Post on 02-Dec-2015
Prepared by: Suhaida @ Suhana Kamarudin
At the end of this course students will be able to;
i. Apply the procedures in preparing contract documents
ii. Identify the requirement of site meetings and the
recording of minutes
iii.Prepare a simple interim payments
iv. Prepare a variation order and final account
LEARNING OUTCOMES
• ‘When the contractor has executed work including delivery
to… the works of any unfixed materials or goods intended
for use thereon.. and the total value thereof has reached the
sum referred to in the Appendix.. The S.O. at that time make
the first valuation of the work… Thereafter, once (or more
often at the discretion of the S.O.) during the course of each
succeeding month the S.O. shall make a fair valuation of the
works properly executed and of the materials delivered to..
the works…’
VALUATION
• The SO/Arch. has to make interim valuations in order
to arrive at the amount due in interim certificates.
• The evaluation is for the work executed and materials
delivered on site and to be carried out at least once a
month.
VALUATION (cont’d)
• The S.O. and the contractor have to agree on specific
dates or days of the month to carry out the valuation
work.
• Interim certificate can only issued when the total value
of works executed and materials on site exceeds the
required minimum value i.e. RM1,000.00 (No provision
for minimum value in PAM Form)
VALUATION (cont’d)
• The evaluation should be as accurate as is reasonable
possible and is subject to the possibility of arbitration.
• A new evaluation of the work done provides an
opportunity to adjust or modify previous evaluations of
earlier certificates.
• The value of work executed consists of Preliminaries
and permanent work done by contractor.
VALUATION (cont’d)
• This section consist of those item that do not form part
of the permanent works but are essential to be
provided for the successful completion of the job.
• The employer and the contractor should agree the
method of paying for the prelim. Items at the
beginning of the contract.
• Valuation is only made on the items that are priced
and carried out by the contractors.
PRELIMINARIES
• The price of each item may be broken down and categorized
as initial cost, progressive cost or completion cost to the
employer.
• Initial cost – a lump sum to be paid to the contractor in the
first interim payment.
• Progressive cost – a continuing cost to be spread
throughout the execution of the work and either related to
time or to the expenditure on the work.
• Completion cost – a lump sum to be paid to the contractor
upon completion of the work.
PRELIMINARIES (cont’d)
PreliminariesBQ Ref Description Total Initial Progressive Completion
D/11/A Temporary road 10,000.00 7,500.00 1,500.00 1,000.00
D/11/C Temporary Office 18,000.00 14,000.00 3,500.00 500.00
D/11/D Signboards 2,000.00 1,700.00 200.00 100.00
D/11/G Light & power 10,000.00 1,000.00 8,500.00 500.00
D/12/B Water for the works 15,000.00 3,000.00 11,500.00 500.00
D/12/D Contractor's equipment 300,000.00 50,000.00 240,000.00 10,000.00
D/12/E Site telephone 8,500.00 500.00 7,500.00 500.00
D/12/F Temporary hoardings 28,000.00 20,000.00 5,000.00 3,000.00
Total for the item
Claim when project start
Recurring
End of project
PRELIMINARIES (cont’d)
PRELIMINARIES (cont’d)
PRELIMINARIES (cont’d)
• Total amount of RM644,700.00 in column ‘Progressive’ to be paid
progressively during the execution of the works and can be done in
2 ways:
a) Pro-rata on contract period:
Preparation of Interim Certificate No 5.
Initial Cost = RM 291,700.00
Assumptions: Contract period = 24 months
Progressive payment = RM644,700 x 5/24 months
= RM 135,387.00
Amount of Preliminaries items to be paid:
Payment 1 = RM 291,700 + RM 135,387.00 = RM 427,087.00
PRELIMINARIES (cont’d)
b) Pro-rata on the value of work executed
Assumptions:
Contract sum = RM25,000,000
Provisional sums = RM1,500,000
Preliminaries = RM 969,500
Initial cost = RM 291,700.00
Net contract sum = RM25,000,000 –(RM1,500,000 + RM969,500)
= RM22,530,500
Amount of Preliminaries item to be paid:
If net value of work executed by contractor to date = RM 900,000.00
Progressive payment = (RM900,000.00/ RM22,530,500) X RM 644,700
= RM25,753.10
Payment 1 = RM 291,700 + RM 25,753.10
= RM 317,453.10
PRELIMINARIES (cont’d)
Preliminaries = Total Initial Cost + Work done x Recurring Cost]
Builder’s Work
PREVIOUS CURRENT CUMULATIVE
• Only the value of work properly executed by the contractor in
accordance with the contract must be included in the certificate.
a) Valuation based on Contractor’s work executed
• The valuation calculates the estimated value of work executed
by reference to:
The detailed quantities and rates for every item in the BQs
The cost of elements or work sections.
The contract sum
VALUE OF THE PERMANENT WORKS EXECUTED
• Valuation based on measured items
W.B.L.F.F.
Excavations
3/1/A To red. Lev. 990.00 100% 990.00
3/1/B For pile cap n.e. 1.0 m dp 10,900.00 100% 10,900.00
3/1/C Ditto 1.0 -2.0 m dp 5,250.00 100% 5,250.00
3/1/D Grd bm n.e. 0.50m dp 1,890.00 90% 1,701.00
3/1/E Hardcore 2,850.00 30% 855.00
Conc. Gr.15
3/1/F Lean conc. To pile cap 3,248.00 100% 3,248.00
3/1/G Ditto to grd bm 8,690.00 100% 8,690.00
Conc. Gr.30
3/1/H Pile cap 125,080.00 100% 125,080.00
3/1/J Col. Stump 7,695.00 100% 7,695.00
3/1/K Grd bm. 32,631.00 25% 8,157.75
3/1/L Bed 53,852.00 0% -
Total Carried Forward 172,566.75
Contract Sum Work done %Amount of
Work DoneDescription BQ Ref
VALUE OF THE PERMANENT WORKS EXECUTED(cont’d)
• Valuation based on elemental cost
A W.B.L.F.F. 25,400.00 100% 25,400.00
B FRAME 31,900.00 95% 30,305.00
C UPPER FLOOR 18,250.00 90% 16,425.00
D STAIRCASE 5,890.00 90% 5,301.00
E ROOF 20,850.00 30% 6,255.00
F EXTERNAL WALLS 9,500.00 35% 3,325.00
G INTERNAL WALLS 3,240.00 30% 972.00
H WINDOWS 8,500.00 0% -
J DOORS 5,400.00 0% -
K INT. WALL FINISHES 12,690.00 0% -
L INT. FLOOR FINISHES 22,200.00 0% -
M INT. CEILING FINISHES 13,850.00 0% -
N EXTERNAL FINISHES 15,800.00 0% -
P MECHANICAL AND ELECTRICAL WORKS 58,000.00 0% -
Total Carried Forward 87,983.00
BQ Ref Description Contract SumWork done
%
Amount of
Work Done
VALUE OF THE PERMANENT WORKS EXECUTED(cont’d)
The contract sum method:-
• This is only suitable for small job and to be done by
experienced staff only
• The amount of work done is calculated by multiplying
the estimated percentage completion with the contract
sum.
• Example:
Amount of work done = 25% X 100,000.00 = RM25,000
25% of overall work done and RM100k is the contract sum
VALUE OF THE PERMANENT WORKS EXECUTED(cont’d)
• This is an alternative method of valuing the work
executed by the contractor
• Interim payment to be made on the basis of
percentage completion of the various components of
the project.
• An example of breakdown of works for stage payment
for a residential building.
VALUATION BASED ON STAGE OF COMPLETION
• Schedule of breakdown contract sum
Item Stages of Works % of Contract sum
A Foundation and ground floor 15%
B
Reinforced concrete frame,
staircase and upper floor 20%
C
Walls including doors and
windows 15%
D
Roofing, electrical wiring and
plumbing 15%
E Finishes 15%
F
Roads, drains and sewerage
works 20%
Total 100%
VALUATION BASED ON STAGE OF COMPLETION(cont’d)
• The details of breakdown of works and the percentage of
payment to each stage of work will be decided by employer
and attached to the tender document or as agreed by both
the employer and the contractor before signing the contract.
• The amount to be paid to the contractor for the work
executed is equal to the value of the percentage of the
contract sum assigned to the work.
• In some arrangements, materials on site are not considered
for payments.
VALUATION BASED ON STAGE OF COMPLETION(cont’d)
• The SO/Arch. has to check the contract document for
arithmetical errors in the pricing by the contractor.
• Correction has to be made to avoid mistakes in the
computation of interim payments
• The original contract sum in the Tender Form must not
be changed.
PERCENTAGE ADJUSTMENT
• Source of errors:
a) Adjustment made to unreasonable and inconsistent rates by
the SO
b) Error made in ‘extension’ i.e. multiplication of rates and
quantities
c) Error made in adding up the total of each item on each page of
BQ
d) Error made in transferring the total on each page to Collection.
e) Error made in transferring the total from Collection to
Summary
f) Error made in transferring the total from Summary to Form of
Tender.
PERCENTAGE ADJUSTMENT (cont’d)
• This is the value of work which is not part of the original
scope of work but has been carried out by the contractor
as the result of the SO’s instruction.
• The value of variation works must also be included in
the valuation of permanent work executed by the
contractor.
• The value so consider for payment included the variation
work where variation certificate is not yet prepared.
VARIATIONS
NOMINATED SUB-CONTRACTORS WORKS
Payment to NSC/ NS
Payment to Main Contractor
Monthly claim by sub-contractor/ supplier
Monthly claim by contractor
Valuation and Certification by SO
Subcontractor submits claim to contractor
Contractor incorporates subcontractor’s claim in his claim to the employer
a) Generally
• The contractor entitle to payment for all unfixed
materials delivered to site but not yet
incorporate in the work
• Materials brought to site must not be removed out
of the site without the SO consent and the
contractor is responsible for their safety.
MATERIALS ON SITE (M.O.S)
b) Prerequisite for payment
Unfixed materials may be considered for payment if:
• Delivered to site or adjacent to site
• Intended for corporation in the permanent work i.e. in
accordance with the contract.
• Reasonably, properly and not prematurely brought to site
• Adequately protected against weather and other casualties,
• The cost of the materials have
• been paid by the contractor to the supplier
MATERIALS ON SITE (M.O.S) (cont’d)
c) Computation of valuation
• The materials are priced at invoice prices
• Valuation of M.O.S shall be paid 90% of value claimed by
contractor
• The total to arrive at the amount to be paid to the
contractor (PAM, sub-clause 30.3 allows the full value to
be paid)
MATERIALS ON SITE (M.O.S) (cont’d)
• The changes in cost of materials due to the market
conditions must be taken into account in the interim
payments.
• Price adjustment is made through the application of
indicates which are issued by the department of
statistic in a formula.
• The calculation of the fluctuation in price is to be made
monthly
FLUCTUATION OF PRICE
• Base index figure is the index figure for the
month the tender closes.
• Current index is the figure for the month
preceding the date of the month of valuation.
FLUCTUATION OF PRICE (cont’d)
FLUCTUATION OF PRICE (cont’d)
Amount of Addition / Omission
= Fluctuation factor x Effective value of work done
Fluctuation factor
= Recovery factor x (Current Index figure – Base Index figure)
Base Index figure
Recovery Factor
= 0.60 (i.e – estimated material cost is 60% of the total cost of the
works
Effective value of work done
= Builder’s work – Preliminaries items
Builder’s Work
= Contract Sum – (P.C Sums + Provisional Sums)
Keep calm
To be continued