Tuesday, December 23, 2008

Importance of Contractor Progress Payment Terms


Getting The Tender Right
It has been said that an army marches on its stomach. Contractors and subcontractors in the construction industry run on cash. Lord Denning many years ago made the oft repeated phrase that cash flow is the lifeblood of the construction industry and this sentiment is still relevant today. Estimators when preparing tenders usually concentrate on building profits into the price. Of equal importance is the amount of working capital required to fund the contract and the need to keep the amount to a minimum. The payment terms are therefore crucial to every contractor and subcontractor. Certification and payment should be the subject of careful strategy and planning.

Mobilisation payments are common on overseas projects and should be considered by estimators on home based contracts and proper provision where appropriate included in the tender. The cost of manufacture is often greater than onsite erection but many standard contracts do not provide for certification and payment until the goods have been delivered to site. The reasons are historic in that when these contracts were first drafted many years ago there was very little offsite manufacture and fabrication. Many contracts drafted more recently however recognise that there are substantial costs which may be incurred prior to a start being made on site. The same principle applies to the design costs.

Many years have passed since Architects designed work undertaken by specialist subcontractors. Collateral design warranties became widespread due to the design of specialist installations being passed down to the specialist subcontractor. These early design costs need to be recovered as soon as possible usually long before onsite erection has commenced. When preparing a tender it is therefore essential for proper provision to be made for certification and payment for design and offsite manufacture when the costs are incurred and not many weeks of months later. The specialist subcontractor needs to stand firm when these provisions are challenged by the main contractor or the Employer’s consultants.

In contract negotiations price and performance are usually of more importance to the Employer as the money to pay for the project has usually already been allocated and it is a matter of timing as to when it is called down.

Improving On Going Contractor Payments
Most standard forms of contract provide for monthly payments which are based upon the value of work completed in the previous month. The process of valuing work on a monthly basis can be time consuming and therefore in recent years there has been a move to introduce milestone or stage payments whereby a pre-agreed sum is paid only when work has reached a certain stage or milestone. This information is usually provided at tender stage by the tenderer who needs to invest time and effort into ensuring that the stage or milestone payment plan is calculated to maximise cash flow. Employers who use the normal JCT forms of contract are rarely advised of the risk allocation which is prescribed in the contract.

No provision is usually made in Employers budgets for the possibility of cost overrun. When as a result of variations and delay and disruption claims this becomes a reality the payment shutters come down and receiving money for this type of item becomes very difficult. Contractors and subcontractors often do nothing to help themselves.

Final valuation of variations and delay and disruption claims isn’t given a priority status and can be very damaging to cash flow if left until the work on site has been completed. Time is often saved if variations are finally valued at the time the work is being carried out and delay and disruption claims at the time when these events occur. Getting the additional cost of variations and delay and disruption claims agreed and paid has created a problem for contractors and subcontractors for as long as anyone can remember.

There is no need to suffer for very long in view of the provisions of the Construction Act 1996 which came into force on 1st May 1998. Adjudication which is provided for under the Act is now available at any time to both parties to a construction contract. It takes less than a week to have an adjudicator appointed and his or her decision must be published within 28 days thereafter. With a few exceptions these decision are enforceable by the Courts. In excess of 6000 adjudications have been heard since the Act came into force, the majority of which have been commenced by specialist subcontractors who consider they have been underpaid. Often the threat of adjudication is sufficient to enable meaningful negotiations to get under way.

Remedies For Late or Non-payment
The Construction Act has been a blessing to specialist subcontractors. Not only does it provide facilities for referring disputes to adjudication but it outlaws pay when paid clauses. These clauses allow the main contractor to delay payment to the subcontractor until the money is received from the Employer and to avoid payment to the subcontractor entirely if the money isn’t received from the Employer. Since the coming into force of the Act the only pay when paid clause permitted is in respect of non-payment due to the insolvency of the Employer. A further benefit included in the Act provides that if payment is not forthcoming in accordance with the contract terms the contractor or subcontractor may subject to proper written notice suspend work until payment has been received. When money is in short supply often the companies who threaten to suspend work are the ones who receive payment first particularly if the work is on the critical path. If payment is made late interest becomes due on the outstanding money in accordance with Late Payment of Commercial Debts (Interest) Act 1998 which applies to all contracts as from 1st November 2002. The rate of interest payable is 8% above bank minimum lending rate unless the contract itself provides a substantial remedy for late payment. This contractual remedy to be regarded as substantial would have to be in the region of an 8% interest rate. If properly applied these statutory provisions can often substantially improve a specialist subcontractor’s cash position.

Benefits of Partnering
It has been argued that many of these problems are removed on Partnering Contracts. If this is the case many specialist subcontractors are still still waiting for the benefits to filter down and in the mean time may prefer to apply the “Cash is King” policy.

Source: http://www.longworthconsulting.co.uk/news%20construction%20contract%203.htm
Note: English and Scots Law Cases in Construction Contract Disputes & Adjudication


The Process

The Certification process in the construction industry has been in place for many a long year and is an integral part of both building and civil engineering. It involves client, consultant, main contractor and subcontractor alike. The very existence of large numbers of companies who make their living in the construction industry depend upon the certification process. On many standard forms of main contract the contractor is entitled to be paid the sum which is certified by the Architect, Engineer or Contract Administrator. Main contractors in an effort to ensure that they do not finish up paying out more than they receive link the payment under the subcontract to the amount certified under the main contract. The widely used standard forms of contract published by the JCT and ICE provide for the Architect, Contract Administrator or Engineer to issue a payment certificate at regular intervals normally monthly which under the terms of the contract is the sum which the Employer is required to pay. Where any form of advanced payment or payment on account is involved there is always a fear on the part of the paying party that there may be an overpayment followed closely by the insolvency of the party who has received payment. Where this occurs the paying party is usually left out of pocket. Architects and the Quantity Surveyors who provide the necessary financial advice, Contract Administrators and Engineers are only too well aware of the dangers of over certifying. Employers who find themselves in the position of having overpaid a main contractor who subsequently goes out of business are usually never slow to argue that the over payment has resulted from negligence on the part of one or more of its consultants and are quick to threaten legal action to recover the overpayment.

Unilateral Action

Often Employers take matters into their own hands having received a payment certificate and take unilateral action to reduce the amount certified before making payment. Employers who take the decision to reduce the amount certified often fail to realise that it is not just a simple matter of sending off a cheque in a reduced amount. The Housing Grants, Construction and Regeneration Act 1996 put a stop to that method. One of the objects of the Act is to assist cash flow in the construction industry and so includes a procedure intended to make it a little more difficult to avoid paying sums when they are due. Section 110(2) states that a party to a construction contract may not withhold payment unless an effective notice to withhold payment has been made. To be effective the notice must state the amount which the Employer intends to withhold and the reasons for it being withheld The contract must provide a timescale within which the notice must be served before payment is to be made.

Legal Scrutiny

The withholding by the Employer of sums certified came under review in the recent case of Rupert Morgan Building Services Ltd v David Jervis and Harriet Jervis (2003). Work was undertaken by the claimant on a cottage owned by the defendants, the conditions of contract used were those issued by the Architecture and Surveying Institute. These conditions provided for the defendant to pay the claimants sums which had been certified by the Architect who had been appointed by the defendants. A dispute arose out of the payment of the sum included in Certificate No 7. The Architect certified as due for payment a sum of £44,000 plus VAT of which the defendants disputed £27000. It was argued by the defendants that the amount certified included items for which payment had already been made. In time honoured fashioning the defendants merely sent off a cheque in the reduced amount. It is unlikely that they were familiar with the requirements of the 1996 Act and due to a lack of the necessary withholding notice the claimant applied to the court to enforce payment in full of the sum certified. The case finished up in the Court of Appeal who had the task of wading through a number of cases which involve reviewing the circumstances under which a withholding notice in accordance with the 1996 Act is required. It has to be said that the decisions handed down by the courts on this matter lack consistency. There is what is referred to as the narrow and alternatively the wider interpretation of the wording. The Act refers to the notice being required in respect of a sum which is due under the contract. It is often argued in accordance with the narrow interpretation that if some or all of the work for which payment is sought has not been carried out in accordance with the contract then payment cannot be due. This being the case the need for a withholding notice does not arise. The wider view is that payment properly applied for under the contract will have to be made in full unless a proper withholding notice has been served.

Court Explains

The Court of Appeal avoided deciding whether the narrow view or wider view was correct. The opinion however was expressed that if the narrow view is taken as being correct then there is a fuzzy line between claims for breach of contract such as delay which require withholding notice and abatement, which reduces the value of work carried out, which does not. To get round this difficulty the Court of Appeal decided that the sum due under the contract was the amount which has been certified by the Architect. This being the case the narrow view argument used by the defendants that the sum wasn’t paid because it wasn’t due could not apply.
It seems in view of what was said in the Court of Appeal concerning the narrow and wider interpretation of the circumstances when a withholding notice is required that commercial common sense needs to be in place at all times. It must always be good policy for the paying party to send a withholding notice as required by the contract if the intention is not to pay the full amount of sums certified or where an application for payment is made the intention is to pay a lesser sum.

Source: http://www.longworthconsulting.co.uk/news%20construction%20contract%207.htm

Thursday, November 20, 2008

What is Practical Completion?

The issue of whether a construction project has achieved Practical Completion has long been the source of many disputes within the construction industry. This is not surprising as many of the Standard Forms of Contract rely upon the issue of a Certificate of Practical Completion to trigger such matters as the release of the first moiety of retention, exclusion of liability for Liquidated and Ascertained Damages and Insurance of the Works.

Given the importance of this matter it is somewhat surprising that the Standard Forms used throughout the Construction Industry (with the exception of the process plant industry IChemeE, although still open to interpretation) do not define completion. Instead, they generally leave the matter to the discretion of the Architect, Engineer and Supervising Officer etc.

The following unhelpful entry is made in the JCT 1998 at Clause 1.3 (Interpretations, Definitions etc):-

‘Practical Completion: see Clause 17.1’

Clause 17.1 provides

‘When in the opinion of the Architect Practical Completion of the Works is achieved,……… he shall forthwith issue a Certificate to that effect and Practical Completion of the Works shall be deemed for the purposes of the Contract to have taken place on the day named in such Certificate’.

Various attempts have been made by the courts to form a definitive opinion for Practical Completion and the following cases are worth noting:-

Westminster Corporation v J. Jarvis and Sons (1970)

Here Lord Salmon LJ stated that “The obligation on the contractors under clause 21 to complete the works by the date fixed for completion must, in my view, be an obligation to complete the works in the sense in which the words ‘practically completed’ are used in clause 15 and cause 16 of the contract. I take these words to mean completion for practical purposes, i.e. for the purpose of allowing the council to take possession of the works and use them as intended. If completion in clause 21 meant down to the last detail, however trivial and unimportant, the clause 22 would be a penalty clause and unenforceable.”

However, in the same case a further definition was given by Lord Dilhorne who appeared to view practical completion as fault free completion of the works saying that:

“The contract does not define what is meant by Practical Completion. One would normally say that was practically completed when it was almost but not entirely finished, but practical completion suggests that this was not the intended meaning and what is meant is the completion of all the construction that has to be done…”

In 1982 this rather strict impression was diluted in the case of HW Neville (Sunblest Ltd) v William Press and Sons where it was said “I think the word practically …… gave the Architect a discretion to certify that the contractor had fulfilled it’s obligation ……. Where very minor deminimis work had not been carried out, but that if there were any patent defects in what the contractor had done the Architect could not have given a certificate of Practical Completion”.

Judge Newy in Emson Eastern v EME Developments (1991) further reinforced this view where he said that “because a building can seldom if ever be built as precisely as required by drawings and specification, the contract, realistically refers to ‘practical completion’ and not ‘completion’, but they mean the same. If contrary to my view, completion is something which occurs only after all defects, shrinkages and other faults have been remedied and a certificate to that effect has been given, it would make the liquidated damages provision unworkable”.

Whist Practical Completion seems to be generally understood by the industry, in practice there remains a difficulty in arriving at a formal definition that is accepted within the industry as a whole. Keating submits that the following represents the correct analysis:-

“1. The Works can be Practically Complete notwithstanding that there are latent defects;

2. A Certificate of Practical Completion may not be issued if there are patent defects. The Defects Liability Period is provided in order to enable defects not apparent at the date of Practical Completion to be remedied;

3. Practical Completion means the completion of all the construction work that has to be done;

4. However, the Architect is given discretion under clause 17.1 to certify Practical Completion where there are very minor items of work left incomplete, on ‘de minimus’ principles.”

Hudson’s approach, whilst not as simplistic, essentially follows the same principles i.e.

“It is desirable to be clear as to the precise meaning of ‘completion’ in a time obligation. There is surprisingly little English authority on the point, but it is clear that the requirement will be less rigorous than in other contractual contexts. Usually it will mean bona fide completion free of known or patent defects so as to enable the owner to enter into occupation. The words ‘practical’ or ‘substantial’ in the English standard forms probably do no more than indicate that trivial defects not affecting beneficial occupancy will not prevent completion (the more so, of course, if the contract provides for a maintenance or defects liability period).

Notwithstanding the “definitions” referred to above, it is often the case that individual circumstances can and do affect the issue of a Certificate of Practical Completion, irrespective of the condition of the works on site. Such circumstances may include the Employer’s willingness, or not, to accept the works which may be dependant upon whether he has a client to occupy them – why take on the cost of maintaining, securing and insuring the works when you have a Contractor in a position to do these works at no cost and you may be able to recover Liquidated and Ascertained Damages in addition?

Given the ambiguity in current case law and the currency at which this matter arises, it is surprising that the more frequently used standard forms of contract contain no clearer definition for Practical Completion. In the absence of such clear definition or persuasive case law either way, it is at the mercy of the Architect, Employer and Employer’s Agent and their interpretation of Practical Completion that the Main Contractor finds himself and against whom he has to argue his position accordingly.

Source: http://www.alway-associates.co.uk/legal-update/article.asp?id=10



1. The courts had in earlier cases confirmed the intention of the Post-1980 Articles and Conditions of Building Contract published by the Singapore Institute of Architects ("SIA Contract") of providing a system of "temporary finality" regulated by the architect's certificates over a wide range of matters, which could be enforced immediately by summary judgment pending subsequent arbitration or litigation, if any.

2. In China Construction, the defendants/employers contended that the architect has not certified an interim payment certificate in accordance with the provisions of the contract and hence, it should not be given the "temporary finality". This case illustrates the typical problems faced by contractors arising from the late and under-certification of architects.

Brief Facts

3. The plaintiffs were the main contractors engaged by the defendant owners under a
contract in the SIA standard form of contract for the building of a theme park on Sentosa Island at a lump sum of S$8.146m. The provisions for the issue of interim certificates were contained in clause 31 as modified by the parties. By an addendum to the contract, a new clause 31(13) was added which provides " the issuance of each and every Interim Certificate by the Architect is conditional upon the Contractor having sent to the Quantity Surveyor a detailed statement and breakdown of the approximate value of the work executed and of unfixed materials on site, at least ten days before the date of each relevant certificate".

4. The practical completion of the Works was certified on 15 January 1995. On 7 October 1995, the plaintiffs submitted progress claim no. 20, described as the "penultimate" claim, for the (cumulative) sum of $6,568,910.27. The architect would, in the normal course, have issued one interim certificate in respect of the claim. However, he did not do so. Instead, he issued one interim certificate (no. 20) on 27 June 1996 for the cumulative sum interim of $4,621,575.75 and a net sum of $43,690.00. He issued another interim certificate (no. 21) on 13 January 1997 for a cumulative sum of $4,815,928.50 and a net sum of $194,352.75.

Then, nearly two years later, on 10 December 1998, he issued interim certificate no. 22 for the cumulative sum of $5,136,664.29 and a net sum of $320,735.79. The last certification was based on the project quantity surveyor's valuation made on 31 July 1997. The plaintiffs commenced legal proceedings and applied for summary judgment in respect of the net sum of $320,735.79. The plaintiffs succeeded before the learned assistant registrar. The defendants appealed.


5. The defendants' main contentions are summarised as follows:

Firstly, contrary to clause 31(2), the interim certificate no. 22 does not show the valuation date. The defendants refer to the Tropicon case in which interim certificates were struck down on the ground, inter alia, that they did not show the valuation date.

Secondly, only one interim certificate can be issued on one progress claim. There was no progress claim in respect of interim certificate no. 22. The defendants relied on clauses 31(2) and 31(13).

Thirdly, interim certificates are intended to be issued during the progress of the work, and not after the contract has been completed. Thus the defendants said interim certificate no. 22 was contrary to the scheme and provisions of the contract. The defendants again referred to the Tropicon case in which interim certificates were held to be invalid on account of having been issued more than 2 years after completion.

Fourthly, the interim certificate no. 22 was not in form or in content a correction certificate under clause 31(4).


6. Warren Khoo J gave summary judgment for the plaintiffs. He pointed out,
inter alia that:

(a) When considering the question of validity of interim certificate no. 22, it is
appropriate to take into account the conduct of the parties and the architect in the
matter of certifications and payments. He added that "it is quite apparent that it is
not in regard to interim certificate no. 22 alone that the architect and the parties
have not followed the provisions of the contract. ... Indeed they have been
habitually ignored". On the evidence, the learned judge held that "it seems to me
that in view of these apparently habitual departures from the contract, all in
relation to certifications of payments to the contractor, the defendants' criticisms
about the form and timing of the certificates cannot be taken seriously. There has
been a general waiver of the strict requirements of the contract, and it is
inequitable for the employer to go back on it when it suits them".

(b) A correction certificate (under clause 31(4)) may be issued at any time. It can be issued before completion of the contract; between two interim certificates;
notwithstanding that an interim certificate has already been issued on the same
progress claim.

(c) After analysing the Tropicon case and clause 31(4), the learned judge said "that
there is nothing in that case to support the view that a correction certificate, in the absence of vitiating factors such as those present in that case, should be
invalidated merely on the ground that it was issued long after the completion

(d) The delay in this case was probably consistent with a pattern of grudging and
belated certifications, as manifested in the manner in which the previous two
certificates referred to were issued. It seemed evident that what happened was
that the architect having certified certain sums, did not consider that he had
certified enough and proceeded to issue a further certificate or certificates on the
basis of the same progress claim made on 7 October 1995.

(e) "An interim certificate for payment issued by the architect under the SIA contract, like other certificates issued by him, is prima facie to be honoured. It enjoys "temporary finality"; i.e. finality pending resolution of any underlying disputes between the parties by review in arbitration or court proceedings. Summary
judgment is to be given in the meantime on the certificate unless it can be shown
in a summary way that the certificate has not been issued in the proper exercise of
the architect's certification powers under the contract. All this is provided in
clause 31(11) of the general conditions. The burden of showing that the power has
not been properly exercised in respect of any certificate is on the party challenging
its validity. On the facts of this case, I am not prepared to find that the architect
has not acted properly in the exercise of his power under clause 31(4). The interim
certificate in question must be honoured".


It is submitted that this case illustrated the following important aspects of the SIA contract:

(a) The architect must exercise his certification powers in accordance with the
provisions of the contract.

(b) The Tropicon case is no authority for the proposition that an interim payment
certificate is in all cases to be invalidated merely on the ground that the
requirements of the contract are not met. Further, in considering the question of
validity of interim certificates, the courts take into consideration the conduct of the parties and the architect.

(c) Clause 31(4) allows the architect to issue further interim certificates to correct earlier interim certificates at any time (but it of course must be before the Final Certificate).

(d) In the absence of vitiating factors, the court will give "temporary finality" to an interim certificate by way of summary judgment.

Sumber: http://www.drewnapier.com/publications/Dnpub10.pdf

Thursday, October 23, 2008

History of Quantity Surveying

The quantity surveyor emerged in England at the beginning of the nineteenth century, although the firm of Henry Cooper and Sons of Reading was established as early as 1785. Prior to the first recorded usage of the term "quantity surveyor" in 1859, the terms "measurer", "custom surveyor" or "surveyor" were used.

In those early days the quantity surveyor acted for the master tradesmen, measuring the work after completion and frequently submitting partisan Final Accounts to the building owner. As a direct result of these activities it increasingly became the practice of building owners to have work executed under contract and to call for tenders before any work was undertaken. A procedure therefore developed whereby building owners would approach an architect to design a building. Drawings and specifications were distributed to selected master builders, who would then submit tenders for the total price rather than a collection of prices from master tradesmen.

The task of arriving at an accurate estimate of cost or tender can be carried out in only one way - that of measuring the quantities of all materials and labour necessary to complete the work, i.e. preparing bills of quantities. As each builder had to prepare his own bills of quantities for each project, they realised that it would be more economical for them as a group to employ one surveyor to measure quantities for them all. They would thus share the cost of the surveyor, obtain an identical Bill of Quantities which ensured that they would all be tendering on the same basis.

The building owner subsequently realised that it would be to his personal advantage to appoint and pay the fees of the quantity surveyor.

Thus the independent professional quantity surveyor gained consultant status.



(Issued February 1996; Revised June 2002)

Cost Engineering and Quantity Surveying have similar and highly overlapping functions. Quantity Surveying relates more to building design and construction, while Cost Engineering relates more to engineering projects and processes. However Cost Engineers and Quantity Surveyors commonly work in both areas. Cost Engineering and Quantity Surveying differ primarily in the route taken to professional qualification, not to any substantive difference in the two professions. Project Management overlaps both Quantity Surveying and Cost Engineering in the project cost management area to some degree but most Project Management functions are quite different from those of Cost Engineering and Quantity Surveying.

The following document summarizes the conclusions of discussions held at ICEC International Congresses and endeavors to compare the similarities and differences between the three professions, in terms of cost management matters only. A definition of entire scope of Project Management activity is not intended, nor should it be inferred, from this document. 

1.Cost Engineering (CE) and Quantity Surveying (QS)
To provide independent, objective, accurate, and reliable capital and operating cost assessments usable for investment funding and project control. 
To analyze investment and development for the guidance of owners, financiers and contractors.

CE and QS include:
- estimates of capital or asset costs including development costs;
- estimates of operating and manufacturing costs through an asset's life cycle;
- risk assessment and analysis;
- trending of scope and cost changes;
- decision analysis;
- financial analysis (eg, net present value, rate of return, etc);
- project cost control;
- appraisals of existing assets;
- project analyses, databases, and benchmarking;
- planning and scheduling;
- siting studies, etc.;
- productive and investment needs assessment;
- facility management needs assessment;
- project feasibility and budget assessment; 
- cost management;
- procurement management;
- contract administration;
- whole-life appraisals;
- quality audits;
- value management;
- dispute resolution. 
These are typical functions of the CE or QS but not all practitioners in the field perform all of these functions. Many specialize in a limited number of these functions.

The CE or QS provides information by:
- estimating costs and analyzing risk,
- trending and controlling costs and assessing design, and
- documenting costs.
These are interdependent and feed back to each other. They include:
- analyzing cost,
- assessing design,
- assessing risks,
- trending costs,
- advising clients,
- managing cash flows,
- preparing feasibility analyses, and
- assessing life-cycle costs.

2. Project Management (on cost management matters only) (PM)
Function: To set project objectives in line with the purpose(s) set up by general management and to manage the resources necessary to meet the objectives.

PM should:
- ensure that a realistic reference (scope, cost, time) is set up for further control
and is in line with the objectives;
- ensure that appropriate management tools are set up to help the team control the project;
- create a cost-minded atmosphere within the team;
- make decisions on what should be done in case of variance;
- ensure that the project objectives remain in line with business needs;
PM delivers the project by:
- managing resources,
- delegating tasks,
- making decisions,
- receiving information,
- setting goals,
- motivating people, and
- understanding cost engineering and quantity surveying.



Variations Clause 
Most standard forms of contract include a clause under which the employer or his representative is able to issue an instruction to the contractor to vary the works which are described in the contract. A change in shape of the scheme, the introduction of different materials, revised timing and sequence are all usually provided for by the variations clause. It will also usually include a mechanism for evaluating the financial effect of the variation and there is normally provision for adjusting the completion date. In the absence of such a clause the employer could be in a difficulty should a variation to the works be required. The contractor could either refuse to carry out the work or undertake the work and insist upon payment on a quantum meruit or fair valuation basis. Calculation of the price for the extra work applying this method could involve payment well in excess of the contract rates.

Separate Contract 
Even where a contract includes the usual variations clause there may be circumstances which could lead to additions or changes introduced by the employer which falls outside the variations clause. Contractors who find themselves with unattractive contract prices would find it to their advantage to be able to argue that a change introduced by the employer fell outside the variations clause thus leaving the way open to argue that payment for the change should be on a quantum meruit or fair valuation basis. 

This situation arose in the UK case of Blue Circle Industries v Holland Dredging Co (1987). The works involve dredging in Larne Lough in Ireland to enable larger vessels to dock. The tender referred to the dredged material being deposited in areas approved by the public authorities, the intention being to discharge the material excavated in suitable areas in the lough. Resistance to the plan came from several quarters including the Larne Harbour Board and as a result an alternative plan was agreed to use the excavated material to form an artificial bird island. It was argued by the contractor that this was not a variation to the works within the confines of the contract but a separate contract in its own right. 

The decision in Thorn v Mayor and Commonalty of London a case heard way back in 1876 influenced the court. In this case it was held that if the additional or varied work were so peculiar, so unexpected and so different from what any person reckoned or calculated upon to such an extent that it is not contemplated by the contract then it would constitute a separate contract. The judge in the case considered that the construction of the bird island was wholly outside the scope of the original dredging contract and therefore constituted a separated contract. 

Experience In The USA
The position in the USA is similar but more developed. It addresses a situation where a large number of changes are instructed which individually fall within the ambit of the variations clause but collectively have the effect of completely changing the scope of the works. This situation is referred to as either abandonment or cardinal change and deals with the situation where the employer makes excessive changes to a project beyond what the parties reasonably could have anticipated at the time the contract is entered into. Courts will look at a number of factors in helping to decide whether the changes have been excessive. The starting points are the size, complexity and expected duration of the contract. Other factors to be considered are the number of changes, how many changes were anticipate when the project started, the magnitude of the work involved in the changes and the length of time in which such changes were made. 

There is no required intention on the part of the employer to abandon the contract by introducing excessive changes; this will often be implied as a result of constant interference or change. If the parties ignore the procedural provisions of the contract with regard to variations this could help influence the court into accepting that abandonment has occurred.

It is difficult to be hard and fast as to when additional or changed work will constitute a separate contract or convert the contract the parties entered into a different one. Courts in the USA seem to be more sympathetic to the contractor’s case for abandonment or critical change than in most other countries. Courts and arbitrators in the UK and like jurisdictions find themselves in the long grass when trying to decide what is due if payment is to be on a quantum meruit or fair valuation basis. They feel more comfortable in dealing with additions or changes priced at contract rates and are inclined to play it safe in holding that the facts as presented have not resulted in a separate contract. Employers who are perhaps starting to feel uneasy about the prospect of the USA attitudes creeping into the thinking of judges or arbitrators could give consideration to rewording the variations clause to give a wider definition of additions and change.


Outsourcing and Quality Performance: Malaysia’s Public Works Department

Abdul-Rashid Abdul-Aziz, School of Housing Building and Planning, Universiti Sains Malaysia, Penang, Malaysia 
Normah Ali, Contract and Quantity Surveying Division, Public Works Department, Kuala Lumpur, Malaysia 

A brief quality assessment exercise conducted among officers of Malaysia's Public Works Department (PWD) on outsourced quantity surveying services affirmed the view that the consultants' performance was generally unsatisfactory. The performance dimensions cover from preliminary estimates and cost plans to final accounts. The result of this purely academic exercise generated sufficient interest among top decision-makers at PWD's Contract and Quantity Surveying Division to render quality improvement initiatives feasible. For a large public sector organisation usually afflicted with inertia, the changes that have taken place within such a short space of time are encouraging. What this case study points to is that given sufficient motivation, even a simple quality assessment exercise is able to prompt quality changes.

Despite having significant in-house quantity surveying (QS) expertise, Malaysia's Public Works Department (PWD) regularly engages independent consultants to undertake some or all of the QS functions on projects. Constrained from employing more technical staff despite mounting public construction expenditure, the practice of outsourcing relieves work pressure. While the PWD QS staff have long endured, at-times, unsatisfactory quality of services rendered by outsiders, there has been no effort to narrow their performance gap. For the first time, a simple quality assessment exercise was recently conducted to gauge the perception of PWD staff about the service quality of the PWD-engaged QS practices. What was only meant to be a simple academic exercise motivated top management at PWD's Contract and Quantity Surveying Division to initiate the quality improvement. This paper presents the results of the survey followed by the specific steps taken by the PWD to safeguard public interest.
Research method

Quality assessment survey forms were sent to selected PWD's QS personnel, who regularly deal with independent QSs. While staff in the various state-level offices (in QS units) were also approached, the majority of respondents were from PWD headquarters in Kuala Lumpur (in the Contracts and Quantity Surveying Division) to reflect their higher propensity to deal with external service providers (Table I). Of the 55 questionnaires that were distributed 47 were returned completed (i.e. 85 per cent response rate).

Satisfaction levels were scored against 12 performance criteria that PWD had long defined although not applied. While not as sophisticated as some performance measurement systems (Hoxley, 2000; Kaplan and Norton, 1992; Lee and Howard, 1994), the organisational impact of this exercise was profound. Respondents were given the opportunity to assess up to four QS consultants of their own choice. Overall 69 firms made up the sample population. Multiple feedback on specific firms by different respondents was averaged out to obtain single figures. For the purpose of this paper, the results were aggregated to reflect the overall quality of the QS consultancy services rendered to PWD.

Theoretical review
Under pressure to improve the performance and cost efficiencies, public sector organisations in the UK, US, Australia and New Zealand were compelled to outsource (Boston, 1995; Donahue, 1989). An international survey among the US and European companies found 14 objectives for outsourcing that can be conveniently clustered into three groupings (Kakabadse and Kakabadse, 2001). First, to achieve best practice across the enterprise and also to enhance the cost discipline and control skills of managers. Secondly, to improve the service quality and management by focusing more on the core competencies of the organisation. Finally, to gain access to new technology and skills, reduce headcount, enhance the organisation's capability to develop new products and services and reduce capital costs. Other scholars have produced similar lists (Beyers and Lindahl, 1996; Coffey and Drolet, 1996).

Several writers have argued that contracting out is not a panacea (Stean and Walker, 2000). In certain instances, in-house service provision is more efficient than market reliance. Organisations contemplating outsourcing must consider the following risks involved (Lonsdale and Cox, 2000):
loss of core activities,
being leveraged by suppliers,
loss of strategic flexibility,
suffering interruptions to supply,
receiving poor quality of supply,
a fall in employee morale,
a loss of internal coherence,
confidentiality leaks, and
loss of intellectual property rights

Making outsourcing decisions require proper estimating of the cost of a service or product, the time horizon of the outsourcing decisions and any associated opportunity costs (Kee and Robbins, 2003). Cost pertains to not only contract price but also monitoring financial and technical expenses (Prager, 1994).

There is a wide range of outsourcing arrangements: from short-term contracts to full ownership of and, or, merger between service purchasers and service providers (Bensaou, 1999). The relationship between two parties in a market transaction must have overlapping motives in order to enter into, develop and maintain a relationship (Dwyer et al., 1987). The commercial relationship will continue for as long as the overlapping motives remain. Having externalised a particular service, the service recipient needs to monitor the quality of service by the provider, a task that is difficult for public sector organisations that traditionally lack the necessary skills and capabilities (US General Accounting Office, 1997) or are short-staffed (Prager, 1994). Other possible barriers, public sector organisations might face, include the appropriation system that controls public enterprises in accordance with government rules, the political control over such organisations and organisational culture that treats the political masters, not citizens, as customers (Madsen, 1995).

PWD (Jabatan Kerja Raya, JKR)
PWD was established in 1872 during the British occupation. In 1956, it was placed under the Ministry of Public Works (then known as Ministry of Public Works, Post and Telecoms) when the latter was established. At present, PWD has many semi-professionals and professionals in the engineering, architecture and QS disciplines. PWD's clients are other ministries, federal and state governments.

PWD is the largest construction project-based organisation (PBO) in Malaysia with an elaborate organisation set-up (Figure 1). PWD has in-house QS expertise. The Contract and Quantity Surveying Division located in the Kuala Lumpur headquarters has 166 staff, consisting of 51 qualified quantity surveyors, 43 technical assistants, 34 technicians and 35 non-technical workers. Experts also reside in other PWD divisions such as Mechanical Engineering, Building (further dispersed among the various units), Road, Water Supply, Structural and Engineering Specialist and Planning and Corporate Services. PWD's QS personnel are also located in state-level offices, Kesedar (a government agency), Kelantan Federal Development Department and Sabah Federal Development Department, although they can only deal with projects not exceeding RM5 million in value. Furthermore, they are also placed in other ministries, e.g. Ministry of Finance, Ministry of Health, Ministry of Defence, etc.

Unlike some public bodies in other parts of the world, outsourcing by PWD did not stem from ideological grounds or public sector reforms (Boston, 1995; Donahue, 1989), but rather from sheer pragmatism: to relieve mounting workload that began in the 1980s. To a lesser degree, outsourcing is also to ensure that the private QS practices flourish. With no opportunity to augment its manpower, PWD is not in the position to weigh the risks involved in outsourcing (Lonsdale and Cox, 2000). For the year 2001, for example, the Contract and Quantity Surveying Division provided pre-contract duties to 70 projects to the value of RM2.5 billion and post-contract duties to 111 projects to the value of RM11.7 billion. One-hundred and twenty-one projects valuing RM2.1 billion were passed on to QS consultants.

Unlike the UK that introduced compulsory competitive tendering (CCT) in the 1990s for the purchase of property and construction professional services (Hoxley, 2000), in Malaysia consultants are selected either by the Treasury or PWD depending on the size of the projects or value of the fees. Of all the possible types of outsourcing relationships (Bensaou, 1999), PWD normally engages independent QS firms on project-based contracts. Front line PWD QS have long been aware of their under-performance, thus affirming Stean and Walker's (2000) observation that reliance on the market may not necessarily be better than in-house servicing. But outsourcing persists mainly because of under-staffing. Action (e.g. warning letters, immediate termination, black-listing, etc.) can be taken against under-performers. However, unless very serious, written complaints by PWD engineers and project managers against certain QS consultants were very often ignored. Such behaviour can be attributed to collective exclusion brought about by occupational enclosure (Murphy, 1990). Legislative instrument grants the QS profession, the monopoly over their functions. In undergoing the same procedures of professionalism set by the Institution of Surveyors Malaysia – tertiary education, training and socialisation processes – the ties between the quantity surveyors across the organisational divide is strong (Burrage, 1972), perhaps as strong if not stronger, than their affiliation to their own organisations. Indeed among the consultants are those that began their professional career with PWD. Those that are with PWD at present might move to private practice at sometime in the future. When probed, PWD quantity surveyors conceded that they prefer not to be too stringent with their opposites in the private sector to avoid “ruining their rice bowl”. Though not explored, while understaffing (Prager, 1994), capabilities deficiency (US General Accounting Office, 1997) and even inherent barriers (Madsen, 1995), may have contributed to lax monitoring, occupational enclosure certainly exerted a strong influence.

It is not usual for PWD to require the entire range of services offered by QS consultants. The three most frequently outsourced services are preparing work progress evaluation, evaluating work variations and completing final accounts (Table II) and the tasks that can be categorized as post-contractual. One function least delegated to outsiders is tender evaluation to avoid the risk of sensitive information leaking to interested and influential parties who are keen to secure lucrative construction contracts.
Quality analysis of services rendered by QS consultants

This section dwells on the survey findings summarised in Table III. As mentioned in the introduction, the simple assessment exercise was initially meant to be an end in itself to satisfy purely academic interest.

For financial allocation from Treasury, preliminary estimates and cost plans that are prepared must be contained in the preliminary detail abstract (PDA). Of the PWD-engaged QS consultants, 57.8 per cent met or surpassed the expectations of respondents for this particular role.

According to respondents, 58.1 per cent of the surveyed QS firm population met or surpassed their expectations pertaining to advising construction costs. For government construction contracts, QS consultants need to “rationalise” the price to ensure that the figure offered by the contractor's is realistic.

Of the PWD-engaged QS firms, 63.8 per cent under-performed when preparing the BQ, in terms of accuracy and timeliness, despite the fact that this traditional QS function is one of the more frequently outsourced to independent parties (Table II). Inaccuracy of BQ can stem from the omission of important cost items, disparity between drawing details and quantity lists and over- or under-measurement of cost items. Slowness in preparing the BQ risks and delaying the date for calling of tenders would then affect the project completion. Since the preparation of BQ relies very much on architectural and engineering drawings, those involved must establish a good working relationship with the other consultants and personnel from other disciplines.

As for tender estimates, 58.9 per cent of the surveyed population met or surpassed the expectations of the respondents. Selection of the contractor is made by the Tender Board on the basis of the Tender Evaluation Report. A very high proportion (72.2 per cent) of the surveyed QS firm population under-performed when evaluating the tenders. In fact, of all the services that the external consultants render, this task recorded the worst performance. It is just as well that PWD outsources this task least frequently (Table II).

During the preparation of the contract documents, the BQ figures are once again double-checked. It is imperative that the contract document be prepared on time so that the project is not delayed. Of the PWD-engaged QS firms, 57.2 per cent were regarded by the respondents as being under-performers when it comes to preparing contract documents.

PWD-engaged QS firms scored the highest (i.e. 79.4 per cent) in fulfilling or surpassing the expectations of the respondents for site meeting attendance. It is interesting to note that 20.7 per cent were rated “excellent”, the highest compared to other performance criteria. The results may not be surprising as other than taking up the consultants' time, attending site meetings is perhaps the least taxing activity performed.

Apart from costs, QS consultants are duty-bound to give contractual advice on matters such as contractors' claims. Of the surveyed QS firms, 52.7 per cent met or surpassed the expectations of the respondents in this regard. Interestingly, seeking contractual advice from independent QS firms is not regularly done (Table II), in part because not all of them are well versed with the PWD form of construction contracts.

In assessing the cost of variation works, 59.5 per cent of the surveyed population performed below expectation even though it is among the most frequent activity outsourced to them (Table II). Too regularly, they either gave unrealistic figures or disregard PWD format, which then requires intervention by PWD personnel.

Interim certificates have to be prepared promptly so as not to encumber the contractor. Of all the tasks, PWD outsources this task most frequently (Table II). Of the surveyed population, 65.0 per cent met or surpassed the expectations of the respondents for this function.

The surveyed population scored the worst (i.e. 71.5 per cent) for final accounts preparation that sometimes take years to complete. In the worst case, PWD had to redeploy its staff to complete the task. Consultants cannot be blamed entirely for poor performance; late appointments and loss (i.e. transfer, resignation and retirement) of PWD officers sometimes hinder information collection. It is interesting to note that a relatively significant proportion of the surveyed population (i.e. 13.6 per cent) scored “excellent”, but an almost equal proportion (i.e. 12.6 per cent) “failed”. Given that preparing final accounts is one of the most frequently assigned tasks to independent consultants (Table II), their poor performance reflected badly on them.

Of the PWD-engaged QS firms, 73.3 per cent were rated satisfactory or excellent in upholding project confidentiality. Those that contravene can be subjected to legal action as provided by the 1972 Official Secrets Act. The 1967 Quantity Surveying Act outlines the ethical standards for practicing QS that include maintaining confidentiality of sensitive information and documents.

The aggregated results point to much room for the improvement of PWD-engaged QS consultants across all the performance criteria. Several points deserve highlighting. Serious service quality gaps pertain to tender evaluation (72.2 per cent), preparing final accounts (64.8 per cent), producing BQ (63.8 per cent), costing variation orders (59.5 per cent) and preparing contract documents (57.2 per cent). Construction analysis, production of BQ and settlement of final accounts are the traditional functions of quantity surveyors (RICS, 1982; 1984), so scoring badly for such tasks does not reflect well on their professionalism. While performing better for other technical tasks (these preclude attending site meetings and upholding confidentiality), the margin is not wide enough. Just over half of the surveyed population met or exceeded the expectations of PWD when it comes to giving legal advice on contractors' claims (52.7 per cent), preparing preliminary estimates and cost plans (57.8 per cent), providing construction cost advice (58.1 per cent), preparing tender estimates (58.9 per cent) and evaluating interim payments (76.0 per cent). Respondents suggested that the effectiveness of the QS consultants in delivering quality service very much rests on the accumulated experience of the personnel, maintaining an effective cost databank that can provide up to date information, deep understanding of PWD procedures and formats and the ability to work well with other consultants such as architects and engineers from whom input is required. Payment of services rendered was also found to have an effect on performance quality.

Remedial response

The assessment exercise generated real figures for the first time that could no longer be ignored, not even for the sake of professional occupational enclosure (Murphy, 1990). PWD's top management at the Contract and Quantity Surveying division were driven to take corrective steps, remarkable for a large conservative public sector organisation such as PWD possibly afflicted with all sorts of impediments to quality improvements (Madsen, 1995; Prager, 1994; US General Accounting Office, 1997). Necessary resources were diverted to render concrete steps feasible, beginning with the running of a workshop attended by every principal of PWD-engaged QS firms to pinpoint where the major problems lie and how best to tackle them to improve quality performance. Among the points raised were incomplete architectural and engineering drawings, poor communication, and lack of knowledge about PWD procedures and formats. Some of the terms used by PWD were not well understood by outsiders (e.g. “similar work experience” and “identical work experience”) used for tender evaluation. The workshop was beneficial, in that the weaknesses of PWD were brought to the attention of top decision-makers. The lack of familiarity among some of the PWD's own staff about its own procedures and circulars is a case in point. As indicated earlier, there must be overlapping motives for the two parties to continue in an outsourcing relationship (Dwyer et al., 1987). For private practices, public work constitutes a significant and reliable source of revenue. Hence their tolerance to PWD's shortfalls.

Other quality initiatives were followed, including the assignment of a section within the Contract and Quantity Surveying Division to oversee the consultants' performance and implement programmes to improve their service delivery. Thus far, four courses on PWD procedures and circulars have been conducted, which were well received by independent consultants and PWD's own staff alike. Complaints management was tightened up so that every complaint from PWD's project managers, engineers and quantity surveyors about QS consultants is at present dealt with promptly to prevent problems from festering. Essentially to ensure the quality improvement of QS consultants, transformation had to take place inside PWD. All these events have taken place within the last 6 months of writing this paper. Though perhaps premature to make any conclusions, there has been a marked improvement in the service quality of QS consultants if fewer complaints from PWD officers are anything to go by. All these arose from a small exercise that was academic in nature. Though the concrete measures taken thus far have not been extensive, it has to be borne in mind that the quality ethos has only taken root at PWD's Contract and Quantity Surveying Division within the 6 months preceding the writing this paper.


There is a growing number of academics who feel that a total quality orientation should be developed by the civil service that procures construction projects for the interest of the public (Holt and Rowe, 2000). As Malaysia's PWD rely on independent QS firms to cope with work overload, the quality of services offered by QS consultants has a bearing on the delivery of construction projects by PWD to society. By assessing their service performance and implementing the necessary follow-up initiatives, public interest can be further safeguarded. What this case study underscores is that quality assessment exercises do not have to be sophisticated. What matters more is that they are able to motivate decision-makers to make the necessary organisational changes.

Figure 1PWD organizational chart 
Table IDistribution of questionnaire respondents by location 
Table IIFrequency of types of services relied upon by PWD 
Table IIISatisfaction levels of respondents to the services offered by independent QS firms 

Bensaou, M. (1999), "Portfolios of buyer-supplier relationships", Sloan Management Review, Vol. 10 No.4, pp.35-44. 
Beyers, W.B., Lindahl, D.P. (1996), "Explaining the demand for producer services: is cost driven externalization the major factor?", Papers in Regional Science, Vol. 75 No.3, pp.351-74. 
Boston, J. (1995), The State under Contract, Bridget Williams, Wellington, . 
Burrage, M. (1972), "The group ties of occupations in Britain and the United States", Administrative Science Quarterly, Vol. 17 No.2, pp.240-53. 
Coffey, W.J., Drolet, R. (1996), "Make or buy: internalization and externalization of producer service inputs in the Montreal metropolitan area", Canadian Journal of Regional Science, Vol. 19 No.1, pp.25-48. 
Donahue, J.D. (1989), The Privatisation Decision: Public Ends, Private Means, Basic Books, New York, NY, . 
Dwyer, R., Schurr, P., Oh, S. (1987), "Developing buyer-seller relationships", Journal of Marketing, Vol. 51 pp.11-27. 
Holt, R., Rowe, D. (2000), "Total quality, public management and critical leadership in civil construction projects", International Journal of Quality and Reliability Management, Vol. 17 No.4/5, pp.541-53. 
Hoxley, M. (2000), "Measuring UK construction professional service quality: the what, how, when and who", International Journal of Quality and Reliability Management, Vol. 17 No.4/5, pp.511-26. 
Kakabadse, A., Kakabadse, N. (2001), "Trends in outsourcing: contrasting USA and Europe", European Management Journal, Vol. 20 No.2, pp.189-98. 
Kaplan, R.S., Norton, D.P. (1992), "The balanced scorecard – measures that drive performance", Harvard Business Review, pp.171-9. 
Kee, R.C., Robbins, W.A. (2003), "Public sector outsourcing: a modified decision model", The Journal of Government Financial Management, Vol. 52 No.2, pp.46-52. 
Lee, H., Howard, J.L. (1994), "Measuring the quality of services", Benchmarking for Quality Management and Technology, Vol. 1 No.3, pp.39-51. 
Lonsdale, C., Cox, A. (2000), "The historical development of outsourcing: the latest fad?", Industrial Management and Data Systems, Vol. 100 No.9, pp.444-50. 
Madsen, O.N. (1995), "Public enterprise and total quality management", Total Quality Management, Vol. 6 No.2, pp.165-73. 
Murphy, R. (1990), "Proletarianisation or bureaucratization: the fall of the professional?", in Torstendahl, R., Burrage, M. (Eds),The Formation of Professions, Sage, London, pp.70-96. 
Prager, J. (1994), "Contracting out government services: lessons from the private sector", Public Administration Review, Vol. 54 No.2, pp.176-84. 
Royal Institution of Chartered Surveyors (1982), "The report of a working party on quantity surveyors education, membership and training", The Mason Report, London, . 
Royal Institution of Chartered Surveyors (1984), "A study of quantity surveying practice and client demand", London, . 
Stean, P.D., Walker, D.H.T. (2000), "Competitive tendering and contracting public sector services in Australia – a facilities management issue", Facilities, Vol. 18 No.5/6, pp.245-60. 
US General Accounting Office (1997), Privatisation: Lessons Learned by State and Local Governments, Washington, . 


Cost Engineering

The Association for the Advancement of Cost Engineering (AACE International) defines Cost Engineering as:
"the area of engineering practice where engineering judgment and experience are used in the application of scientific principles and techniques to problems of cost estimating, cost control, business planning and management science, profitability analysis, project management, and planning and scheduling."[1]

Key objectives of cost engineering are to arrive at accurate cost estimates and to avoid cost overruns.

This broad array of topics represent the intersection of the fields of project management, business management, and engineering. Most people have a limited view of what engineering encompasses. The most obvious perception is that engineering addresses technical issues such as the physical design of a structure or system. However, beyond the physical manifestation of a design of a structure or system (for example, a building), there are other dimensions to consider such as the money, time, and other resources that were invested in the creation of the building. Cost engineers refer to these investments collectively as "costs".

Cost engineering then can be considered an adjunct of traditional engineering. It recognizes and focuses on the relationships between the physical and cost dimensions of whatever is being "engineered". Cost engineering is most often taught at universities as part of construction engineering, engineering management, and related curricula because it is most often practiced on engineering and construction capital projects. Engineering economics is a core skill and knowledge area of cost engineering.

Cost engineering is a field of engineering practice that began in the 1950s (AACE International was founded in 1956). The skills and knowledge areas of Cost Engineers are similar to those of Quantity Surveyors. AACE International is one of many international engineering organizations representing practitioners in these fields.

In 2006, AACE published the Total Cost Management (TCM) Framework which outlines an integrated process for applying the skills and knowledge of cost engineering (see References). This has also been called the world's first process for portfolio, program and project management.

1.Amos, Scott (editor), "Skills and Knowledge of Cost Engineering," Fifth Edition, AACE International, Morgantown, West Virginia, 2004.
2.Humphreys, Kenneth K (editor), "Jelen's Cost and Optimization Engineering" 3rd Edition, McGraw-Hill, 1991.
3.Hollmann, John K. (editor), "Total Cost Management Framework", AACE International, Morgantown WV, 2006.

Source: http://en.wikipedia.org/wiki/Cost_engineering

What Liability Does A Quantity Surveyor Have If A Certificate Is Overvalued Or Incorrectly Valued?

The employment of a Quantity Surveyor arises from his appointment by the Employer or by someone authorised on his behalf to make the appointment. The express and implied terms of the appointment govern the rights and obligations of the parties; the express terms are of course the starting point. The GC/Works/5, 1998 and 1999 versions, sets out the duties of the Quantity Surveyor in Annex 3. This Annex, together with the General Conditions of GC/Works/5, comprise the express terms. 

The Supply of Goods and Services Act 1982 provides that a duty to serve the Employer with reasonable care and skill is implied in a contract for the supply of a service where the supplier is acting in the course of a business. Thus, even where the construction professional may have been engaged without reference to any standard form conditions, the duty to act with reasonable care and skill is implied by statute. 

As described in Hudson, generally, an owner under a building or engineering contract will have four main interests which he employs his professional adviser(s) to secure, namely:- 
"a design which is skilful and effective to meet his requirements, including those of amenity, durability and ease of maintenance, reasonable cost and any financial limitations he may impose or make known, and comprehensive, in the sense that no necessary and foreseeable work is omitted; 

obtaining a competitive price for the work from a competent contractor, and the placing of the contract accordingly on terms which afford reasonable protection to the owner's interest both in regard to price and the quality of the work; 

efficient supervision to ensure that the works as carried out conform in detail to the design and the specification, and 

efficient administration of the contract so as to achieve speedy and economical completion of the project." 

Insofar as any act or omission of the construction professional prejudices any of these 
interests, and is due to lack of skill or care on his part, he will be failing in his obligations and will, if a breach of duty is clear, be liable to the Employer for any damage which he may suffer (save, possibly, for pure economic loss). 

The precise degree of care owed by those holding themselves out as specially qualified in a particular trade or profession has been described in a number of different ways. 

It is a question of fact which "appears to us to rest upon this further enquiry, viz: whether other persons exercising the same profession or calling, and being men of experience and skill therein, would or would not have come to the same conclusion as the defendant" (per Tindal C J in Chapman -v- Walton). 

In England, the House of Lords has adopted as definitive, in the case of professional people generally, the following direction to a jury by McNair J:- 

"Where you get a situation which involves the use of some special skill or competence ... the test is the standard of the ordinary skilled man exercising and professing to have that special skill. A man need not possess expert skill ... it is sufficient if he exercises the ordinary skill of the ordinary competent man exercising that particular art." (Bolam -v- Friern Hospital Management Committee) 

"Architects, doctors, engineers, attorneys and others deal in somewhat inexact
sciences and are continually called upon to exercise their skilled judgment in order to anticipate and provide for random factors which are incapable of precise measurement. The indeterminate nature of these factors makes it impossible for professional service people to gauge them with complete accuracy in every instance. Thus, doctors cannot promise that every operation will be successful; a lawyer can never be certain that a contract he drafts is without latent ambiguity; and an architect cannot be certain that his structural design will interact with natural forces as anticipated. Because of the inescapable possibility of error which inheres in these services, the law has traditionally required, not perfect results, but rather that exercise of that skill and judgment which can be reasonably expected from similarly situated professionals ... Until the 
random element is eliminated in the application of architectural sciences, we think it fairer that the purchaser of the architect's services bear the risk of such unforeseeable
difficulties." (City of Mounds View -v- Walijarvi) 

Under GC/Works/5, at Condition 10 (1.10 in the 1999 form) "The Consultant shall perform the Services in accordance with all Statutory requirements and with the reasonable skill, care and diligence of a properly qualified and competent consultant experienced in performing such Services on projects of similar size, scope, timescale
and complexity as the Project." 

Relevant duties of the Quantity Surveyor in relation to the over valuation or incorrect valuation of a certificate include those set out in A3.4.3, A3.4.4 and A3.4.6; in Stage 5, relating to the Contractor's final account, the Quantity Surveyor's obligations are set out in A3.5.1, A3.5.2 and A3.5.3. 

There is a dearth of authority upon the standard(s) of skill or care owed by a Quantity Surveyor to the Employer. Since, however, his task involves very large numbers of arithmetical calculations, it seems that an occasional slip or error may be insufficient to sustain an allegation of professional negligence against him. 

In the case of London School Board -v- Northcroft in 1889 a school board employed a Quantity Surveyor for measuring up buildings of a value of [pounds sterling]12,000 which had been completed. They brought an action against him for negligence in making two clerical errors in the calculations, whereby the board had overpaid two sums, one of [pounds sterling]118 and the other of [pounds sterling]15. It was held that as the Quantity Surveyor had employed a competent skilled clerk who had carried out hundreds of intricate calculations correctly, the Quantity Surveyor was not liable for these two errors. 

Given his professional status and skills, it is argued that a Quantity Surveyor must employ them for the Employer's benefit, should he have an opportunity to do so, even though some other adviser, such as the A/E, must bear the prime responsibility. If he notices defective work while visiting for the purposes of making his valuations, for example, he should bring what he has seen to the A/E's attention, in case the latter has missed it. Considering the high degree of skill professed by Quantity Surveyors in the detail of construction methods, there would seem to be no reason why they should not also be joined as defendants by an Employer where, for example, the defects were so glaring that they should have been seen by them in the course of valuation inspections, as well as by the A/E. 

The mere fact that the mistake in question may be a simple mathematical error will not be sufficient to rebut an allegation of negligence. In Tyrer -v- District Auditor of Monmouthshire there were a number of successful claims against the Quantity Surveyor, including the allegation that the Quantity Surveyor had approved excessive quantities of prices which led to irrecoverable overpayments to the Contractor. There was, in addition, a simple mathematical error in issuing an interim certificate. The Judge found that the error could have happened at any time, but "the obligation was on the appellant to ensure that adequate checks were made". 

To read further articles and papers from Fenwick Elliott, please visit our website - www.fenwickelliott.co.uk 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. 

Ms Victoria Russell 
Fenwick Elliott LLP  

Source: http://www.thefreelibrary.com/What+Liability+Does+A+Quantity+Surveyor+Have+If+A+Certificate+Is...-a0153419222

Discover the Health of the Quantity Surveyors Market with Individual Company Analysis

DUBLIN, Ireland -- Research and Markets (http://www.researchandmarkets.com/reports/
c53250) has announced the addition of "Quantity Surveyors - Portfolio Analysis" to their offering. 

The Portfolio Analysis - Quantity Surveyors is a comprehensive evaluation of the UK market. The revised and updated 2007 edition analyses the financial performance of the companies important to the success of your business. Using the most up to date information available, the analysis is ideal both as a tool to benchmark
 your own company's results and to study the 
market in more depth. Aimed at the busy manager, the Portfolio Analysis is both quick and easy to use thanks to the unique visual layout

The Analysis lays bare the performance of each company highlighting their strengths and weaknesses. Do you know which companies are best to do business with? Do you know which companies are selling at a loss and whose profit margins are plummeting? Find out the answers to all these questions and more with the newly published Portfolio Analysis. 

The report is divided into two colour-coded sections for your ease of use, Sector Analysis and Individual Company Analysis. 

Sector Analysis: Sales growth, market share and profitability are all analysed over a 10 year period giving you the fullest picture possible of the health of the market. Companies are ranked on these categories so you can see which companies are outshining the rest. Use the industry average tables to benchmark your own company's performance- how do you compare to the rest of the industry? 

Industry Analysis: Each company receives a full page of analysis, evaluating their financial performance over the last five years so you get a full picture of the long term prospects of each company. Each company page of analysis is also packed with the following information: Full business name and address, Names and ages of directors, contact details and website address, seven unique charts showing at a glance the performance of each company, averages for the industry are also shown indicating the bare minimum each company should be looking to achieve, and five years of the latest accounts available. 

New! Written summary on each company highlighting their key strengths and weaknesses. 

For more information visit http://www.researchandmarkets.com/reports/c53250

Source:   http://www.thefreelibrary.com/Discover+the+Health+of+the+Quantity+Surveyors+Market+with+Individual...-a0161474576

Learning From Other QS 2

Marcus Rathbone is a chartered quantity surveyor working for a firm of construction consultants, Rex Procter and Partners in Bradford. He left school after A levels to take up an employer sponsored college course for five years. He worked on his own projects during his training, gaining valuable experience. 

How would you outline your role? 
I am part of a team of surveyors working for a principle client. Clients range from smaller private developers to multi-national corporations with projects carried out nationwide. My work depends on the nature and size of the project. It may involve a number of roles from the traditional quantity surveyor through to project manager.

What are your main responsibilities? 
They include the preparation of 'bills of quantities' (estimates of amounts of materials needed to complete a job) to obtain a price for building works as part of a tender process. I prepare and agree valuations with contractors to determine what the client should pay and advise on contract documents drawn up between the client and contractor. I also undertake project management of building works and prepare cost reports as the work is proceeding. Arranging and chairing site meetings to monitor progress of the works on site is also part of my job. 

What hours do you work? 
My contracted hours are 37.5 hours per week. My working day starts at 9.00am and finishes at 5.30pm. I usually have an hour for lunch and am free to take reasonable breaks during the day. Occasionally I work additional hours either to meet deadlines or if traveling to and from meetings or building sites. 

What is your working environment like? 
My work is largely office based using a computer during the day with additional desk space to review drawings and other information.

Who do you work with? 
I work with a team of surveyors supported by administrative staff. My colleagues represent a range of ages and experience from trainees to experienced senior members of staff. We are managed by a Practice Associate who is responsible for overseeing and managing day-to-day workloads. Each Associate is in turn overseen by a Partner of the practice who is responsible for the running of the company.

What skills or qualities do you need? 
Skills necessary to carry out this line of work include being good with numbers, computer literate and a good communicator. A reasonable standard of grammar will also help when preparing written documents. 

Why did you choose this type of work? 
I knew it would offer a varied workload and that the work would be largely desk based, but would offer the opportunity to leave the office for meetings and site visits. It is challenging but also rewarding with the opportunity to meet different people and travel.

What training have you done? 
After qualification it is necessary to undertake Continuing Professional Development (CPD) to keep up to date on construction matters such as law, contracts and government policy together with new construction techniques and materials. 

Do you use any special tools or equipment? 
The two essential pieces of equipment necessary are a calculator and scale ruler. Other than that the principle equipment used is a desktop PC on which estimates, valuations, cost reports and bills of quantities are prepared.

What do you like/dislike about your job? 
I like the variety of the workload and the fact that it is not a static mundane job. Responsibilities and tasks change with each job depending on the role being undertaken. The additional benefits of healthcare, company car and pension are also attractive. I am not as keen on some of the travel aspects of the job, which can sometimes mean early starts or late finishes. 

What are the main challenges? 
One of the more challenging aspects includes negotiating with contractors to resolve disputes or agree final accounts at the end of jobs. Managing the construction process can also be extremely challenging, but at the same time the most rewarding.

How do you see your future? 
It is my intention to remain in quantity surveying for the remainder of my career, however I may elect to specialise in a particular field of the profession at some time in the future. 

Marcus' route 
GCSEs..A levels..ONC Building Studies at college..Degree in Quantity Surveying… 
Member Royal Institution of Chartered Surveyors (MRICS).

Marcus' tips
Try and get the right qualifications as this will save time in gaining access to the degree course.
Take the part-time route to qualification, learning in both the workplace and the academic environment.
Try and get some experience beforehand. Ask local practices or the local authority for placement experience.

Source:  http://www.connexions-direct.com/jobs4u/index.cfm?pid=66&catalogueContentID=875&parent=794

Wednesday, October 22, 2008

Working in Dubai - Etiquette

Before one even dips a toe into the surreal world of office politics, a newcomer to a foreign workplace must understand the basics of local business etiquette. Here is our guide to getting it right in Dubai.

Fridays and Ramadan: Friday is the Muslim day of prayer and rest and so scheduling meetings or making phone calls to Muslim colleagues or clients on this day should be avoided.

During Ramadan, the Islamic month of fasting, Muslims are not permitted to eat, drink or smoke between sunrise and sunset. Muslim hospitality allows that non-Muslims may be invited to eat and drink by their hosts, but this must take place sensitively, and strictly away from public gaze. Bottled-water swiggers be aware: this includes you. Re-hydrate away from the public gaze and with respect for your hosts.

Business hours: Dubai's fierce summer temperatures make taking a siesta a common practice. These breaks are generally taken between 2pm and 5pm. The Arab working week runs from Saturday to Wednesday with the working day running from 8am to 1pm. Business resumes after the temperatures have begun to cool from 4pm and carries on until 7pm. During Ramadan the working day is two hours shorter. Western-run businesses may differ. 

Dress conservatively: Though often described as the most cosmopolitan and liberal of the Arab states, Dubai still adheres to an unspoken dress code that is both conservative and modest compared to that experienced in the West. In particular those working in the more rural and therefore traditional areas should take care to wear clothing that covers the body and limbs. Despite the often oppressive heat, those doing business in Dubai are expected to present themselves smartly.

Casually formal: Business meetings with Arab clients or colleagues can seem to begin in a very informal fashion and can often take place in eateries. In the usual extended preamble it is common to ask after family and to make polite chit chat. The true business portion of the meeting can sometimes arrive quickly and unexpectedly and be resolved in a very short time in comparison with Western business practices. 

Never cause someone to lose face: Never criticize or correct either a client, or colleague in front of someone else. This public loss of face will be deeply resented by the individual. Keep all such sensitive discussions to private meetings away from the public glare. 

Pressing the flesh: Arabic handshakes are different from the Western power-shake in that each is followed by a touching of the heart by the palm of the right hand as a gesture of sincerity. The full polite greeting should include the term ‘Mr' (Sayed) or ‘Mrs' (Sayeda) followed by the FIRST name. Note it is only permissible to shake a woman's hand if she first offers it to you. 

Foot conscious: Never sit or lounge in a way that will cause the soles of your feet to point directly at someone else. Pointing the sole of your foot at someone, even by accident is considered extremely offensive in Arab culture.

Business lunches: These can be a lot more formal than Westerners are used to. Don't under any circumstances order alcohol to accompany your meal.

Business cards: It is considered polite to have one side of your card translated into the local language (Arabic), and to present this side of the card face up when passing it on to an Arab colleague or client. 

What not to do

Working in another country can mean having to adapt to a very different culture. Here is our guide to avoiding those potentially tricky faux pas when in Dubai. 

Don't assume your sense of humour will travel: Leave your … t-shirts at home. Ditto the equally hilarious Aditoff, or any similar items that might include sensitive material. What might be classed as funny, puerile, ironic, satirical or anarchic in Britain might very well be considered deeply offensive in Arabic culture. 

Don't drink alcohol in public: While the balmy winter climate in Dubai might make you hanker for an alfresco beer or seven, public consumption will leave you in very hot water. Alcohol is available for non-Muslims with a permit, but you must not be seen to be drunk in public, or offer alcohol to a Muslim. If working or travelling to the Emirate of Sharjah, note that alcohol is forbidden to all. 

Don't photograph without thinking: Dubai is an extremely photogenic place, but it is forbidden to photograph women, and that men may only be photographed with their express permission. Do not point a camera at police, state or military personnel or property, or any other structure that might be considered sensitive.

Don't flaunt your sexuality: It is important to dress modestly and with respect to local customs and sensibility in any Arabic country. While there are underground gay communities throughout the Middle East, homosexuality is still officially taboo in Dubai and arrests are not uncommon. 

Don't get into heavy discussions: For obvious reasons the Middle East is a sensitive area at present. It is neither polite nor wise to get into heated political or religious debate with your hosts.

Don't forget to haggle: In popular markets across the Arab world it is common practice to engage in bargaining with the stallholder when buying certain goods. Traders expect to drop their prices but the process should remain good natured and respectful at all times. 

Don't judge Dubai by its cab drivers: Cab drivers are the same the world over; remember, their manner and viewpoints are rarely characteristic of the population as a whole.

Komen: Bekerjalah di mana-mana kerana semuanya masih di bumi Allah. Jangan hanya untuk buat duit halal. Tapi bersikap untuk mengambil yang elok-elok sahaja.

Source: http://www.building.co.uk/story.asp?storycode=3065609

Learning From Other QS 1

Quantity Surveying Overseas : The Grand Museum of Egypt

When completed, the Grand Museum of Egypt will be a centre of Egyptology. Precisely located on the first desert plateau to give unrivalled views of both Cairo and the pyramids, it will boast several levels, conservation workplaces, a piazza and a grand staircase – to name just a few of its features. It is also designed to make the most of the light, incorporating a translucent stone wall. Clare Nugent’s employers were hired by the architects commissioned to design the project to provide cost management and design management/co-ordination services.

Clare worked on the cost side of the project as an assistant quantity surveyor alongside an associate and another assistant surveyor. ‘My team was involved throughout the preconstruction stages. I came in at the tender development stage, which involves providing the client with information on costs that they can use when considering bids from construction companies to complete the work,’ explains Clare.

There were two separate processes in this stage: finalising project costs and producing bills of quantities (lists of the amount of materials needed for construction). ‘I spent half my time in helping with the bills of quantity and half in checking the costs in the cost development plan. This entailed calling up suppliers to find out rates for certain items, such as steel, and consulting the design to confirm the quantities that would be needed on the project.’ Clare also attended progress meetings with the design managers, architects and others as appropriate. ‘Sometimes we’d meet with the structural engineers or the building services engineers who work for other firms, and I liked gaining a wider perspective on the project,’ she says.

However, Clare also had a co-ordination role that led her abroad. ‘My employer had outsourced some of the work to our office abroad and I coordinated this with our work,’ explains Clare. ‘This meant that I had the chance to accompany my associate – who is my line manager – out there to meet everyone and confirm that things were as they should be. It was an amazing experience and good to meet the team out there face to face after so many conference calls.’

The Grand Museum has been Clare’s first major project since joining her employer, although she has also combined her work on this with doing ‘feasibility studies’ (high level cost analysis) for other projects and so has gained a broad overview of work. ‘I had a certain amount of construction knowledge from my degree but I’ve learned a lot about surveying this year,’ she says. ‘I’ve developed quantity surveying techniques such as cost planning and completing bills of quantities and I’ve also built on my organizational skills.’

Now that the team members have submitted their final report on this project, their role has effectively finished, barring any last-minute queries that might arise. ‘The great thing about this project, though, is that there haven’t been any issues and we’ve stuck to time. I’ve enjoyed working on an international and innovative project; it’s been the best start to my career.’

Source : http://targetjobs.co.uk/quantity-surveying-and-building-surveying/articleview-39s_35a_4351.aspx

Cost Overrun

Cost overrun is defined as excess of actual cost over budget. Cost overrun is also sometimes called "cost escalation," "cost increase," or "budget overrun." However, cost escalation and increases do not necessarily result in cost overruns if cost escalation is included in the budget.

Cost overrun is common in infrastructure, building, and technology projects. One of the most comprehensive studies [1] of cost overrun that exists found that 9 out of 10 projects had overrun, overruns of 50 to 100 percent were common, overrun was found in each of 20 nations and five continents covered by the study, and overrun had been constant for the 70 years for which data were available. For IT projects, an industry study by the Standish Group (2004) found that average cost overrun was 43 percent, 71 percent of projects were over budget, over time, and under scope, and total waste was estimated at US$55 billion per year in the US alone.

Spectacular examples of cost overrun are the Sydney Opera House with 1,400 percent, and the Concorde supersonic aeroplane with 1,100 percent. The cost overrun of Boston's Big Dig was 275 percent, or US$11 billion. The cost overrun for the Channel tunnel between the UK and France was 80 percent for construction costs and 140 percent for financing costs.

Three types of explanation of cost overrun exist: technical, psychological, and political-economic. Technical explanations account for cost overrun in terms of imperfect forecasting techniques, inadequate data, etc. Psychological explanations account for overrun in terms of optimism bias with forecasters. Finally, political-economic explanations see overrun as the result of strategic misrepresentation of scope and/or budgets.

All of the explanations above can be considered a form of risk. A project's budgeted costs should always include cost contingency funds to cover risks (other than scope changes imposed on the project). As has been shown in cost engineering research [1], poor risk analysis and contingency estimating practices account for many project cost overruns. Numerous studies have found that the greatest cause of cost growth was poorly defined scope at the time that the budget was established. The cost growth (overrun of budget before cost contingency is added) can be predicted by rating the extent of scope definition, even on complex projects with new technology. [2]

Cost overrun is typically calculated in one of two ways. Either as a percentage, namely actual cost minus budgeted cost, in percent of budgeted cost. Or as a ratio, viz. actual cost divided by budgeted cost. For example, if the budget for building a new bridge was $100 million and the actual cost was $150 million then the cost overrun may be expressed as 50 percent or by the ratio 1.5.

List of projects with large cost overruns
 Big Dig
 Channel Tunnel
 F-22 Raptor
 National Programme for IT
 Panama Canal
 Suez Canal
 Sydney Opera House
 TAURUS (share trading)
 Airbus A380
 Scottish Parliament Building
 Montreal Olympic Stadium
 Rogers Centre (formerly SkyDome)
 Pickering Nuclear Generating Station
 Millennium Dome
 Humber Bridge
 Oresund Bridge
 Hallandsås Tunnel
 Great Belt railway tunnel
 Sydney Olympic Park
 Joetsu Shinkansen high-speed rail line
 Pergau Dam
 V-22 Osprey
 Denver International Airport
 Eastern span replacement of the San Francisco–Oakland Bay Bridge

Cost underestimation
Cost underestimation is defined as the act of assessing the cost of a future venture lower than what actual cost turned out to be once the venture was implemented. Cost underestimation causes cost overrun. The main causes of cost underestimation are optimism bias and strategic misrepresentation.


1. Hackney, John W. (Kenneth H. Humprhies, Editor), Control and Management of Capital Projects, 2nd Edition, AACE International, 1997
2. Merrow, Edward W., Kenneth E. Phillips, and Christopher W. Meyers, Understanding Cost Growth and Performance Shortfalls in Pioneer Process Plants, (R-2569-DOE), Rand Corporation, 1981

Flyvbjerg, Bent, Nils Bruzelius, and Werner Rothengatter, Megaprojects and Risk: An Anatomy of Ambition (Cambridge University Press, 2003).
Flyvbjerg, Bent, Mette K. Skamris Holm, and Søren L. Buhl, 2002, "Underestimating Costs in Public Works Projects: Error or Lie?" Journal of the American Planning Association, vol. 68, no. 3, 279-295.
Standish Group, 2004. CHAOS Report (West Yarmouth, MA: Author)
UK Department for Transport, 2004. Procedures for Dealing with Optimism Bias in Transport Planning: Guidance Document (London).
Lev Virine and Michael Trumper. Project Decisions: The Art and Science, Vienna, VA: Management Concepts, 2008. ISBN 978-1567262179

Source:  Wikipedia, the free encyclopedia.

Tuesday, August 5, 2008

Incompetent contractors, delays, cost overruns, failed projects: Lessons learnt

05 Feb 2007
Farrah Naz Karim

PUTRAJAYA: The government has put in place mechanisms to avoid delays in project completion and ensure cost effectiveness. Referring to the New Sunday Times report yesterday on cost overruns in projects due to the incompetence of contractors and consultants, Minister in the Prime Minister’s Department Datuk Seri Mohd Effendi Norwawi said the mechanisms would ensure only competent contractors were given government jobs.

He said the government had drawn valuable lessons from case studies of failed projects, as well as the successful ones.

“We have put in place new initiatives to streamline our procurement processes and to ensure projects are delivered efficiently and cost effectively.”

These, he said, included:
• Ensuring projects are awarded to competent contractors; and,
• Installing systems to monitor projects on near real-time basis to spot any delivery problems early and resolve problems immediately.

This, Effendi said, should ensure significant improvements in the execution of projects under the Ninth Malaysia Plan (9MP).

The report quoted Deputy Auditor-General Anwari Suri as saying that some tenders for government projects had been given to those who were incompetent or did not have sufficient financial means to complete the work.

Anwari had said that these were among the reasons for shoddy work and delays in project completion.

Effendi assured that the government had put in place a more stringent project procurement process.

Meanwhile, the Finance Ministry is considering setting up a central database system to prevent contractors from "hoarding" projects and sub-contracting them.

Parliamentary secretary Datuk Dr Hilmi Yahaya said the issue of sub-contracting needed to be addressed immediately.

At present, he said, only consultants undertaking projects worth over RM50 million were registered with the government.

"We need a central system to monitor projects awarded to contractors, even those at the district level," said Hilmi.

Education Minister Datuk Seri Hishammuddin Hussein said his ministry had put in place an "A-to-Z" monitoring system to ensure there were no hiccups in the implementation of projects.

A strict vetting process for engaging contractors, he said, was in place to ensure that contractors who were already engaged in several other government projects were not awarded contracts by his ministry.

This, he said, would mean the contractors concerned would be able to give priority to his ministry’s projects.

"A delay in projects spells problems. For this ministry, it also means that our children will not be able to go to school. It is vital that construction projects for educational purposes be completed within the time frame.
Companies that offer my officers bribes and those with a history of not completing school building projects will be blacklisted," said Hishammuddin.

Comment: Later...