8m+2*.5m width
with free space.
1 12.5 Bulk excavation with depth of 85cm
8.5 and length =12+2(.25)
0.85 Width =8+2(.25)m
Total volume of bulk excavation.
90.32m3
2 12.5 Total volume of trench excavation along
1.5 through length of wall foundation or x
1 direction.

18.75m3 Length =12+2(.25)m

Width =.5+2(.25)m
Depth =1.5m
Note ,o.25 is working space
2 8.5 Total volume of trench excavation along
1.5 through width of wall foundation or x direction.
1 Length =8+2(.25)m
Width =.5+2(.25)m
12.75m3 Depth =1.5m
5 1.7 Total volume of footing one pit excavation ,
1.7 Length =1.2m + 2(.25)m
1.15 Width =1.2m+ 2(.25)m
16.62m3 Depth =1.15m
10 1.5 Total volume of footing two pit excavation ,
1.5 Length =1m + 2(.25)m
1.05 Width =1m+ 2(.25)m
23.6m3 Depth =1.05m

The general formula for quantizing concrete making materials given below. You can use this
formula for more calculation over any concrete of your need.
Assume the following
 Concrete mix ratio is =a:b:c
 Total volume of concrete =zm3
 Total sum of parts =r
 Density of cement =u
 Density of fine aggregate =v
 Density of course aggregate =w
Amount of cement = (a/r)*z*u*1.30*1.05
Amount of sand = (a/r)*z*v*1.30*1.05
Amount of aggregate = (a/r)*z*w*1.30*1.05
Note: 1.30 is given for shrinkage property of the concrete and 1.05 is given for the probability of
wastage at site.
1.8. Writing Bill of Quantity

Billing of Quantity is the final stage in the preparation of the completed bill of quantities. The
effort of assembling and ordering was completed at the abstracting stage and all that remains is
for the descriptions and quantities to be presented in a structured and consistent fashion. There
are three levels of heading and they have the following titles.

Chapter Two
2.0. Construction Contract
There are different variations of contracts in common use in the construction industry. Clients
choose from among this forms based on their specific needs and objects. The risks associative
and hence the potential rewards vary with the type of contract adopted.
A. Fixed price contract.
In this type of contract, the parties contracting agree on a pre-determined price to execute the
contract. This pre-determined amount can only be altered by changes to the contract. There two
variations of these forms of contract.
B. Lump sum contract.

In this form of contract, the parties agree on the total amount of money required to complete the
contract. Thus, as a general practice, the contractor doesn’t have to show the specific
breakdown of costs and match it to the specific work executed. However, to combat problems
arising from a possible change in the contractual item, the contractor may be asked to specify the
unit price of each of the major works to be done. In this way, when there is a change to the agreed
items, the new cost of the changed item may be calculated by multiplying the mount to be
executed by the unit price.
This form of contract’s major advantage is that both the client and contractor know the extent of
their commitment in advance. For example, the client knows his cost along with the cash
flow, while the contractor knows the whole of his duties and can accordingly make
tradeoffs between resources and projects. However, the approach has a major disadvantage of
being not tenable for project whose design is not finished. Unless the design is substantially
finished, the contractor wouldn’t know the whole extent of the work and couldn’t come up with
the total cost of the project.

ii. Unit price contract
In this form of agreement, the parties agree on the unit price of each and every item to be
executed. Though the contractor is asked to come up with the total sum of the project
work, in this form of arrangement, it is the unit price of the items specified that governs the
project work, i.e., if there is some kind of discrepancy between the total sum and unit price
multiplied by amount of work to be done, the latter takes precedence. Moreover, if there is a
change in the amount of work to be done, the contractor would be asked to do it by the unit
price rate submitted during the bid stage unless the change is considerable and warranties
change in the unit price rate. This form of arrangement generally has advantage over the lump
sum contract. For example, as stated above, it is more adaptable to changes in the amount of
work to be done. Besides, it can be used in cases where the detail design is not finished by asking
the contractor to make a rough estimate of the work to
Be done and submit a unit price accordingly and hence promotes open competition involving
quantities of work that cannot be accurately forecast at the time of bidding. Perhaps the major
down side of this approach is that it takes a relatively long span of time and higher cost for the
preparation of specification and detailed bill of quantities.
C. Cost-Plus Contracts
In cost-plus arrangement, the contractor will be paid for the costs incurred for the
execution of the project plus an agreed amount of profit margin. Generally this type of contract
is suitable for negotiated contract between the contractor and the client. The form of arrangement
is usually used in innovative projects where it may not be possible to have a predefined unit
price as the project is the first of its kind and won’t be easy to determine the amount of
man hour needed to execute it. Thus to use this arrangement, there can only be agreement
on what constitute a cost, which generally can be categorized under materials, equipment, labor,
contractor’s staff (both project and overhead staff) and some other general conditions as in
insurance etc.

There different varieties of this approach:
i. Cost plus percentage of cost
This type of contract fixes percentage of the cost of construction for the profits and risks to be
due to the contractor. However, there is one big problem in this arrangement, contractors often
try to exploit the arrangement via different means such as over staffing the project, not
assigning the most competent resource, forging invoices etc. As a measure of partial
counteracting of this problem, clients usually demand other variations of the cost plus contract.
ii. Cost –Plus fixed fee
In the arrangement, the parties agree on the cost the contractor may incur to execute the job plus
a fixed fee to cover for the contractor’s staffing costs, overheads, profits etc. Still the problem
with this kind of arrangement is that, there is no effective counterchecking mechanism if the
contractor tries to cheat by producing forged invoices.
iii. Cost-Plus fixed fee with guaranteed maximum price.
The arrangement is meant to prevent the project cost escalating above a certain maximum price.
In the arrangement, the contractor will be reimbursed for the costs incurred, plus given an agreed
amount of fixed fee to cover for its other expenses and profits. But in this arrangement, unlike
the previous one, the agreement puts a cap to the maximum price the project can possibly
escalate to. One of the major problems with this arrangement is the attitude seen by contractors
to push the price always near to the provided. To at least counteract this problem, clients usually
provide a ‘share in the saving’ clause to the agreement.
iv. Cost-Plus Sliding Scale Fee Contract:
A form of cost-plus contract that acts in the nature of a compromise between the percentage of
cost fee and a fixed fee. It is one in which the fee is established in accordance with a sliding scale
arrangement. Either of the following general schemes may be followed.

2.1. Project Delivery Systems

The whole process of implementing projects, from need identification through to operation or
facility management, traditionally has been a fragmented effort by the owner, the consultant and
the contractor. It has been argued that this fragmented system has incurred serious
inefficiencies in the industry and deprives the owner from getting the best value for his[her]
money and effort. Along with these critics of the way the construction industry does business,
there has been calls to improve the management of the planning, design, engineering and
construction as the inefficiencies caused costly budget overruns, inadequate quality control,
excessive delays and other project complexities such as customer dissatisfaction. As a
result, starting the early 1970s, different management systems evolved to deal with these
problems and issues. Although there are different variations, major forms of project delivery can
be classified as design-bid-build, design-build, construction management and the different
variations of the public private project delivery systems.
2.1.1. The traditional design-bid-build (DBB) approach

Construction practices traditionally have been based on an owner identifying a need and
proceeding with the design-bid-build arrangements. The owner hires an architect/engineer to
develop the design, plans and specifications in accordance with the owner’s needs. The bidding
process begins once the design is completed. Then after, the contractor who won the bidding
implements the project according to the design specifications. The key feature of this
approach is that each of these project participants is a separate entity and their roles are
sequential in nature. This strategy of conventional processes of sequential project delivery
system, which assumes that clients benefit from choosing a new set of project team selected
competitively for every project they engage on, is meant to minimize risks and changes through
thorough descriptions of specifications and contracts.

Advantages of traditional Design-Bid-Build

The process embodies a design in a set of substantially complete documents that are
capable of transmitting the owner’s wishes to the constructor.
The contractual relationships between the constructor and his/her subcontractors
make it easy for the constructor to fire, replace, or take over from subcontractor if
he/she defaults
Owners are often guaranteed the maximum price for completing the entire project.
Disadvantages of Traditional Design-Bid-Build
 Change order abuse often leads to unnecessary increase in the overall cost,
 The process is sequential in nature; the escalating factor between the time a
project is conceived and when it is actually constructed can add significant cost.
A delay in construction means that an owner is paying additional rent for his
current facility or that production in a new manufacturing facility is delayed,
 Throughout the process, the owner has little or no direct control over what the facility
will ultimately cost, but still pays the bill. During design or engineering, there is no sure
procedure for evaluating the cost implications of the architect’s or engineering’s
proposals. The proposed design or engineering may be impractical, or there may
be simpler and cheaper techniques that provide the same result. Normally, alternative
procedures become known only after the bid phase, when changes represent
sweeping revisions and major expenditure of time and effort. Such changes would
have been simple earlier. The owner is faced with the opposition of paying more
than expected for the original design.
Design-Build
The design-build method of project delivery is one way that reduces the number of
contractual relationship that the client has to go into and the associated inefficiencies. In
this method, the owner contracts with a single firm, which provides both the design and
construction services. The process focuses on just two parties: the owner and the design-build
firm. The argument is that, with few parties involved in the contractual relationship, the process
becomes more efficient.

Advantages of Design-Build
A single contractual relationships is involved in design and construction; the
concept allows for construction to begin even when the design is not complete.
For owners, this means they can get a building in a much quicker time period.
Problems are solved more quickly, since the designer and the contractor are both
on the same team.
Design-build provides better coordination, increased efficiency, lower costs,
and usually improved quality.
The process provides reduced administrative owner coordination between the
architect/engineer, contractors and/or the CM
It allows the use of phased construction to reduce design-build time.
Design-build provides a tremendous opportunity for incorporating construction
expertise during the planning and design phases.
It takes the owner out of the center of debates when design and/or
construction errors or omissions occur.
Legally, the owner deals with one contractual entity instead of several unrelated
parties.
Disadvantages of Design-Build
 The design-build approach does not provide owner representation on the design-
construction team.
 It is difficult to determine and/or control the overall cost of the project,
since design and construction are occurring at the same time.
 The owner doesn’t have a firm project cost at the start.
 A design-build firm has control over the integration of design and construction
functions.
 Quality could suffer in guaranteed maximum price orlump-sum contracts.
 Certain checks and balances between the designer, builder, and owner during
the design and construction phase do not exist.
 The final result may differ from the owner’s expectations because of the
owner’s minimal involvement.

 Any mistakes made by the designer can be covered up by the contractor if both
are employed by the same company.
 The burden on the owner to select a qualified design-build firm is heavier than in
other forms of project delivery.
 An additional design team often is required to develop scope drawings used for
the design-build selection process.
Force Account
Project Owners undertake the project. Used when: It provides a comparative advantage in Cost,
Time and Quality issues. When there is a lack of capacity from the contractor sector to undertake
very large and technologically new projects. When projects are unattractive to bidders.
This system is promoted for
Comparative advantage of cost, quality and time
Scale of projects and technology (large, small)
Remote projects
spatially scattered and maintenance projects
Build Operate Transfer
Build - Operate – Transfer (BOT) is a form of procurement and contract delivery system that
promotes Public Private Partnership (PPP) in which a private company is contracted to finance,
design, construct, and operate for a certain period (usually 10 years) and transfer. The project
owner is not responsible for any liability other than force majeure and agreed upon claim
adjustments. The Operation period between completion and transfer gives the contractor an
opportunity to verify the quality of the output of the services and works .BOT project involves a
potentially complex contractual structure.
This delivery system is advantageous because of
 It minimizes owners’ scarcity of financial resources;
 It devoid of considerable risks from the project owners
 The facility is well operated and transferred with free of charge or
minimum compensations to project owners.
 Integrates the process of design, construction, operation, and
maintenance.

Projects completed faster

Disadvantages of BOT are:
 Cost more in the long run
 Longer tendering process
 Costly tendering
 Future political change may disrupt prior agreement
 No capable local contractors
 Contractors not interested in all works
Construction Management
The CM process allows a systematic approach to project management. By being involved from
inception to completion, the CM firm can interrelate and control all relevant variables
that influence the major success factors of time, cost, quality and customer satisfaction. The
process enables a construction manager to contribute his/her knowledge early in the design phase.
He performs value analysis and life-cycle cost analysis to ensure optimal design of
Project regarding the major measures of success.
The construction manager, by his everyday involvement in the construction industry, has better
access to contemporary information such as cost than most architects/engineers. [s]he is in
a better position to make dependable preconstruction estimates. This improves project designs
and prevents delays from duplications and project-letting iterations as a result of bid overruns.
The CM firm offers an independent, objective manager working on the owner’s behalf
to provide integrated management for an entire project. The CM’s management skills
complement both the architect/engineer’s design skills and the contractor’s construction
skills to procure optimal design and construction. The owner receives and information base for
decision-making that is multi-disciplined and objective. The construction management process
may minimize the owner’s time commitment and need for in-house staff. When adequate
trust exists, the CM should be able to make most decisions for the owner once the scope and
budget arte established. The CM can handle project planning, change orders, the selection of
contractors, financing and monitoring the owner’s cash. The CM can be structured to enable the
owner as much involvement as he prefers.

2.2. Builders
Although construction is not a new activity, the most significant developments have taken place
since industrialization. Before the Industrial Revolution construction involved only a handful of
technologies–bricklaying, carpentry, thatching and stonemasonry. Some projects were
sufficiently important to justify the appointment of an architect but few projects employed other
than craft skills. In the absence of a designer, buildings simply evolved, involving slight
modifications as each new project applied the lessons from experience. Pre-industrial projects
were totally organized by a master mason or an architect. The interactions between the few trades
were predictable.
Each craftsman had a detailed knowledge of a particular technology and knew what to expect of
the other trades. Thus, organization and management were simpler than they are today. The
Industrial Revolution led to the emergence of new materials and ways of working. These led to
more adventurous and innovative buildings. For example, the use of steel beams enabled larger
spans to be achieved. In parallel with the developments to the technology of materials, the
transportation network became more sophisticated enabling the rapid spread of new technologies.
Thus, sites became more complex, involving increasing numbers of specialist trades.
As the technological complexity of any process grows, so the demands for integration and
Contractor fulfilled a need by employing all the necessary skills, providing all of the materials,
plant and equipment and undertaking to build what the client had had designed. Thus, in a general
contract, the basic premise is that the employer takes the responsibility for design and the
contractor takes the responsibility for fabrication. Although this process is often referred to as
traditional general contracting, it is a tradition that only goes back to the end of the nineteenth
century.
The task of builders is to fabricate the products of the industry. Recent developments have caused
some building firms to move away from a focus of fabrication and more towards a focus of
management and co-ordination of others (trade contractors). Some builders respond to the market
by specializing in narrower fields (whether technical specialization or management); others
respond by offering wider, integrated packages (e.g. design and build). Perhaps the only constant
is that the builder must ultimately ensure that work takes place on a site.

2.2.1. Contractor’s Works Programme

Based on deadlines specified in the Contract, the Contractor is required to submit a Works
Programme to be approved by the Engineer that provides for completion of the Works in
accordance with these deadlines. Approval of the programme by the Engineer shall be given
based on completeness (i.e., includes all activities) and accuracy (activities are properly
sequenced) of the proposal, and on comparison of total output of the Contractor’s scheduled
mobilized equipment with the types and actual quantities of works scheduled to be completed
during each month of the specified construction period.
An additional check shall be made to ensure that outputs for relevant activities are reduced
realistically during the monsoon period. Following approval of the Contractor’s initial Works
Programme, the programme is reviewed periodically in order to appraise the need for changing
the proposed scheduling of activities to be in line with actual construction progress. In

the case where deviations from the proposed schedule are significant enough to raise
concern with regard to the Contractor’s to complete the woks on time, the Contractor is
to be required to provide an acceptable revised programme to catch-up and meet the
original deadline requirements (i.e. He may need to mobilize additional equipment,
or work additional hours per week etc).
2.3. Designers
The advancing technological complexity of the industry also led designers to embrace new
techniques. There grew a demand for specialist designers who understood the new technologies.
It is useful to think of design as a once whole discipline that has been successively eroded by
more specific disciplines. As explained above, the need for co-ordination of building work led to
the emergence of general contractors. Further, the need for measurement and valuation of work
in progress and for cost planning led to the emergence of quantity surveying; the need for a
specialized understanding of new technologies led to the emergence of structural engineering and
services engineering; the need for overall control of the process led to the emergence of project
management.
In simple projects, some of these disciplines have little involvement, but their roles can be very
significant in the case of complex buildings. Like builders, designers face an increasingly

complex management problem. The co-ordination of information from tens or sometimes

hundreds of specialists is a very real problem.
Good design requires a clear policy for the project that provides a basis for all design decisions.
Although architectural training may cover management issues, the skills of good leadership will
not necessarily be found in all architects. When clients feel that architectural leadership will not
be forthcoming, they will look to alternatives, such as the appointment of a project manager or
the use of a procurement system that plays down the role of the architect. The progressive erosion
of the architect’s role leads to the question of whether an architect should lead a project or should
be just one of the consultants managed by a project leader.
The debate can be resolved down to two alternatives; it is either art or science. An art involves
the artist exercising subjective and personal choice with little need to rationalize or explain the
output. This contrasts sharply with the view of architecture as a science, which involves rational
choices based upon objective techniques that can be explained and justified. Architecture as art
cannot be subjected to external management; indeed it can only occur if the architect is in
complete control of the process. Architecture as science can be subjected to external controls
because output can be measured against some predetermined objective set by the architect.
Reality is rarely so simple: real projects involve a complex and difficult tension between these
views and such a debate is rarely exercised at the outset of a project.
The Engineering Design Drawings depicting the designs and scope of works are legal
documents which form an integral part of the Contract, and the Contractor is required to
perform the work in accordance with them. Consequently, to achieve proper administration
of the contract the transmittal of the approved design drawings, and subsequently
submitted drawing related to “works” and “day works” orders, must be handled with
circumspection and properly recorded at all stages to avoid unnecessary disputes and claims
there is different stakeholders’ participation in the decision-making process of building
maintenance. Facility management executives, project managers, supervisors, occupants, and
property owners are the primary stakeholders in building maintenance decision-making. A
decision-making approach enabling group decision-making is essential for effective building
maintenance decisions. Stated that it is clear a decision-maker should consider multiple issues

when considering the building maintenance process.” Both physical and social factors, and
instead of a single-criterion consideration, a multi-criteria approach has to be used in the process.
Also, reducing maintenance costs and time is a key maintenance management demand. And
emphasized that most of the early decision-making models depended on a single type of event
and criteria. Because of the complexity of the process, different requirements of different
maintenance needs and possible correlations between different events caused the need for multi-
criteria decision-making models for building maintenance.
2.4. Regulators
Buildings and structures affect everyone who comes into contact with them and very few people
believe that the freedom to erect structures should be unfettered. There are many instances where
a structure can threaten the freedom, privacy or rights of an individual. Thus, legislation of many
types has evolved to regulate the activities of those who wish to build. Planning legislation
controls the appearance of buildings; building control legislation controls safety of finished
buildings; health and safety legislation controls safety of the process of building; and so on.
Planning control arises from the Town and Country Planning Act 1947 which basically sets up a
process of locally based plans that describe the views of the local planning authority on how the
area will develop.
Additionally, all building work requires permission before it can go ahead. In this way, proposals
for building and alteration work can be gauged against the local development plan. An applicant
who fails to get permission has a right of appeal. Building control is intended to identify certain
minimum standards defined nationally but enforced locally. The Building Act 1984 refers to
Approved Documents, which contain advice on how to satisfy the functional requirements of the
regulations. This advice is not compulsory, but if it is not followed, then it must be proved to the
satisfaction of the Building Inspectorate that the building satisfies the functional requirements of
the regulations. The Health and Safety at Work Act 1974 (under which the Construction Design
and Management Regulations 1995 are issued) and the Occupiers’ Liability Act 1957 also have
an impact on the organization and 2.4.Purchasers
All construction work is ultimately undertaken for the benefit of a client. But even within one
project, not everyone works for the same paymaster. Clearly, someone is paying for the work
and such a person is best thought of as the purchaser. The concept of client is wider than this as

it includes end users, workforce, etc. On some projects users and purchasers are different and
become involved in the project in different ways. On other projects one organization, or even one
person undertakes the two roles. Everyone involved, whether designer or builder, is involved
through a contract. This will connect a purchaser with a supplier or with a provider of services.
The document may be a building contract, a sub-contract or a professional’s conditions of

engagement. Although many of the participants will be professionals, the basic commercial
nature of the process cannot be denied. Contracts are records of business transactions and the
Courts will approach them with the same rules that apply to all commercial contracts. The
importance of purchasers cannot be over-emphasized. Construction is about providing a service.
They are made complex by the nature of the product, the duration of the project and the
involvement of so many different people. But this should not distract us from the idea that those
who pay have expectations. If their expectations are not met, then dissatisfaction is bound to
follow.
Purchasers do not fall into a discrete category. The word covers everyone who buys construction
work, from a householder buying a garage or a multi-national corporation buying a factory
complex, to a national government buying a nuclear power facility. In other words, it is wrong
to categorize purchasers into one group. There are very few generalizations that apply across the
board and it is important always to be clear about the type of purchaser for a project. Management
of construction.
2.5. Users
Finally we turn to the users of buildings. Although there is an overlap with the preceding
category, users of buildings are a much wider group. All of us pass by buildings, enter buildings
and live in buildings. The products of the construction industry affect everyone; therefore a
decision is needed in each project about the extent to which people outside the immediate project
team should be involved. As mentioned earlier, one of the purposes of legislation is to oblige
construction project teams to take account of the impact of a project upon society. However, any
firm involved in the property development process risks alienating potential clients or potential
public support. Because so many people are affected in so many different ways, it is important
to develop approaches that take account of some of these effects.

For example, surveys among workers and customers might help to reveal possible problems;
feedback from earlier projects may shed light on potential problem areas; public consultation
processes may avoid protests and boycotts of controversial developments. There are all sorts of
ways in which the users of buildings might be involved at an early stage of a project but the
benefits of such early involvement are far reaching.
2.6. The Nature of Professionalism in Construction

The professional institutions in construction differ from those in other industries by their sheer
number. The various skills embodied by the institutions grow increasingly specialized and
institutions proliferate. Before considering the impact of so many professions, it is worthwhile
considering the concept of professionalism.
2.6.1 Professionalism defined

The literature on professionalism identifies four basic defining characteristics in the way that the
term is used; a distinct body of knowledge, barriers to entry, serving the public and mutual
recognition.
Distinct body of knowledge
First, each of the professions has its own distinctive competence, which is embodied in an
identifiable corpus of knowledge. Typically this will be represented by an institute’s library, by
its active participation in an area of research and by a close involvement with academic courses
leading to qualifications. All of the professional institutions in construction seek to make clear
commitments in these areas.
Barriers to entry
Professions seek to regulate who can enter. One of their roles is to obstruct those who are not
properly qualified to practice. They do this through entrance examinations and other qualifying
mechanisms which seek to ensure the relevant level of skill and conduct in those seeking to join.
Typically, professional institutions require academic qualifications first, and then a period of
approved training before being admitted to full membership. The academic qualification will
usually derive from university education to degree level on a course of study recognized and
approved by the institution. The period of professional training typically involves working for
two years under the guidance and supervision of a qualified professional who takes responsibility
for ensuring that the novice is exposed to a wide range of professional practice.

Service to the public

A further distinction drawn by professionals is that they seek to serve the public first and
foremost. This concept underlies many of the aims and objectives of modern professional
institutions. It means that the true professional places the public good before mere financial
reward. This phenomenon is usually apparent in a code of conduct for members. Any member
who breaches the code will normally be asked to resign from the profession.
Mutual recognition
A profession that is not recognized by other professions has no real status. Mutual recognition is
an essential part of defining a professional institution. Without this, an institution is merely a
collection of like-minded people who do not fit into the established network of professions.
Clearly, a professional institution needs to belong to an infrastructure of institutions; otherwise
there is no reason for it to exist.
Conflict in project teams
The characteristic grouping of project teams very often results in conflict at a variety of levels.
Each project participant has particular aims and objectives and it is rare to find contract structures
that encourage harmony among these aims. Project participants expect to enter into
confrontations with each other and with the client. This expectation of adversarial conflict is at
the root of the ‘internecine strife’ observed above. The purpose of ‘conditions of engagement’
and other contracts is to regulate these confrontations and to provide a basis whereby one party
can enforce the promise of another. It is not their purpose simply to avoid or prevent tension and
conflict. One of the purposes of assembling a team of people from different professions is to
harness a variety of views. It should be expected that each person brings his or her own criteria
for decision-making; they all have their own agenda and this is as it should be.
The tensions thus generated should precipitate debate and dialogue so that clear choices can be
made. In other words, controlling conflict is not the same as eliminating it. The idea that conflict
is destructive and causes misery is so self-evident that it is seldom debated. Employees fight
about many issues, but the wisdom of avoiding conflict is too often not one of them. However, it
is the failure to use conflict that causes the distress and low productivity associated with
escalating conflict. Conflict avoidance and the failure to develop an organization equipped to

manage it, not conflict itself, disrupt. Open, skillful discussion is needed to turn differences into
synergistic gains rather than squabbling losses.
ROLES AND RELATIONSHIPS
Those put forward for consideration.), smoothing (avoiding conflict) and forcing (the naked use
of power). They found that the most effective integration was achieved in organizations that used
confrontation, supplemented as necessary by forcing behavior to ensure that issues were properly
confronted. Smoothing was the least effective method. Clearly, the problem is not merely a
question of avoiding conflict and eliminating disputes, but a more definite problem of how to
take advantage of the potential benefits of conflict without removing necessary sanctions.
2.7 Consultant Roles
Professional institutions continue to proliferate, and some have not been in existence long enough
to have established any traditions. Nonetheless, there is often an emphasis on ‘traditional’ by
those who wish to give the impression that professionals occupy a clear and unassailable position.
While this may be a laudable aim, it is an unfortunate trait of our professions that their high ideals
of protecting the interests of clients and the public sometimes take second place to the survival
of the professional institution. The position of a professional institution, therefore, should always
be questioned. The preferred role of a professional may not always match up with what is
required for any given project.
Indeed, professions often seek to develop a professional identity that is uniform and consistent.
The difficulty with this is that the pursuit of a professional identity can get in the way of providing
a proper service to a client. Andrews (1983) observed that as specialized institutions proliferate,
institutional survival matters more than the appropriateness to changing circumstances of fiercely
protected roles. The professions tend to establish a baseline of services to be offered by their
members and recommended fee scales often accompany this. In this way, the professions manage
to limit the type of work undertaken by their members. A more important limiting factor is the
professional indemnity insurance policy which underwrites the activities of a professional.
The insurers will only underwrite specific risks and this generally means that professionals who
step outside the boundaries of their institution’s typical work will be uninsured. Generally, clients
would be unsettled about employing professional advisors who had no indemnity insurance
cover. The expected roles, then, can be discovered by looking at the relevant institutions’

published ‘conditions of engagement’ or ‘professional service agreements’, phrases used to

describe the contract between consultant and client.
2.8 Professional Services Agreements
The current trend in documentation for appointing consultants to project teams is propelled by
the momentum that began to gather pace. There are a few basic principles that seem to underpin
the modern consultants’ contract. Most have dropped the title ‘conditions of engagement’ and
are now called variously professional services agreement, professional services contract or
simply agreement. There have been considerable efforts on the part of those who draft standard-
form contracts to create the kind of integration between the various participants’ contracts called
for by Latham. This has resulted in a common pattern of defining the services separately from
the contractual conditions that govern the provision of those services. It must always be
remembered that the conditions governing the relationship are separate and distinct from the
specific duties that a consultant will undertake.
Thus, the same set of conditions, at least in theory, could cover a variety of consultants’
appointments, with each having a different set of duties and responsibilities within the project.
Professional services agreements serve various purposes. First, they contain the detailed
conditions of a contract between two parties (but they do not form a legal contract; this is
generally contained in a memorandum of agreement which incorporates the conditions). In this
they are convenient to use because appointments can be made on the standard conditions simply
by referring to them. There is no need to draft a specific appointment agreement. Further, so long
as there is scope for amending them, they can also provide a useful starting point for negotiations
about duties for a particular project.
From the point of view of the professional institutions, standard conditions provide a framework
for identifying the duties of the professional. By unifying appointments, similar services are
offered by all members of the profession. In the sense of providing a set of rules for conduct,
these documents fulfil the most laudable aims of a profession. They discourage unscrupulous
practitioners from offering second-rate services. Such unification enables institutions to negotiate
professional indemnity insurance policies on behalf of all those who employ the standard
conditions.

Another function fulfilled by a formal agreement for services is that of attributing fees to various
aspects of the work. By listing the activities to be done sequentially, those activities can be
grouped together so that parts of the fee can be paid at each of the major steps in the consultants’
involvement. A potential problem arises when different professions have their own professional
service agreements, and this may lead to confusion. It can be unproductive and cause wasted
work or delay because the purposes behind writing the standard terms have been to standardize
the relationship between the client and the consultant. This misses the significance of teamwork
in construction. It is essential that the team acts as a whole, and the fragmentation created by
differing terms of appointment can compromise.
As stated above, these standard professional service agreements are contracts and thus subject to
the rules of contract law. The terms within them relate to the obligations of the parties, and detail
the services to be carried out and the payments to be made for them. These terms need to be
incorporated into the contract between the parties, for they are not a contract in themselves. The
general situation is that they will not be automatically incorporated (i.e. implied) unless the client
is familiar with the usual relationship between client and architect and has engaged similar
professionals before on similar terms. Otherwise, the terms must be expressly included by
reference to them from the document that forms the contract.
This can be done by using a memorandum of agreement, signed by the parties, which refers to
and expressly incorporates the conditions of engagement or professional service agreement.
Indeed, most standard agreements.
2.9. ARCHITECT
The accepted role of the architect has long been to design the building, advise on the selection
and appointment of other consultants, manage the design, select and appoint the contractor and/or
sub-contractors, and generally represent the client’s interests as far as possible. Coupled with
these responsibilities is the duty to act as an independent certifier under certain standard forms
of contract, where the architect has to judge certain issues impartially. There are some apparent
and inherent conflicts in this combination of responsibilities,. It has been suggested that the skills
necessary to be a good designer are not the same as the skills necessary to be a good manager.

This, it should be said, flatly contradicts the idea that the architect can only design effectively
when he or she has the highest authority in the project. Unfortunately, many people have come
to interpret the former notion as meaning that the skills necessary for designing are incompatible
with management skills, and that one person cannot possibly do both. This is clearly a very
different view from the latter. The two roles are different, but not necessarily incompatible.
However, not all people can develop both sets of skills with equal facility, and it has become
clear that there are some architects who are better at design than management, others who are
better at management, and still others (the most valuable type) who are equally competent at
both.
Similar arguments apply to the role of engineers and their responsibilities in civil engineering
projects. An example of the conflicts within the roles of the architect is the task of managing the
design process. There is a view that design is the total process of integrating all of the constraints
on a planned building project in such a way as to optimize as many of them as possible. This
explains why design and management need to be integrated in one person. There is another view,
equally compelling, which sees management as the function that integrates design information
from all of the constraints and other designers. This view suggests that the interaction between
groups of professionals, successfully managed by one who is not ‘designing’ will result in the
optimization of as many constraints as possible. This is not the place to indicate the ‘correctness’
of one view or the other. The aim here is simply to raise these issues so that the reader may
recognize the arguments.

2.10 Typical Conditions in Professional Services

2.10.1. Agreements
While there are many standard agreements for the appointing consultants, the aim here is merely
to summarize the common threads in them, using SFA/99 as the basis and highlighting the major
differences exhibited in other documents. Other agreements mentioned are the NEC Professional
Services Contract 2nd edition (Institution of Civil Engineers 1998) and GC/Works/5 General
Conditions for the Appointment of Consultants (Property Advisors to the Civil Estate 1998a).
2.10.2. Defining the appointment

In SFA/99 the appointment is defined with recitals and articles of agreement, in a pattern familiar
to users of JCT building contracts. The appendix and schedules are placed immediately after the
articles of agreement (rendering the term appendix somewhat confusing). The appendix records
data specific to the project, such as the law that applies to this contract, time limits, limit of
liability, the amount of professional indemnity insurance, and the names of the adjudicator and
arbitrator. The schedules then contain the detail of the services to be performed by the architect.
Schedule 1 contains a description of the project and site, schedule 2 indicates the roles that the
architect will perform, as well as a pre-printed list of the roles not usually performed, schedule 3
identifies the fees and expenses and schedule 4 (very usefully) identifies the other appointments
made by the client for the purposes of the project.
This last schedule leaves spaces to insert the names and addresses of the project manager,
planning supervisor, quantity surveyor, structural engineer, building services engineer, site
inspector and others. It also identifies which elements of the building are to be designed by
participants other than the architect. A services supplement identifies in some detail the design
and management services to be provided by the architect, with advice in the guide that this can
be tailored, deleted or replaced depending upon the circumstances of the project. A slightly
different approach is taken in GC/Works/5, which begins with a single section called
appointment particulars, which seem to be more detailed and include the description of services
and the particulars of other consultants appointed by the client. This documentation also includes
considerable detail on the tendering procedure to be adopted for the appointment
To the project, and the relationship between price and quality for the purposes of each project.
Fees and expenses are identified as well as the documents and other information that comprise

the tendering documents. Interestingly, a significant amount of detail is called for in the model
form for the consultant’s tender, which includes the formal offer as item 27, incorporating by
reference GC/Works/5 General conditions for the appointment of consultants. The memorandum
of agreement (Model Form 10) is then a very small document simply recording that the parties
have agreed the particulars.
The NEC Professional services contract contains several pages of data provided by the employer
identifying the employer, adjudicator, the law applicable to the contract, the language of the
contract and the health and safety requirements (these latter items making clear that the
agreement is not solely for use in the UK). The parties’ main responsibilities are outlined as well
as contract specific data such as the timing of certain events and intervals. There is also a page
of data provided by the consultant identifying who it is, including named individuals who will
perform the work.
2.10.3. Definition of services
As stated earlier, the conditions governing the relationship between consultant and client are
generally separate from the detailed description of the precise services to be undertaken under
the agreement. SFA/99 typifies the current approach to this, by the use of schedules in the
agreement. The first of these describes the client’s requirements in order to form the basis of the
architect’s services and fees. The second provides for the specific services to be listed and for the
sake of clarity also lists a range of activities that are not normally undertaken, unless specifically
identified.
The third schedule contains details of fees and expenses, and the fourth lists the other
appointments that will be made under separate agreements by the client, listing project manager,
planning supervisor, quantity surveyor, structural engineer, building services engineer, site
inspector/clerk of works and ‘other’.

As mentioned above, GC/Works/5 utilizes a detailed schedule of appointments particulars

(Model Form 1), which includes reference to the services to be provided, which will be listed in
an annex and incorporated by reference. As in SFA/99, there is also reference to the services that
will not be provided. The NEC Professional services contract includes in the data provided by
the employer two entries of relevance here. One entry states the services are … and another states
the scope is in … The contract data sections are intended to be reproduced (but not photocopied)
and completed, so the amount of space left in the pre-printed version is not to be taken as
indicative of the amount of detail required.
The guidance notes suggest that the services should be described briefly, apparently more for the
purposes of identification, rather than obligation. The scope is to be identified in a separate
document, merely incorporated here by reference. The guidance notes provide a useful table
collating all the references from the contract to the scope of the consultants’ work. Employer
commissions design In general contracting, the designers act on behalf of the employer in
converting the employer’s requirements first into a brief and subsequently into a workable
design. The processes of briefing and design are complex, difficult and often poorly understood.
By developing a brief and a design philosophy for a project, an architect acts not simply as an
agent of the client but also as a representative of the architectural profession exercising
judgements and guarding the interests of the public (see Section 1.8). In the light of this, the idea
that the employer instructs the architect and the architect converts these instructions into a design
is a gross over-simplification. The preparation of a brief involves an intensive and comprehensive
employer selected sub-contractors are called nominated sub-contractors. In IFC 98 they are called
named sub-contractors. There are no provisions for employer-selected sub-contractors in the
Engineering and Construction Contract.

A ‘Prime Cost Sum’ is a part of the work that is not priced by the tendering contractor. The tender
documents simply tell the contractor how much money to include for such an item so that
overheads and profit can be added. When the work is executed the contractor is paid whatever
the item ultimately costs.
2.10.4. General Contracting
Dialogue between designer and client, in the context of the project’s environment. Therefore, the
involvement of the designer in the subsequent construction process is inevitable because of the
impossibility of converting the overall requirements into a simple set of instructions. If the
employer’s requirements can be given in a simple way, then the designer may be redundant and
general contracting is probably unsuitable. Although civil engineering projects are not generally
subjected to aesthetic arguments, the relationship between a civil engineering project and its
environment places civil engineers in a similar position. The involvement of the lead designer in
the production process is necessary to ensure that the contractor’s work is in accordance with the
specifications, to revise and refine the design where necessary and to respond to the contractor’s
requirements for guidance and information.
2.10.5. Experience of the lead designer
The lead designer has much flexibility in choosing the design team. Typically, consultants with
significant input will be in direct contract with the employer but often the lead designer will
subcontract parts of the design to specialists. The wide range of design inputs demands good
coordination and integration skills, as well as good communication skills. In addition, the lead
designer must develop a clear understanding of the employer’s requirements and, in the case of
commercial projects, a clear understanding of the way that the project fits into the employer’s
business strategy. Such a complex role demands a wide range of skills. Although many architects
and engineers have proved themselves worthy of this task, the employer must be clear about the
kind of person that is needed and must use careful selection procedures. Clients should be wary
of design practices that use the senior partners to impress clients and earn commissions, but more
junior staff to actually undertake the work.

2.10.6. Complete design

It is customary to choose a contractor by opting for the one with the lowest price. As stated
earlier, one of the reasons for a standard method of measurement is to ensure that bills of quantity
are prepared in a consistent way. This bill ensures that all bidders calculate their prices on the
same basis. However, a comprehensive bill (i.e., fully measured bill) can only be prepared from
a complete design but there are techniques to deal with incomplete design. For example,
quantities need not be precise, in which case a bill of approximate quantities can be used. There
is a version of JCT 98 available for this. In civil engineering contracts approximate quantities are
the norm. Because the final quantities are not known until after the work is executed, this is
termed a re-measurement contract: the work is specified in approximate measure for the purposes
of tendering and after execution is measured again for the purposes of payment.
By their nature, civil engineering contracts, unlike building contracts, cannot be specific about
everything. For example, ground conditions are not clear until the ground is actually excavated.
Finally, there are also without quantities versions of JCT 98 for use where the design is so
undeveloped that there are no measured quantities at all. Although there are such versions of
general contracts to enable bidding to proceed on incomplete information, they should not be
taken on lightly and the use of alternatives should always be explored.
2.10.7. Involvement of quantity surveyor
The importance of the bills of quantity underlines the need for quantity surveying expertise in
general contracting. Quantity surveyors contribute cost planning, cost control, procurement
planning and contractor selection expertise. In combination, these enable the choice of contractor
to be dictated by lowest price bidding. The training and experience of quantity surveyors enables
them to focus on financial aspects above all others. Indeed, clients for whom finance is a priority
sometimes appoint a quantity surveyor as a project manager to oversee design and construction.
However, it is important to remember that there is more to construction than finance. The project
team must be balanced in a way that matches the priorities for a project. The particular tension
between design, finance and workmanship, represented by general contracting, is only one of
many. A client who wishes to have quantity surveying skills in a central role, balancing these
against design and craft criteria, is well placed to take advantage of general contracting.
Other balances require different approaches.

2.10.8. Price as the basis of selection

There are many ways of configuring the pricing of work in a general contract. For example, as
mentioned in Section 3.2.3, it is typical for ICE 7 projects to involve re-measurement in that the
quantities in the bills are intended only as a guide. However, if firm quantities are used (as in
JCT 98 with quantities), then the work is not re-measured after execution but the contractor is
paid on the basis of the quantities in the bill, not the quantity actually executed. The only
exception to this is work that has been subject to a variation instruction (see Section 14.3). IFC
98 may be used with bills, but not necessarily. In general, these contracts can be used with any
of a wide range of pricing mechanisms. However, one thing remains constant. In all cases, the
contractor offers to do the work for a price, not for reimbursement of cost. A contractor who
estimates too low is held to the bargain, even if the job runs at a loss. Similarly, for a contractor
who estimates too high, the bargain still holds, despite the employer paying over the odds.
This principle underlies some important decisions in the courts that demonstrate reluctance to
intervene in what turns out to be a bad bargain (see Section 9.3.2). It applies as much to every
rate in a bill as it does to the whole contract sum. This is one reason that the bills play such an
important role in the management of construction contracts. An employer who does not wish to
have the contract governed in this way should use an alternative procurement method.
2.10.9. Employer-selected sub-contractors
The grantee is responsible for obtaining bids and referrals from subcontractors on behalf of the
participating families. In most cases the grantee will coordinate all the work involved in receiving
the bids and referrals and then will relay the information to the participants to determine who is
the lowest responsible bidder and if the bidder is credible. The grantee should not be confused as
being a general contractor; their role is just as a coordinator, organizer, and advisor to the
participants. Before the bidding process can even start, the grantee or the participant must provide
the subcontractors that are going to be bidding the job a complete copy of the blueprints and
specifications and any other data involved in the subcontracted task. For competitive bidding to
be a valid procedure, all competitors must bid under exactly the same conditions for an identical
scope of work. There are no laws stating that certain contractors cannot perform specified work
other than requiring them to have the proper license. So be very careful in qualifying a
Subcontractor by local directories.

Prior to obtaining bids from prospective subcontractors, the grantee should schedule interviews
with them to discuss the self-help program and how it differs from conventional home building.
The grantee should clearly outline the family participation in the construction process, families
are required to do 65% of the labor tasks. The grantee should make the subcontractor aware that
the timing between certain tasks will generally take longer than in typical market home building
and that they will need to price accordingly. Some contractors will need to submit two proposals,
one for rough in phase and one for final completion.
After examining the drawings and specifications, some subcontractors may want to visit the
jobsite. When submitting a task for bid to subcontractors, always tell them the location,
availability of electric, water, telephone, local ordinances, storage of equipment, delivery
information, topography and drainage, etc. Give subcontractors access to all available
information concerning the project. Always make sure that you give the subcontractor a firm date
by which you need the bid.
All too often subcontractors wait until the last minute before giving an estimate. Make sure the
subcontractor is aware of the length of the project so they can guarantee pricing accordingly.
Make sure references are acquired from other jobs where similar work was performed. Once a
subcontractor is selected, each Self-Help family must sign a construction contract with each
subcontractor. The contract should also list the grantee’s requirements that the subcontractor
must comply with and specify the conditions under which payment may be withheld or another
contractor substituted.
The subcontractors’ work should be inspected carefully. Errors or changes can be handled with
little trouble and time if dealt with right away. Subcontractors are sometimes requested by
owner/builders to grant extensions of the acceptance time. Subcontractors are generally willing
to oblige, but sometimes in their eagerness to get the job they will agree to such an extension
without giving the matter sufficient consideration. Such action means that the completion date of
the project will be set back by a length of time equal to the extension of the acceptance period.
Due to increased wage and material costs, a subcontractor may not be willing to extend the
original acceptance period. When increased costs are anticipated and the subcontractors do not
wish to absorb them, they should quote the required additional amount in exchange for extending

the acceptance period. Problems with subcontractors usually evolve from lack of communication.
Make sure that contracts and payment schedules have been clearly defined. If the subcontractor
is not fulfilling the contract or the work is poor quality and all attempts to work things out have
failed then you have no choice but to release the subcontractor from the job. Hopefully having to
terminate a subcontractor is the last resort, particularly since replacing them after work has begun
can be even more difficult. Obtaining bids and choosing the right subcontractor can be quite an
experience. Good preparation is the answer to a successful project.
There are several circumstances under which an employer would wish to select a sub-contractor
with whom the main contractor must enter into a contract (Hughes, Gray and Murdoch 1997). In
some cases, the employer requires control over the selection of certain specialist sub-contractors
 To ensure the chosen sub-contractor has a proven track record for good work.
 To use a proprietary system chosen by the employer.
 To use a sub-contractor with whom the employer has developed a long term
business relationship.
 To base the selection of the sub-contractor on a basis other than lowest bid. In
other cases, the employer may make the selection because of the needs of the
design team or because of the nature of the construction process:
 Some specialist sub-contract work requires a longer lead time than the project
construction programmer would allow, therefore, such work must be started before
the main contractor has been chosen.
 The design team may wish to ensure the quality of design input from a specialist
subcontractor.
 The designers and quantity surveyors may wish simply to increase their
professional influence over the details of the project.

2.10.10. Construction Planning & Scheduling

Time management is an important aspect of job control. If a construction project is to proceed
efficiently and be completed within the contract time, the work must be carefully planned and
scheduled in advance. Construction projects are complex, and a large job will involve literally
thousands of separate operations. If these tasks were to follow one another in single file order,
job planning and scheduling would be relatively simple, but this is not the case. Each operation
has its own time requirements, and its start depends on the completion of certain preceding
operations. At the same time, many tasks are independent of one another and can be carried out
simultaneously.
Thus, a typical construction project involves many mutually dependent and interrelated
operations that in total combination comprise a tangled web of individual time and sequential
relationships. When individual task requirements of materials, equipment and labor are
superimposed, it becomes obvious that project planning and scheduling are very complicated and
difficult management functions. The traditional basis for the planning and scheduling of
construction projects has been the bar chart. This graphical representation of work versus time is
a useful and convenient device for depicting an established schedule of construction operations
and recording its progress. The bar chart is very useful. Its unsurpassed visual clarity makes it a
very valuable medium for displaying job schedule information. It is immediately intelligible to
people who have no knowledge of CPM (Critical Path Method), or network diagrams. It affords
an easy and convenient way in which to monitor job progress, check delivery of materials,
schedule equipment and crews, and record project advancement. For these reasons, bar charts
will undoubtedly continue to be widely used in the construction industry.
Conventional bar charts can be quickly derived from a project schedule. Activities may not
always be the most desirable basis for bar chart preparation or usage. Simpler diagrams with
fewer bars and showing larger and more comprehensive segments of the work may be more
suitable for ordinary job applications. In such a case it is an easy matter to combine strings or
groups of activities into a single bar chart item.

Knowing where you’re going before you get there is half the battle; so don’t leave
Construction Schedules out of your plan. Despite having executed contracts and agreements with
subcontractors, one of the most common problems which still persists is getting the
subcontractors on the job when needed and keeping them there until the job is completed. Here
again is where the construction schedule comes in handy as a valuable management tool. If the
schedule is adhered to, the grantee can give subcontractors plenty of notice of when they will be
needed on the job. Both starting and completion dates can more accurately be negotiated.
To further maximize the usefulness of the construction schedule, on-site meetings should be
arranged with subcontractors prior to them starting their work to coordinate in detail the work to
be done, and during construction to review their progress and performance. Each subcontractor
should receive a copy of the construction schedule so that they are fully aware of the
organization’s construction interdependencies and time lines. Of course, there may always be
dilemmas that arise, but with a feasible construction schedule, and open and clear lines of
communication, problem solving becomes much easier. Following these simple guidelines will
minimize most of the problems that arise with subcontractors. Remember, clear communication
and prompt action is essential.

2.11. Contract Agreement

For the Procurement of Construction work
Procurement Reference No:

This Contract Agreement is made on the ............. day of the month of ................, 2015
between
SERADEF, and having its principal place of business BULE HORA, Tell +251 0462-20-39-
91/0462-20-90-23, Fax, 251-0462-20-46-84.(hereinafter called the “Public Body”),
And JARSO RETA BC incorporated under the laws of and having its principal place of
business at HAWASSA P.O Box-----------Tell.--------------------------/-------------------Fax------
--------- (hereinafter called the “Contractor”), of the other part
WHEREAS
(a) The Public Body invited bids for The Construction Of Animal Feed At Bule Hora
(hereinafter called the “Works”), and has accepted a Bid by the Contractor for the
provision of those Works in the sum of 4,814,528.01 /Four Million Eight Hundred
Fourteen Thousand Five Hundred Twenty Eight Birr And 01/100 Cent Only/ With Vat
(hereinafter called “the Contract Price”) in the manner and on the terms described herein.
(b) The Contractor having represented to the Public Body that it has the required skills,
personnel and technical resources, has agreed to carry out the Works on the terms and
conditions set forth in this Contract;
Now therefore the parties hereto hereby agree as follows:
1. The Agreement
1.2 In this Agreement words and expressions shall have the same meanings as are
respectively assigned to them in the Conditions of Contract referred to.
1.3 The following documents shall constitute the Contract between the Public Body and the
Contractor, and each shall be read and construed as an integral part of the Contract:

1. Contract Agreement, including all appendices;
2. Letter of Acceptance by the Public Body to the Contractor;
3. The Special Conditions of Contract;
4. The General Conditions of Contract;
5. The Bid Submission Sheet with Annexes;
6. Technical specifications;
7. The design documentation (drawings);
(a) For Unit-price contracts: The Bill of Quantities and Price Schedule (after
correction of arithmetical errors);
8.
(b) For Lump-sum contracts: The Breakdown of the Lump-sum Price (after
correction of arithmetical errors);
1.4 This Contract shall prevail over all other Contract documents. In the event of any
discrepancy or inconsistency within the Contract documents, then the documents shall
prevail in the order listed above.
1.5 In consideration of the payments to be made by the Public Body to the Contractor as
hereinafter mentioned, the Contractor hereby covenants with the Public Body to carry
out the Works and to remedy defects therein in conformity in all respects with the
provisions of the Contract.
1.6 The Public Body hereby covenants to pay the Contractor in consideration of the
provision of the Works and the remedying of defects therein, the Contract Price or such
other sum as may become payable under the provisions of the Contract at the times and
in the manner prescribed by the Contract.
In Witness Whereof, the Parties hereto have caused this Contract to be signed in their respective
names as of the day and year first above written.

For the Employer ---------------------------------- For the Contractor --------------------------

------
Name:_____________________________________
Position:__________________________________
Date: ________________________
WITNESS
Name Signature
1. __________________________ ___________________
2. __________________________ ___________________
3. __________________________ ___________________
B. Performance Security
(Bank Guarantee)
Date:
Procurement Reference No:

To:
Whereas (hereinafter “the Contractor”) has undertaken, pursuant to Contract No. Dated, to
supply (hereinafter “the Contract”).
And whereas it has been stipulated by you in the aforementioned Contract that the Contractor
shall furnish you with a security issued by a reputable guarantor for the sum specified therein as
security for compliance with the Contractor’s performance obligations in accordance with the
Contract.
And whereas the undersigned, legally domiciled in [insert complete address of Guarantor],
(hereinafter the” Guarantor”), have agreed to give the Contractor a security:-
Therefore We hereby affirm that we are Guarantors and responsible to you, on behalf of the
Contractor, up to a total of and we undertake to pay you, upon your first written demand
declaring the Contractor to be in default under the Contract, without cavil or argument, any sum
or sums within the limits of as aforesaid, without your needing to prove or to show grounds or
reasons for your demand or the sum specified therein.
This security is valid until the day of,
This guarantee is subject to the Uniform Rules for Demand Guarantees, ICC Publication No 458.
Name:
In the capacity of
Signed:
Duly authorized to sign the Security for and on behalf of:
Dated on ____________ day of __________________, _______

C. Advance Payment Security

(Bank Guarantee)
Date:____________________________________
Procurement Reference No: ____________________________
To:__________________________________________
In accordance with the payment provision included in the Contract, in relation to advance
payments, (hereinafter called “the Contractor”) shall deposit with the Public Body a security
consisting of, to guarantee its proper and faithful performance of the obligations imposed by said
Clause of the Contract, in the amount of.
We, the undersigned , legally domiciled in (hereinafter “the Guarantor”), as instructed by the
Contractor, agree unconditionally and irrevocably to guarantee as primary obligor and not as
surety merely, the payment to the Public Body on its first demand without whatsoever right of
objection on our part and without its first claim to the Contractor, in the amount not exceeding .
This security shall remain valid and in full effect from the date of the advance payment received
by the Contractor under the Contract until, [insert year].
Name:
In the capacity of
Signed:
Duly authorized to sign the Security for and on behalf of:
Dated on ____________ day of __________________, _______
2.5. Contract document

A Contract is a written agreement between or among two or more parties whereby each party
promises to do or not to do something and agrees to terms set out in the contract. A written or
spoken agreement between two or more parties intended to be enforceable by law.
The purposes of a contract are to: enforce law, clearly show the Terms and Conditions of
contracts, clearly show the Rights, Obligations and remedial rights of contracting parties and

clearly show handling provisions for price, completion time, requirement variations adjustment
systems, Changes in cost and dispute resolution mechanisms.
There are four ways in which a contract may be discharged.
A. By performance:
A construction contract will be discharged by performance on the part of the contractor when all
the works has been completed including maintenance during defects liability period, and when
the Engineer has issued all the required certificates and on the part of the employer when he has
paid all the payments due.
B. By agreement:
A contractual obligation may be discharged by a subsequent binding contract. Order of Contract

Documents
C. By Frustration:
Occurs when the contract was executable at time of agreement but subsequent events, over which
the contracting parties have no control, make it impossible to fulfill the contract obligations. The
Ethiopian civil code deals with frustration under force majuere.
D. by Acceptance of breach:
Breach of a contract occurs where, without justification, a party either fails to perform its
contractual obligation expressly or by implication.
Invalidation of a Contract
Invalidated contract is a contract which is not binding, the two main factors that can invalidate a
contract are
Mistake:
• The situation in which an ‘offer’ made by one party and its ‘acceptance’
by the other do not actually corresponds.

Misrepresentation (False statement):
• The making of an untrue statement relating to fact which includes another

party to enter into contract.
• When misrepresentation occurs, the injured party can either state or reject the contract.
Conditions of Contract
Are terms in which parties in the contract are governed or administered with, these promises and
terms shall be enforceable by law and incorporates the rights and obligations of each contracting
parties. Conditions of contract are often conventionally described as being either “general” or
“special
General Conditions of Contract
Specify the manner and the procedures for implementing the provisions of the construction
contract according to the accepted practices with in the construction industry. These conditions
are intended to govern and regulate the requirements of the formal contract or agreement.
General conditions state about:

Responsibilities of the owner
Responsibilities of the contractor
Administration of the contract
Subcontractors
Construction by owner or by separate contract
Change in the work
Time
Payments and completion
Protection of persons and property
Insurance and bonds
Uncovering and correction of works
Termination or suspension of the contract

The priority among the documents is as follows:
1) Contract Agreement
2) Letter of Acceptance
3) Tender and Notice to Tenderer/Appendix
4) Conditions of Contract Part (II)-Special Conditions
5) Conditions of Contract Part (I)-General Conditions
6) Specifications
7) Drawings
8) Priced Bill of Quantities
2.12. Description of the different Processes

It is intended to provide procedural and contractual guidance and assistance to resident site staff
undertaking supervision of construction contracts. They are also intended for reference by
the Team Leader of the Consultants acting for and on behalf of the Engineer. It does not
generally address those administrative procedures which are specific to the Company
rather than the contract. These are the subject of separate instructions. Site staffs are expected
to establish and implement the procedures and systems advocated here, or to adopt other
systems and procedures which are equally effective with the approval of the Team Leader.
The principals involved in the supervision of most re-measurement contracts are broadly the
same, although this has been based specifically on the FIDIC General Conditions of Contract. It
is not intended that this should simply be a reiteration of the FIDIC Conditions of
Contract, but rather should supplement the Conditions of contract and should emphasize
the actions and requirements which are considered to be especially important, particularly
as they affect the conduct of the Engineer and the Resident Engineer. In the text the
expressions “Clause” and “Sub-Clause” refer to Clauses and Sub-Clauses of the FIDIC

Conditions of Contract. The expressions “Section”, “Item” and “Appendix” generally refer
to sections, numbered items and appendices of the context should clearly indicate otherwise.
2.12.1. General Works Management Processes
The General Works Management Processes describe the organization and responsibilities of the
Engineer. The attention of those acting as Engineer, Engineer’s Representative or acting on
behalf of the Engineer, is particularly drawn to the need to issue specific instructions to
site staff on: correspondence and data to be copied to the Engineer throughout the
duration of a contract; and the storage and disposal of Site records at the close of a
contract. Other processes describe the organization the Engineer must establish in order to
function efficiently.
Particular emphasis is laid on the need to establish an efficient establishment, effective

record keeping and to ensure good communications between members of his own staff
and with the Contractor and the Engineer. Health and Safety, Environmental protection and
Social Control are major challenges, recognized within Egis International. In this context,
beyond making sure of the regulatory compliance applicable to its activities, Egis
International demands that its employees be aware and informed of the Health and Safety
procedures, environmental protection and social issues involved by the contract in order to
develop a homogeneous awareness within the contractor’s company.
2.12.2 Works Supervision Management Processes
Works Supervision Management Processes describe how to proceed to achieve client’s
requirement during the works supervision, in compliance with the General Conditions of
the Contract. It deals with the project start, organization of management meetings, control
of Contractor’s documents (schedule, drawings, procedures, management plan of different
types, etc…), time control, completion and take-over of works including defect reliability
Procedure.
2.12.3. Quality Management Processes

Quality Management Processes describe how the Engineer shall manage Works Quality in
accordance to the general request of the bidding documents and technical specifications. They
deal with the Contents of the Contractor’s Quality Management System, the audits the Engineer

shall carry out on Contractor’s QMS, Works nonconformity Management and Engineer’s
control plan.
2.12.4. Financial Management Processes

The objectives of financial management process are to:
Strictly avoid any unexpected event regarding the cost of a project, Ensure that every possible
effort is made to keep the project’s costs within the budget , Take advantage of any
opportunity to decrease the project’s costs without changing its scope, quality and schedule,
Manage change in the design involving variation order ,Cost control is expected to provide the
most reliable information possible at a given time for decision making. And it is intended to
anticipate events in order for the project team to develop relevant actions to address arising
issues before their impact cannot be mitigated anymore.
2.12.5. Evaluation and improvement
The Consultant wishes to deliver services with a quality level complying with the
Contract’s requirements.
2.12.6. Monitoring
Client’s satisfaction: Client’s satisfaction is monitored during project review meetings
(Client / Consultant). Minutes are prepared, and the status of actions decided during the last
meeting is reviewed.
Audit: Contractor’s audits shall be performed. (Cf. Procedure P3.2). Internal audit would be
performed at the request whether of the Egis International Head Office or the Employer
Monitoring of processes: The relevance of the QAP processes are discussed by the Team Leader
and the Project director.
Monitoring of outputs: The quality of the services is regularly discussed internally by the
Consultant’s key staff. The minutes are prepared by the Team Leader and forwarded to the p
Improvement
Continuous improvement: The Consultant improves the efficiency of the QAP on a
continuing basis during the lifetime of the Project, using the approach defined in the
QAP, the result of audits, the analysis of data as well as the preventive and corrective
actions.

Preventive action: The Consultant implements actions in order to resolve the causes of
potential internal non-conformities. These actions are designed in internal meetings following
observations made by the Consultant’s staff.
Corrective action: The Consultant implements actions in order to resolve non-conformities.

These actions are designed on case by case basis.
2.12.7 Methods Statement

Prior to the commencement of important item of work and activity (which may be listed by the
Engineer and given to the Contractor), the Contractor is required to submit for approval
by the Resident Engineer a “Methods Statement”, which describes the methodology as to
how he (the Contractor) plans to carry out that item of work/activity in accordance with
the Specifications. The Methods Statements shall be developed to a degree of detail depending
upon:
(a) The intricacy of operations for carrying out the proposed construction activity; and
(b) The extent to which the methodology is detailed out in the Specifications.
The Methods Statement shall describe the equipment to the deployed (size/number/capacity),
the sequence of operations, field trials if any are involved, design of mixes, job-mix-
formulae, temporary works erection and launching, traffic management plan, safety
precautions, environmental protection measures etc. The Methods to be furnished by the
Contractor in respect of each major activity shall be step-wise sequencing of tasks, and
should be detailed and meaningful. The Engineer shall either straightway give his consent or
ask for modification before acceptance. The following lists out some important activities, and
details out what would be expected.
1.13. Contract
In the Contract, the following words and expressions shall have the meanings stated below:
Accepted Contract Amount is the amount accepted by the Parties as of the Contract Effective
Date and stated in Schedule 1 [Contract Details] for the execution of Works and is to be paid/or
adjusted in accordance with the Contract.

Advance Payment Certificate means a Payment Certificate issued by the Engineer for advance
payment under Sub-Clause 14.2 [Advance Payment].
Advance Payment Security means the security (or securities) to be provided under Sub-Clause
14.2 [Advance Payment].
Affiliate means:
(a) The ultimate parent company of the Contractor;
(b) Any company controlled by that ultimate holding company;
(c) Any company controlling the Contractor; or
(d) Any company controlled by the Contractor.
For the purposes of this definition control means that a party possesses, directly or indirectly ,
the power to direct or cause the direction of the management and policies of the other party ,
whether through the ownership of voting shares, by contract or otherwise, and the terms ‘controls
‘and ‘controlled ‘shall be interpreted accordingly .
Author means any person, including a relevant employee of the Contractor or a Subcontractor
or other contributing person, who is an author of any Contractor's Documents, which are assigned
or licensed to the Employer under the Contract.
Authority means all local, regional, territorial, free zone, municipal government, ministry ,
governmental department, commission, board, bureau, agency , instrumentality , executive,
judicial or administrative body , recognized by the United Nations and having jurisdiction over
the Works and/or the Contractor as well as its Affiliates.
Auxiliary Works means those works that form, or will form, part of the Project set out in the
Specification, that are connected to, or otherwise interface with, the Works, and will be designed,
supplied, constructed, commissioned and/or tested by third parties under separate contractual
arrangements with the Employer.

Base Date means the date twenty-one (21) days before the latest date for submission of the
Tender. Bill of Quantities means the document set out in Schedule 4.1.A [Bill of Quantities].
Claim means a request or assertion by one (1) Party to the other Party for an entitlement or relief
under any Clause of the Conditions of Contract or otherwise in connection with, or arising out
of, the Contract or the execution of the Works.
Commencement Date means the date by which the Contractor shall commence the execution of
the Works (including, without limitation, mobilization and procurement) as notified under Sub
Clause 8.1 [Commencement of Work].
Complete has the meaning given in Sub-Clause 10.1 [Taking Over].
Compliance Verification System means the compliance verification system to be prepared and
implemented by the Contractor for the Works in accordance with Sub-Clause 4.8 [Quality
Management and Compliance Verification Systems].
Conditions of Contract or these Conditions means these General Conditions as amended by

the Particular Conditions (if any).
Contract means the Instrument of Agreement together with these General Conditions, the
Particular Conditions (if any), and all the Schedules and documents (if any) which are listed as
forming the Contract in the Instrument of Agreement.
Contract Effective Date means the date of the latest signature by the Parties and on which the
Contract comes into force and effect as stated in the Instrument of agreement.
Contract Price means the price for the execution of the Works defined in Sub-Clause 14.1
[Contract Price] and includes any adjustments to the price made in accordance with the Contract.
Contractor means the entity named as the "Contractor" in the Instrument of Agreement and the
legal successors in title and permitted assignee of such entity.

Contractor Background Intellectual Property Rights or Contractor Background IPR

means IPR owned or licenced to the Contractor which exist prior to the Contract Effective Date
and are used by the Contractor in carrying out the Works or otherwise made available to the
Employer under or in connection with this Contract.
Contractor's Documents means all documents, drawings and sketches, maps, plans,
photographs, specifications, calculations, digital files, reports, computer software, databases,
manuals, as built documents, models, three-dimensional works pertaining to geography or
topography or other architectural works, technical documents and any other Copyright Works
prepared by or on behalf of the Contractor for the benefit of the Employer pursuant to the
Contract. Additionally , Contractor ’s Documents shall comprise the documents: stated in the
Specification; required to satisfy all permits, permissions, licenses and other regulatory approvals
which are the Contractor ’s responsibility under Sub-Clause 1.12 [Compliance with Laws]; and
others as listed under clause 10 [Employer’s Taking Over] and Sub-Clause 4.1[Contractor’s
General Obligations], where applicable.
Contractor's Equipment means all apparatus, equipment, machinery, construction plant,

vehicles and other items required by the Contractor for the execution and completion of the
Works and the remedying of any defects. Contractor’s Equipment excludes the T emporary
Works, Plant, Materials and any other things intended to form or forming part of the Permanent
Works as well as Employer’s Equipment (if any).
Contractor's Personnel means the Contractor's Representative and all personnel the Contractor
utilizes on the Site, or other places where the Works are being carried out, which may include
the staff, labor , agents and other employees of the Contractor and of each Subcontractor and any
other personnel assisting the Contractor in the execution of the Works.

Contractor's Representative means the person identified as such in Schedule 1 [Contract

Details] or appointed from time to time by the Contractor under Sub-Clause 4.3 [Contractor's
Representative],who acts on behalf of the Contractor.
Convention on the Privileges and Immunities of the United Nations means the convention
adopted by the General Assembly of the United Nations on 13 February 1946, which defines and
specifies numerous issues relating to the status of the United Nations, its assets and its officials,
in terms of the privileges and immunities that must be granted to them by its Member States.
Convention on the Rights of the Child means the convention adopted by the General Assembly
of the United Nations on 20 November 1989, which defines the civil, political, economic, social
and cultural rights to which all children everywhere are entitled.
Copyright Works means any copyright works forming part of the Contractor's Documents or
any other documentation which the Contractor is required to provide to the Employer or the
Engineer under the Contract.
Cost means all direct and reasonable expenditure necessarily incurred in connection with the
execution of the Works by the Contractor but does not include non-Project specific overheads,
profit or loss of profit.
Cost plus Profit means Cost plus the applicable percentage for profit stated in Schedule 1
[Contract Details] (if not stated, five (5) per cent). Such percentage shall only be added to Cost,
and Cost plus Profit shall only be added to the Contract Price, where the Contractor is entitled
under a Sub-Clause of these Conditions to payment of Cost plus Profit.
Country means the country in which the Site (or most of it) is located and where the Permanent
Works are to be executed.
Date of Completion means the date stated in the Taking-Over Certificate issued by the Engineer;
or, if Sub-Clause 10.2 [Taking Over of the Works and Sections] applies, the date on which the
Works or Section are completed in accordance with the Contract; or, if Sub-Clause 10.3 [Taking
Over of Parts of the Works] or Sub-Clause 10.4 [Interference with Tests on Completion] applies,
the date on which the Works or Section or Part are deemed to have been taken over by the
Employer.

Day means a calendar day, unless provided otherwise.
Day work Schedule means the document included in Schedule 4.1.B [Day work Rates] (if any),
showing the amounts and manner of payments to be made to the Contractor for labor, materials
and equipment used for day work under Sub-Clause 13.5 [Day work].
Declaration on Fundamental Principles and Rights at Work refers to the Declaration on

Fundamental Principles and Rights at Work adopted by the International Labor Organization
(ILO) on 18 June 1998.
Defects List is the list of omissions, outstanding work and defects which are minor in nature and
do not prevent the operation of the Works and are identified in the Taking-Over Certificate
according to Sub-Clause 10.2 [Taking Over of the Works and Sections].
Defects Notification Period or “DNP” means the period for notifying defects and/or damage in
the Works or a Section or a Part (as the case may be) under Sub-Clause 1 1.1 [Completion of
Outstanding Work and Remedying Defects], as stated in Schedule 1 [Contract Details] (with any
extension under Sub-Clause
Extension of Defects Notification Period, calculated from the Date of Completion of the Works
or Section or Part.
Delay Damages means the damages for which the Contractor shall be liable under Sub-Clause
8.7 [Delay Damages] for failure to comply with Sub-Clause 8.2 [Time for Completion] and any
approved EOT.
Dispute means any situation where:
(a) One Party makes a claim against the other Party (which may be a Claim, as defined in these
Conditions, or a matter to be determined by the Engineer under these Conditions, or otherwise);
(b) The other Party (or the Engineer under Sub-Clause 3.5 [Agreement or Determination]) rejects
the claim in whole or in part; and
(c) The first Party does not acquiesce by giving Notice of dissatisfaction in Sub-Clause 3.5
[Agreement or Determination]; provided however that a failure by the other Party (or the
Engineer) to oppose or respond to the claim, in whole or in part, may constitute a rejection if, in

the circumstances, the senior representatives or the arbitrator(s), as the case may be, deem it
reasonable for it to do so. All disputes or disagreements include those arising out of or in
connection with the formation, performance, interpretation, nullification, termination or
invalidation of the Contract or the Works, or any other.
Drawings means: The Engineering Design Drawings depicting the designs and scope of
works are legal documents which form an integral part of the Contract, and the Contractor
is required to perform the work in accordance with them. Consequently, to achieve proper
administration of the contract the transmittal of the approved design drawings, and
subsequently submitted drawing related to “works” and “day works” orders, must be handled
with circumspection and properly recorded at all stages to avoid unnecessary disputes and
claims.
Employer's Documents means documents, drawings and sketches, maps, plans, photographs,
specifications, calculations, reports, computer software, databases, manuals, as-built documents,
models, three-dimensional works pertaining to geography or topography or other technical
design, technical documents and any other items owned by or licensed to the Employer and
provided to the Contractor by or on behalf of the Employer pursuant to the Contract.
Employer’s Equipment means the apparatus, equipment, machinery, construction plant and/or
vehicles (if any) to be made available by the Employer for the use of the Contractor in the
execution of the Works under Sub-Clause 2.4 [Employer-Supplied Materials, Employer’s
Equipment and Employer’s Facilities] but does not include Plant which has not been taken over
by the Employer in accordance with Clause 10 [Employer’s Taking Over].
Employer’s Facilities means the facilities such as buildings, utilities and premises, to be made
available by the Employer for use by the Contractor under Sub-Clause 2.4 [Employer-Supplied
Materials, Employer ’s Equipment and Employer’s Facilities] but does not include the facilities
which have not been taken over in accordance with Clause 10 [Employer’s Taking Over].
Employer’s Personnel means the Engineer and the Engineer’s Assistants described in Sub-
Clause 3.1 [Engineer’s Duties and Authority] and Sub-Clause 3.2 [Delegation by the Engineer]
and all of the respective staff, labor and other employees of the Employer; and any other
personnel notified to the Contractor, by the Employer or the Engineer, as Employer ’s Personnel.

Employer-Supplied Materials means the materials (if any) to be supplied by the Employer to
the Contractor under Sub-Clause 2.4 [Employer-Supplied Materials, Employer’s Equipment and
Employer’s Facilities].
Engineer means the person appointed by the Employer to act as the Engineer for the purposes
of the Contract and named in Schedule 1 [Contract Details], or any replacement person appointed
from time to time by the Employer and notified to the Contractor under Sub-Clause 3.4
[Replacement of the Engineer].
Engineer’s Assistant means the person assigned to be a resident engineer and/or consultants
and/or inspectors appointed to inspect and/or test items of Plant and/or Materials and/or Works
in accordance with Sub-Clause 3.2 [Delegation by the Engineer].
Extension of Time or “EOT” means an extension of the Time for Completion of the Works or
a Section (as applicable) under Sub-Clause 8.4 [Extension of Time for Completion].
Final Completion Certificate means the certificate issued by the Employer under Sub-Clause
1 1.9 [Final Completion Certificate].
Final Payment Certificate means the Payment Certificate issued by the Engineer, under Sub-
Clause 14.13 [Issue of Final Payment Certificate].
Final Statement means the Statement defined in Sub-Clause 14.1 1 [Final Statement].
Force Majeure is an exceptional event or circumstance occurring after the Contract Effective
Date:
(a) Which is beyond the Party’s control;
(b) Which is Unforeseeable and/or such Party could not reasonably have provided against before
the Contract Effective Date;
(c) Which, having arisen, the Party could not reasonably have avoided or overcome; and
(d) Which is not substantially attributable to the other Party.

General Conditions means this document entitled “Construction Contract for Major Works:
General Conditions of Contract”.
Goods means Contractor's Equipment, Materials, Plant and Temporary Works, or any of them
as appropriate.
Health and Safety Improvement Notice means a Notice to be issued under and in accordance
with Sub-Clause 4.7 [Health and Safety Procedures].
Health and Safety Management Plan means the Contractor’s Health and Safety Management
Plan (as may be updated and/or revised from time to time) which is submitted in accordance with
Sub-Clause 4.7 [Health and Safety Procedures].
Industry Best Practices means the practices which are generally engaged in or observed by
international construction industries with respect to works of a similar size, type, nature, scope
and complexity to the Works and which, with respect to any objective, may be expected, in the
exercise of reasonable judgment, to accomplish that objective in a manner consistent with
applicable Laws, reliability, safety, environmental protection, economy and expediency.
Instrument of Agreement means the document entitled “Construction Contract for Major
Works: Instrument of Agreement” signed by the Parties and forming part of the Contract.
Intellectual Property Rights or “IPR” means all IPR conferred by Law or equity and
subsisting anywhere in the world, including:
((i) copyright and related rights;
(ii) Inventions (including patents, innovation patents and utility models);
(iii) Confidential information, trade secrets, technical data and know-how , whether or not
confidential and in whatever form held, including formulae, design specifications, drawings,
data, manuals and instructions;

(iv) Designs;
(v) Trademarks, trade name, service marks and domain names; and
(vi) Circuit layout designs, semi-conductor topography rights and rights in databases, whether
or not any of these is registered, registrable or patentable;
(vii) Goodwill, rights to sue for passing off; and/or
(viii) Proprietary rights and any other IPR, in each case whether registered or unregistered;

Chapter two
2.0. Claim and dispute management in construction industry
2.1. Introduction
Although a construction project should be a mutually beneficial endeavor, the nature of the
industry inevitably leads to adversarial relationships that can culminate in disputes. Owners and
contractors are acutely aware of the capital they must commit to a construction project and the
adverse effect any increase in that capital commitment would have on their bottom lines. This
natural economic tension has led many in the industry to suggest joint venturing or partnering as
a way to lessen this tension and alleviate disputes. Regardless of the merits of these proposals,
the reality of the construction industry is that contractors and owners must be aware of and be
educated about claims and claims resolution procedures in order to protect their significant
capital investment. This book is dedicated to that proposition.
As a primer, this chapter provides an overview of the types of claims that may arise on any
construction project and, in general, the categories of damages and proof necessary to sustain an
award. Enough cannot be said of the importance of damages and their proof. Without proper
proof of damages, the best case imaginable on liability for a claim is of little value, regardless of
the forum in which It Is presented. Moreover, it is extremely unlikely that any negotiated
settlement will occur if there is no proof of damages. The cost of claim resolution will increase,
and the amount of any resultant recovery will decrease. The authors of this book provide the tools
and information necessary to reduce the likelihood of this result's occurring.
At the inception of every construction project, parties are enthusiastic and optimistic. They are
confident of their ability to fulfill their respective obligations under the contract documents while
they mutually benefit from the project. Unfortunately, this optimism is often dashed, sometimes
very early in the project. Immediately, the contract documents are reviewed with a fervor and
intensity previously considered unnecessary and unwarranted. Yet these documents define the
primary relationship between or among the parties and form the basis, in general, for all claims.
Assuming the typical contractual arrangement that occurs between a contractor and owner, this
chapter provides an overview of the types of claims that generally arise out of the construction
contract from both the contractor's and owner’s positions. Most construction disputes include
some, if not all, of the types of contractual claims discussed here.

2.2 Contractor Claims

In bidding any construction project, a contractor assumes certain things to be inherently correct.
The contractor assumes that the scope of work has been appropriately defined, that the contract
specifications, designs, and contract drawings have been drafted correctly, that the owner has
fulfilled any conditions necessary for the contractor to begin work, and that the site conditions
are as represented by the owner or as inspected by the contractor. If these or other assumptions,
such as the completeness or correctness of the schedule, are not valid, then it is highly likely that
the contractor will make claims.
2.3 Scope Changes
Minor changes in the scope of work inevitably occur on every construction project, and virtually
every contract contains provisions governing them. A minor adjustment in the construction
drawings, a change in materials, potential value engineering, unanticipated field conditions, or a
design error, among a myriad of other reasons, can result in a scope change. Because such
changes are considered usual and normal in the construction industry, the parties often pay little
attention to the applicable provisions of the contract, the impact of the change on other work, and
the actual cost of the scope change. Scope changes provide some of the most fertile ground for
disputes in the construction Industry.
Formal change orders under the usual provisions of a construction contract can resolve certain
cost issues if scope changes occur. However, if a contractor has not realized the impact that a
scope change has on other work, a formal change order may result in the contractor's releasing
the owner from delay, disruption, or acceleration claims.' These claims may account for
substantially more recoverable cost than the actual cost of performing the scope change. It is
therefore Imperative that a contractor fully understand the change order provisions of the
contract' as well as the full impact of a scope change on other work.
When minor changes in the scope of work start escalating the parties should consider whether
obligations under the contract have mutually changed or not. This concept is known as cardinal
change. A cardinal change occurs when a party effect an alteration in the work so drastic that it
effectively requires the contractor to perform duties materially different from those originally
bargained for. "4 The determination of whether a change is a cardinal change is almost purely
factual in nature. The deciding factor may be increased cost of performances or the nature of the
extra work requested. In any event, a cardinal change is so profound that a contractor is not

limited to the provisions of the contract in recovering costs and damages' and may elect to refuse
to perform and hold the other party liable for breach of contract.
2.4 Acceleration, Delay, and Disruption Claims
Claims for acceleration, delay, and disruption on a construction project either involves a change
in the time anticipated for performance of the contract, or a change in the manner anticipated for
performance. Each claim has its own distinct elements required for proof, which are not
interchangeable.
Acceleration involves a speeding up of the work process. When a project is accelerated, the work
is accomplished in less time than was originally anticipated or budgeted. The contractor is usually
required to increase the number of work hours over a given period of time, either by working
overtime, hiring additional manpower, or both. Equipment and supervisory costs also necessarily
increase when a project is accelerated.
There are two types of acceleration: directed acceleration and constructive acceleration. Directed
acceleration occurs when the owner orders the contractor to speed up the pace of the work.
Whenever an owner directly accelerates a contractor, the owner is liable to the contractor for its
acceleration costs.
2.5. Acceleration Claims
Many construction contracts contain provisions that explicitly allow the owner to order
acceleration. Constructive acceleration occurs when a contractor is forced to increase the pace of
work to meet a project schedule that has not been extended because of excusable delays.
Although the owner may not directly order the contractor to accelerate, the owner does require
the contractor to complete the project under the original timetable which, because of the
excusable delays, results in the work's being accomplished in less than the originally budgeted
time. Courts have held that a contractor must prove five elements in order to recover under a
theory of constructive acceleration:
1. An excusable delay
2. Notice to the owner of the excusable delay and a request for a time extension
3. Refusal by the owner to grant the extension within a reasonable time
4. An order either expresses or implied, to accelerate
5. Actual acceleration by the contractors

The definition of what constitutes an excusable delay is often found in the contract language. In
general, it is something beyond the control of, and not caused by the fault or negligence of, the
contractor. Defective plans and specifications, owner-ordered changes in the work, and the
failure of the owner to make timely deliveries of materials ma all are considered excusable delays.
Without proof of an excusable delay, a contractor cannot recover under a theory of constructive
acceleration.
Once the delay has been encountered, the contractor must give notice to the owner of the delay
and request a time extension. Although some courts have allowed recovery without the
contractor's giving notice when the owner's conduct showed that it was aware of the delay and
was allowing the acceleration, actual notice and request is always the more prudent course.
The third element needed to establish constructive acceleration is the owner's refusal to grant the
extension. If the requested time extension is granted, no acceleration will be necessary because
the work can proceed at the expected pace and finish on a later date. If the owner still insists on
the original completion date, however, or a date that, though extended, does not account for all
excusable delays, the contractor will still need to accelerate to complete the job on time.
After failing or refusing to grant a time extension, the owner must then either expressly or
impliedly orders the contractor to accelerate. An express order to accelerate always fulfills this
element of proof, but implied orders to accelerate may also be enough to prove the contractor's
claim. Although the mere failure of the owner to act on a request to accelerate, or expressions of
concern about tile progress of the work, have been held not to be implied orders to accelerate, an
owner's refusal to grant a reasonable time extension combined with a demand to complete the
work in the original time frame is such an order.
Finally, In order to recover, the contractor must show that it actually accelerated its performance.
The contractor may produce pay records showing overtime worked or additional manpower
used above that which was budgeted for in the original bid to meet this burden of proof.
Delay, in its most basic form, involves an increase in the time needed to complete the project
beyond what was contemplated at the time the contract was signed. Although the damages
suffered under an acceleration claim usually involve claims for additional manpower and hours,
damages under a delay claim usually involve claims for extended home and field office overhead,
additional costs of financing, and other time-related items.

There are two general types of delays: excusable and non-excusable. Excusable delays, which
may be provided for in the contract, are not the fault of the contractor and may extend the time
for contract performance. Excusable delays may be either compensable or non-compensable. It
is generally foreseeable that there will be delays in completing almost any construction contract,
and a contractor will not be compensated for delays that are simply the result of increased
difficulty of completion." Delays caused by owner interference; however, would be both
excusable and compensable to the contractor. Delays caused by labor disputes may be excusable,
though not compensable, whereas delays caused by labor shortages may be non-excusable."
When each party has contributed to a delay, each party then bears its own costs of the delay."
If the delay is not excusable and is found to be the fault of the contractor, the contractor may be
liable in damages to the owner. The amount of damages may be computed based on the actual
damages suffered by the owner as a result of the delay, or they may be computed as contractually
delineated liquidated damages. The contract may also provide that the owner may terminate the
contractor for failure to complete the project on time.
Similarly, delays caused by the owner are excusable by the contractor and are also compensable
to the contractor. An owner may cause delays by providing defective plans and specifications to
the contractor, not allowing the contractor e to coordinate the activities of access to the Site at
the agreed-upon time, failing to coordinate the activities of multiple contractors, and failing to
approve shop drawings in a timely manner.
The contractor generally must give written notice of an excusable delay to an owner when it is
requesting a time extension or other relief. Written notice may not always be required, however,
if the delay was caused by the owner or if the owner had actual notice of the delay and was not
prejudiced.
2.6. Disruption Claims
Disruption claims are based on events that preclude the contractor from completing the work in
the manner in which the, work was bid. Owner-caused disruption can be the result of incomplete
or incorrect contract drawings changes in the work, failure to respond to questions in a timely
manner, or failure to approve shop drawings in a timely manner. Other disruption claims may be
based on weather, labor problems, and the like. As with delay claims, not all disruption claims
are compensable.

The significant difference between delay and disruption claims lies in the types of damages the
claimant seeks to recover. Claims for delay necessarily extend the time for project completion
and result in damages for extended home, and field office overhead, equipment rental, and
financing. Claims for disruption, however, may not extend the project time, but they may be
based on additional labor and labor inefficiency because of the effects of overtime, the stacking
of trades, having to do the work out of sequence, and field installation of material which should
have been completed offsite. Thus, although both delay and disruption claims may be based on
owner interference with the work, the damages suffered by the contractor are quite different.
Additionally, although many contracts contain a no damages for delay clause, few preclude
damages for owner-caused disruptions. Therefore, a contractor who would be unable to recover
for a delay claim might be able to recover for a disruption claim simply because of the contractual
language.
The contract limitation on delay or disruption claims must be analyzed very carefully.
Differences do exist between provisions that insulate a party from liability and provisions that
merely place a limit on liability Exculpatory clauses are disfavored and generally unenforceable.
whereas limit of liability clauses are enforceable so long as they are reasonable and are not so
drastic as to remove the Incentive to perform with due care." When a party does not exercise due
care in performing required duties under a contract, enforcement of the contract clauses is
unlikely."
2.6.1. Payment Claims
Critical to every contractor is the expected cash flow under the payment terms of the contract.
When payment is not made or is made in an untimely fashion, not only are bottom-line profits
affected, but also the contractor's capital, its financing, its ability to perform other projects, its
bonding capacity, and its obligations to employees, subcontractors, and material suppliers are all
negatively impacted. Failure to make prompt payment can be a death knell for many contractors.
Contractors traditionally had little leverage in dealing with this type of claim outside the normal
claim process. Now, however, prompt payment acts" add stiff penalties for failure to make timely
payments or for wrongfully with- holding payments. Significant interest and penalties are
awarded on balances due. And attorneys' fees are recoverable by "substantially" prevailing
parties. Prompt payment claims certainly should be considered by every contractor in addition to
the elements of cost recognized.

2.6.2. Termination Claims

Contractors often find themselves threatened with termination for allegedly improper
performance or failure to comply with certain contract provisions. A party may terminate a
contract but only if the breach is material and occurs prior to substantial completion. A minor or
partial breach ordinarily does not relieve a party of its duty to perform.
To determine whether a breach is material, the following factors are considered:
1. The extent to which the injured party will be deprived of the benefit it reasonably
expected
2. The extent to which the injured party can be adequately compensated
3. The extent to which the party failing to perform will suffer because of the forfeiture
4. The likelihood bit file hearty failing to perform will cure the alleged failure
5. The extent to which the behavior of the party failing to perform comports with the
standard of good faith and fair dealing
6. The extent to which the contract has been performed at the time of the alleged breach
7. Whether the breach was willful or caused by negligence or extraneous circumstances
8. The seriousness of the breach from the standpoint of what was bargained for.
If an owner terminates without a material breach a occurring, then the contractor may cease work
and sue the owner for breach of contract.
Similarly, even if omissions exist, an owner cab be liable for wrongfully terminating after a
contractor has substantially completed contract performance." Substantial completion can be
determined by considering the cost to complete the project in relation to the overall contract price.
Such liability can be particularly appropriate given the owner's implied duty not to interfere with
or hinder the contractor's progress.

2.6.3. Owner Claims

The owner has rights to enforce contract provisions against non-complying contractors. In
today's economic climate, no owner is in a position to fund the faults of the contractor. The
owner certainly is entitled to timely and professional performance from its contractor. Avenues
for recovery are available and can be pursued when defects and delays become apparent during
construction,
2.6.4. Delay Claims
Time is critical in almost every construction project. No benefit accrues to the owner until
construction is complete. Until then, the owner is on the paying end of the equation. If a project
is not completed on time, the, owner may face the risk of a market collapse, the loss of use of the
project, financing penalties, and a whole host of other losses that are not subject to easy
calculation or determination.
For this reason, many contracts include provisions for liquidated damages designed to reasonably
approximate the losses an owner may suffer. As long as the liquidated damage sum is reasonable
in relation to the anticipated losses and the owner has not contributed to the delay in completion,
these clauses are enforceable against the contractor."
When a contract does not include a liquidated damage clause, the owner may recover the actual
damages suffered as a result of the delay. Actual damages Include both direct and consequential
damages.
Direct damages are those that naturally flow from the delay, such as lost rental value, interest
rate difference between construction loan and permanent loan financing, construction
management fees and overhead, storage and cost of materials, and potential claims from other
contractors. Consequential damages, on the other hand, are losses that arise from special
circumstances but were within the contemplation of the parties at the time they executed the
contract. These may include lost profits on sales, an increase in production costs during the period
of delay, or penalties from financing commitments. Of course adequate records are key to
establishing either direct or consequential damages. Chapter 14 provides a detailed analysis of
these damages.

2.6.5. Cost of Corrective Work

Owners find themselves at times in the position of having to correct a contractor's defective work.
This may occur after the contractor has left the project or during construction, when the contractor
for financial or other reasons is incapable of performing. Many contracts include exclusive
remedies to cap a con tractor's liability or limit the owner to a specified remedy, such as repair
and replacement.
Such exclusive remedy provisions are generally held to be valid and fully enforceable. However,
when a contractor makes repeated, unsuccessful attempts to cure defective work, exclusive
remedy provisions will not be enforced, and the owner will be entitled to recover an amount
approximating the owner's loss of the benefit of its bargain.
This result fully comports with the remedies available to the owner who, without such a contract
provision, is entitled to recover either the repair or replacement value of the work or the
diminished value of the project. The diminished value theory is normally applied when the cost
of correcting the defective work would result in economic waste.
2.6.6 Termination Claims
Termination is the most draconian remedy available to an owner. For that reason, the owner must
carefully comply with every contract provision and take all reasonable steps before exercising it.
An owner may be deemed to have waived the right to terminate the agreement if the owner allows
the contractor to continue performance after the material breach. It is imperative that the owner
give notice to the contractor, providing reasonable time for proper performance, before
exercising the right to terminate." Moreover, the owner cannot take advantage of any obstacle
the owner has placed in the contractor's path as a reason to terminate the agreement. In essence,
the owner must be innocent of any wrongdoing and must follow the very letter of all applicable
contract provisions before exercising this right, or the owner would be subject to a wrongful
termination claim.
2.6.7. Tort Claims
When the contractual relationship totally collapses, the parties are likely to raise tort claims as
well as contract claims. Typical tort claims include tortious interference with contractual or other
advantageous relations, fraud, misrepresentation, and negligence. The number of possible tort
claims is limited only by the imagination of the legal professionals involved.

Because the relationship between the contractor and owner is fundamentally based on contract,
often the parties include provisions barring the assertions of tort claims between them." However,
such provisions do not preclude claims by or against parties not privy to the contractual
relationship, including claims by the contractor against design professionals.
Typical litigation scenarios see contractors suing design professionals for negligent
misrepresentation or alleging that they are third-party beneficiaries of the owner-design
professional contract. These theories draw a fine line between tort and contract, between the
nature of the duties owed and the kind of injury that is compensable, and courts are split over
which ones to recognize. Thus, the Restatement (Second) of Torts recognizes a cause of action
for negligent misrepresentation in the context of design professional responsibility for faulty or
inadequate construction documents, but does not recognize the nearly identical notion of
negligent Interference with contract.
Many courts have addressed this tension by adopting what is commonly referred to as the
economic loss theory." Simply put, the economic loss theory holds that design professionals are
not liable for any alleged negligence that results in purely economic damages to a contractor with
whom they share no contractual relationship. The contractor must instead pursue the owner on a
contract c a m. The economic loss theory has been interpreted to prevent recovery of economic
damages for negligent misrepresentation when the claimant's resulting losses arise from a prior
contract arrangement. The economic loss theory, by definition, does not preclude per oral injury
or property damage claims.
Other courts, of course, have adopted the Restatement approach by expressly allowing a
contractor to pursue tort-based claims against design professionals regardless of the nature of the
damages claimed. The line is ever-changing, and courts have reversed positions once thought to
be solidly held.
Before pursuing any tort claims, however, consideration must be given to the nature of the
damages claimed, whether those damages are recoverable in contract, and the added cost of
pursuing a tort theory of recovery that will be hotly contested by the opposing party.

2.6.8. Overview of Damages

In order to develop an effective construction claim, it is essential that the claimant establish not
only liability but also damages. Damages in construction claims, either from the contractor's or
the owner's perspective, fall into two categories: direct damages and consequential damages.
Direct damages occur when specific project costs increase as a result of a certain event, such as
a project delay, for which the direct damages could include escalation of material and labor costs,
extended job site support costs, and unabsorbed home office overhead. In contrast, consequential
damages do not occur directly as a result of a specific event. Instead, these damages, which
normally include claims for such things as lost profits, harm to business reputation, and interest
on invested capital, have an indirect link to events like delay or acceleration. This chapter will
largely focus on direct damages, because they are generally the largest and most easily quantified
component of construction claims.
In order to prove damages, the claimant must establish a causal link between the event that gave
rise to the claim and the increase in project costs. The claimant can use a number of pricing
methodologies to establish that causal link. The first is the total cost approach, under which the
claimant quantifies the total costs incurred on the project and subtracts them from the estimated
costs to perform the job under expected circumstances. The damages are the excess of actual over
expected costs.
A second methodology is the modified total cost approach. Under this approach, the claimant
again subtracts planned project costs from actual costs; however, it then adjusts the difference
for any increase in costs that is its own fault. The third methodology by which the claimant can
establish damages is the discrete cost approach, under which it identifies all costs that relate to a
specific incident, such as a project delay, for which the claimant is not responsible. The total of
these costs equals the damage amount.
A final methodology is the quantum merit approach. This pricing methodology is applicable
when the project has changed so substantially that the original cost estimate is no longer
applicable. This methodology assumes that the project is, in effect, a different project and, as a
result, the claimant is entitled to all reasonable costs to perform the work, including overhead
and profit.

Regardless of the claim methodology chosen, the first step in preparing the claim for damages is
to undertake a detailed review of the documents and evidence. This specifically identifies
information that relates to the claim. It is often a formidable task, because project documentation
is often voluminous. Fortunately, certain categories of documents and information almost always
merit consideration,
Once the crucial documents have been identified, the claimant can proceed with pricing the claim
under one of the pricing methodologies. Typical procedures performed when pricing the claim
include: schedule analysis (comparing the project schedule as It was planned against the as-built
project schedule), comparison of actual costs to bid costs, labor productivity analysis, analysis of
home office overhead, and review of cost records related to specific tasks.
2.6.9. Contractor's Damages for Delay
In the typical delay claim, the contractor argues that a delay by the owner, either as a direct
result of the owner's actions or its failure to ensure that other parties on the job completed their
work in a timely manner, forced the contractor to take longer than anticipated to perform its work.
As a result, the contractor argues that its cost of performance Increased because it had to incur
time-related costs over a longer period.
This raises the question, however, of what costs are impacted by the delay. One typical cost
category impacted by project delay is job site support, also known as general conditions. Specific
costs included in this category are salaries for the project supervisor, clerks, engineers, and
manager, the cost of field trailers and other site vehicles, and the cost for temporary items like
toilets and fencing. Although on the surface it would appear that all of these costs are time-
related. It is important to understand that one-time items or other costs that are not time-related
may be included in the claim. For example, a contractor may have awarded its project supervisor
a bonus, and that bonus might be reflected in the supervisor's salary in the accounting records
including the bonus In the claim for additional supervisor salaries Is inappropriate because the
bonus has nothing to do with the length of time that the contractor was on the job. This highlights
the need for a detailed analysis of job site support costs.
Another category of costs often claimed in connection with project delay is escalated labor,
material, and equipment costs. The general argument regarding escalation is that performance at
a later period forced the contractor to purchase labor, materials, or equipment at a higher price
than it would have if there had been no delay. Consider the example of a road contractor who

was delayed in performing its paying activity. If a delay on the project caused the contractor to
push back the purchase of sand by several months and the price of sand increased during the
delay period, the contractor would be entitled to recover the increased cost of the sand.
In a delay situation, a contractor may also seek to recover costs related to, idled equipment. For
example, if a delay caused the contractor to keep a crane onsite for a month longer than
anticipated, the contractor could recover the cost of having that crane on the site. The contractor
can determine the specific cost related to a particular piece of equipment in a number of ways. If
the equipment is rented from a third-party source, the cost is the periodic rental rate multiplied
by the period of delay. On the other hand, If the equipment is owned, the contractor can calculate
the cost based on its internally determined charge- out rates (it they are reasonable), published
rates (such as those published by the Army Corps of Engineers), or the actual cost for owning
and operating the equipment.
A final cost category that typically appears in delay claims is unabsorbed home office overhead.
When a project is delayed, the contractor continues to incur costs for items like accounting, rent
on its office space, and utilities, but it may not generate revenues from the project during the
delay. As a result, overhead costs may not be absorbed.
2.10. Contractor's Disruption Damages
Disruption claims arise when there are changes in the method of performance or the planned
work sequence. Usually, these changes are brought on by events like encountering underground
utilities that are not shown on the project drawings, changes in the project drawings, or failure
by other contractors to schedule and coordinate work properly. Typically, these types of events
cause the contractor to lose efficiency in performing its work. This, in turn, can manifest itself in
higher labor and equipment costs as more labor and equipment are needed to complete the job.
Consider a situation in which a contractor excavating a site discovers buried storage tanks that
were not indicated on the project drawings. In order to remove the tanks, the contractor may have
to bring additional laborers onsite to hand-dig around the tanks. This obviously will impact the
amount of material the contractor can move each day and thereby affect the amount of time that
labor and equipment are onsite' In addition, labor costs will further increase because the
contractor has to add additional personnel to remove the tanks. The contractor must take care to
avoid being solely responsible for costs associated with site conditions. Many construction
contracts require contractors to have made site inspections and to accept responsibility for site

conditions as they exist. Recently, a contractor was held to not have grounds for recovery of
increased costs caused by unexpected soil conditions even though the owner had supplied soil
samples." The basis for this decision was that the contract specifically separated those samples
from the clause requiring the contractor to plan for the soil conditions as well as other unexpected,
unobvious site conditions.
Another major cost component that often appears in disruption claims is mobilization and
demobilization costs. When an event causes disruption to a project, the contractor may elect to
move its crews and equipment to another task In order to keep the project moving. In doing so,
the contractor incurs costs related to removing the personnel and equipment from the disrupted
task and adding them to the other task.
2.6.11. Contractor's Acceleration Damages
Acceleration claims arise when a contractor is ordered, either directly or constructively (for
example, when its claim for a time extension is denied), to increase the pace of its performance
on a project. In increasing the, pace of performance, the contractor invariably Incurs
unanticipated costs as it adds labor and equipment, puts its crews on overtime, or adds
supervisory personnel. These additional costs may represent the contractor's acceleration
damages, and they typically include:
Overtime labor costs
Additional labor costs (including shift differentials)
Additional equipment costs
Additional supervision costs
Increased overhead costs
Increased labor and equipment costs because of inefficiency
Increased subcontractor costs
An example may serve to highlight how some of these costs may increase as a result of
acceleration. A contractor was retained by a municipality to reconstruct a bridge that spanned a
local river. This particular bridge was the most direct way to access the municipality, because
alternate routes resulted in a substantial detour. Therefore, the elected officials were under
tremendous pressure to get the project completed as quickly as possible. As a result, the
municipality ordered the contractor to accelerate work. In order to do this, the contractor added
labor to the job and put its crews on overtime. The contractor also subcontracted some of the

work it intended to perform to another company In order to ensure that it was completed on time.
Further, the contractor’s management personnel spent a substantial amount of their time
administering the project. Given this, the contractor has a claim for increased labor costs;
increased subcontractor costs, and increased overhead. In addition, the contractor may have a
claim for labor inefficiency if the crew size or overtime impacted productivity.
2.12. Contractor's Damages for Differing Site Conditions
The key to proving damages in differing site conditions claims, as in any other claim, is
establishing the causal link between the event and the damages sustained by the contractor. In
the case of differing site conditions, the link, typically, is demonstrated by deteriorating
productivity. For example, a contractor engaged in excavating and installing a runway for a new
municipal airport encountered buried drums containing a toxic chemical. The contractor did not
have experience in dealing with such conditions and, therefore, was unprepared to deal with the
situation. Different equipment had to be brought on to the site and extensive testing had to be
performed to ensure that the tanks had not leaked. As a result, the contractor's progress, and hence
its productivity, on the excavation was slower than anticipated. The upshot of this was that the
contractor's labor and equipment costs per unit of material moved was higher where it
encountered the drums than in the other areas of the project. This difference in cost represents
the damages.
In addition to labor and equipment costs, claims for damages related to differing site conditions
may also include claims for:
 additional materials
 new or different materials
 subcontractor claims
 additional subcontractor costs

2.6.13. Contractor's Damages for Changes in Scope
In order to fully account for the impact of a change in scope, the contractor must consider both
the direct and indirect costs of the change. The direct costs of the change are the most obvious,
because the contractor is likely to incur higher than anticipated direct costs for items such as
labor, material, equipment, and insurance. Assuming that the contractor maintains relatively good
cost
2.6.14. Termination
records, It to a fairly straightforward process to price these items, independent of whether the
calculation is performed prospectively (before the work is performed) or after the work is
completed. If the calculation is performed prospectively, the contractor should price the work
using either the contract stipulated dies or its actual rates to date on the projects for labor,
material, equipment, and the like. If the claim is prepared after the work has been completed, the
most effective method for proving the damages is to quantify the actual costs Incurred in
performing the work.
The Indirect costs, which result from events such as out-of-sequence work, project delay, or
acceleration, are much more difficult to quantify, especially if the contractor is attempting to
price the change order prospectively. Nonetheless, these events can cause significant damages,
and the contractor should consider them in pricing any claim for changes.
By way of explaining pass-through claims, consider the example of a generic contractor who
subcontracted out the electrical work on the construction of a commercial office building.
Various delays on the project impacted the electrical contractor's work and, as a result, it asserted
a claim against the general contractor for escalated labor and unabsorbed home office overhead.
The general contractor, in turn, included the subcontractor's claim in its claim for delay damages,
which it asserted against the owner. The subcontractor's claim is a pass-through claim. As this
example illustrates, pass-through claims involve issues like delay, acceleration, and changes in
scope and, therefore, are analyzed in the same way as claims asserted directly by a contractor
against an owner. This analysis includes examining the issue of who is responsible for the
damages arising from a particular event. If it is determined that the general contractor in the
example was responsible for some of the delay experienced by the subcontractor, the general

cannot pass the entire amount of the claim through to the owner. In this case, the general
contractor must segregate and allocate the damages between itself and the owner.
2.6.15 Contractor's Damages for Termination Claims
Contractor’s art terminated from projects for a variety of reasons. However, from a legal
standpoint, the termination ultimately falls into one of two categories: either termination for
convenience or termination for default. The contractor should understand the importance of this
distinction, because the recoveries available vary depending on what type of termination
occurred.
Termination for convenience largely occurs in connection with federal procurement contracts,
because termination for convenience clauses is included in all federal contracts. These claims
can also arise between private parties because, increasingly, these clauses are included in private
contracts. The basic premise for the termination for convenience clause is to provide the owner
with flexibility in getting the project completed in the most effective manner but also enabling
the contractor to receive fair compensation for the work performed. In essence, termination for
convenience is a no-fault event, so the recoveries available are limited to the contractor's direct
costs. Specifically, the contractor is entitled to recover:
 the reasonable cost of its work
 a fair and reasonable profit on the work completed
 termination expenses, such as accounting and legal costs
 interest from the date the claim was filed until the date of payment
The courts scrutinize any claim for damages, especially related to federal contracts, to ensure that
several issues are addressed: whether cost overruns are taken into account and used to reduce the
claims; whether the contractor had been losing money on the job and, therefore, is not entitled to
profits; and whether the contractor will recover more than the original contract amount less
progress payments made.
In the case of termination for default, the contractor is entitled to damages if it rightfully
terminates the contract (based on a material breach of the contract by the owner) or if it is
wrongfully terminated by the owner. Under both scenarios, the damages that the contractor is
entitled to recover are the same. However, unlike recovery under termination for convenience,
damages recoverable under a termination for default claim vary depending on the stage of the
project at the time of the termination.

If the termination occurs before the contractor has performed any work, the calculation of
damages is relatively simple; the contractor may be entitled to recover its anticipated profit on
the project. In addition, if the contractor has incurred any preparatory costs, such as preparing
its bid and schedule or mobilizing crews and equipment, it is entitled to recover those costs.
If the termination occurs after work has begun, the contractor is entitled to recover its unpaid cost
of performance (that is, the total contract price less the cost to complete less progress payments
made), as well as its expected profit on the project. The key to this calculation is determining the
contractor's cost to complete the project. There are several ways that the cost to complete is
determined. One approach is to take the contractor's actual unit costs up to the time of termination
and apply them to the remaining tasks. When there is substantial performance and accurate cost
information, this works well. Another approach is to calculate the contractor's actual total costs
up to the time of termination and then add to that the anticipated profit on the project' This
approach works well when the contractor was terminated in the early stages of the project and
sufficient cost detail is not available.
In addition to these recoveries, the contractor may also seek indirect costs in a claim, for damages
arising from a termination for default. One such cost is for unabsorbed home office overhead.
Home office costs may be recoverable under the theory that the contractor would have used the
revenues from the terminated project to cover this expense. In that case, the claim should be
evaluated to ensure that borne office costs are not being claimed as part of the unpaid cost of
performance. In addition to home office costs, the contractor may also seek to recover damages
related to lost profits and impairment of goodwill.
2.6.16. Owner's Liquidated Damages Claims
Liquidated damage provisions are often Included In construction contracts and provide owners
with a contractually stipulated recovery, usually on a per-day basis, when a contractor is at fault
for delay in the completion of a project. The objective of such a provision is to provide the owner
with a way to recover its delay-related costs, such as lost profits and increased borrowing costs,
without having to file a claim. Obviously, this reduces the uncertainty regarding recovery, but it
does also cause the owner to recover less than the actual damages sustained.
The computation of damages under a contract's liquidated damages provision is relatively
straightforward. For example, suppose an owner and contractor entered into a contract that
contained a liquidated damages provision of $200 for each day that the contractor remained on

the job after the stipulated contract completion date. Through various actions, the contractor
delayed completion of the project by 100 days. As a result, the recoverable damages due to the
delay are $20,000 ($200 per day x 100 days).In most cases, a liquidated damages provision limits
the owner's ability to recover its direct damages. However, as 1.22 shows, an owner can recover
both liquidated and direct damages associated with termination for default.
2.6.17. Owner's Delay Damages
The recoveries available to an owner when a contractor is at fault for delaying a project depend,
in part, on what the construction contract states. If the contract contains a liquidated damages
provision, the recoveries are limited to the liquidated damages, regardless of whether the actual
damages exceed or fall short of the liquidated damages. However, if the contract does not contain
a liquidated damages provision, the owner may be entitled to recover both the direct and
consequential damages arising from the delay. The recoverable direct damages may include:
 lost rental value of the property
 escalation on material costs
 storage costs on furniture and fixtures
 interest on the construction loan
 management fees
 overhead
Consequential damages that may arise as a result of delay on the part of the contractor include
lost profits and diminution of business value.
By way of example, consider a situation in which a contractor was retained to build a new
manufacturing and headquarters facility on property adjacent to a company's current facility. The
contract for this project did not contain a provision for liquidated damages. During the course of
work, the contractor failed to staff certain tasks properly and, as a result, completion of the project
was delayed by six months. The owner had assumed that the contractor would complete the
project as specified and purchased office furniture and new manufacturing equipment. As a
result, the owner had to place the furniture and equipment into storage until the project was
completed, thereby incurring six months' worth of storage costs. In addition, the project was
financed by a construction loan, and the delay caused the owner to pay an additional six months
of interest on the loan. Further, !lie owner was entitled to lost profits as a result of the delay,

because its inability to move into the new facility prohibited it from expanding capacity to meet
a demonstrated demand for its products.

Chapter Three
3.0. Cost estimation
Before taking up any construction work for its execution, the owner or builder should have a
thorough knowledge about the volume of work that can be completed within the limits of his
fund or the probable cost that may be required to complete the contemplated work. It is therefore
necessary to prepare the probable cost or estimate for the intended work from its design plan and
specifications. Otherwise it may so happen that the work has to be stopped before its completion
due to shortage of funds and or materials.
There are many costs associated with construction projects. Some are not directly associated with
the construction itself but are important to quantify because they can be a significant factor in
whether or not the project goes forward and feasible. These include the initial capital cost and
the subsequent operation and maintenance costs. Each of these major cost categories consists of
a number of cost components:
3.1. Information required for cost estimation

Project price is affected by the size of the project, the quality of the project, the location,
construction time, and other general market conditions. The accuracy of costing is directly
affected by the ability of the Cost Engineer to properly analyze these basic issues.
Project Size:
The size of the project is a factor of the owner’s needs. At the conceptual stage, size is an issue
of basic capacity, such as apartment units for a real estate developer or kilometers of roadway
for highway engineering. As the project becomes better defined, its size begins to be quantified
more accurately.
The principle of economy of scale is an important factor when addressing project size. Essentially
as projects get bigger, they get more expensive but at a less rapid rate. This occurs because the
larger the project, the more efficiently people and equipment can be used. Also a people repeat
task, they get better and faster, reducing the cost of labor. On large commercial building and
heavy engineering projects, worker productivity is plotted into learning curves. Cost Engineers

treat project size by establishing tables that recognize the typical size of a project and a respective
price and then adjust up or down from this norm.As operations continue, crews learn so that the
time required to complete the next like unit is less. In general for buildings built to the same
specification in the same locality, the larger building will have the lower unit area cost. This is
mainly to the decreasing contribution of the exterior walls plus the economy of scale usually
achievable in larger buildings. As an example, the area conversion scale shown below will give
a factor to convert costs for the typical size building to an adjusted cost for the particular project.
Project Quality:
An owner may require a high quality project to create a specific image or may need facilities for
a specific use. Whatever the reason, the consequences are always the same: an increase in costs.
Early in the project, the Cost Engineer must discuss expectations of quality with the users, the
designers and applicable government agencies.
Project Location:
Constructing a facility in a locality is very different from constructing one on other areas. The
differences are in labor costs, the availability of materials and equipment, delivery logistics, local
regulations, and climate conditions. Material costs are a factor of availability, competition, and
access to efficient methods of transportation. Labor costs, particularly unionized labor, are a
factor of the strength of the local bargaining unit. The cost of labor is also a factor the degree of
sophistication and level of training found at the project location. On some projects the numbers
and the skill levels of workers required are not available locally and must be imported.
Understanding the need for such importation adds significantly to the accuracy of an estimate.
Local conditions can influence the costs of the project. The need for citizen involvement, local
taxes or fees, and government requirements all can cost the project money. Extreme climatic
conditions, political instability, and earthquake zones all add to the cost in ways that may not be
entirely obvious without some investigation.
The cost of labor and material in different locations can be predicted by establishing location
indices for different cities and parts of the country. An index is created for a particular city by
comparing the cost of labor, equipment and material for that city to the national average. This

allows an estimator using national average costs to adjust the estimate to a particular location.
Most design and construction companies have developed an accurate record of location indices,
which they use for their pricing, or they buy this cost data from national pricing suppliers. To
predict the costs of other local factors, such as political instability, a company either uses its own
experience in the locale or teams up with a local partner who knows how the local atmosphere
can affect project costs.
Construction Time:
A project is estimated at a given point in time, but usually the actual procurement and field
construction occur at some point in the future. Sometimes this future can be years away,
especially in the case of a very large or phased project. The estimate, then, must take into
consideration when the actual project will be built. Labor and material costs usually escalate in
time; so by examining past and current trends, the estimator can predict where these costs will
be at the time of actual construction.
Other:
An estimator who accurately incorporates project size, project quality, location, and time has an
estimate that reflects the fair value for the project. In a normal market without any unusual
circumstances, this estimate should reflect the price that is paid.
Market conditions, however, shift; and owners, designers, and contractors all look at a given
project from different perspectives. In a market without much work, contractors may bid a project
at cost or with little profit to cover their overhead and keep their staff employed. On complicated
projects, contractors may bid the work low in hopes of making significant profit on future
changes. Conversely, they may bid a work high to cover the increased risks of a complex project.
It is not unusual for contractors to offer very competitive prices when they hope to enter a new
market or establish a relationship with a new owner. Such issues are very difficult to quantify but
should be considered in the preparation of the estimate. They are usually treated as a percentage
applied at the end of the estimate, included in either overhead or profit or in a final contingency.

3.2. Types of cost estimation

A) Approximate Estimate
Preliminary Estimates: Early in the planning stages, both building owners and designers must
agree on an anticipated cost of the project at bid award. Preliminary Estimates are employed in
the early planning phases of a proposed project to match an owner's needs, expressed as written
programmatic requirements, with budget constraints in order to establish its overall scope (size)
and quality expectations. Estimate comparisons at this stage are especially valuable in evaluating
the feasibility of strategic alternatives being considered to satisfy current and projected space
requirements (e.g. new construction versus renovation, or lease space). As the design is not fully
developed at this stage, a contingency is typically included in the order of 15%.
Intermediate Estimates: After proceeding with a preferred course of action, Intermediate
Estimates are employed at various stages of project design development to maintain
accountability for initial budget projections and as a means of evaluating competing alternative
construction assemblies, systems, and materials. On large projects it is common practice for
an owner to employ a construction manager or professional estimator to continually update
project estimates and provide feedback on budget impacts of decisions on major design
elements. As the design progresses, the contingency can be.
B) Detailed Estimate
Final Estimates: As the design is completed a detailed pre-bid estimate can be prepared. At this
stage the contingency would be reduced to zero. The estimate should be organized in the same
format as required of the bidders, which typically is the unit price bill of quantity format.
This then allows for a comparison of the final estimate with the bids received and can aid in
negotiating with the lowest bidder. In addition, having the final estimate and bids in the same
format facilitates the development of a cost database for use in planning future projects.

Estimating Methods
There are four primary methods used to estimate construction costs. Those methods are
known as:
• Project Comparison Estimating or Parametric Cost Estimating,
• Area & Volume Estimating,
• Assembly & System Estimating, and
Unit Price & Schedule Estimation

Each method of estimating offers a level of confidence that is directly related to the amount of time
required to prepare the estimate Project Comparison Estimating or Parametric Cost Estimating is
often used in early planning stages when little information is known about the program other than
overall project parameters. This method is sometimes called a “p r e l i m i n a r y “o r "ballpark"
estimate and has no better than15% to 25% accuracy. Project comparison estimating uses
historical information on total costs from past projects of similar building type. For example,
the number of beds in a hospital, or number of spaces in a parking garage, or number of
courtrooms in a courthouse can form the basis of a project comparison estimate by comparing
them to similar scope projects recently done in the same geographic region.
This estimating method requires the assumption of an approximate gross area for the
proposed work and a sufficient historical record of similar building types. The greater
the number of prior project combinations for which scope and prices are known, the
easier it is to perform Project Comparison Estimating. Fig. B illustrates an example
of regression analysis used to develop a project comparison estimate. The scattered
points in the figure show the combinations of overall project size and cost. The line
shown is the "best fit" of a linear relationship between size and construction cost and
may serve to predict a preliminary budget. The distances between the line and the
points give a visual impression of the statistical confidence of the estimate.
Square Foot & Cubic Foot Estimates are another method of developing both
preliminary and intermediate budgets based on historical data. This method is
effective in preparing fairly accurate estimates if the design is developed enough to

allow measurement and calculation of floor areas and volumes of the proposed
spaces. There are several historical databases available to support this method of
estimating providing unit costs that are adjusted annually and many of the large
estimating firms maintain their own databases. More accurate estimates made with
this method make adjustments and additions for regional cost indices, local
labor market rates, and interpolation between available cost tables. Further
adjustments may be made to account for other unique aspects of the design such as
special site conditions or design features being planned. In addition, the estimate can
develop overall "core and shell" costs along with build-out costs of different space
types, allowing for relative ease of determining the impact of changes to the
program. Estimates made with this method can be expected to be within 5% to 15%
of accurate.
Assembly & Systems Estimates are intermediate level estimates performed when
design drawings are between 10% and 75% complete. Assemblies or systems group
the work of several trades or disciplines and/or work items into a single unit for
estimating purposes. For example, a foundation usually requires excavation,
formwork, reinforcing, and concrete including placement and finish and backfill. An
Assembly & Systems estimate prices all of these elements together by applying
values available in assemblies cost data guides. Estimates made with this method
can be expected to be within 10% of accurate.
Unit Price and Schedule Estimating, the work is divided into the smallest possible work
increments, and a "unit price" is established for each piece. That unit price is then multiplied
by the required quantity to find the cost for the increment of work. This calculation is often
called "extending". Finally, all costs are summed to obtain the total estimated cost. For
example, the cost to erect a masonry wall can be accurately determined by finding the number
of bricks required and estimating all costs related to delivering, storing, staging, cutting,
installing, and cleaning the brick along with related units of accessories such reinforcing
ties, weep-holes, flashings and the like. This method of estimating provides the most
accurate means of projecting construction costs, beyond which accuracy is more likely to be
affected by supply and demand forces in the current market.


3.3. Approximate Cost Estimate

This is made to find out an approximate cost in a short time and thus enable the responsible
authority concerned to consider the financial aspect of the scheme for according sanction
to the same. Such an estimate is prepared adopting different methods for different types of
works. During preparation of the estimate detailed surveying, design, drawings etc.,
are not required. This estimate is prepared after preliminary investigation, preliminary
surveying and a line sketch of the drawing according to the requirements. Rates are
determined either from practical knowledge or from records of similar works.
The estimate is accompanied with a brief report stating the sources of proposal, necessity
and demand, provisions or accommodations made, viability, basis of the estimate, rates and
how the expenditure involved can be met. Beside the report the estimate is provided with a
line plan, site or layout plan, soil testing by trial boring etc…
Purpose of approximate estimate: Approximate estimate is worked out before preparation
of detailed estimate of a work or a project to serve mainly for the following purposes:
i) To investigate feasibility: An approximate estimate of a project gives an idea for the

probable
Expenditure in a short time. From the outline idea of expenditure the practicability to take
up such a project considering availability to fund can be ascertained.
ii) To save time and money: Before having any rough idea of financial implications
if detailed
Drawings, specifications and detailed estimates are prepared, spending much time,
labor and money and finally the project is rejected due to unexpected difference between
the amount of the detailed estimate and the availability of fund then the entire time and
money are lost. So it is a general procedure to prepare a preliminary estimate before
drawing up detailed estimate for a project.
iii) To investigate benefit and comparison of cost with utility: Where there is no scarcity
of fund but it is intended to know readily whether the investment shall be ideal then
approximate estimated cost of the project is drawn up and compared with the income or
benefits availed from such expenditure. In case the preliminary studies from the preliminary
estimate show the investment returns more than the investment, then approval is given for

expenses to prepare the detailed estimate of the project.

IV) Adjustment of Planning: For unavoidable projects approximate estimates for a
number of alternatives for the original work after adjustment of sketch of the intention
along with sketch reports are required for study. From these approximate comparative
estimates, a decision is made to select the sketch for preparation of its detailed design and
estimate.

v) To obtain administrative approval: For government or public body projects approximate

estimate with a brief report and site plan has to be submitted to obtain administrative approval to
proceed with detailed with detailed investigation and preparation of detailed estimate.
vi) For insurance and tax schedule: For insurance and tax schedule, the value of a property or
a project is drawn up from the approximated cost estimate.
3.4. Detailed Cost Estimates
It is the task of the estimator to predict the cost of construction for the items of finished works
presented in the bill of quantities. An accurate cost prediction can only take place when each
item has been analyzed into its simplest element and the cost methodology estimated on the
basis of factual information.
3.5. Disposition of the Cost Calculation
i) Direct itemized costs: Costs that can be allocated directly to a product
Material costs
- Construction/Building material
- Operating supplies
- Loading, unloading and transportation costs
- Wastages
Labor costs
The real challenge in pricing construction work is the computation of labor and equipment costs.
These are the categories of construction expense that are inherently variable and the most difficult
to estimate accurately because of human variance and external conditions. To do an acceptable
job of establishing these costs, the estimator must make a complete and thorough job analysis,
maintain a comprehensive library of costs and production rates from past projects (historical data),
and obtain advance decisions about how construction operation will be conducted. Labor costs
include:
- Standard wages
- Extra pay
- Supplementary pay
- Social Service payments
- Supplements

- Other payments
Equipment costs: - All costs for commissioning /holding and operation of the equipment
- Ownership of plant
- Hire of plant
All items of mechanical plant should be estimated in terms of all-in rate and a production output.
In the case of hired plant, the standing costs will be comparable to the hire charge.
The main factors in building up a rate will be:
- Standing Costs: includes capital sum based on purchase price and operating cost,
maintenance, tax and insurance
- Operating Costs: operators cost, fuel, consumable stores
Costs for sub-constructor:- If the work is to be Sublette to a nominated sub-contractor, the
cost shall be determined and separately established as a sub-contractor fee.
Ex. –Marble cladding, Supply and fix items (aluminum frames), Furniture etc.
3.4.1. Indirect Costs

The project overheads are the cost of administering a project and providing the general plant,
facilities and site based services. They consist of the items that cannot be satisfactorily allocated
to individual unit rates of finished work. The cost of some of the project are time related and will
be estimated in terms of the contract period or length of time on site and the all-in rate for a unit
of time, the information on time being obtained from the pre-tender program. Other project
overheads are value related and will not be able to be evaluated until after the adjudication process
by management.
Site overhead costs
Time-independent costs
 Costs for site plant/ site installations, Cost for site facilities, Engineering and
controlling, Operation risks, Special costs
Time-dependent costs
 Commissioning /holding costs, Operating costs, Costs for contractor’s agent
General overhead costs
Risks and profit

Direct cost + Indirect cost = bid sum

+Value-added Tax (VAT)
Bid sum inclusive turnover tax /vat
Direct cost + Site overhead Cost = Production cost production
Production cost +General overhead cost = Self-costs
Self- costs + Risk& profit = Bid sum
Bid sum + Vat = Bid sum inclusive vat.
3.5. Execution of the Cost Calculation
3.5.1. Construction Material Costs
- Cost of all material which will be part of the building.
What is the required information?
 Quantity of material required to produce a unit amount of itemized work
 Basic price (Prime cost) at the source of material
 Transport, loading and unloading to the site
 Waste/loss (e.g. Breaking, rupture, defective material, wastage etc).
Ex. Calculation of material costs for 1m3 of C-25 grade concrete.
Required information for the calculation of material cost
 Type and quantity of materials for a unit amount of work.
 Basic price including transportation, loading and unloading of materials.
 Loss or wastage amount.

Example
3.5.2. Calculation of the material costs of 1m3 concrete C-25 grade given.
1Qtl of cement at Mugher - 1500 Birr
1truck of Sand (13 m2 ) from source to Site 2500 Birr
1 truck of gravel (6m3) from source to site 3000 Birr
1m3 water 1 Birr
Transportation cost 0.07 Birr/Qtl/Km
Wastage 5%
Cost /
Rate
Type of material Unit Qty Unit
(Birr)
(Birr)
Cement Qt1 3.6 1505.25 5418.9
Sand M3 0.5 2508.75 1254.375
Gravel M3 0.75 3010.5 2257.875
Water M3 0.3 1 0.3
SUM 8931.45
Loss 5% 446.5725
Total 9378.023
3.5.2. Labor Costs

All costs, which result from the building /construction works of the employees on site include:-
- Standard wages
- Extra and supplementary pay for
 Production bonus, Long continuity of Service (permanent laborer)
 Over time pay, Merit increase, Property creating performance, Less favorable condition
/allowances
-Social Service payments
 Holiday pay if any, Health insurance, Unemployment insurance, Payment during
sickness

3.5.3. Required information for the calculation of labor cost

 Number and type of skilled and unskilled manpower for a particular type of work,
(Crew)
 Performance of crew per hour for a unit amount of work
 Indexed hourly cost of the workman ship.
 Utilization factor of the workmanship: Share of a particular personal per hour for the
specified work.
Example: Calculation of indexed hourly cost for carpenter
 Standard wage:- 150 birr /day
 Extra pay (for long continuity of service)
1Birr /hr for 60 % of the carpenters
 Over time
50 weekly working hours / 44 weekly working hours/
6 overtime hours with 25% increment
 Property- Creating performance
For 80% of the employees 0.25birr /hr
 Supplements: 10% of wage
Solution:
Standard wage..........................................19 Birr /hr
Extra pay = 0.6 (1) ...................................0.6 birr/hr
Over time 6x0.25 x 19...............................5.7 birr/hr
50
Property creating performance 0.80(0.25) = 0.2 birr/hr
Supplements= 0.1(19)..............................…..0.5birr/hr
Total..................................................…….. 27.4 b/hr.

Example2. Calculation of labor cost for a m3 of concrete; production rate 1.25 m3 /hr
Labor No UF Indexed hourly cost Hourly cost (Birr)
Forman 1 1/2 36.1 18.05
Plasterer 2 1 23.1 46.2
Carpenter 1 1/4 27.4 6.85
Bar bender 1 1/4 27.45 6.86
D. Laborer 18 1 21.63 389.34
Total 467.3
Labor cost = 467.3/1.25= 373.84/m3

3.5.4. Equipment cost
Required information
 Type of equipment for a particular item of work.
 Performance of equipment per hour for a unit amount of work (production rate)
Two methods of calculation are followed.
I) with charges accounted for depreciation, interest return and monthly repair costs
II) With monthly rental charges.
Example: Calculation of equipment cost for m3 of concrete
Mixer - Original cost = 50,000 Birr
Assume 8 working hours per day
Useful life = 3yrs and 22 days per month
Interest rate=6.5%
Monthly repair cost with supplies: - 700 Birr
Vibratory- Original cost = 5,000 Birr
Useful life = 7yrs
Repair cost monthly = 50 Birr
Hourly equipment cost

i) Mixer
Depreciation (d)
50,000 Birr = 7.89 Birr/hr

3x12(22x8) hr
Interest of return (i)
1/3 [50,000 (1+0.0665)3 - 50,000] Birr /year = 3465.83 Birr/year
Hourly cost 3465.88/ (12x8x22) = 1.641 Birr/hr.
Hourly repair cost = 700/8x22 = 3.98 Birr/hr.

Hourly Mixer cost = 7.89 + 1.641+ 3.98 = 13.511 Birr/hr.
ii) Vibratory
Depreciation (d)
5000/ (7x12x8x22) = 0.338 Birr/hr.
Interest return (i)
1/7 [(5000 (1+0.065)7 - 5000] = 395.7 Birr/hr.
395.7/ (12x8x22) = 0.187 Birr /hr.
Repair cost
50/ (8x22) = 0.284 Birr /hr.
Hourly vibrato cost = 0.338+0.187+0.284= 0.81 Birr/hr.
Type of Hourly
equipment No UF Hourly rental rate Cost
Mixer 1 1 1 13.51 13.51
Vibratory 1 1 0.81 0.81
Total hourly cost
(Birr) 14.32
Equipment cost for (1m3 concrete) 14.32/1.25 = 11.46 Birr/ m3
Example. Equipment cost using monthly rental changes

Mixer= 5000 Birr Month rental charge
Vibrator = 500 Birr month rental charge
Hourly cost
Mixer 5000/22x8 = 28.41 Birr/hr.
Vibrator = 500/22x8 = 2.84 Birr /hr.
Total = 31.25 Birr/hr.

Equipment cost for 1 m3 of concrete = 31.25/1.25 = 25 Birr/ m3

Direct cost = material cost +labor cost + equipment cost
=9378.023+373.84+25 = 9,776.86 birr/hr.
Indirect cost = 9,776.86*.15= 1,466.53 birr/hr.
Total cost = direct cost + indirect cost = 11,243.39 birr/hr.
Example
1) Costs For Formwork
Two methods of calculation to be accounted
i) With monthly rental charges
Ex. Steel form works
ii) With charges according to the number of uses
Ex. Timber formworks
1m2 formwork for floor slab made of zigba: - 300 birr & number of possible uses 7
Type of material Unit Qty Rate Cost per unit
Zigba m2 1 42.85 42.85
Batten m 1 2.0 2.00
Beams m 1 4.16 4.16
Eucalyptus posts m 1 2.5 2.5
Mold oil lt 0.1 1 0.1
Nail kg 0.22 8 1.78
Sum 53.37
Loss 5% 2.67
Total 56.04

3.6. Two approaches for cost calculation

i/ Cost Calculation with predetermined charges
Direct itemized cost Indirect itemized cost

- Material - Site overhead costs
- Labor - General overhead cost
- Equipment - Risk and profit
- Subcontractor
Unit prices
(Rate)
Bid Sum
Procedure for the cost calculation with predetermined charges
The direct itemized cost will be established in accordance with the methods and approach
illustrated in the previous examples. However the indirect itemized cost will be a product of the
corresponding direct itemized cost with some fixed charge to be established by the individual
contractors for the particular project. In our country high-class contractors presume 30-40%
of the direct itemized cost as an indirect cost for the particular item of work. One can readily
establish the corresponding unit prices by just summing up the direct and indirect itemized costs.
The summation of the price of the whole item which results from the multiplication/unit price x
quantity/ would give the bid sum to the particular project.
Example: Establish the unit price of 1 m3 concrete considered for in the previous examples.
Given that the surcharge for the indirect cost is 35%.
Material cost= 400.25
Labor cost = 28.78
Equipment cost = 11.04
Direct cost = 440.07
Note: 35% is the surcharge applied to
get the bid sum
Indirect cost = 0.35 (440.07) = 154.02
Unite price = 440.07 + 154.02= 494.1 Birr/ m

ii/ Cost calculation through the bid Sum

In this approach, amounts for site overhead costs, general overhead costs, risk and profit are to
be ascertained separately for each project. Here from surcharges on direct itemized costs result
with different amount for each project;
Four steps for this calculation method:
- Establishing the production costs
- Establishing the bid sum
- Establishing the surcharges on direct itemized costs
- Establishing the unit prices
Eg. Given the following detail for the construction of 5Om long fence around a site.
1/ List of items quantities and direct itemized costs are as given in the table
No Items of work Unit Quantity Direct itemized
cost
1 Excavation to a depth of 1m M3 40 6
2 50 cm thick masonry wall M3 25 185
3 Concrete for tie beam M3 5 425
4 Dia 14 deformed bar Kg 242 5
5 Dia 8 stirrups kg 132 4.5
6 Formwork tie beam M2 20 45
7 20cm thick HCB wall M2 90 52
Direct cost 14,374 birr
2) Site overhead costs

 Site facilities (office, store---)------------------------------------2500 birr
 Electricity, water & telephone -----------------------------------800 birr
 Salary professionals ------------------------------------------------2000 birr
 Secretarial service ---------------------------------------------------300 birr
3) General overhead cost -----------------------------------------10 % direct cost
4) Risk & profit--------------------------------------------------------7% of direct cost

Question: Establish bid sum and unit prices for the itemized works.
Step 1: Establish production cost. (Direct cost + Site overhead cost)
Direct cost: - 14,374 birr
Site overhead cost: - 5,600 birr
Production cost 19,974 birr
Step 2: Establish bid sum [production cost + General overhead cost + risk & profit]
Production cost ------------------------- ------ 19,974 birr
General overhead cost = 10 %( 14,374) =1,437.40 birr
Risk & profit ---------------7 %( 14374) = 1,006.18 birr
Bid sum without vat = 22417.58 birr
Vat 15% = 3362.64
Bid sum with vat = 25780.22 birr
Step 3: Surcharge on direct itemized cost
Surcharge = Bid sum without vat
Direct itemized cost
= 22,417.58 = 1.5596 = 1.56

14,374

Step 4: Establishing unit prices

Unit price = Surcharge x direct itemized cost
Item of work Unit Qry Unit price Amount
1. Excavation m3 40 9.36 374.40
2. masonry wall m3 25 288.53 7213.25
3. Concrete m3 5 662.83 3314.15
4. dia 4 bar kg 242 7.798 1887.116
5. dia 8 bar kg 132 7.018 926.376
6. formwork m2 20 70.18 1403.6
7. HCB wall m2 90 81.099 7298.91
Bid sum without vat 22417.8

Add 15 % vat 3362.67
Bid sum with vat 25780.47 birr

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Specification and Quantity Surveying Dejene Dibaba

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COLLEGE OF ENGINEERING AND TECHNOLOGY

DEPARTMENT OF CONSTRUCTION TECHNOLOGY AND

BULE HORA, ETHIOPIA

1. Stages of a Civil Engineering Project 1

1.1. Pre design stage activities ........................................................................................ 1

1.3. Construction site supervision................................................................................ 9

1.4. Specification and quantity surveying ..................................................................... 11

1.4.7.2. Category of work in construction industry: .................................................. 17

1.8. Writing Bill of Quantity ......................................................................................... 23

2.0. Construction Contract 24

2.1. Project Delivery Systems ....................................................................................... 27

BY DEJENE DIBABA AND YOHANNES TEDLA II

2.2. Builders .................................................................................................................. 32

2.3. Designers ................................................................................................................ 33

2.7 Consultant Roles ..................................................................................................... 39

2.10.2. Defining the appointment .............................................................................. 43

2.10.3. Definition of services..................................................................................... 44

2.10.4. General Contracting ....................................................................................... 46

2.10.5. Experience of the lead designer ..................................................................... 46

2.10.6. Complete design ............................................................................................ 47

2.10.7. Involvement of quantity surveyor.................................................................. 47

2.10.8. Price as the basis of selection ........................................................................ 48

2.10.9. Employer-selected sub-contractors................................................................ 48

2.10.10. Construction Planning & Scheduling .......................................................... 51

2.11. Contract Agreement ............................................................................................. 53

B. Performance Security ......................................................................................... 55

C. Advance Payment Security ................................................................................ 57

BY DEJENE DIBABA AND YOHANNES TEDLA III

2.5. Contract document ................................................................................................. 57

2.12.2 Works Supervision Management Processes ................................................... 61

2.12.3. Quality Management Processes ..................................................................... 61

2.12.4. Financial Management Processes .................................................................. 62

2.12.5. Evaluation and improvement ......................................................................... 62

2.12.6. Monitoring ..................................................................................................... 62

2.12.7 Methods Statement ......................................................................................... 63

1.13. Contract ................................................................................................................ 63

2.0. Claim and dispute management in construction industry 73

2.1. Introduction ............................................................................................................ 73

2.6.2. Termination Claims ......................................................................................... 79

2.6.3. Owner Claims .................................................................................................. 80

2.6.4. Delay Claims ................................................................................................... 80

2.6.5. Cost of Corrective Work.................................................................................. 81

2.6.6 Termination Claims .......................................................................................... 81

2.6.7. Tort Claims ...................................................................................................... 81

BY DEJENE DIBABA AND YOHANNES TEDLA IV

2.6.8. Overview of Damages ..................................................................................... 83

2.6.9. Contractor's Damages for Delay ...................................................................... 84

2.10. Contractor's Disruption Damages ..................................................................... 85

2.6.11. Contractor's Acceleration Damages .............................................................. 86

2.12. Contractor's Damages for Differing Site Conditions ........................................... 87

2.6.14. Termination ................................................................................................... 88

2.6.15 Contractor's Damages for Termination Claims .............................................. 89

2.6.16. Owner's Liquidated Damages Claims ........................................................... 90

2.6.17. Owner's Delay Damages ................................................................................ 91

3.0. Cost estimation 93

3.1. Information required for cost estimation ................................................................ 93

3.5. Execution of the Cost Calculation........................................................................ 104

3.5.2. Labor Costs .................................................................................................... 105

3.5.3. Required information for the calculation of labor cost.................................. 106

3.5.4. Equipment cost .............................................................................................. 107

3.6. Two approaches for cost calculation .................................................................... 110

BY DEJENE DIBABA AND YOHANNES TEDLA V

Course Objective: aspects of contracts and bidding; types of construction documents