Module 007: Competitive Pricing
of Construction
Works
Module code:
Level:
CPD Points:
Guided learning hours:
NCC/WB/007
A +B
2.4
24
Developed for NCC by:
Ms B. Mwiya
Prof. M. Muya
Dr L. Matakala
Dr. E. Mwanaumo
Mr C. Kaliba
Mr S. Sanga
Aim and purpose
This module will guide and assist participants in developing essential procedures and a systematic
approach to quoting and ‘Wining the Work’. It will give learners the opportunity to develop skills
needed to calculate unit rates for an element or trade section of a bill of quantities in tender
production.
Learning outcomes
On completion of this module a learner should:
1. Know the basic information needed to produce a tender;
2. Be able to calculate unit rates for an element or trade section of a bill of quantities; and
3. Be able to produce a tender for a specific construction trade or element.
Training Manual
National Council for Construction
Competitive Pricing of Construction Works
Module Overview
These days competition is what it is all about. Wasted time and money on unsuccessful tenders
must be reduced. Most builders and contractors believe that their estimating is orderly and accurate,
when in fact they could be missing out on substantial work and profit.
The estimator produces an estimate of project cost to enable the company to submit a tender after
the decision has been made on the amount of profit to add to the project. This decision is based on
the company’s required return whilst taking into account their current workload and advance order
book, level of risk associated with the project, the current and future market conditions, and the
perceived workload or current order book of competitors who may also tender for the project.
Learners will become aware of the need to work with great accuracy as any errors could lead to
financial losses or an unsuccessful tender. After completing this module learners will be able to
build up analytical unit rates and apply them to tender documentation in order to produce a tender
for construction work, taking into account the commercial decisions to be made in arriving at a
tender sum.
Designed for: Owner/Managers, Administrators, Sole Trader, Partnerships, Small Company
Structures
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Training Manual
COMPETITIVE PRICING OF CONSTRUCTION WORKS CourseContents
1 2 ESTIMATING .................................................................................................................... 4 1.1 Definition: ................................................................................................................... 4 1.2 Types of Estimating .................................................................................................... 4 1.2.1 Approximate Estimate ......................................................................................... 4 1.2.2 Superficial or Floor Area Method ........................................................................ 5 1.2.3 Approximate Quantities ....................................................................................... 5 Introduction to Unit Rate .................................................................................................... 6 2.1 Bid Based Estimate (Historical) .................................................................................. 6 2.1.1 Bid Price Adjustments ......................................................................................... 7 2.1.2 Summary .............................................................................................................. 7 2.2 Cost Based Estimate (First Principles) ........................................................................ 8 2.2.1 Cost of Labour ..................................................................................................... 8 2.2.2 Cost of Materials ................................................................................................ 10 2.2.3 Cost of Plant & Equipment ................................................................................ 11 2.2.4 Preliminary and General Items .......................................................................... 12 2.2.5 Estimating Lump Sum Items ............................................................................. 13 2.2.6 Subcontractors.................................................................................................... 13 2.2.7 Provisional and Prime Cost (PC) Sums ............................................................. 14 2.2.8 Escalation ........................................................................................................... 14 2.2.9 Overheads .......................................................................................................... 15 2.2.10 Profit .................................................................................................................. 15 2.3 3 Cost implications in Variations and Extension of Time ........................................... 16 2.3.1 Variations ........................................................................................................... 16 2.3.2 Extension of time ............................................................................................... 17 Appendices ....................................................................................................................... 19 3.1 All - in construction worker rates .............................................................................. 19 3.2 All in Plant & Equipment Rate ................................................................................. 22 3.3 Build up rates from first principles ........................................................................... 23 3.4 Variation submission ................................................................................................. 24 3.5 Extension of time application .................................................................................... 25 Page | 3
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ESTIMATING
1.1 DEFINITION:
Estimating is defined as the technical process of predicting cost of construction. It involves both
calculation and assessment of technical data and human judgment of circumstances and
probabilities which must be brought together in its production.
1.2
TYPES OF ESTIMATING
1.2.1 Approximate Estimate
a) Unit Method
 This method produces total single price for the project and is based on cost per unit or person
to be accommodated. This technique is between the cost of the construction and the number of
functional unit it accommodates. Examples are:
 schools cost/ student place;
 hospital accommodation cost/bed space;
 hostel cost/bed space;
 cinema cost/sit;
 hotel cost/room;
 stadium cost/sit;
 church cost/space;
Total estimate cost is equal to no of functional unit multiply by unit rate. A lot of skill is required
in selecting an appropriate rate. Rates can be obtained by careful analysis of the number of recently
completed projects of similar types, size and constructional method. However, adjustment would
need to be made to account for:
 varying site condition;
 specification changes; and
 market condition.
Advantage
 It is simple and quick to use
Disadvantage
 Lack of precision
 It is advisable to express cost within a range of prices
b) Cube Method
This method was used extensively between the World War I and World War II. But it is not in
common used anymore. Rules of must as defined by Royal Institute of British Architect (RIBA)
are external plan area of a building is multiply by a height to get the volume of the building. The
height is measured from the top of concrete foundation to half way of the roof if pitched or to
600mm above the roof if flat. If the roof space is occupied the height is taken up to ¾ (0.75) way
up the roof. If the flat roof has a parapet, the height is taken up to the top of the parapet or 600mm
whichever is greater.
Total estimated cost is equal to cubic content/m3 multiply by cost/m3
All projections such as porches, steps, domes, bays are measures and added to the cubic content of
the building. Where parts of the building vary substantially in constructional method or quantity of
finish then it is preferable to calculate separate volume and to apply different rate.
Advantage
 It is useful in estimating the cost of heating and air conditioning
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Disadvantages
 Building cost could relate better in floor area than with volume
 It does not give the client an indication of the amount of the usable floor area
 It takes no account of number of stories or plan shape which is known to affect cost.
 It produces a large cubic quantity that will increase the possibility of further inaccuracy in
estimating.
 Large amount of variation have been known to occur in case rate of building of the same
type
1.2.2 Superficial or Floor Area Method
This is probably the most popular method of cost prediction during the early stages of a project
once the general outline drawings are been prepared, the method relate a unit cost to floor area and
is more readily appreciated. The area of each of the floor is measured and then multiply by cost/m2
by the convention the superficial area is measured between the inside faces of the external wall and
no deduction are made for partitions, stairs, lifts etc. It should be borne in mind that if the client
expresses his requirement in term of usable space, it is necessary to add to this area, circulation and
other non-usable space to make the building function correct. The rate to be used is usually obtained
from cost analysis of previously completed building of similar plan shape, storey height level of
finish and method of construction, certain rules must be applied.
 if the building is made up of parts that varies substantially in terms of quality of finish and
construction method, it is preferable to price it independently using rates appropriate for
each part. Items of work which cannot be related to the floor area will need to be priced at
separate rate or using different methods and added items such as piling, heating and air
conditioning, lift installation and external work. Allowances should be made for site
condition, construction method, materials, quality of finish and number and quality of
fittings. Total estimated cost equal to gross floor area multiply by cost/m2
Advantage
 Ease of calculation
 Cost are expressed in a way which is readily understood by the average building client
 Rates are readily available from many sources and also can be very easily calculated from
existing project.
 Majority of items in the building and the cost impact are related more to floor area than
the volume
Disadvantages
 Does not directly take account in changes in plan shape or total height of the building
which also have a cost impact.
 Adjusting from the variables mention is not easy
1.2.3 Approximate Quantities
This method is probably the most favoured by quantity surveyor because it used idea which are
similar to those used in preparing bill of quantities. It provides a more detailed estimate than the
other method described. Quantities are measured from the drawings and similar omnibus
description is given to this measurement. The description will include all items which are associated
with that drawing. Example a floor slab will include the stripping of vegetable soil, reduced level
excavation, hardcore filling under the floor, concrete bed and reinforcement. An upper floor will
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include the ceiling finish and painting of the surface of the slab, the floor construction, the floor
screed and floor finish.
Using approximate quantities: the strip foundation as 1m depth level and compacting, deldrin antitermite treatment. Back filling, disposal of surplus material from site, concrete (1:3:6) in foundation
200mm thick, 200mm hollow concrete blockwall in cement mortar (1:4) filled solid with weak
concrete. The item is then given a composite price to include every unit in this extended description.
Special paper is printed for this form of estimating. It has dimension column on the left and the
usual billing price column on the right.
With a multi rate system, it is essential to allow for preliminary and contingency in addition to the
actual cost of work in pricing also care must be taken to include for all the items ion the description
and make any necessary allowance for minor work or labour covered by the overall measurement
and prices, accuracy of this method is high, changes in design shape and specification can be allow
for both the preparation and calculation is lengthy and labourous.
Advantages
 It is reliable and give a more detail estimate than any other method
 In practice only major items that are of course important are measured
Disadvantages
 It required more time and effort than any other method
 More detail information is required from the designer and with other method
2 INTRODUCTION TO UNIT RATE
To analyse something is to break it down into its constituent parts and study each part in detail.
Therefore analytical estimating involves the analysis and costing of construction resources to
produce an estimate. The production of an estimate normally involves the calculation of unit rates
i.e. the cost of an individual measured item for example a square metre of brickwork, a cubic metre
of concrete or a metre of skirting as found in a Bill of Quantities.
Analytical estimating is therefore the most accurate form of estimating as each resource and unit
rate is analysed and costed individually. This form of estimating is used for pricing contracts with
bills of quantities, specifications and drawings or where the contractor has measured and prepared
their own quantities of work.
Unit rate estimating can employ bid based (historical) or cost based (first principle) estimates
2.1 BID BASED ESTIMATE (HISTORICAL)
Creating cost estimates from historic bid prices is a relatively straightforward process. After
determining the quantities for different items from project plans, the estimator matches the items
to appropriate historical unit bid prices or to average historic unit bid prices. Historical bid-based
estimating uses data from recent contracts as the basis for determining estimated unit prices for a
future project. Historical bid price data from previously let projects are typically stored in a
database for 3 to 5 years. However, for price averaging and use in new estimates, the data retrieval
period is often limited to 1 to 2 years, unless there is not sufficient bid data for an item, in which
case dated data must be used. In such an instance, the estimator may search the bid database across
a longer time period. Historical data can be easily sorted and analyzed in a multitude of ways. The
prices for the new estimate should be adjusted for specific project conditions in comparison to the
previously bid projects. However, there are many factors that need to be considered to develop an
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accurate construction estimate using historical bid prices. These factors can pose a certain level of
risk in using this method to develop an estimate. Consequently, the estimator must ensure that the
selected historical prices match the conditions of the project being estimated.
2.1.1
Bid Price Adjustments
a) Geographic considerations
Geographic considerations can have a profound effect on the selection of unit bid prices. A project’s
location, whether in an urban, suburban, or rural setting, and in relation to material supply sources
should be considered in establishing prices for an estimate.
b) Quantity Considerations
The plan or expected quantity of a given work item affects the unit cost of constructing and/or
supplying the item. Generally speaking, the unit price for larger quantities of a given material will
be less than smaller quantities. Suppliers offer discounts for larger quantity orders, and
mobilization, overhead, and profit are all spread out over a larger quantity, thereby reducing their
effect on a per-unit basis. Waste is also spread over a larger quantity, thereby having a smaller
impact on unit cost. Larger quantities give rise to efficiency by gaining experience and expertise in
completing the work.
c) Item Availability
Materials that are readily available or ones that are commonly used are generally less expensive to
purchase and install/construct. The contracting community is familiar with these types of items,
and this experience reduces costs and risks. Non-standard pay items or materials that are in short
supply are usually more expensive, and this should be considered in establishing the unit price.
d) Scheduling/Lead Time
When a contractor can plan for and maximize resource utilization, the contractor can be more
competitive pricing the work. Lead time needs to be considered in the estimating process by
estimating the project based upon when it will be built.
e) Difficult Construction/Site Constraints
Difficult construction and site constraints will increase the cost of construction for a contractor.
Placing piles under water, working near active railroads or adjacent to historic buildings (possibly
fragile), constructing on or near environmentally hazardous sites, and having limited room to
construct an item are all examples of constraints that should be considered when deriving an
estimated unit price.
f)
Risk Analysis and Contingency
Adjustment of item bid prices for risks should be clearly documented. The estimator is probably in
the best position to assess the uncertainty associated with bid pricing. If quantities are determined
by the estimator, this person should also provide input on uncertainty associated with any quantity
take-off. The estimator should adjust bid prices to reflect uncertainty associated with the particular
item of work being estimated. This uncertainty should be captured in the bid price as an adjustment
(i.e., contingency).
2.1.2 Summary
Advantages
 Straight forward process
 Reduced estimate preparation time
Disadvantages
 Database of bid data must be maintained;
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Consistent bid items must be utilized for all contracts, and the work covered by these bid
items must be consistent.
Difficult for lump-sum items
During times of rapidly fluctuating prices, it is advisable to limit the period of time from
which unit bid data are analysed
Thoroughly understand the project characteristics of the similar project to adjust the
project bid prices to reflect the similar project being estimated.
If the item in question is unique in some manner, whether it is innovative, new, or
experimental, or is considered a specialty item, costs may need to be adjusted to account
for the contractor’s unfamiliarity with the work and potential increased risk in construction
Historical approach is not ideal for Zambia due to the lack of construction cost indices
2.2 COST BASED ESTIMATE (FIRST PRINCIPLES)
Contractors typically use cost-based estimating methods for arriving at a contract bid price. Such
estimates reflect the cost to construct the specified work in the most economical manner based on
the contractor’s capability and considering the time allowed by the contract. These detailed taskby-task estimates reflect the unique character of a project, geographical influences, market factors,
and the volatility of material prices. In addition to the direct costs for performing the tasks, indirect
costs of project overhead expense are calculated and a reserve to protect for project risk is
determined. Finally, to arrive at a bid number, the contractor adds a desired profit amount to the
total estimate of project expenses.
Cost-based estimating requires the estimator to carefully review the construction requirements as
described in the contract documents, visualize the construction process, and model the costs to
complete the work. These estimates are based on many sub-estimates of work crews and equipment
completing tasks at assumed rates of productivity. Bid items are broken down into detailed taskby-task work activities. The direct cost for each task is developed with separate costs for the labour,
equipment, subcontractor, and material components of the work required to complete a task. Costbased estimating uses the latest price data for materials, equipment, and labour, so unlike bid-based
estimating that used historical data, it provides a much more accurate projection of costs during
periods when prices are escalating rapidly.
Unit Rates maybe calculated in one of two ways:
 Net Rate – (Excludes Overheads and Profit)
 Gross Rate – (Includes Overheads and Profit)
In our industry, most estimators will calculate costs based on net rates these will then be enhanced
later to include overheads and profit. The resources which compromise a unit rate are direct cost
namely labour, materials and plant, then add an overhead expense, a risk amount, and a reasonable
profit amount.
2.2.1 Cost of Labour
Labour may be paid for on an hourly, daily, weekly or piecework basis. Directly employed
operatives are usually paid in accordance with a working rule agreement which will specify the
rates and allowances to be paid. Cost of labour considers the recognized basic wage rate for both
skilled and unskilled operatives, as stipulated by ABCEC including appropriate allowances,
employer’s statutory payments and other payments relating to union or trade agreement. The
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estimator calculates a labour rate per hour which is realistic and which reflects the actual cost of
labour to the contractors. According to ABCEC agreement the following items are included in
arriving at the ‘all-in’ labour rate.
a) Basic wage rates
b) Holiday Pay (annual leave)
c) Sick leave
d) Occasional leave
e) Public holidays
f) Inclement weather
g) Overtime
h) Housing allowance
i) Tool allowance
j) Service benefits
k) NAPSA
l) WCF
m) Protective clothing
n) Funeral benefit
o) Maximum advance
p) Incentive
q) Lunch
r) Transport
s) Medical / first aid
t) Wagetkt
u) Incidental costs
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However, if the project is of firm contract, additional allowances are added to take care of possible
increase in labour rate by recognizing the size and likely duration of the contract.
Refer to appendix 1 for calculation of All-in-rate of Labour
2.2.2 Cost of Materials
Material in the building industry refers to varying components delivered to site which when
articulated or appropriately combined, result to functional element of a building project. Material
cost affect the estimate greatly and this depends on the source of supply and the competitiveness
of quotation received by the estimating department. Several factors affect the cost contractors pay
for materials. In addition to the actual cost of the material the estimator must also consider:
 Transportation costs
 Unloading and Stacking costs
 Materials movement on site
 Extra Materials to compensate for:
o Wastage
o Allowance for materials being measured net in B o Q
o Loss in consolidation, shrinkage etc
Note: Where prices of materials are described by suppliers as ‘ex works’ this means the price at
the factory and delivery costs will have to be added.
The estimating department does send out enquiries to suppliers of materials with a view to
obtaining a more realistic and workable information. The CIOB code of estimating practice
outlined this information to include:
a) Title and location of the work
b) Specification, class and quality of the material
c) Quantity of material required
d) Likely delivery programme and special delivery requirements
e) Access to site and any restrictions
f) Date by which the quotation is required
g) Period for which the quotation is to remain open
h) Whether a fluctuation or firm price required
i) Discount required and
j) Person in the contractor’s organization to be contacted when queries arise.
The code recommended a further check on the obtained information so as ascertain that the
following criteria are satisfied:
i.
The material comply with the specification
ii.
The material will be available in sufficient quantities to meet the requirements of the
construction programme
iii.
The supplier has imposed no special delivery conditions
iv.
The method and rate of delivery complies with the contractors requirement(s)
v.
The condition contained a counter offer, which is at variance with the terms and conditions
of the enquiry.
vi.
The quotation is valid for the required period
vii.
Prices are given for small quantities where applicable
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viii.
Discount conform to the requirements of the enquiry
ix.
Requirement concerning fixed or fluctuating prices are satisfied.
The next line of action for estimating department is the calculation of the unit rates for material.
Prices should therefore include the basic price, less discounts retained by the contractor, allowance
for waste, unloading, stacking, storing, distributing around the site and the return of crates or
packings where appropriate.
2.2.3 Cost of Plant & Equipment
Plant is employed on a building site in order to save money, labour or time, or a combination of
all. For any given project, the estimate department obtains information on plant to be required from
the method statement and the programme while the period of requirement is found from the tender
programme.
Plant may be divided into two main categories, the costs of which can be allocated to contracts in
differing ways.
a) Non-Mechanical Plant
Basic items of plant including – barrows, hosepipes, spades, trestles, scaffolding, small powered
hand tools etc. With the exception of scaffolding and one or two other items it is virtually
impossible to allocate the cost of non-mechanical plant items to a contract, let alone to a specific
unit rate. Example a wheelbarrow may be used on several contracts in its lifetime. The cost may be
included in overhead charges as a percentage, as a lump sum in the preliminaries bill or, more
accurately, on longer contracts a list of non-mechanical plant items is prepared, costed and included
in the contract sum.
b) Mechanical Plant
Mechanical plant such as excavators, lorries, dumpers, mixers etc. require a more complex
approach. Mechanical plant can be very expensive. Mechanical plant can further be categorised as
Mechanical plant with operator or Mechanical plant without operator
A factor which affects the costs of plant is the source of provision. According to the CIOB code of
Estimating practice, a contracting firm has three alternatives to make a choice and these are:
 Purchase plant for the contract;
 Hiring existing company owned plant; and
 Hiring plant from external sources
The purchase of plant by a contracting firm for any given project is a function of many variables
including the nature of the contract, the size of the project, the type of the client, the location and
complexity of the project.
Often times, contracting firms resort to hiring plant from external sources. This action has relatively
proved to be cheaper. However, reasonable carefulness is usually required to ensure that quotations
obtained are for plants, which will meet the contractor’s requirements including the job
specification(s). Articulating these requirements the code of estimating practice posit that
clarification should be that:
i.
The plant complies with the specifications
ii.
It is available to meet the needs of the construction programme
iii.
Delivery and collection charges can be identified
iv.
Where appropriate all operator costs are included and that operators will conform to the
intended working hours of the site;
v.
Any attendance or supplies to be provided by the contractor are clearly identified
vi.
Maintenance responsibilities, charges and liabilities are identified
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The quotation conforms to the terms and conditions of the enquiry and does not represent
a counter offer; and
Requirements concerning fixed or fluctuating prices are met.
If the contracting firm chose hiring existing company owned plant for the proposed project, then
action shifts to the calculation of the associated costs. Plant is normally charged to the contract on
a rental basis, except in the case of plant specially made or purchased for a specific operation. The
later plant is normally charged in full to contracts and allowance made for disposal on completion,
often at scrap value.
Example of calculation of unit rate for mechanical plant is included in Appendix 2
2.2.4 Preliminary and General Items
Mobilization is a contract pay item used to cover a contractor’s preconstruction expenses and
the costs of preparatory work and operations. Since there is no clear list defining this work
effort, and since contractors have the ability to adjust their bids as needed to cover these
expenses, there are no true rules as to what percentage should be used per contract. Therefore,
when starting an estimate for a project, enter 10% as a beginning point for mobilization and
adjust it up or down as below:
less than US$100,000 Use 8% to 12%
$100,000 - $250,000 Use 6 % to 10 %
$250,000 - $500,000 Use 6 % to 9%
$500,000 - $1,000,000 Use 5 % to 9 %
$1,000,000 - $2,000,000 Use 6 % to 9 %
$2,000,000 - $5,000,000 Use 7 % to 9 %
$5,000,000 - $10,000,000 Use 8 % to 10 %
$10,000,000 - $20,000,000 Use 7 % to 11 %
Over $20,000,000 Use 7 % to 10 %
To more accurately calculate the Mobilization percentage that should be used for each
individual project, consideration should also be given to:
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The location of the project;
The complexity of the project;
The need for specialized equipment;
The type of work being performed;
Rural vs. Urban Projects with multiple work sites;
Excessive preparatory removal items;
Large quantities of excavation;
Spanning of constructions seasons when it would become necessary for the contractor to
shut down and clear the work site between these seasons.
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2.2.5 Estimating Lump Sum Items
From an estimating standpoint, lump sum bid items are often more difficult to price. Lump sum
items can reduce administrative costs in contract administration, as well as allowing a
contractor a variety of work means and methods, and thus do make sense in some instances.
They also transfer the risk of performance and quantities to the contractor. If the work to be
performed can be quantified, then a payment method that includes a quantity should be used.
However, lump sum bid items are often used when an item of work can only be defined in
general terms, such as when the finished product can be defined but not all the components or
details can be easily determined. This can make estimating lump sum items difficult for the
estimator. The more information and breakdown of a lump sum item that an estimator has
available, the greater the likelihood that an accurate lump sum estimate can be developed. An
estimator should define a lump sum item in terms of its simplest, most basic components and
should consider other factors that may not be easily estimated. By breaking out a lump sum
item into smaller items of work which have historical data, and then applying reasonable
estimated prices to those sub units, the estimator can accurately establish a price for the overall
lump sum item. Using lump sum items typically transfers risk to a contractor, and the contractor
may adjust his price upward to take on this risk. Contractors cannot necessarily rely on overruns
to cover work that they did not foresee. Lump sum items are typically bid at higher costs than
component costs due to the transfer of risk from the owner to the contractor. Therefore, the use
of lump sum items should be used with great care.
In roadworks, as may be the case for a time-based lump sum bid item such as Project
Temporary Traffic Control, the lump sum payment may provide the basis as an incentive to
perform the work more quickly. In such a situation, hourly pay items offer no incentive, and
may even cause the contractor to stay in the work zone as long as possible.
2.2.6 Subcontractors
Subcontractors derive their definition from the mode of selection including the type of service they
are required to render in a given project. Generally, subcontractors are defined as individuals or
firms who enter into a legal contract with the main contractor to complete an agreed part of the
contract. Subcontractors can be:
 Domestic referring to the main contractor’s own subcontractors
 Nominated which arises where the design team/client requires control in the selection of a
specialist
In order to arrive at the likely cost of items to be undertaken by the domestic subcontractor, the
estimating department abstract from the bills items applicable to each trade including the trade
preamble. Thereafter, enquires are sent with a view to obtaining subcontractors’ bills of quantities
from selected number of tenderers. The sent out enquiries usually contain conditions of the main
contract and the date by which the tenders are to be submitted to enable the main contractor
determine the rates to be inserted in the tendering bills. The main contractor adjust rates obtained
from the subcontractors by adding to the most competitive subcontractors rates, a percentage to
accommodate profit and attendance before inserting in the tendering bills of quantities.
Usually nominated subcontractors undertake works included in the bills as provisional or prime
cost sums. The main contractor is allowed to add an amount of money or percentage to cover any
profits he may require on such work. He is also required to provide general attendance on
nominated subcontractors and to allow the use of general facilities such as standing scaffolding,
mess-room and sanitary accommodation, welfare facilities, storage for plant and material,
provision of water and electricity and clearing away of rubbish. It is usual for such attendance to
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be described in the bills and the main contractor is allowed to add an amount of money or
percentage to cover the cost involved.
a. Nominated Suppliers
Nominated suppliers are involved when goods and materials expected to be used in a given project
are covered by the inclusion of a provisional or prime cost sums in the bills. Under the arrangement,
the main contractor is allowed to add an amount of money or a percentage to cover any profit he
may require on such items. The cost of fixing goods and materials which are obtained from a
nominated supplier is measured and the unit items are priced in accordance with the trade involved.
The cost of unloading, storing, hoisting the goods/materials and returning packing cases etc, to the
nominated supplier, carriage paid and obtaining credits therefore, is included with the item of
fixing.
2.2.7 Provisional and Prime Cost (PC) Sums
In a typical bill of quantities where the contract is with quantities and specification where contract
is without quantities, some parts of the work remain unmeasured and/or specified in details. Lump
sums are usually appropriately included to take care of this shortfall.
A prime cost sum is a sum provided for work or services to be executed by nominated
subcontractor, a statutory authority or a public undertaking or for materials or goods to be obtained
from a nominated supplier.
A provisional sum is a sum provided for either defined or undertaken work. It is defined when work
is not completely designed at the time of tender documents are issued but for which certain
specified information can be given.
In either case of prime cost and provisional sums, elementary precaution should be taken of,
checking to ensure that the sums of money included in the text are extended into the pricing column.
Following each prime cost item there will provision for addition of profit and attendance. Profit is
normally calculated on a percentage basis while attendance will be assessed on the cost of the
services to be provided and entered as a lump sum.
2.2.8 Escalation
The future cost of material, labour and plant can be difficult to predict. Prices for these
commodities have risen across time, but they have also experienced increases and decreases
within the same year. The art of budgeting for a construction program that spans more than 12
months is a challenge because of the price volatility in construction commodities. In addition,
a boom in construction followed by a bust can change both contractor and supplier margins as
markets move from being very tight to slack. For these reasons, and others not listed here, it is
vital to account for inflation when preparing any estimates for any project.
Price volatility among inputs to construction leading to inflation, occur for several reasons and
can originate from either consumers or suppliers. One accepted method for tracking cost
escalation involves the use of indexes. By tracking all of these goods at once, the supply and
demand movements that cause the price of single goods to fluctuate and can be observed. When
there is no system to properly account for cost volatility, the possibility that price inflation will
be accounted for multiple times, or not at all, in a project’s estimate becomes a significant
concern. This is very probable in Zambia as there is a lack of construction specific indices. At
the moment contractors rely on expert judgement or experience.
Page | 14
National Council for Construction
Competitive Pricing of Construction Works
Training Manual
2.2.9 Overheads
Overheads may be defined as the cost of maintaining (running) the contractor’s organisation or
those costs incurred in the operation of a business which are not directly related to individual items
of production.
There are two types of overheads:
a) Head Office
Annual cost of staff salaries, expenses, rentals and rates, water, electricity, telephones, maintenance
and depreciation of office equipment, postage, insurance, advertising, maintenance of buildings
and equipment etc. The cost of these items is expressed as a percentage of a company’s turnover
and included in the tender.
b) Project or Site
Project site costs including non – productive or non-key staff such as site supervisory staff, site
office costs, storage facilities temporary roads and services and other preliminary / site organisation
costs. Items are priced as individual items and may be fixed or time related costs or a mix of fixed
and time related costs. The costs of these items are included in the tender.
The techniques and methods applicable in the calculation of overheads revolve on the policy of the
contracting firm and the type of overhead involved. Usually with site overheads each contract will
have a calculated allowance in the tender, but head office overheads are a percentage of budget
turnovers and this is applied to all contracts. Most contractors use systems which record past and
present overheads, the projection of overheads for the future, and rate at which overheads are being
recovered. An important part of a contractor’s general overheads is the cost of financing
construction works in advance of payment, which needs to be calculated and included in the tender.
The appropriate addition for head office overheads varies with the extent of centrally provided
services and the size of organization, but could be in the range of 4 to 8% of turnover.
2.2.10 Profit
Profit is defined as the difference between the contract sum and that required to pay for overheads
site costs, labour, plant and materials to complete the contract. The amount of profit that a
contractor can make is determined by a number of factors largely outside the remit of an estimator.
However, in larger companies the senior or managing estimator may be a member of the
management team and in smaller companies / firms the estimator may be a director or the managing
director. In both cases they may be party to, or may have to make commercial decisions regarding
profit margins. Factors affecting profit levels are:
 Market forces of supply and demand
 Amount of competition
 Who the competitor are
 Size / Value of contract
 Interest rates.
 the size and nature of the contracting firm,
 the organization of the contracting firm,
 the client and even the disposition of the project consultants.
 Risk involved in contract such as:
o Contractual risks. These are risks stemming from the contract documents and the
necessary arrangements for work to be done by subcontractors and/or deliveries
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Training Manual
National Council for Construction
Competitive Pricing of Construction Works
from suppliers of materials or components. Also included would be the firm price
tender risk.
o Technical risks. These risks revolve around the form of construction (whether
traditional or non-traditional) and the ease of otherwise of executing the work,
previous experience of erecting buildings of similar construction and the problems
of programming and plant utilization.
Basically, the greater the risk involved the higher the profit requirement and vice versa. In
practice however, the following allowances provided by most contracting firms to
accommodate the much cherished profit.
i.
Builders work(10 – 15%)
ii.
Subcontractors and suppliers (contractor’s own) 5 – 10%
iii.
Nominated subcontractors (2 ½ - 7 ½ %)
iv.
Nominated suppliers (5 – 10%)
2.3
COST IMPLICATIONS IN VARIATIONS AND EXTENSION OF TIME
2.3.1 Variations
A variation is an alteration to the scope of works in a construction contract in the form of an
addition, substitution or omission from the original scope of works.
Almost all construction projects vary from the original design, scope and definition. Whether
small or large, construction projects will have inevitably depart from the original tender design,
specifications and drawings prepared by the design team. This can be because of technological
advancement, statutory changes or enforcement, change in conditions, geological anomalies,
non-availability of specified materials, or simply because of the continued development of the
design after the contract has been awarded.
Variations may include:





Alterations to the design.
Alterations to quantities.
Alterations to quality.
Alterations to working conditions.
Alterations to the sequence of work.
Variations may not (without the contractors consent):




Change the fundamental nature of the works.
Omit work so that it can be carried out by another contractor.
Be instructed after practical completion.
Require the contractor to carry out work that was the subject of a prime cost sum.
In legal terms, a variation is an agreement supported by consideration to alter some terms of
the contract. No power to order variation is implied. Hence there should be express terms in
contracts which give the power instruct variations. In the absence of express terms in the
contract the contractor may reject instructions for variations without giving rise to any legal
consequences.
Standard forms of contract generally make express provisions for variations. Such provisions
enable the continued, smooth administration of the works without the need for another contract.
Page | 16
National Council for Construction
Competitive Pricing of Construction Works
Training Manual
Variation instructions must be clear as to what is and is not included, and may propose the
method of valuation.
Valuation of variations
Variations may give rise to additions or deductions from the contract sum. The valuation of
variations may include not just the work which the variation instruction describes, but other
expenses that may result from the variation, such as the impact on other aspects of the works.
Variations may also (but not necessarily) require adjustment of the completion date.
Variations may be valued by:
a) Similar rates
Valuations of variations are often based on the rates and prices provided by the contractor in
their tender, provided the work is of a similar nature and carried out in similar conditions. This
is true, even if it becomes apparent that the rates provided by the contractor were higher or
lower than otherwise available commercial rates. They do not become reasonable or
unreasonable by the execution of variations.
b) New rates
If similar types of works to those instructed by a variation cannot be found in the drawings,
specification or bills of quantities, then fair valuation of the contractor's direct costs, overheads
and profit is necessary. Rates will be built up from first principles.
Limits on variations
Forms of contracts put limitations on variations that can be instructed. If the value of the
contract increases or decreases by more than 15% of the net contract sum (excluding
provisional sums and day works) then the contract administrator can add or deduct from the
contract sum a determined value upon consultation with the contractor, having due regard to
their site expenses and other general overheads. Note that this 15% increase or decrease is not
for a single item of work, but the total contract sum at completion.
If the rate in the bill multiplied by the final total quantity of work done is more than 1% of the
priced total of the bill at the contract date, than it will constitute a variation.
Refer to sample in appendix 3.4
2.3.2 Extension of time
Many construction contracts allow the construction period to be extended where there are
delays that are not the contractor's fault. This is described as an extension of time (EOT).
When it becomes reasonably apparent that there is a delay, or that there is likely to be a delay
that could merit an extension of time, the contractor gives written notice to the client identifying
the relevant event that has caused the delay. If the client accepts that the delay was caused by
a relevant event, then they may grant an extension of time and the completion date is adjusted.
Relevant events may include:
 Variations.
 Exceptionally adverse weather.
 Civil commotion or terrorism.
Page | 17
Training Manual







National Council for Construction
Competitive Pricing of Construction Works
Failure to provide information.
Delay on the part of a nominated sub-contractor.
Delay in giving the contractor possession of the site.
Force majeure (such as an epidemic or an 'act of God').
The supply of materials and goods by the client.
Changes in statutory requirements.
Delays in receiving permissions that the contractor has taken reasonable steps to avoid.
The contractor is required to prevent or mitigate the delay and any resulting loss, even where
the fault is not their own.
Assessing claims for an extension of time can be complicated and controversial. There may be
multiple or concurrent delays, some of which are the contractor's fault and some not. There are
many occasions where contractors contribute to delay themselves by their performance during
design periods, when producing drawings, mock ups and samples or in inter-facing with subcontractors. Crucial in assessing applications for extension of time is the quality of the
information provided and records available.
All claims should be judged against the progress of the works and not the programme and must
demonstrate the link between the breach (cause) and the delay. Supplemental and wrap-up
agreements previously agreed by both parties can weaken the contractor’s final entitlement.
The client representative may review extensions of time after practical completion and further
adjust the completion date.
Mechanisms allowing extensions of time are not simply for the contractor's benefit. If there
was no such mechanism and a delay occurred which was not the contractor’s fault, then the
contractor would no longer be required to complete the works by the completion date and
would only then have to complete the works in a 'reasonable' time. The client would lose any
right to liquidated damages.
Claims for EOT can be with or without costs. The EOT application should considers:




The event - the circumstance which has given rise to extension of time request.
Liability for the event
Contractual entitlement referring to provisions entitling the contractor to a claim
Contractual compliance such as notices and detailed particulars the contractor is
obligated to submit.
 Statement of claim containing a succinct statement of what the contractor is claiming.
 Substantiation showing documentary evidence in support of the assertions made within
the claim submission.
 Recommendation as to the way forward
Refer to sample in appendix 3.5
Page | 18
National Council for Construction
Competitive Pricing of Construction Works
3
Training Manual
APPENDICES
3.1
ALL - IN CONSTRUCTION WORKER RATES
 Based upon Association of Building & Civil Engineering contractors (ABCEC) and National
Union of Building, Engineering & General Workers (NUBEGW)
 Joint Industrial Council Collective Agreement (2014 - 2015)
Description
Unit
Qty
Average working weeks in Zambia
Working hours per day
hrs
9
Working hours per week
hrs
45
Working hours per month
hrs
195
Public holidays per year
day
13
Annual leave
day
24
Sick leave
day
30
Inclement weather
hrs
40
30
WCF
hrs/ mth
%/(basic hrs + annual
leave
pay
+
occasional leave pay)
%/(basic hrs + OT +
leave pay + service
pay + tool allowance)
Medical
%/medical scheme
50
HIV training/first aid
%/probation period
0.5
Work suit (overalls)
K/no.
120
Gumboots
K/pair
75
Head gear
K/no.
35
Raincoat
K/no.
120
Uniform
K/no.
150
Reflector vest
K/no.
35
Safety shoes
K/pair
200
Tool allowance (car/pl)
%/basic rate
7.5
Housing allowance
%/basic rate
30
Funeral Benefit
K/event
2050
Max Advance
K/event
800
Incentive
K/day
Overtime rate
%/basic rate
1.5
Lunch allowance
K/day
11
transport
K/day
11
UTH medical scheme
k/mth
20
Service benefit
Napsa
Risk
No of weeks in a year
52
less annual leave (includes
industry close down)
4.8
less public holidays
2.6
44.6
(UK
has
46.2
working weeks)
2007 working hours
5
1.97
0
0
Page | 19
National Council for Construction
Competitive Pricing of Construction Works
Training Manual
Workma
n
Skilled
Worker
-Class
I–
Brickla
yer/Pla
sterer,
Sign
writer
3.97
5.53
Skilled
Worker
-Class
I–
Plumbe
r, Sheet
metal
worker,
Carpen
ter/Join
ter,
Plant
Mecha
nic
5.61
178.65
248.85
19.23
Sick leave
Forema
n
SteelFixer
II
Opera
tive
Class
II
Opera
tive
Class I
Licens
ed
Blaste
r/Driv
er
Gen.
Purpo
se
vehicle
Securi
ty
Guard
/Watc
hman
6.10
4.81
5.39
6.02
5.17
55.86
252.45
274.50
216.45
242.55
270.9
232.65
223.44
26.78
27.17
29.54
23.30
26.10
29.16
25.04
24.05
17.36
24.18
24.53
26.67
21.03
23.57
26.32
22.60
21.71
Occasional leave
12.82
17.85
18.11
19.70
15.53
17.40
19.44
16.69
16.03
Public holidays
Inclement
weather
10.41
14.51
14.72
16.00
12.62
14.14
15.79
13.56
13.03
3.56
4.96
5.03
5.47
4.31
4.83
5.40
4.64
4.45
-
-
-
-
-
Rate
Basic 45
Holiday
Pay
(annual leave)
Overtime
Housing
allowance
-
-
-
-
53.60
74.66
75.74
82.35
64.94
72.77
81.27
69.80
67.03
Tool allowance
13.40
18.66
18.93
20.59
16.23
18.19
20.32
17.45
16.76
Service benefits
32.04
44.64
45.28
49.24
38.83
43.51
48.59
41.73
40.08
NAPSA
10.53
14.67
14.89
16.19
12.76
14.30
15.97
13.72
13.18
4.79
6.68
6.77
7.37
5.81
6.51
7.27
6.24
6.00
2.69
2.69
2.69
-
2.69
2.69
2.69
2.69
-
1.68
1.68
1.68
-
1.68
-
-
-
-
0.78
0.78
0.78
0.78
0.78
0.78
0.78
0.78
-
2.69
2.69
-
2.69
2.69
2.69
2.69
2.69
2.69
-
3.36
-
-
-
-
3.36
0.78
0.78
0.78
0.78
0.78
0.78
-
-
4.48
-
4.48
4.48
4.48
4.48
WCF
Protective
clothing
Work suit
(overalls)
Gumboot
s
Head
gear
Raincoat
Uniform
Reflector
-
vest
0.78
Shoes
-
Funeral benefit
Maximum
advance
Incentive
0.78
-
45.96
45.96
45.96
45.96
45.96
45.96
45.96
45.96
45.96
17.94
17.94
17.94
17.94
17.94
17.94
17.94
17.94
17.94
-
-
-
-
-
-
-
-
-
Lunch
55.00
55.00
55.00
55.00
55.00
55.00
55.00
55.00
55.00
Transport
66.00
66.00
66.00
66.00
66.00
66.00
66.00
66.00
66.00
2.69
2.69
2.69
2.69
2.69
2.69
2.69
2.69
2.69
Medical / first aid
Page | 20
(4 Shifts)
National Council for Construction
Competitive Pricing of Construction Works
Workma
n
Skilled
Worker
-Class
I–
Brickla
yer/Pla
sterer,
Sign
writer
Skilled
Worker
-Class
I–
Plumbe
r, Sheet
metal
worker,
Carpen
ter/Join
ter,
Plant
Mecha
nic
Forema
n
3.5
3.5
3.5
3.5
Wagetkt
Incidental costs
Total
Rate/hr
Training Manual
-
-
-
-
Opera
tive
Class
II
Opera
tive
Class I
Licens
ed
Blaste
r/Driv
er
Gen.
Purpo
se
vehicle
3.5
3.5
3.5
3.5
3.5
-
-
-
-
-
SteelFixer
II
Securi
ty
Guard
/Watc
hman
556.12
696.16
700.65
750.81
631.53
686.40
742.95
666.65
647.38
12.36
15.47
15.57
16.68
14.03
15.25
16.51
14.81
14.39
Page | 21
week
Training Manual
3.2
ALL IN PLANT & EQUIPMENT RATE
Page | 22
National Council for Construction
Competitive Pricing of Construction Works
Equipment Basic Rates
Cost of Owning and Operating Construction Equipment: Caterpillar Method
Average working weeks in a year
Average working hours in a year
Finance charges (lending rate + 3%)
Insurance rate
Road tax %
Cost of diesel per litre
Less tire / consummable replacement costs
44.6
2007
23
7.5
1
6.59
*Purchase price is price landed in Zambia
Owning Costs 'ZMW/hr
S/No.
Description
Concrete Mixer (a) 0.4/0.28 m3
Concrete Mixer (b) 1 m3
Dozer D - 80 - A 12
Dozer D - 50 - A 15
Front End loader 1 m3 bucket capacity
Generator( b) 33/63 KVA
Hydraulic Excavator of 1 m3 bucket
Motor Grader complete with scarifier, CAT
14 or equivalent
Pneumatic Road Roller
Pot Hole Repair Machine
Road marking machine
Smooth Wheeled Roller 8 tonne
Tipper - 5 m3
Tractor
Water Tanker
Plate compactor
Utilization
Factor %
85
85
78
78
80
85
80
78
75
78
85
85
90
86
75
85
Plant
Hours per period
annum
(years)
1,705.95
7
1,705.95
7
1,565.46
10
1,565.46
10
1,605.60
9
1,705.95
5
1,605.60
9
1,565.46
1,505.25
1,565.46
1,705.95
1,705.95
1,806.30
1,726.02
1,505.25
1,705.95
10
6
7
7
6
6
7
7
9
Life
(Hours)
11,941.65
11,941.65
15,654.60
15,654.60
14,450.40
8,529.75
14,450.40
*Purchase
price 'ZMW
160,000.00
180,000.00
1,289,484.00
1,230,684.00
128,576.00
103,978.00
403,270.00
15,654.60
9,031.50
10,958.22
11,941.65
10,235.70
10,837.80
12,082.14
10,536.75
15,353.55
862,250.00
513,324.00
454,524.00
6,958.00
9,555.00
226,870.00
79,000.00
256,270.00
9,310.00
Less tire /
Percent for
consummable consummable
replacement replacement
costs
costs
2
3,200.00
2
3,600.00
6
77,369.04
3
36,920.52
4
5,143.04
3
3,119.34
4
16,130.80
5
7.5
5
2.8
7.5
3
2
2
3
43,112.50
38,499.30
22,726.20
194.82
716.63
6,806.10
1,580.00
5,125.40
279.30
EquipBuildUp 1
Depreciati
licence
Nett value on
Interest Insurance tax
Sub total
156,800.00
13.13
12.08
3.94
0.53
29.67
176,400.00
14.77
13.59
4.43
0.59
33.38
1,212,114.96
77.43
97.95
31.94
4.26
211.57
1,193,763.48
76.26
96.46
31.46
4.19
208.37
123,432.96
8.54
9.82
3.20
0.43
22.00
100,858.66
11.82
8.16
2.66
0.35
23.00
387,139.20
26.79
30.81
10.05
1.34
68.99
819,137.50
474,824.70
431,797.80
6,763.18
8,838.38
220,063.90
77,420.00
251,144.60
9,030.70
52.33
52.57
39.40
0.57
0.86
20.31
6.41
23.84
0.59
66.19
42.32
36.25
0.52
0.70
16.35
5.90
21.93
0.68
21.58
13.80
11.82
0.17
0.23
5.33
1.92
7.15
0.22
2.88
1.84
1.58
0.02
0.03
0.71
0.26
0.95
0.03
142.98
110.54
89.05
1.28
1.82
42.69
14.48
53.87
1.51
Operating costs 'ZMW/hr
Fuel /
oil
Fuel / oil
Litres/h consumpti Maintena Sub
r
on
nce
total
1.2
7.91
1.88
9.78
1.2
7.91
2.11
10.02
38
250.42
49.42 299.84
21
138.39
23.58 161.97
18
118.62
3.20 121.82
4.9
32.29
1.83
34.12
18
118.62
10.05 128.67
19
7.6
5
1.8
17
17
9
9
9
125.21
50.08
32.95
11.86
112.03
112.03
59.31
59.31
59.31
27.54
25.58
14.52
0.11
0.42
3.77
0.92
3.41
0.16
152.75
75.66
47.47
11.98
112.45
115.80
60.23
62.72
59.47
Total
Owning &
Operating
costs / hr
39.46
43.40
511.42
370.35
143.82
57.12
197.65
295.73
186.20
136.52
13.26
114.27
158.49
74.71
116.58
60.99
National Council for Construction
Competitive Pricing of Construction Works
3.3
Training Manual
BUILD UP RATES FROM FIRST PRINCIPLES
Page | 23
BUILDING RATES FROM FIRST PRINCIPLES
K/hr
K/hr
General workman
5.16
Tipper 5m3
18.00
Skilled workman
5.75
Foreman
6.10
Equipment operator
6.00
1
Excavate
Hand dig
2.5 hrs
/m3
@ 5.16
OHP
12.9
20%
15.48 /m3
Can dig 2.83m3/day
EXCAVATION TRENCH
A
Machine digging (Excavator)
EX: Barloworld
US
Kwacha Equivalent
Add Operator cost per hour
Out put
Cost Per m3
Add handling at 5%
B.
$30.00
195.00
6.00
201.00
9.00
22.33
Per Hour
Per Hour
per Hour
per hour
m3/hour
per m3
1.12
23.45 /m3
Labour Based
1 labourer can dig 1m3 of trench in 2.5 hours
All in-rate per hour for labourer
5.16 Per hour
Cost per m3 =
12.90
Add handling at 5%
0.65
13.55
Combined rate
Method:
Add waste at 5%
Excavator 50%
Man 50%
11.73
6.77
18.50
Machine only Man Only Combined
23.45
13.55
18.50
1.17
0.68
0.92
24.62
14.22
19.42
Add OH
At 10%
12.5%
15%
17.5%
20%
Say
27.08
27.70
28.32
28.93
29.55
28
15.64
16.00
16.36
16.71
17.07
16.00
21.36
21.85
22.34
22.82
23.31
22
2
3
4
5
Return, Fill & Ram (Backfilling)
5m3/day
=
Cart Away
Hand load = 1m3/hr
5m3 tipper return trip = 1hr
8x
5
5.16
=
=
8.26
20%
9.91 /m3
18
5
Ant repellant
can spray 10m2/hr
1L (Aldanol 48) with 95L water (1:95) @ 5L/m2
1L bottle of Aldanol 48 covers
95 = 19m2
5
1L bottle of Aldanol =K40.80
40.8
19
10% waste
Form sinking in laterite bed 400x100mm
3m
/hr
@ 5.16
OHP
5.16
3.6
8.76
20%
10.51 /m3
0.52
2.15
2.66
0.27
2.93
20%
3.52 /m2
1.72
20%
2.06 /m3
6
Concrete
Cement
65 x
20
Transport 5m3 (7.5T) truck @K18/hr
I load / day
(Offloading??)
1.442 tons = m3
1,300.00 T
19.20
1,319.20
18x8
7.5
=
1,902.29 /m3
River Sand: K 40/m3 delivered to site
Stone
130.00 T
7.70
137.70
1.5 T/m3
206.55 /m3
Collect 0.35/T/km x 22km
Transport (rate x Dist x ton)
Cement
Sand
Stone
1,902.29 /m3
40 /m3
206.55 /m3
Mix and place
1 mix. Ope
1 Dumper
2 skilled
6 labourer
1:3:6
304.37
19.20
198.29
521.85
0.16
0.48
0.96
6.00
6.00
11.50
30.96
54.46 /hr @ 8hrs/day
Crew can mix & place 8m3 per day
0.23
0.46
0.91
1:2:4
434.81
18.29
188.85
641.94
6.00
6.00
5.75
5.16
Waste @ 10%
OHP @ 20%
54.46
576.31
54.46
696.40
57.63
633.95
126.79
760.73 m3
(100mm slab)
69.64
766.04
153.21
919.25
x 0.10
91.92
9.19
101.12
Add 10% labour (curing)
Training Manual
3.4
VARIATION SUBMISSION
Page | 24
National Council for Construction
Competitive Pricing of Construction Works
25 March 2015
Director of Building
Buildings Department
Lusaka, Zambia
Attention:
Director of Buildings
Dear Sir,
CONTRACT NO. 123456 CONSTRUCTION OF SME TRAINING HOUSES
Variation No. 004
–
Please find enclosed Variation no. 4 as per drawing. The drawing indicates two (2) brick
columns to the verandah of each house. But there is no description for columns in the Bill of
Quantities.
Yours faithfully,
Contractor XYZ
VARIATION ORDER NO. 004
CONTRACT No:
123456
CONTRACT NAME:
Construction of SME training houses in Mongu District,
Western Province
CONTRACTOR:
XYZ Contractors
P.O. Box 1111111
Lusaka
EMPLOYER:
Ministry of Transport, Works, Supply and Communication
P.O. Box 50800
Lusaka
PROJECT MANAGER:
Director of Buildings
P.O. Box 50800
Lusaka
The following Variation Order is instructed in accordance with clause 37 of the Conditions of
Contract.
Description of Variation
Design of 300 x 300mm brick columns to the house as indicated on the drawing. This item is
omitted from the Bill of Quantities
As per the attached schedule.
The estimated cost of this Variation Order is:
VARIATION (as per attached summary sheet)
ZMK 29,730.00
The recommended extension of time to be granted: 0 WEEKS.
Source of
Funding
Contingencies
Funding from Client
BOQ items rearrangement
X
Prepared by: ________________________ Verified by: ___________________________
Date:
________________________ Date:
XYZ Contractors
___________________________
Consultant
Accepted by: ________________________ Approved by: ___________________________
Date:
________________________ Date:
Director of Buildings
___________________________
Ministry of Transport, Works, Supply and Communication
CONTRACT NO. 123456: CONSTRUCTION OF SME TRAINING HOUSES IN MONGU
DISTRICT, WESTERN PROVINCE
Variation 004 - 300x 300mm Brick Columns
ITEM
DESCRIPTION
QTY UNIT
RATE
TOTAL
CONCRETE WORK
Plain insitu concrete
0.1
m3
1,250.00
125.00
1.63
m2
130.00
211.90
5.28
m2
215.00
1,135.20
3/6F 1.5M brickforce
-
m
2.00
-
3/6G 1M brickforce
9.6
m
1.50
14.40
3/3D Slurry mix (1:4) with quarry dust
Block work and Brickwork
3/6A 150mm wall
3/5B 90mm selected plain face brick,
fair face and pointing one side
1,486.50
Total for 20 Houses
20
29,730.00
National Council for Construction
Competitive Pricing of Construction Works
3.5
Training Manual
EXTENSION OF TIME APPLICATION
Page | 25
CONTRACT NO. 123456: CONSTRUCTION OF SME TRAINING HOUSES IN MONGU
DISTRICT, WESTERN PROVINCE
EXTENSION OF TIME APPLICATION No. 1
Contract No. 123456: Contract for the Proposed Construction of SME training houses in Mongu district, Western Province
TABLE OF CONTENTS
List of tables .................................................................................................................................................... ii 1. Introduction...............................................................................................................................................1 1.1. Background .......................................................................................................................................1 2. The Event ..................................................................................................................................................2 3. Liability for the event ...............................................................................................................................2 3.1. Delayed release of the advance payment...........................................................................................2 3.2. Delays in certificate payments ..........................................................................................................2 4. Contractual compliance ............................................................................................................................2 5. Statement of claim and Substantiation .....................................................................................................2 5.1. Delayed Release of the Advance Payment ........................................................................................2 5.2. Delays in Certification of Payments ..................................................................................................3 6. Recommendation ......................................................................................................................................3 7. Appendices: ..............................................................................................................................................3 LIST OF TABLES
Table 1: Contract details ..................................................................................................................................1 Table 2: Notice of Claim within Reasonable Time..........................................................................................2 XYZ Contractors
Extension of Time Application
ii
Contract No. 123456: Contract for the Proposed Construction of SME training houses in Mongu district, Western
Province
1. INTRODUCTION
1.1.
Background
On 19 November 2013, the Government of the Republic of Zambia through the Ministry of
Transport, Works, Supply and Communication signed a contract with XYZ Contractors
Limited for the Construction of SME training houses in Mongu district, Western Province.
The site was handed over to the contractor on 12 December 2013 and works commenced
thereafter. Contract details are highlighted in Table 1.
Table 1: Contract details
Contract No:
Contract Name
Original Contract Sum
Revised Contract Sum
Amount of Advance Payment
Client
Project Manager
Contract Start Date
Site Possession Date
Completion Date
Revised Completion Date
Duration of Contract
123456
Construction of SME training houses in Mongu
district, Western Province
ZMW 2,000,000.00
N/A
20%
Ministry of Transport,
Communication
The Director of Buildings
03 December 2013
12 December 2013
05 June 2014
Nil
24 Weeks
Works,
Supply
and
The extension of time application considers:
i. The event - the circumstance which has given rise to extension of
time request.
ii. Liability for the event
iii. Contractual entitlement referring to provisions entitling the contractor
to a claim
iv. Contractual compliance such as notices and detailed particulars the
contractor is obligated to submit.
v. Statement of claim containing a succinct statement of what the
contractor is claiming.
vi. Substantiation showing documentary evidence in support of the
assertions made within the claim submission.
vii. Recommendation as to the way forward
XYZ Contractors
Extension of Time Application
1
2. THE EVENT
The contractor is claiming that two major events gave rise to the current circumstances.
These are:
 delayed release of the advance payment; and
 delays in certification of payments.
3. LIABILITY FOR THE EVENT
3.1. Delayed release of the advance payment
20% Advance payment was a condition of the contract. Therefore, delay in the release of
advance payment is tantamount to a breach. Consequently, any delay in the payment of
advance payment entitles the contractor to a compensation event under clause 41.1(i).
3.2. Delays in certificate payments
According to clause 56 of the GCC, delay in certificate payment is a fundamental breach of
contract.
4. CONTRACTUAL COMPLIANCE
For a compensation event claim the contractor is obligated to submit notice(s) and
detailed particulars within a specified time frame. Clause 30.1 states that the
contractor shall warn the project Manager at the earliest opportunity of specific
likely future events that may likely increase the contract price, or delay the execution
of the Works. From Table 2 all events qualify in contract compliance regarding
reasonableness of notice.
Table 2: Notice of Claim within Reasonable Time
S/No. Event
i.
Delayed release of the advance payment
ii.
Delays in certificate payments
Period
April 2014
On going
Reasonableness
Yes
Yes
5. STATEMENT OF CLAIM AND SUBSTANTIATION
Documents provided as evidence in support of the assertions made within the
claim submission are attached in Appendix 1.
5.1. Delayed Release of the Advance Payment
In accordance with Clause 41.1(i) delayed payment of Advance is a compensation event. The
Advance payment certificate was submitted on 13 November 2013 and part payment made on
16 July 2014. The balance of the advance amounting to K390,163.01 has not been paid to
date. This notwithstanding, plant was delivered to site and the performance guarantee issued.
The performance guarantee is necessary for implementation of any contract.
XYZ Contractors
Extension of Time Application
2
5.2. Delays in Certification of Payments
IPC No. 1 dated 13 April 2014 in the sum of K639,953.03 has not been paid to date. This has
adversely affected cash flow forecasts.
6. RECOMMENDATION
Due to the affected cash flow, the contractor has continued to have presence on site though
works have been slowed down. The contractor is claiming an extension of time with costs of
52 weeks with the revised completion date as 05 June 2015.
OR
The Contractor is therefore claiming an extension of time with costs of 20 weeks from date of
payment of the full advance claimed. The client is urged to settle the balance advance.
7. APPENDICES:
Contractor’s Letter of early warning
XYZ Contractors
Extension of Time Application
3