Project Finance Control & Cost Reporting, Design Economics and Cost Planning, & Quantification and Costing Flashcards
1
Q
What are the typical responsibilities of the cost manager on a construction project?
A
Subject to the scope of service, typical responsibilities include. Managing risk allowance expenditure, initiate action to avoid overspending, prepare pricing documents for tendering, evaluating, and analysing tender bids, preparing interim valuations, value CE’s, negotiate and agree final accounts, issues financial reports, provide initial cost advice on whole life costs, produce cost estimates and cost plans, produce cost reports, estimates, and forecasts, prepare, and maintain cash-flow forecasts.
2
Q
If you are producing estimates and cost plans, which measurement rules represent industry best practice for capital building and building maintenance works in the UK?
A
New Rules of Measurement (NRM)
3
Q
Can you name three NRM documents?
A
NRM1 – Order of Cost Estimating and Cost Planning for Capital Building Works
NRM2 – Detailed measurement for building works
NRM3 – Order of Cost Estimating and Cost Planning for Building Maintenance Works
4
Q
Can you provide a brief overview of each of the NRM documents please?
A
NRM1 – Provides guidance on the quantification and costing of building works for the purpose of preparing cost estimates and cost plans. It is the ‘cornerstone’ of good cost management of construction projects, enabling more effective and accurate cost advice to be given to clients and other project team members, as well as facilitating better cost control.
NRM2 – Is written mainly for the preparation of bill of quantities and quantified schedule of works.
NRM3 – Gives guidance on the quantification and description of maintenance works for the purpose of preparing initial order of cost estimates. The rules also aid procurement and cost control of maintenance works.
5
Q
What is the structure of NRM1?
A
General Introduction, Measurement rules for order of cost estimating, Measurement rules for cost planning, Tabulated rules of measurement for elemental cost planning, Appendices.
6
Q
What is an example of a measurement rule in NRM1?
A
Soil Stabilisation is to be measured in M2 and the area measured is the area affected by the soil stabilisation.
7
Q
Where you could find guidance on what is included and excluded in the GIFA?
A
The Code of Measuring Practice guidance by RICS
8
Q
What is the structure of NRM2?
A
General introduction, Detailed measurement of building works, Rules of measurement for building works, Appendices.
9
Q
What is CROME references in NRM3?
A
Construction, renewal, operation, maintenance, end of lift costs.
10
Q
Why is it important to measure the works according to industry standards and best practice?
A
To provide consistency and greater accuracy in pricing. To ensure that all parties price on the same basis and therefore reduce the risk of dispute.
11
Q
Is it mandatory for Chartered Surveyors to follow the procedures set out in NRM?
A
Following NRM is not a mandatory requirement. However, when an allegation of professional negligence is made against a surveyor, the adjudicator or court is likely to take account of the contents of any relevant guidance notes published by RICS in deciding whether the surveyor acted with reasonable competence.
12
Q
What are preliminary costs?
A
Necessary costs which are not usually tangibly reflected in the finished works.
13
Q
What are the key headings for contractor preliminaries identified in NRM2?
A
Employer’s requirements, Site accommodation, Site records, Site establishment, Temporary Services, Mechanical Plant, Temporary Works, Cleaning, Fees and Charges, Insurance, Bonds, guarantees, warranties.
14
Q
How is risk dealt with under NRM?
A
NRM recommends that risk allowances are not standard percentages, but a properly considered assessment of the risk, considering the completeness of the design and other uncertainties such as the extent of site investigation undertaken.
15
Q
Can you tell me the 4 risk categories identified under NRM?
A
Employer Change Risk, Employer Other Risk, Design Development Risk, Construction Risk.
16
Q
Name some examples of Employer Change Risk?
A
Changes in scope of works or project brief, changes in quality, changes in time.
17
Q
Name some examples of Employer Other Risk?
A
Inadequate or unclear project brief, unrealistic design and construction programmes, contractual claims, acceleration of construction works, delay in payment.
18
Q
Name some examples of Design Development Risk?
A
Inadequate or unclear project brief, inadequate site investigation, use of provisional sums.
19
Q
Name some examples of Construction Risk?
A
Inadequate site investigation, ground water, tree preservation orders, contaminated ground.
20
Q
How does NRM defined the ‘cost limit’ for the project?
A
NRM1 – The maximum expenditure the client is prepared to make in relation to the completed building. Includes construction costs, the cost of professional services, certain other project costs, items required post completion and during its operation, and risk allowances.
21
Q
How does NRM define the ‘base cost estimate’ for the project?
A
NRM1 – An evolving estimate of known factors without any allowances for risk and uncertainty, or an element of inflation. The base cost estimate is the sum of the works cost estimate, the project and design team fees estimate, and the other development and project costs estimate.
22
Q
What are ‘other development and project costs’?
A
Costs not necessarily directly associated with the cost of constructing the building. Lands acquisition is an example.
23
Q
What is an ‘order of cost estimate’?
A
NRM1 – An estimate based on benchmarked data for a similar type of project based on the client’s strategic definition or initial brief. Its purpose is to establish the affordability of a proposed development for a client. It takes place prior to the preparation of a full set of working drawings or bills of quantities and forms the initial build-up to the cost planning process. Order of cost estimates are a method of cost prediction.
24
Q
What RIBA stage is the order of cost estimate typically produced?
A
RIBA Stage 1 – Preparation and Briefing
25
What are the RIBA stages of work?
RIBA Stage 0 – Strategic Definition
RIBA Stage 1 – Preparation and Briefing
RIBA Stage 2 – Concept Design
RIBA Stage 3 – Spatial Coordination
RIBA Stage 4 – Technical Design
RIBA Stage 5 – Manufacturing and Construction
RIBA Stage 6 – Handover
RIBA Stage 7 – Use
26
What is the difference between an order of cost estimate and a cost plan?
An Order of Cost Estimate provides a possible cost based on the employer’s requirements and it is the initial phase of the cost planning process. The estimate is usually completed using m2 areas or functional units.
A cost plan is a more detailed elemental breakdown that shows how the costs are distributed across the project. A cost plan is an estimate based on a specific design.
27
Can you explain the term ‘cost per functional unit’?
NRM1 – The unit rate that, when multiplied by the number of functional units, gives the total building works estimate. I.e. works cost estimate less main contractor’s preliminaries and main contractor’s overhead and profit. The total recommended cost limit can also be expressed as a cost per functional unit.
28
What is a ‘functional unit’?
A unit of measurement used to present the prime use of a building or part of a building (I.e. per bed space, per house, per m2 of retail area, per m2 of a library).
29
What typical information should accompany an order of cost estimate?
Covering letter, executive summary, cost limit, specification notes, assumptions, exclusions, drawings and other information upon which the estimate is based on, risk register, cash flow information.
30
What is a cost plan?
NRM1 – In the context of cost prediction, a cost plan is ‘an estimate based on a specific design’.
31
Other than predicting the final project cost, what other benefits does the cost plan provide to the project and project team?
Designers are aware of the cost implications of their proposals, which enables them to arrive at practical and balanced designs. Provides information upon which the employer can make informed commercial designers.
32
Do you need a programme to complete the cost plan?
Preliminaries are typically presented as a weekly rate in developed cost plans; therefore, a programme or at least some high-level dates will be required. The key information usually required is: Design and tendering periods, start date on site, construction period, completion date.
33
How do you structure an elemental cost plan?
I would structure it in-line with NRM1. Facilitating works, Substructure, Superstructure, Internal finishes, Fittings, Furnishings, and Equipment, Services, Prefabricated buildings and building units, Work to existing buildings, external works, Main contractor’s preliminaries, Main contractor’s overheads and profit, Project and design team fees, Other project costs.
34
What sources of cost information and data are available when preparing a new estimate or cost plan?
Information produced by the Building Cost Information Service (BCIS), Published price books such as SPONS, Benchmarked data from previous projects, Speaking directly with Contractors, Subcontractors, and Suppliers for cost information.
35
How do you take account of the project location, and why?
SPONS has its own location factor near the front of the book. BCIS allows you to re-base cost data based on location. It is important to do so as London’s prices are typically more expensive than a similar project in Salford.
36
What is a cost plan risk allowance?
NRM1 – A quantitative allowance set aside as a precaution against risks and future requirements to allow for uncertainty of outcome.
37
When calculating the total fee estimate for a project, what component fees might be included?
Consultant fees, Contractor fees, other fees such as planning permission application and statutory undertaker fees.
38
How would you deal with a cost plan that is over budget?
Communicate the matter with the client and project team in a clear and concise manner. Identify areas where potential savings can be made, possible in terms of material specification or re-design.
39
How can the cost manager help control the design to keep the project within budget?
Explain to the design team where the cost plan sits against the budget and discuss the limitations, identify, and communicate areas of design which may not be economical, regular project risk reviews and asking the design team to focus on mitigating key design risks, explain how changes in the design will impact the cost plan, contribute to value engineering and/or cost saving sessions.
40
You mention a BoQ preparation for skirting and architraves? How did you go about doing this?
I first went to site and carried out my own linear measurements of the skirting and architraves using a measuring tape and laser measure. I knew this was to be measured in linear meter after checking NRM2 Work section 22: General Joinery. I then used the tendered rate for the same specification and re-based the rates since they were 3 years ago. To do this I do the BCIS TPI from the date of tender to the current quarter.
41
In your view, what are some of the key reasons cost overrun on a project?
Ambiguous client briefs or changes in the later stages of a project, unrealistic cost estimates, project risk is realised or not properly managed, inadequate management control or processes, uncoordinated design, unknown external factors (COVID), unsuitable procurement strategy, Statutory authority influences such as planning permission, inflation or changing market conditions.
42
What is BWIC?
Builders work in connection refers to the builder’s work that is necessary to allow other works to proceed (typically mechanical and electrical services).
43
Why is VAT usually excluded from the cost plan?
Employers may incur different levels of VAT. We are not VAT experts.
44
Can you tell me what you understand by the term benchmarking?
Benchmarking is the use of historical data from projects of a similar nature. It can be used as a comparison or check for cost planning purposes. Benchmarking can highlight areas of design that are not value for money, or if the price offered by the contractor is in line with market conditions.
45
How would you undertake a benchmarking exercise for your client?
Produce a clear document that shows the various cost plan elements side-by-side with the benchmark projects. This process will identify the items which are abnormal, I would then endeavour to justify cost anomalies for flagged items.
46
What is wall-to-floor ratio?
The wall-to-floor ratio is calculated by dividing the external wall area by the gross internal floor area. This may reveal how efficient the design is and may help inform the construction cost.
47
How are subcontractor preliminary costs captured in the cost plan?
Costs associated with the subcontractor’s preliminaries should be included in the unit rates applied to sub-elements and individual components.
48
Can you define contractor overhead and profit (OH&P)?
Profit can be defined as the money the contractor makes after accounting for all costs and expenses. General overheads are those not readily chargeable to one particular project, they constitute the contractor’s cost of doing business. These costs may include head office expenses, marketing, administration, IT equipment.
49
What allowance would you make for contractor OH&P in the cost plan?
The percentage will vary due to various factors such as: Project location, level of perceived risk, project type and value, market conditions.
50
What is a provisional sum?
Generally, an allowance or estimate included within the contract price that are: not sufficiently defined, designed, or detailed to allow an accurate determination of its cost at the time the contract.
51
How are provisional sums expended?
The contract administrator (JCT) should issue an instruction for its expenditure. Where a contract includes a provisional sum, the final amount payable will be adjusted.
52
How does the NEC contract incorporate provisional sums?
Unamended NEC contracts do not provide for the use of provisional sums. NEC approach – if the scope of works is so unclear that a price cannot be provided with a level of certainty, the item should be excluded until it can be properly defined.
53
What types of provisional sums are there?
Defined and Undefined.
54
Please explain the difference between Defined and Undefined provisional sums?
Defined – The Contractor is deemed to have allowed for it within the programme and prelims
Undefined – The Contractor does not allow for it within the programme or prelims. This means the Contractor may be entitled to an EOT/and or additional prelims when the actual works are undertaken.
55
Would the contractor be entitled to claim additional preliminaries and/or EOT when expending a defined provisional sum?
No, since the provisional sum is defined, the contractor should have allowed for programme and prelims in their price.
56
Can you name some of the pricing documents we might use at tender stage?
Bill of quantities, Schedule of rates, Contract Sum Analysis, Schedule of work, Priced Activity Schedule
57
Can you name some of the pricing options for contracts?
Fixed price, Target Cost, Cost Reimbursable, Guaranteed maximum price
58
What is a Fixed Price contract?
Fixed price provides for payment of a set amount. The amount of the fixed price is determined by the contractor by estimating their cost to provide the work, and then adding overhead and profit.
59
What are they key advantages of fixed price contracts
The contractor takes on the pricing risk but stands to benefit from increased profit if actual costs turn out to be below the estimated costs. Cost certainty for the client.
60
What are they key disadvantages of fixed price contracts?
A fixed price agreement presents a higher risk to a contractor. If the contractor underestimates their costs, the profit margin decreases and may disappear altogether. As a result of the additional risks faced by the contractor, they may increase their tender price.
61
What is a cost-reimbursable contract?
It involves the client paying the contractor for the costs incurred during the project, plus a pre-agreed percentage for profit.
62
What are they key advantages of cost-reimbursable contracts?
Since cost reimbursable contracts are flexible by nature, inaccuracies in the initial bid aren’t as detrimental as they are with fixed price contracts. Cost reimbursable allows the client to make design changes along the way, contractors know they’ll be paid for the extra time or materials that those changes incur.
63
What are the key disadvantages of cost-reimbursable contracts?
The final contract price is uncertain until the end of the project. Contractors may deliberately incur higher costs to increase profit.
64
When might a cost-reimbursable contract be used?
Where the nature or scope of work to be carried out cannot be properly defined at the outset. This pricing strategy would suit emergency work such as infrastructure repairs or immediate reconstruction following a fire.
65
What is a remeasurement contract?
Works are carried out based on pre-agreed unit rates. The actual quantities of work carried out are measured, and the tendered rates are applied to those quantities. The contractor is paid for the actual work they have done, so the final value of the project will be derived based on the unit priced and exact quantities.
66
What are the advantages of remeasurement contracts?
Since the work is tendered on approximate quantities, the contractors will submit competitive prices in their tender. The contractor’s risk is comparatively lower than a fixed price.
67
What are the key disadvantages of remeasurement contracts?
There is less cost certainty until the project is complete. General accuracy of cash flow forecasting. The risk to the client is higher than fixed price.
68
What is a target price contract?
The main difference is the use of the pain/gain mechanism. The target cost is set early in the project, and upon completion, cost savings or overruns are shared between the contractor and employer based on a pre-agreed formula or percentage.
69
What are the key advantages of target price contracts?
The contractor and client are incentivised to reduce costs. Encourages active and equitable risk sharing, based on clearly defined allocation of risk agreed upon the outset of the project.
70
What are the disadvantages of target price contracts?
The client and contractor must share the pain/gain, this exposes the client to greater risk. Complex target price, pain/gain share may not be easily understood by all parties.
71
What is a guaranteed maximum price contract?
It is a contract which sets a limit on what the client will pay the contractor, regardless of actual costs incurred (i.e. the contract sum will not exceed a specified maximum price). If the actual cost of the works is higher than the guaranteed maximum price, then the contractor must bear the additional costs. If the cost is lower than the guaranteed maximum price, the contract should set out which party will benefit from the savings. Usually, the savings will be split between the client and contractor using a pre-agreed formula or percentage.
72
What are the key advantages of GMP?
Establishes the client’s maximum financial commitment (subject to client CE’s). If the contractor’s costs exceed the target cost, only the target cost is paid. Both the contractor and the client have the potential to benefit from the savings.
73
What are they key disadvantages of a GMP?
The contractor will share any savings made while taking on the risk of cost overrun.
74
How would you administer a GMP?
Within the NEC Contract Data Part One you could make the Contractor bare the full 100% of pain, while the client would get a % of gain.
75
What are contractor preliminaries?
Preliminaries are items that are necessary for the contractor to complete the works but will not actually form part of the works once the work is complete. Items include: Management and staff, site establishment, temporary services, security, safety and environmental protection, insurance.
76
When assessing the costs for contractor preliminaries at tender stage, what are the key considerations to determine if they are fair and reasonable?
Length of contract, type of project, size of the project, need for temporary works, security requirements, method and sequencing of works
77
Can you give me examples of contractor preliminaries that might be abnormal (over and above standard project?
Tower crane, evening/weekend working, road closures/traffic management, closing train lines.
78
What is inflation?
NRM1 state – sustained increase in the general price level of resources. It is included as an allowance in the order of cost estimate or cost plan for fluctuations in the basic prices of labour, plant, equipment, and materials.
79
What are the two types of inflation as defined in NRM1?
Tender inflation – an allowance included in the order of cost estimate or cost plan for fluctuations in the basic prices of labour, plant, and equipment, and materials during the period from the base date to the date of tender return.
Construction inflation – An allowance included in the order of cost estimate or cost plan for fluctuations in the basic prices of labour, plant, and equipment, and materials during the period from the date of tender return to the mid-point of the construction period.
80
What does TPI stand for?
Tender Price Index.
81
What is a bill of quantities?
Bills of quantities are a means of breaking the project down into exact quantities that are measured in an industry-wide recognised format. Includes all components of a building (or project) as well as preliminaries. Usually based on mature drawings or specifications, at tender stage, the contractor inserts their cost or rate against each item. The document then forms a precise tool for pre and post contract cost control (such as managing CE’s, project expenditure, and cash flow).
82
Why would you use a BoQ over a schedule of work?
Schedules of work break the works section down in less detail than a BoQ and do not contain any quantities for specific work items. The BoQ simplifies the tender process because tendering contractors will be pricing against the same quantities from the drawings and specifications themselves. This also simplifies the tender analysis.
83
What are the disadvantages of using a BoQ?
Expensive and time consuming to produce. Potential for errors when measuring.
84
What are the key advantages of using a BoQ?
Ideal for post-contract control, simplified tender analysis, very detailed and comprehensive. All the tenderers are pricing the same items and quantities, effective document for interim payments and preparing the final account.
85
What are the two types of BoQs?
NRM2 states Firm BoQ and Approximate BoQ. Firm is where if there were no design changes you would provide a price at the tender stage, which would equal the final cost. Approximate is where there is not enough design detail to prepare a firm BoQ.
86
When would a BoQ with approximate quantities be used?
Since the quantities are approximate, this type of BoQ is suitable for a remeasurement form of contract.
87
What is a cash flow forecast?
A cash flow forecast is a financial planning tool that shows the predicted inflow and outflow of a project. Typically shown on a month-by-month basis. When the construction is underway, the cash flow project for contractor payments will form an ‘S’ curve.
88
What are the key differences between the client cash flow and contractor?
Contractor cash flow will typically show construction costs (materials, labour, plant, preliminaries). Client will show statutory payments, consultant and legal fees, land acquisition charges.
89
How will the client benefit from accurate cash flow projections?
Cash flow forecast will assist with planning expenditure and ensure that an appropriate level of funding is in place for future payments. The project allows the client to plan and anticipate periods of cash shortages and take corrective action where necessary. Allows the client to gain an understanding of the potential financial commitment at a specific point in the future. The projection can also act as a sense check for monthly contractor valuations.
90
Construction cash flow forecast – if payments to the contractor are behind the project, what might this indicate?
This could indicate that works are behind.
91
Construction cash flow forecast – if the contractor’s monthly valuation is ahead of the cash flow forecast, what might this indicate?
The project is ahead of programme, or the contractor is overclaiming.
92
What is the purpose of post-contract cost reporting?
To provide an overview of the client’s current financial commitment. To inform the client of the likely outturn of the project, including forecasting the outturn cost as a variance against the budget and/or tender sum. To give the client an understanding of potential savings or additional funds required.
93
What information would you include in a post-contract cost report?
Executive summary, contract sum, instructed CE’s, potential future variations as advanced warnings, status of any claims, cost plan, value engineering options, anticipated final account forecast, earned value management, risk allowances, total of certified payments, cash flow forecast, recommendations, and next steps.
94
What is the difference between cost and price?
Cost is the total of labour, plant, and materials, and management deployed in relation to the building work. Price is the amount the client will ultimately pay for the work to be completed.
95
What is life cycle costing?
Life cycle costing is an objective method for measuring and managing the lifetime costs of any project or asset. In construction, it enables design options to be compared from a lifetime perspective with a view to understanding and reducing overall costs associated with owning and/or operating the asset. For example, anyone buying a car would want to know not only the purchase price, but also its ongoing costs, such as fuel consumption, likely maintenance, and the residual value on disposal.
96
What highway examples do you have for life cycle costing?
The comparison between rigid and flexible pavements. Flexible payments are cheaper in the short-term, however it could be argued that it is more expensive in the long-term due to the maintenance required.
97
What are they key advantages of LCC?
LCC ensures that the project that the highest possible value, even if upfront costs are not significantly reduced. It provides a mechanism for identifying and addressing issues with the original design. The process will promote better durability, reduced maintenance, fewer risks, operational efficiency, and even an increased building lifespan.
LCC credits are included in many green building certification schemes, such as BREEAM. LCC is an excellent planning tool that covers long spans of time. With a properly conducted LCC, you can effectively avoid surprises and reduce financial risks.
98
What are they key disadvantages of LCC?
Components are not always replaced at end of life. The cost associated with defects (caused by poor workmanship or design faults) cannot be predicted. Uncertainty from inaccurate data may influence the decision-making process. Choosing the wrong discount rate will heavily affect accuracy.
99
What is the typical analysis period to calculate LCC?
The LCC period of analysis should be determined by the client. It might be the length of private finance initiative (PFI) concession, the length of lease, the anticipated functional life of a whole building, the time to first refurbishment.
100
What are the key cost categories to consider when calculating WLC?
Construction costs, maintenance costs, operation costs, occupancy costs, end of life costs, non-construction costs, income, externalities.
101
In your opinion, how accurate is LCC?
Various assumptions based on trends, inflation, historic data etc. must be; therefore, the precision relies on the accuracy. If LCC is calculated over a long analysis period, the accuracy is likely to fail.
102
Where can you get information about maintenance costs?
Building Cost Information Service (BCIS), Pricing books such as SPONS, Contractors and Subcontractors, in-house data, previous projects.
103
How can LCC be used in a value engineering exercise?
It may be the case that a component or element of the design has a high capital cost, but its maintenance and replacement costs are significantly less than a cheaper capital cost alternative.
104
What is the difference between LCC and WLC?
LCC focuses on the construction, maintenance, operation, and disposal of the asset. Whereas WLC also includes client and user costs, such as project financing, land, income, and external costs.
105
What are Advanced Payments?
Payments are issued to the contractor in advance of completing the works or procuring materials. Lift installations are typically advanced payment since a lot of the cost is borne
upfront.
106
What are the key disadvantages of advanced payments?
There may be a commercial risk for the client i.e. the supplier goes into liquidation. The payment will affect the client’s cashflow. A workaround would be to have an advance payment bond administered via X14 of the NEC4 contract. This would protect the payment in advance of the works being completed.
107
What would you do if the contractor claimed for paint in their first interim valuation?
Assuming the project is a new build, the contractor is likely to be front-loading. I would assess if they had done any painting during the site visit and adjust the valuation accordingly.
108
What are the key things to consider prior to valuing materials off-site?
Request a vesting certificate, check that insurance is in place until the materials arrive on site, ask for evidence that the materials are clearly marked for the project and are set apart from other materials, check that the material off-site bond has been provided.
109
What needs to be in place to make payment for materials on site?
Materials should be adequately protected, should be covered by the works insurance, materials should be on site within a reasonable period when they are actually needed.
110
What is a vesting certificate?
A vesting certificate is a document evidencing that ownership of goods or materials will transfer from one party to another upon payment.
111
Can you explain what is meant by the term ‘daywork’?
Daywork is work recorded on a daywork sheet together with labour, material, and plant resources utilised to carry out the work. It is generally used when work cannot be priced in the normal way or is uneconomical work. An example is fire stopping expert.
111
What does the term ‘payment on account’ mean?
The term ‘on account’ means a payment for an item of work for which no instruction has been issued but is anticipated. Payments ‘on account’ are used by the quantity surveyor for any item in a valuation that cannot be agreed under the contract rules, but both sides agree that some payment is due.
112
What information is typically shown on a payment certificate?
Date of certificate, contract date, address, key payment timeline dates (due date, assessment date, final date for payment), project number, certificate reference number, gross value, retention, previous amount due, amount due, VAT, Project Manager signature.
113
Can you explain the payment timescale for the JCT Design & Build 2016 Contract?
Contractor required to make an interim application for payment before each Interim Valuation Date. Payment notice is then issued by the Employer stating the sum it considers to be/have been due on the Due Date not later than 5 days. The Due Date is 7 days from the Valuation Date. Otherwise application becomes the payment notice. The payless notice may be issued no later than 5 days before the Final Date for Payment.
114
Can you explain the payment timescale for the NEC4 ECC Contract?
Contractor to submit an interim application to the QS Not less than 7 calendar days before the due date. The due date being 7 calendar days from the assessment date. The Interim certificate to be issued 5 calendar days from the due date. If the payment certificate is not issued on time the applied value becomes the notified sum. The contractor can issue a default payment notice. A pay less notice may be issued 7 calendar days from the final date for payment.
115
What happens if the client fails to pay the amount due on or before the final date for payment?
The client will be liable for interest on late payment. The contractor may also wish to exercise their right to suspend works.
116
What is a ‘pay less notice’?
The purpose of a pay less notice is to give the paying party the right to pay less than/withhold all or part of the notified sum.
117
What are the client’s obligations if they wish to withhold the notified sum, but fail to issue a pay less notice?
If the paying party does not serve a valid pay less notice, they are obliged to pay the notified sum without deduction, regardless of whether they have a valid challenge to the sum.
118
What is a final account?
The final account is the conclusion of the contract sum (including all necessary adjustments) and signifies the agreed amount the client will pay the contractor.
119
What are the usual components of a final account?
Summary, measured work, CE’s, total of all previous payments made to the contractor, delay damages (X7), Retention (X16), Fees, OH&P, original contract sum, final account sum.
120
Which NEC4 ECC Option contracts include clause 50.9?
C, D, E and F. It is the cost-reimbursable contracts only to clarify the finalisation for the defined cost for a part of the works giving closure.
121
What is a defect?
NEC4 clause 11.2 (6) “a part of the works which is not in accordance with the scope” and further clarifies in clause 41.4 “if a test or inspection shows that any work has a Defect, the Contractor corrects the Defect and the test or inspection is repeated”.
122
What is the defects date in NEC4?
A period of weeks usually 52 “after Completion of the whole of the works”. It is stated in the Contract Data Part One. Until the defects date, the Supervisor and Contractor each notify the other of Defects as soon as they find them.
123
What is the defects correction period?
The defect correction period identifies how long the contractor has to rectify a Defect which has been notified to them (usually 3 weeks).
124
What happens if the Contractor does not correct a notified Defect?
Clause 46 of the NEC4 contract explains the process. If a Contractor does not correct a defect but is given access, they are obliged to pay the costs of the Defect corrected by other people.
125
When is the defects certificate issued?
NEC4 clause 44.3 states the Supervisor issues the Defects Certificate at the defects date if there are no notified Defects, or otherwise at the earlier of the end of the last defect correction period and the date when all notified Defects have been corrected.
126
What is the green book?
It is guidance issued by HM Treasury on how to appraise policies, programmes, and projects. It gives guidance on the optimism bias thresholds.
127
What is optimism bias?
The tendency of individuals to expect better results than average outcomes from their actions. In the context of rail infrastructure projects, optimism bias can lead to underestimation of project duration, overestimation of its benefits and underestimation of its overall cost.
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What is Earned Value Management?
It is a project management methodology to assess project performance in relation to schedule and cost. You achieve this by calculating your Schedule Performance Index and Cost Performance Index.
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What is value?
The ratio between a function and the whole life cost for that function.
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What is value for money?
The way of evaluating if the benefits obtained from a project or investment are worth the resources expended.
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What is value management?
It is the overarching process of trying to optimise value on a project. It consists of setting up value workshops with the project team to identify areas of improvement etc.
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What is value engineering?
Value engineering forms part of the Value Management process. It is trying to achieve more value without compromising quality, such as swapping Halogen bulbs for LED.
