Designing Buildings - User contributions [en]

Open book accounting

2013-12-19T09:50:39Z

David Trench:

= Introduction =

Open-book accounting is a method of procuring work under which contractors are reimbursed on the basis of transparent records of the costs they have incurred. It is generally associated with incentivised target-cost contracts, management contracts and framework contracts, but can also be applied to the first stage of a two-stage, fixed-price contract. Transparency can apply to the main contractor (whose direct costs may only amount to 20% of the total construction cost) who procures tendered, fixed-priced sub-contracts that are not open book and/or down the whole supply chain for every party involved in a project.

= Definition of actual allowed costs =

There is no industry standard as to how incurred costs are recorded. Some public sector framework agreements and civil engineering contracts carry standard formats but in the majority of cases it is a matter for the client to be given access to the contractor’s records and accounting systems and then agreeing how costs can be monitored and audited using data output from such systems.

Collaboration and trust are paramount to success under such arrangements. Clearly the client must be satisfied that codes are being used that separately allocate accounts, hours worked and invoices paid project by project. Where costs are shared, such as head office staff and overhead costs, these need to be analysed on an annual basis and then pro-rata’d to the client’s project. This should be agreed prior to the start of construction. Normally overheads are expressed in the form of a percentage against the total specific project expenditure running through the contractor’s books. The agreed profit needs to be determined at the outset on the basis of the amount of risk being taken by the contractor and market forces. Profit can be paid as a fixed, lump sum or as a percentage on the same basis as overheads. It is best to agree that profit covers pension contributions and finance charges, whether corporate or a project cost.

= Contentious costs =
*All trade discounts and other credits such as insurance claim receipts should benefit the client. They may well be recorded separately from the expenditure systems. Some discounts may be paid annually and apply to purchases across all projects such as brick orders, so they need to be tracked and proportioned.
*Care should be taken that the contractor is achieving value for money in obtaining prices. This means random market testing. Relationships with subsidiary companies can give rise to a conflict of interests.
*Any cost associated with rectification of defective work is normally disallowed.
*Having defined what is a head-office overhead, it should not then be duplicated in the reimbursable element. Examples might be; a visiting safety inspector, or transport costs between the head office and site.
*Unauthorised or overpayments to sub-contractors should not be reimbursed.
*Costs incurred through contractor negligence should be challenged, though items such as poor planning, over ordering and wastage might be fiercely contested.

= Auditing =

Auditing is within the skill set of either a professional quantity surveyor or an accountant. Both will require experience and knowledge of construction contracting. Detailed understanding of the contractor’s cost systems and project procedures is essential. This will include:
*Code numbering systems.
*Site records.
*Allocation sheets for labour and plant.
*Bonus and non-productive overtime payments.
*Valuation and payment to sub-contractors including claims and variations.
*Inter-company charging.
*National agreements with unions, suppliers and sub-contractors.
*Discount credits.
*Insurance claims.
*Policy on accruals.
*Random market testing to ensure pricing has obtained fair value.
*Changes in legislation affecting cost.
*An understanding of the contract conditions.

This requires routine site and head office inspection of documentation.

= Schedule of rates =

Some public sector authorities look to tender schedules of unit prices with or without inflation criteria. In particular this can apply to framework contracts, or where work is of an unknown quantity but its general scope can be identified. In such cases a document requesting unit prices against various specifications and quantities is sent out to selected contractors for tendering, together with percentages to be applied for overheads, risk and profit. As the project reaches the point of starting construction, the contractor commences work on the basis of measurement of quantity applied to the appropriate unit rate. This saves a lot of auditing since the majority of payment to the contractor is based on quoted pricing and not actual cost. Open books will be required to demonstrate quantities involved and the unit rate applied. However there will be the question of items for which there is no appropriate rate. Generally this is settled by transparency of accounts and open books to establish actual costs.

= Target cost =

Although open-book accounting is about actual costs, very often a target price is set on the basis of a shared risk formula. In effect the client and contractor share any gain by notional savings of actual costs against the target, or any pain through notional losses. The formula is normally set as a stick or carrot against fees or profit. There are usually cut off levels, so for example, a sliding formula set at a 3% base fee for the target price might be capped at 4.5% as a maximum and 1.5% as a minimum. The target price will include allowances for contingency and inflation. It will be subject to adjustment if the client introduces variations to the base scheme against which the target price was agreed, providing the variation is deemed to have a significant effect on actual cost. The advantage of a target-cost arrangement is that it incentivises the contractor to build within the budget and achieve savings whenever possible. Some fee is guaranteed and the reimbursement of cost removes the element of contractor risk that so often leads to adversarial relationships.

= Find out more =

=== Related articles on Designing Buildings Wiki ===
*Collaborative practices.
*Contract.
*Fixed-price contract.
*Framework agreement.
*Procurement routes.
*Profit and overheads.
*Schedule of rates.
*Target-cost contract.
*Two-stage tender.
*Management contracts

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[[Category:Construction_management]]
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[[Category:Cost_/_business_planning]]
[[Category:Procurement]]

Management contractor

2013-12-19T09:41:41Z

David Trench:

NB for a detailed description of the sequence of tasks necessary on a management contract, see the free work plan: management contract: outline work plan.

----

Management contracting is a procurement route in which the works are constructed by a number of different works contractors who are contracted to a management contractor. The management contractor is generally appointed by the client early in the design process so that their experience can be used to improve the cost and buildability of proposals as they develop, as well as to advise on packaging (and the risks of interfaces). It also enables some works contracts to be tendered earlier than others, and sometimes, even before the design is completed (for example piling might commence whilst the detailed design of above ground works continues). This can shorten the time taken to complete the project, but does mean that there will be price uncertainty until the design is complete and all contracts have been let.

Management contracting differs from construction management in that management contractors contract works contractors direct, whereas construction managers only manage the trade contracts, the contracts are placed by the client. In legal terms the management contractor is acting as a principal whereas the construction manager is acting as an agent. This means that on a management contract, the client only has one contract to administer (whereas with construction management there can be many contracts for the client to administer), but they might want warranties from the works contractors so that they can make a direct claim against them, for example, if the management contractor becomes insolvent.

The agreement between client and management contractor is likely to cover both pre-construction and construction activities, with a notice to proceed between the two, before which works contracts cannot be let. Collateral warranties are also likely to be required (for example for purchasers, tenants or funders). In addition the client is likely to define the works contract terms and any requirement for works contract warranties.

There is a body of opinion that believes that if a management contractor operating on a cost plus fee arrangement pursues a works contractor in court for non-performance, the management contractor is unable to prove loss and damages. This is because the loss is simply passed on to the client, and so it is the client that has incurred the damage. This has increased the tendency for clients to require direct warranties from each works contractor.

A management contractor might be reimbursed on the basis of fixed or variable costs (the works contract costs) plus either a percentage fee, a fixed fee, or on a target-cost basis. The terms of the appointment must be clear about what is to be provided by the management contractor (such as the provision of site facilities) and whether activities constitute pre-construction or construction services.

The services of a management contractor might include:
*Advising on the development of the brief (if appointed at this stage).
*Advising on appointments (such as site inspectors).
*Advising on the feasibility, interfaces, buildability, cost and programming of the design.
*Advising on statutory approvals.
*Defining key performance indicators for works contractors.
*Advising on the need for mock ups, samples, tests and inspections.
*Acting as the principal contractor.
*Cost planning and cost control.
*Preparing a construction programme and defining methods of working on site.
*Advising on the packaging of production information.
*Tendering works contracts.
*Consenting to sub-contracting of work by works contractors.
*Arranging for site accommodation, welfare facilities, fences, hoardings, roads and walkways, drainage, power and water supply.
*Co-ordinating setting out.
*Arranging labour for certain site activities (such as cleaning).
*Managing site inspectors.
*Co-ordinating the release of information.
*Managing and co-ordinating works contracts, including acting as contract administrator, carrying out inspections, issuing instructions and certificates etc.
*Co-ordinating the work of statutory undertakers.
*Witnessing tests and co-ordinating commissioning.
*Collating as-built information, building owner's manual, building users handbook, project handbook, health and safety file, pre-construction information, site waste management plan and construction phase plan.
*Monitoring key performance indicators.
*Managing the site.
*Chairing site progress meetings and preparing progress reports for the client.

A decision needs to be made as to whether the client wishes to retain the services of both an independent cost consultant and a management contractor or to transfer cost planning, reporting and cost control as a service to be provided by the management contractor. A judgement has to be made on the competence and experience of the management contractor's proposed quantity surveying and cost estimating team and whether the client has a competent individual to police the financial aspects of the management contractor’s consultancy agreement. Sometimes, cost consultants who were appointed prior to the concept stage, advising on budgets and design concepts, have been retained because they have the confidence of the design team and client.

The most important aspect of selecting the management contractor is the quality and cost of the project management team they put forward. The team leader, the financial manager and the planner are crucial throughout the process as is the field production manager during the construction stage. The management contractor's staff costs during construction are likely to be between 5% and 7% of construction costs, but the quality and effectiveness of staff could easily change the financial outcome of entire project by 10%.

A mock meeting with consultants and the proposed management contractor's senior project team members can be an effective means of discovering how a team performs under pressure. Obviously this should only be done when the candidates have been whittled down to two or three. This technique often produces a unanimous verdict in terms of selection.

= Find out more =

=== Related articles on Designing Buildings Wiki ===
*Collateral warranties.
*Construction manager.
*Contract.
*Contract administrator.
*Free work plan: management contract: outline work plan.
*Key performance indicators.
*Open-book accounting.
*Procurement route.
*Tender.
*Trade contractor.
*Two-stage tender.
*Works contractor.

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[[Category:Appointments]]
[[Category:Procurement]]

Framework contract

2013-12-19T09:41:10Z

David Trench:

Clients that are continuously commissioning construction work might want to reduce timescales, learning curves and other risks by using framework agreements. Such arrangements allow the client to invite tenders from suppliers of goods and services to be carried out over a period of time on a call off basis as and when required.

The framework contract documents should define the scope and possible locations for the works or services likely to be required during the defined time period.

The contract documents should describe the contract conditions that will be used for pre-construction services (such as design) and/or the contract conditions that will be used to execute the works. Depending on the size and complexity of the anticipated projects, the supplier might provide a pricing mechanism or risk adjustment mechanism for different types of contract that might be used, for example a minor works contract, a cost reimbursable contract, a design and build contract and so on. The options would then be selected by the client depending on the nature of the projects that emerged.

Detailed descriptions of the selection and tender process can be found in the article ‘appointments’ for pre-construction services and ‘procurement’ for construction, as well as in the appointment and tender stages of the free work plans available on the Designing Building home page.

Framework tender documents are likely to include:
*The starting and completion dates of the agreement.
*Requirements and obligations regarding insurance, bonds and warranties.
*A description of the contract conditions to be used and assumptions regarding preliminaries.
*A description of how the project will be managed in its various stages and the basis of remuneration.
*A description of the tender selection procedure and assessment procedure to be employed by the client.
*A description of inflation, interest and retention percentages to be applied.
*A description of incentive mechanisms to be applied.
*A description of dispute resolution procedures.
*Rates for travel and subsistence expenses.
*A request for schedules of rates and time charges to be submitted and a breakdown of resources and overheads to be applied to design, or manufacture and installation (including any proposed subcontractor or sub-consultant details).
*Any other criteria required from tenderers in order that the client can properly assess their suitability.

One or more suppliers are then selected and appointed. When specific projects arise the client is then able to simply select a suitable framework supplier and instruct them to start work.

Where there is more than one suitable supplier available, the client may introduce a secondary selection process to assess which supplier is likely to offer best value for a specific project. The advantage to the client of this process is that they are able instigate a selection procedure for individual projects without having to undertake a time-consuming pre-qualification process (which might be subject to OJEU procurement rules on public projects). This should also reduced tender costs.

The advantage to the supplier is that the likelihood of them being awarded a project when they are already on a framework contract should be higher than it would be under an open procurement process. Some suppliers however complain that having already been appointed on a framework agreement, they may then have to bid for individual projects anyway, and after a great deal of time and effort may not be awarded any projects.

= Find out more =

=== Related articles on Designing Buildings Wiki ===
*Appointment.
*Collaborative practices.
*Contract.
*Egan report.
*Government construction strategy.
*Latham report.
*OJEU procurement rules.
*Open-book accounting.
*Partnering.
*Procurement route.
*Public procurement.
*Tender.

=== External references ===
*Construction Manager: [http://construction-manager.co.uk/features/building-better-frameworks/ Building better frameworks].

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[[Category:Procurement]]

Cost reimbursable contract

2013-12-19T09:40:00Z

David Trench:

A cost reimbursable contract (sometimes called a cost plus contract) is one in which the contractor is reimbursed the actual costs they incur in carrying out the works, plus an additional fee. [http://www.icevirtuallibrary.com/content/book/100633 Option E of the NEC3 Engineering and Construction Contract] (ECC) is an example of a cost reimbursable contract.

A cost reimbursable contract might be used where the nature or scope of the work to be carried out cannot be properly defined at the outset, and the risks associated with the works are high, such as, emergency work (for example urgent alteration or repair work, or if there has been a building failure or a fire requiring immediate reconstruction or replacement of a building so that the client can continue to operate their business). Tendering may proceed based on an outline specification, any drawings and an estimate of costs.

This is a high risk form of contracting for the client as the final cost is not known when the contract is entered into (ie there is no contract sum).

The costs for which the contractor is entitled to be reimbursed must be set out very clearly in the contract. This is a complex procedure that needs to be carefully considered, as whilst some direct costs may be relatively straight forward to determine, whilst other ‘shared’ costs, might not.

Direct costs that are clearly attributable to a single project could include:
*Labour.
*Materials.
*Hired plant.
*Sub-contractors.

Other costs that might be spread across more than one project could include:
*Head office costs.
*Staff costs.
*Manufacturing facilities.
*Owned plant.

These costs might be calculated on a pro-rata basis and charged, along with profits as a pre-agreed lump sum, or percentage fee.

In order that the contractor can maintain their cash flow, cost reimbursable contracts may also allow them to charge for liabilities, or for costs that will be incurred before the next interim payment.

Costs are calculated based on the contractor’s accounts and other records, which are made available to the client on an ‘open book’ basis. The client may also monitor activities on site to verify that costs are legitimate (for example checking whether plant that is being charged is actually being used) and that costs are not excessive. This can become complex where the contractor is thought to be operating inefficiently or incompetently.

The contractor can be incentivised to operate efficiently by the introduction of a target cost. Here, a target cost is agreed at the beginning of the project. At the end of the project the actual cost is compared to the target cost (taking into account any changes that have been agreed). If the actual cost is lower than the target cost, the savings are shared between the parties to the contract on some pre-agreed basis (often a percentage). If the actual cost is higher than the target cost, the additional costs may also be shared.

NB JCT suggest that a prime cost contract, cost plus and cost reimbursable contract are in fact the same thing. Others consider that a prime cost contract is one in which the cost of works packages (the prime cost) are reimbursed, but the main contractor takes a risk on staffing, overhead costs and profit which might be tendered on a fixed price.

= Find out more =

=== Related articles on Designing Buildings Wiki ===
*Contractor.
*Contracts.
*Contract conditions.
*Contract sum.
*Interim certificate.
*NEC3.
*Open-book accounting.
*Prime cost contract.
*Procurement route.
*Specification.
*Sub-contractors.
*Target cost.
*Tender.

=== External references ===
*[http://www.icevirtuallibrary.com/content/book/100633 Option E of the NEC3 Engineering and Construction Contract].

[[Category:Contracts_/_payment]]
[[Category:Procurement]]

Target cost for construction

2013-12-19T09:39:21Z

David Trench:

Target costs are generally associated with cost-reimbursable contracts. They introduce a mechanism enabling the contractor, and sometimes the consultant team, to share in the benefits of cost savings, but also to bear some of the client's cost when there are cost overruns. Contracting the contractor and the consultant team on a target cost basis can be an effective way of ensuring good collaboration.

The target cost is set early in the project, and then cost savings or over-runs are shared based on an agreed formula. The aim is to provide a financial incentive encouraging cost control, rather than to penalise. Bonus and penalty payments are usually capped to prevent over-zealous or adversarial behaviour.

Target costs might be set for the overall project, or for specific elements of the works. Agreeing the target cost requires that the client has sufficient knowledge and experience to be able to accurately estimate the likely cost of the works and to negotiate effectively with the contractor and sometimes the consultant team.

Examples of target cost contracts include the New Engineering Contract (NEC) Engineering and Construction Contracts Option C: Target contract with activity schedule and Option D: Target contract with bill of quantities.

= Find out more =

=== Related articles on Designing Buildings Wiki ===
*Bill of quantities.
*Contract.
*Contract condition.
*Contract sum.
*Cost-reimbursable contract.
*New Engineering Contract.
*Open-book accounting.
*Procurement route.

=== External references ===
*PACE [http://webarchive.nationalarchives.gov.uk/20100503135839/http://www.ogc.gov.uk/documents/PACE_-_GACC.pdf Guidance on the Appointment of Contractors and Consultants].
*[http://www.amazon.com/On-target-design-manage-procurement/dp/0727716468 On Target, David Trench, Thomas Telford Ltd 1992].

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[[Category:Cost_/_business_planning]]
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Lump-sum contract

2013-12-19T09:38:42Z

David Trench: Redirected page to Lump sum contract

#redirect:[[Lump_sum_contract|Lump_sum_contract]]

Fixed price construction contract

2013-12-19T09:38:14Z

David Trench:

Lump sum (or stipulated sum) contracts are sometimes referred to as ‘fixed price’ contracts, although strictly this is not correct.

On a lump sum contract, a single ‘lump sum’ price is agreed before the works begin. If the actual cost of the works exceeds the agreed price, then the contractor must bear the additional expense. If on the other hand the cost of the works is less than the agreed price, the contractor will benefit from the savings.

This is unlike a guaranteed maximum price contract, where the contractor bears any additional costs above the guaranteed maximum price, but if the cost is lower than the guaranteed maximum price, then savings may go to the client, to the contractor or are shared. An extension of this is the target cost contract, where there is a ‘pain / gain’ agreement allowing the client and contractor to share both additional costs and savings.

However, lump sum contracts tend not to be fixed, but allow the price to change under certain circumstances:
*Variations: These are changes in the nature of the works. Most contracts will contain provision for the architect or contract administrator to issue instructions to vary the design, quantities, quality, sequence or working conditions.
*Relevant events: A relevant event may be caused by the client (for example failure to supply goods or instructions), or may be a neutral event (such as exceptionally adverse weather) and may result in a claim for loss and expense by the contractor.
*Provisional sums: An allowance for a specific element of the works that is not defined in enough detail for tenderers to price.
*Fluctuations: A mechanism for dealing with inflation on projects that may last for several years where the contractor tenders based on current prices and then the contract makes provisions for the contractor to be reimbursed for price changes over the duration of the project.
*Payments to nominated sub-contractors or nominated suppliers.
*Statutory fees.
*Payments relating to opening-up and testing the works.

A truly 'fixed' price contract would not necessarily be in the interests of the client as it would require that the contractor price risks over which they may have no control, and which might not arise.

= Find out more =

=== Related articles on Designing Buildings Wiki ===
*Guaranteed maximum price.
*Lump sum contract.
*Open-book accounting.
*Procurement route.
*Target cost contract.

[[Category:Contracts_/_payment]]

Fixed-price contract

2013-12-19T09:37:45Z

David Trench: Redirected page to Fixed price contract

#redirect:[[Fixed_price_contract|Fixed_price_contract]]

Target-cost contract

2013-12-19T09:37:07Z

David Trench: Redirected page to Target cost contract

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Open book accounting

2013-12-19T09:35:55Z

David Trench: Created page with " = Introduction = Open-book accounting is a method of procuring work under which contractors are reimbursed on the basis of transparent records of the costs they have incurred...."

= Introduction =

Open-book accounting is a method of procuring work under which contractors are reimbursed on the basis of transparent records of the costs they have incurred. It is generally associated with incentivised target-cost contracts, management contracts and framework contracts but can also be applied to the first stage of a two-stage, fixed-price contract. Transparency can apply to the main contractor (whose direct costs may only amount to 20% of the total construction cost) who procures tendered, fixed-priced sub-contracts that are not open book and/or down the whole supply chain for every party involved in a project.

= Definition of actual allowed costs =

There is no industry standard as to how incurred costs are recorded. Some public sector framework agreements and civil engineering contracts carry standard formats but in the majority of cases it is a matter for the client to be given access to the contractor’s records and accounting systems and then agreeing how costs can be monitored and audited using data output from such systems.

Collaboration and trust are paramount to success under such arrangements. Clearly the client must be satisfied that codes are being used that separately allocate accounts, hours worked and invoices paid project by project. Where costs are shared such as head office staff and overhead costs these need analysing on an annual basis, “pro-rata’d” to the client’s project. This should be agreed prior to the start of construction. Normally overheads are expressed in the form of a percentage against the total specific project expenditure running through the contractor’s books. The agreed profit needs to be determined at the outset on the basis of the amount of risk being taken by the contractor and market forces. Profit can be paid as a fixed, lump sum or as a percentage on the same basis as overheads. It is best to agree that profit covers pension contributions and finance charges, whether corporate or a project cost.

= Contentious costs =
*All trade discounts and other credits such as insurance claim receipts should benefit the client. They may well be recorded separately from the expenditure systems. Some discounts may be paid annually and apply to purchases across all projects such as brick orders, so they need to be tracked and proportioned.
*Care should be taken that the contractor is achieving value for money in obtaining prices. This means random market testing. Relationships with subsidiary companies can give rise to a conflict of interests.
*Any cost associated with rectification of defective work is normally disallowed.
*Having defined what is a head-office overhead, it should not then be duplicated in the reimbursable element. Examples might be; a visiting safety inspector or transport costs between the head office and site.
*Unauthorised or overpayments to sub-contractors should not be reimbursed.
*Costs incurred through contractor negligence should be challenged, though items such as poor planning, over ordering and wastage might be fiercely contested.

= Auditing =

Auditing is within the skill set of either a professional quantity surveyor or an accountant. Both will require experience and knowledge of construction contracting. Detailed understanding of the contractor’s cost systems and project procedures is essential. This will include:
*Code numbering systems.
*Site records.
*Allocation sheets for labour and plant.
*Bonus and non productive overtime payments.
*Valuation and payment to sub-contractors including claims and variations.
*Inter-company charging.
*National agreements with unions, suppliers and sub-contractors.
*Discount credits.
*Insurance claims.
*Policy on accruals.
*Random market testing to ensure pricing has obtained fair value.
*Changes in legislation affecting cost.
*An understanding of the contract conditions.

This requires routine site and head office inspection of documentation.

= Schedule of rates =

Some public sector authorities look to tender schedules of unit prices with or without inflation criteria. In particular this can apply to framework contracts, or where work is of an unknown quantity but its general scope can be identified. In such cases a document requesting unit prices against various specifications and quantities is sent out to selected contractors for tendering, together with percentages to be applied for overheads, risk and profit. As the project reaches the point of starting construction, the contractor commences work on the basis of measurement of quantity applied to the appropriate unit rate. This saves a lot of auditing since the majority of payment to the contractor is based on quoted pricing and not actual cost. Open books will be required to demonstrate quantities involved and the unit rate applied. However there will be the question of items for which there is no appropriate rate. Generally this is settled by transparency of accounts and open books to establish actual costs.

= Target cost =

Although open-book accounting is about actual costs, very often a target price is set on the basis of a shared risk formula. So in effect the client and contractor share any gain by notional savings of actual costs against the target, or any pain through notional losses. The formula is normally set as a stick or carrot against fees or profit. There are usually cut off levels so for example a sliding formula set at a 3% base fee for the target price might be capped at 4.5% as a maximum and 1.5% as a minimum. The target price will include allowances for contingency and inflation. It will be subject to adjustment if the client introduces variations to the base scheme against which the target price was agreed, providing the variation is deemed to have a significant effect on actual cost. The advantage of a target-cost arrangement is that it incentivises the contractor to build within the budget and achieve savings whenever possible. Some fee is guaranteed and the reimbursement of cost removes the element of contractor risk that so often leads to adversarial relationships.

= Find out more =

=== Related articles on Designing Buildings Wiki ===
*Contract.
*Fixed-price contract.
*Framework agreement.
*Procurement routes.
*Profit and overheads.
*Schedule of rates.
*Target-cost contract.
*Two-stage tender.
*Management contracts

[[Category:Contracts_/_payment]]
[[Category:Construction_management]]
[[Category:Contracts_/_payment]]
[[Category:Cost_/_business_planning]]
[[Category:Procurement]]

Specialist contractors start up meeting

2013-09-20T08:55:31Z

David Trench: Redirected page to Specialist contractors' start-up meeting

#redirect:[[Specialist_contractors'_start-up_meeting|Specialist_contractors'_start-up_meeting]]

Specialist designer for construction projects

2013-09-20T08:54:45Z

David Trench:

As buildings become increasingly complicated, it is more and more common for specialists to be required to design particular aspects.

Specialist designers may be:
*Contractors or suppliers appointed in the first instance to carry out design and subsequently to carry out the works on site or to supply goods or services.
*Appointed by the client to carry out design and then perhaps to monitor works on site.
*Sub-consultants to a member of the consultant team.

Where specialist designers are contractors or suppliers, they may be appointed through a two-stage tender process where the specialist design services are procured in the first stage along with agreed rates, overheads and profit for the the products or services to be supplied in the second stage. The specialist designer might then become a named sub-contractor or nominated sub-contractor, or a named supplier in the main contract. In some cases, this second stage appointment might be made direct by the client (for example for the supply of equipment outside of the scope of the main contract).

A design co-ordinator might be appointed within the consultant team to ensure proper integration and co-ordination of specialist designs into the overall design.

On publicly-funded projects, OJEU procurement rules may apply to the appointment of a specialist designers if the potential cost of either the first or second stage contract exceeds the relevant threshold.

= Find out more =

=== Related articles on Designing Buildings Wiki ===
*Appointment.
*Building Information Modelling.
*Collaborative practices.
*Consultant team start up meeting.
*Designers.
*Design liability.
*Design manager.
*Lead consultant.
*Lead designer.
*Nominated sub-contractor.
*Named sub-contractor.
*Named supplier.
*OJEU.
*Procurement routes.
*Specialist contractors.
*Specialist contractors start up meeting.

=== External references ===
*[http://webarchive.nationalarchives.gov.uk/20100503135839/http://www.ogc.gov.uk/category_sourcing_strategy_collaborative_strategy.asp OGC: Collaborative practices.]
*[http://webarchive.nationalarchives.gov.uk/20100503135839/http://www.ogc.gov.uk/documents/CP0065AEGuide5.pdf OGC - Achieving Excellence in Construction Procurement Guide: The integrated project team, team work and partnering.]
*[https://consultations.rics.org/consult.ti/managingthedesigndelivery/viewCompoundDoc?docid=738548&sessionid=&voteid=&partId=738548 RICS Guidance Note Managing the design delivery: A guide to best practice, RICS 2008.]

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Lead designer

2013-09-20T08:54:21Z

David Trench:

The role of lead designer is identified in some forms of contract and appointment such as:
*[http://www.cic.org.uk/activities/liabilityCC.shtml The Construction Industry Council (CIC) conditions of contract for the appointment of consultants on major building projects.]
*[http://www.ribabookshops.com/item/riba-standard-agreement-2010-architect/69979/ The Royal Institute of British Architects (RIBA) Standard Agreement for the Appointment of an Architect 2010.]
*[http://www.scala.org.uk/publications The Society of Chief Architects of Local Authorities (SCALA) Red Book for the appointment of consultants.]
*[http://www.neccontract.com/documents/Contracts/Guidance%20Notes/Engineering%20and%20Construction%20Contract.pdf The New Engineering Contract (NEC) Engineering and Construction Contract (ECC)]

The lead designer directs and co-ordinates other designers in the consultant team as well as any specialist designers that are appointed. This role might include:
*Co-ordinating site surveys.
*Co-ordinate the preparation of information for the project brief.
*Co-ordinating the preparation of designs and specifications.
*Integrating different aspects of the design and their interfaces into the overall design.
*Co-ordinating internal and external consultations and design reviews.
*Defining the form and content of design information to be prepared.
*Reporting to the client on design matters and seeking approvals.
*Co-ordinating the preparation of schedules of inspections, tests, mock ups and samples.
*Co-ordinating consultations, negotiations and submissions to planning authorities and other statutory and non statutory authorities.
*Co-ordinating the preparation of tender documentation and reviewing submissions.
*Co-ordinating quality control systems.
*Co-ordinating the issue of production information to contractors and the the review of designs prepared by contractors.
*Co-ordinating procedures for inspections, commissioning, testing and client training.

As the role of lead designer involves additional services, beyond those expected from a consultant not appointed as lead designer, it is important that it is discussed with consultants before they are appointed and their scope of services and fee is agreed. The client cannot assume that these services will be carried out within the agreed fee unless the role of lead designer has been allocated.

The lead designer will often be the architect, however this is not necessarily the case and appointment documents for other consultants will generally offer provision for them the be nominated lead designer. For example on a very highly serviced building, or part of a building, the services engineer might be an appropriate lead designer.

= Find out more =

=== Related articles on Designing Buildings Wiki ===
*Appointment.
*Architect.
*Collaborative practices.
*Consultant team.
*Designers.
*Design liability.
*Design management plan.
*Design manager.
*Lead consultant.
*Professional indemnity insurance.
*Project manager.
*Services engineer.
*Specialist designers.
*Structural engineer.

=== External references ===
*University of Reading, [http://centaur.reading.ac.uk/4307/1/Roles_in_construction_projects_v6c.pdf Roles in construction projects: analysis and terminology]. Detailed analysis of roles in various forms of contract / appointment.

[[Category:Roles_/_services]]
[[Category:Products_/_components]]
[[Category:Roles_/_services]]

Contractor's design portion

2013-09-20T08:53:57Z

David Trench:

The contractor’s designed portion (sometimes referred to as 'contractor's design portion' or CDP) is associated with JCT construction contracts. It is an agreement for the contractor to design specific parts of the works. The contractor may in turn sub-contract this design work to specialist sub-contractors. This should not be confused with design and build contracts where the contractor is appointed to design the whole of the works.

Until 2005, the JCT Standard Building Contract had a contractor’s designed portion supplement for use where the appointed contractor was required to design specific parts of the works. This provision has now been incorporated into the main contract, but a separate sub-contractor design agreement is available where the main contractor is to design specific parts of the works and a sub-contractor is to design part or all of the sub-contract works. The JCT Intermediate Building Contract still has a separate contractor’s design agreement, as well as a sub-contractor's design agreement. The JCT Minor Works Contract has a ‘with contractor’s design’ option and a separate sub-contract with sub-contractor’s design.

The client’s requirements for contractor's design will generally be set out in the tender documents as ‘Employer’s Requirements’ in response to which the contractor will submit ‘Contractor’s Proposals’.

Contractor’s design may be used with a Pre-Construction Services Agreement or Pre-Construction Services Agreement (Specialist) to provide early consultancy services to the project before the main construction contract commences.

Often, the portion of design left to the contractor is the detailing work undertaken by specialist manufactures and installers. The main contractor has responsibility for managing the procurement of its specialist sub-contractor’s design in an orderly fashion and to an agreed programme so it can be approved by the client’s design team (who within their conditions of engagement avoid liability for specialist design). The main contractor also has to ensure that various specialist sub-contractors under its control co-ordinate their emerging designs with each other. For instance the services sub-contractors need to know both the grid system and position of fixings for a suspended ceiling and likewise the ceiling sub-contractor needs to know details of plant above ceilings which require maintenance access. To carry out this management function 'design managers' have become a regular addition to the main contractor’s project staff.

The main contractor may be given the responsibility for ensuring that its sub-contractor’s design is submitted for and obtains building regulations approval. The client’s design team will usually submit specialist design to the planning authorities when necessary to satisfy planning conditions since it is generally the design team’s responsibility to obtain full planning consent.

Design consultant’s need to judge how far to take their design before handing over its completion to specialists. Furthermore it must be made abundantly clear exactly what the specialist has to design within the work section. A performance specification must describe quality both in terms of function and form, bearing in mind that contractors tendering in competition will respond with the cheapest option available to meet the specification. The use of a sub-contractor design approval procedures to improve what was tendered has been the source of back door variations and many contractual disputes in relation to cost and/or delay. On the other hand it is a waste of designers’ resources and time to develop the design of systems that may or may not be used. Closed specifications reduce options in the specialist market and this is not in the best interests of the client.

It is sensible for the main tender documents to ask for a sub-contractor design programme to be submitted by the main contractor within a certain period after the contract has been placed. This should track specialist design, the approval process, manufacture and installation and fit into the overall contract programme. It is reasonable for the design team to insist on an even workload of sub-contractor drawing submittals so it can balance its resources in relation to the comment and approval process.

The introduction of building information modelling (BIM) is likely to have a profound effect on contractor's design. If at the time of the main contractor's appointment, a fully-integrated and collaborative building model has been prepared, it is unlikely that this will simply be handed over to the main contractor. The model is more likely to remain under the management of the client's design team. Whoever is managing the model will be the party that has to manage the collective input of specialist designers. The main contractor’s role in this process could therefore become redundant, which is not satisfactory under the current terms of contractor's design agreements because it effectively means the designers would be controlling activities of the main contractor’s sub-contractors. However, the main contractor carries the risk of a fixed price and meeting the contract completion date. For this and for programme reasons, contractor's design in the way that we know it now could become a thing of the past. In any case the advent of BIM is likely to alter the timing of the inclusion of specialist design so it takes place in the pre-construction design stage rather than in the construction stage. Consequently the design team will work on the design with specialists in the pre-construction stage and insist that the tendering contractors adopt the specialist and its design as part of the tender offer. So the scope of specialist work, its price and programme will be included within the main contractor's bid. The main contractor’s tender documents will also give the main contractor the choice of seeking alternative sub-contractors thus avoiding the legal problems associated with nominated sub-contractors when the courts judged that a main contractor was not liable for the performance of a sub-contractor forced upon it by the client or its agents.

= Find out more =

=== Related articles on Designing Buildings Wiki ===
*Building Information Modelling.
*Contractor.
*Design manager.
*JCT.
*Nominated sub-contractor.
*Pre construction services agreement.
*Prime cost sum.
*Sub-contractor.

<br/>
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[[Category:Contracts_/_payment]]
[[Category:Procurement]]

Design management plan

2013-09-20T08:53:31Z

David Trench:

A design management plan can be used to co-ordinate design activities. It should at least cover:
*Who does what by when.
*The size and format of drawing types.
*Schedules of drawings to be produced by each discipline/specialist.
*Relationships of interdependent CAD (computer-aided design) systems.
*Transfer of data by information technology.
*Estimates of staff hours to be spent by designers on each element or drawing.
*Monitoring of design resources expended compared to planned estimates.
*Schedules of information required/release dates.
*Initiating procedures for design changes.
*Incorporation within the design schedule of key dates for review of design performance to check:
#Compliance with brief.
#Cost acceptance.
#Value engineering analysis.
#Health and safety issues.
#Completeness for tender.

The project manager, may use the agreed design management plan as a basis for monitoring and controlling the design process. However, integration of the work of consultant and specialists lies<br/>with the lead designer. For certain elements of the project different leads may be nominated, however these roles will always come under the direction of the lead designer for co-ordination.

----

The text in this article is based on an extract from PROJECT MANAGEMENT, by Eric Stokes and Saleem Akram. The original manual was published in 2008. It was developed within the scope of the LdV program, project number: 2009-1-PL1-LEO05-05016 entitled “Common Learning Outcomes for European Managers in Construction”. It is reproduced here in a slightly modified form with the kind permission of the Chartered Institute of Building.

= Find out more =

=== Related articles on Designing Buildings Wiki ===
*Building design.
*Design manager.
*Lead consultant.
*Lead designer.
*Project manager.

[[Category:Design]]

Contractors designed portion

2013-09-20T08:53:00Z

David Trench: Redirected page to Contractor's design portion

#redirect:[[Contractor's_design_portion|Contractor's_design_portion]]

Design manager

2013-09-20T08:52:12Z

David Trench:

Design managers initially emerged in contractor organisations as they started undertaking a portion of design, which involved their specialist sub-contractors.

Traditionally the contractor was presented with a well-developed design that had been produced by the client’s designers. The detailed design of elements such as cladding, lifts, services and joinery were left to the construction stage once the main contractor and its sub-contractors had been appointed.

However, the movement towards management types of contract, private finance initiatives and design build contracts started to put contractors into more of a client role, responsible for developing the building design from the client's brief and sometimes even developing the initial concept design. This was a big jump in terms of the skill set of the design manager and some would say it was usurping the pre-construction role of the project manager.

This new role favours individuals with training in design as well as an understanding of the contracting processes. The design manager has an enabling and co-ordinating role, but is not acting as a designer themselves. The role should not be confused with the lead designer, who heads the decision making and co-ordination of the actual design, or with the lead consultant, who directs the work of the entire consultant team.

The main tasks of the design manager are to:
*Establish a platform for good communication and collaboration between relevant parties and thereby an effective flow of design and production information.
*De-risk design problems by finding solutions before they materialise.
*Contribute to planning and co-ordination in a way that adds value to the processes.
*Prepare, manage and secure all-party ownership of an integrated design programme.

The role requires various capabilities, including:
*An all round basic knowledge of the construction and property industry.
*A good grasp of the technical aspects of design and construction matters, systems and processes.
*An understanding of planning applications, building regulations, codes of practice, environmental and health and safety regulations.
*Planning and programming skills.
*Legal, commercial and contractual knowledge.
*Negotiating and people skills.
*Presentation skills.

All this means that design managers require considerable experience and so tend to come from the ranks of the professions or from design and build contracting organisations and will have experience on a wide number of projects.

The advent of Building Information Modelling (BIM) may present an opportunity for design managers to acquire new skills and establish themselves as the independent controller of the BIM model on behalf of all parties.

= Find out more =

=== Related articles on Designing Buildings Wiki: ===
*Contractors designed portion.
*Design and build.
*Designers.
*Design liability.
*Design management plan.
*Lead designer.
*Lead consultant.
*Management contract.
*PFI.
*Project manager.
*Specialist designers.
*Sub-contractors.

=== External references ===
*The Design Manager Handbook - author John Eynon, published by CIOB & Wiley-Blackwell.

[[Category:Products_/_components]]
[[Category:Design]]
[[Category:Roles_/_services]]

Design manager

2013-09-20T08:43:27Z

David Trench: Created page with " Design managers initially emerged from contractors undertaking a portion of design involving their specialist subcontractors. Traditionally the contractor was presented with a..."

Design managers initially emerged from contractors undertaking a portion of design involving their specialist subcontractors.

Traditionally the contractor was presented with a well developed design carried out by the client’s designers. However the detailed design of elements such as cladding, lifts, services and joinery were left to the construction stage having appointed a main contractor and its subcontractors through competitive tendering.

The movement towards management types of contract, private finance initiatives and design build contracts started to put contractors into more of a client role, responsible for developing the building design from the brief and sometimes even concept design. This was a big jump in terms of the skill set of the design manager and some would say it was usurping the pre-construction role of the project manager.

The new role favoured individuals with training in design as well as an understanding of the contracting processes. The design manager has an enabling and co-ordinating role, but is not acting as a designer themselves. The role should not be confused with the lead designer who heads the decision making and co-ordination of the actual design, as a member of the design team, or with the lead consultant, who directs the work of the consultant team.

The main tasks of the design manager are to:
*Establish a platform for good communication and collaboration between relevant parties and thereby an effective flow of design and production information.
*De-risk design problems by finding solutions before they materialise.
*Contribute to planning and co-ordination in a way that adds value to the processes.
*Prepare, manage and secure all-party ownership of an integrated design programme.

The role requires various capabilities, including:
*An all round basic knowledge of the construction and property industry.
*A good grasp of the technical aspects of design and construction matters, systems and processes.
*An understanding of planning applications, building regulations, codes of practice, environmental and health and safety regulations.
*Planning and programming skills.
*Legal, commercial and contractual knowledge.
*Negotiating and people skills.
*Presentation skills.

All this means that design managers require considerable experience and so tend to come from the ranks of the professions or design and build contracting organisations and have experience on a wide number of projects.

The advent of Building Information Modelling (BIM) presents an opportunity for design managers to acquire new skills and set themselves as the independent controller of the BIM platform on behalf of all parties.

= Find out more =

=== Related articles on Designing Buildings Wiki: ===
*Contractors designed portion.
*Design and build.
*Designers.
*Design liability.
*Design management plan.
*Lead designer.
*Lead consultant.
*Management contract.
*PFI.

=== External references ===
*The Design Manager Handbook - author John Eynon, published by CIOB & Wiley-Blackwell.

[[Category:Products_/_components]]
[[Category:Design]]
[[Category:Roles_/_services]]

Valuation of interim payments

2013-09-16T09:09:33Z

David Trench:

Interim valuation is a pre-cursor to the issue of an interim certificate (which in turn allows an interim payment to be made). It is a detailed breakdown, generally prepared by a contractor, that constitutes an application for part payment of work undertaken since the last valuation. It is checked and signed off by the client's contract administrator who often delegates the task to a cost consultant.

Interim payments are generally used on larger projects to ease the contractor’s cash flow, on the premise that project finance is cheaper for the client than it is for individual contractors.

The basis of the contractor’s interim valuation (application for payment) will vary depending on the type of contract being used. Calculations can be based on:
*Activity schedules assessed in terms of percentage achieved or completion of the activity.
*Milestones reached on a pre-agreed programme.
*Measurement against a bill of quantities.
*Stage payments against calendar dates.

Or a combination of the above.

The detailed build up of the valuation will show all work and entitlement up to the date of the interim valuation and will comprise:
*'''Works packages.'''
*'''Variations. '''These elements should only be paid after the work has been undertaken based on additional costs actually incurred, avoiding duplicate payment of concurrent costs or resources.
*'''Extension of time (EOT) and / or loss and expense.''' Payment entitlement is only due upon delay that is solely caused by the client or items of risk that fall to the client (see relevant events for more information). Concurrent delay where the contractor has part liability may lead to an extension of time and relief of liquidated and ascertained damages but not entitle the contractor to additional payment.
*'''Preliminaries. '''Set up and dismantling costs (only incurred once) and running costs such as insurance and electrical consumption (that will occur regularly), as well as staff and management costs, overhead and profit (which can amount to 50% of the overall cost of preliminaries).
*'''Special payments for off-site goods and materials. '''Such payments might apply on large items of manufacture prior to site installation but only when such payment has been pre-agreed. Such items might include transformers, chillers, lifts, prefabricated units or expensive cladding systems. The application must be accompanied by evidential proof (sometimes photographic), or a factory visit by the client’s representative, a certificate of client ownership and appropriate identification labelling on the items of completed manufacture, stored separately in the factory from other materials. See Off-site goods and materials for more information.
*'''Acceleration costs.''' Sometimes acceleration agreements can be negotiated as an addendum to the contract in lieu of extensions of time caused by elements constituting client’s risk. Such agreements will stipulate the payment provisions.
*'''Provisional sums.''' These are the substitution of agreed costs for any items in the contract documents that were provisional and therefore subject to negotiation and resolution after further and better particulars were available upon which to fix a price.

Certain deductions might be made by the contract administrator when certifying the contractor’s application for payment, such as:
*'''Retention'''. As set out in the contract.
*'''Liquidated and ascertained damages.''' These can only be levied after the completion date has expired.
*'''Set off costs.''' The client’s right to deduct costs it has incurred through the contractor’s negligence such as a successful claim by an adjacent property owner for subsidence due to failure of temporary bracing of a party wall.
*'''Substandard or rejected work.''' Occasionally a client might agree a reduction in payment to reflect diminution of value rather than insisting on replacement.

The interim valuation is for all work competed, not for the work completed in that period. This means that the certified interim payment is calculated by subtracting the the previous valuation from the current valuation, less any deductions. The resulting total and retention figure are then included in the interim certificate issued to the client for payment by the contract administrator.

Under management contracts the works package contracts will be administered and valued by the management contractor or the construction manager to which the management staff costs and fee will be added prior to onward transmission to the client after sign off by the client’s certifying authority.

NB the Housing Grants Construction and Regeneration Act sets out statutory procedures for making and withholding payments on construction contracts. See pay less notice and payment notice for more information.

= Find out more =

=== Related articles on Designing Buildings Wiki ===
*Contract administrator.
*Construction contract certificates, notices and instructions.
*Housing Grants Construction and Regeneration Act.
*Interim certificate.
*Off site materials.
*Pay less notice.
*Payment notice.
*Preliminaries.
*Provisional sum.
*Relevant event.
*Set off.

[[Category:Contracts_/_payment]]
[[Category:Design]]
[[Category:Client_procedures]]

Set off in construction contracts

2013-09-16T09:06:55Z

David Trench:

Set off (sometimes called contra charging) is a legal process by which party A defends a claim brought by party B, by A setting off in extinction or diminution of B’s claim, claims which A alleges against B.

For example:
*A client might reclaim the cost of water damage to their property caused by a contractor fitting out the floor above the damaged area.
*A contractor might set off costs against a sub-contractor that caused damage to finished work adjacent to the working area of the sub-contractor.
*In the case of late completion a client might set off the appropriate amount of liquidated and ascertained damages in accordance with the contract.

Whilst set off is often accompanied by a counterclaim it is to be distinguished in that set off cannot, unlike a counterclaim, give rise to a positive balance of claim.

Set off rights can either be contractual, equitable or in the case of insolvency, statutory.

Contractual set off will depend on the wording of the agreement between the parties. It is possible for contractual set off rights to extend to a wide range of different contracts, but the wording must be clear. Equitable set off arises by operation of law if there is sufficient proximity and connection between the parties (eg. the same parties, site and project). A recent statement of the law of equitable set off is given in the Court of Appeal judgement in Geldof Metaalconstructie NV v Simon Carves Ltd 11th June 2010.

If a contracting party becomes insolvent, the Insolvency Act 1986 Section 323 (bankruptcy) and the Insolvency Rules Rule 4.90 (liquidation) provide for a statutory set off known as ‘mutual credits and mutual debits’. This statutory set off requires account to be taken between the insolvent party and the proving creditor of mutual debts, mutual credits and mutual dealings arising before the insolvency which are then set off leaving only the balance, if any, provable in the insolvency. This is of course only fair as otherwise the creditor would be 100% liable on debts due to the insolvent and only receive the relevant distribution (often nothing) on debts owed by the insolvent.

In construction contracts, rights of set off and withholding payments are regulated by the Housing Grants, Construction and Regeneration Act 1996 Part II Section 111, amended, with effect from October 2011, by the [http://www.legislation.gov.uk/ukpga/2009/20/contents Local Democracy, Economic Development and Construction Act 2009] Part 8 Section 144. These Acts regulate the contents and prescribed periods for 'pay less' notices which must be served if a party wishes to deduct sums from amounts otherwise due under the contract.

Adjudication procedures constrain the effect of set off to preserve the public policy of adjudication that it should be a relatively speedy interim solution. In M J Gleeson Group Plc v Devonshire Green Holding Ltd, March 2004, the court held that a respondent could not set off claims arising after the commencement of the adjudication to avoid payment of a sum awarded by the adjudicator. See also Section 111 (4) Housing Grants, Construction and Regeneration Act.

= Find out more =

=== Related articles on Designing Buildings Wiki ===
*Adjudication.
*Alternative dispute resolution.
*Contracts.
*Contract conditions.
*Housing Grants, Construction and Regeneration Act.
*Liquidated and ascertained damages.
*Mediation.
*Scheme for Construction Contracts.

=== External references ===
*[http://www.insolvency.gov.uk/freedomofinformation/technical/technicalmanual/Ch37-48/chapter40/part3/part3htm Statutory set off.]
*[http://www.legislation.gov.uk/ukpga/1996/53/contents Housing Grants, Construction and Regeneration Act].
*[http://www.legislation.gov.uk/ukpga/2009/20/part/8 Construction Act 2009.]
*[http://www.adjudication.co.uk/legislation/scheme.htm Scheme for Construction Contracts.]
*Construction Week: [http://www.constructionweekonline.com/article-8040-all-about-the-set-off/ All about the set-off].

[[Category:Construction_management]]
[[Category:Contracts_/_payment]]
[[Category:Other_legislation]]
[[Category:Procurement]]

Valuation of interim payments

2013-09-16T09:05:49Z

David Trench:

Interim valuation is a pre-cursor to the issue of an interim certificate (which in turn allows an interim payment to be made). It is a detailed breakdown, generally prepared by a contractor, that constitutes an application for part payment of work undertaken since the last valuation. It is checked and signed off by the client's contract administrator who often delegates the task to a cost consultant.

Interim payments are generally used on larger projects to ease the contractor’s cash flow, on the premise that project finance is cheaper for the client than it is for individual contractors.

The basis of the contractor’s interim valuation (application for payment) will vary depending on the type of contract being used. Calculations can be based on:
*Activity schedules assessed in terms of percentage achieved or completion of the activity.
*Milestones reached on a pre-agreed programme.
*Measurement against a bill of quantities.
*Stage payments against calendar dates.

Or a combination of the above.

The detailed build up of the valuation will show all work and entitlement up to the date of the interim valuation and will comprise:
*'''Works packages.'''
*'''Variations. '''These elements should only be paid after the work has been undertaken based on additional costs actually incurred, avoiding duplicate payment of concurrent costs or resources.
*'''Extension of time (EOT) and / or loss and expense.''' Payment entitlement is only due upon delay that is solely caused by the client or items of risk that fall to the client (see relevant events for more information). Concurrent delay where the contractor has part liability may lead to an extension of time and relief of liquidated and ascertained damages but not entitle the contractor to additional payment.
*'''Preliminaries. '''Set up and dismantling costs (only incurred once) and running costs such as insurance and electrical consumption (that will occur regularly), as well as staff and management costs, overhead and profit (which can amount to 50% of the overall cost of preliminaries).
*'''Special payments for off-site goods and materials. '''Such payments might apply on large items of manufacture prior to site installation but only when such payment has been pre-agreed. Such items might include transformers, chillers, lifts, prefabricated units or expensive cladding systems. The application must be accompanied by evidential proof (sometimes photographic), or a factory visit by the client’s representative, a certificate of client ownership and appropriate identification labelling on the items of completed manufacture, stored separately in the factory from other materials. See Off-site goods and materials for more information.
*'''Acceleration costs.''' Sometimes acceleration agreements can be negotiated as an addendum to the contract in lieu of extensions of time caused by elements constituting client’s risk. Such agreements will stipulate the payment provisions.
*'''Provisional sums.''' These are the substitution of agreed costs for any items in the contract documents that were provisional and therefore subject to negotiation and resolution after further and better particulars were available upon which to fix a price.

Certain deductions might be made by the contract administrator when certifying the contractor’s application for payment, such as:
*'''Retention'''. As set out in the contract.
*'''Liquidated and ascertained damages.''' These can only be levied after the completion date has expired.
*'''Set off costs.''' The client’s right to deduct costs it has incurred through the contractor’s negligence such as a successful claim by an adjacent property owner for subsidence due to failure of temporary bracing of a party wall.
*'''Substandard or rejected work.''' Occasionally a client might agree a reduction in payment to reflect diminution of value rather than insisting on replacement.

(See pay less notice for more information)

The interim valuation is for all work competed, not for the work completed in that period. This means that the certified interim payment is calculated by subtracting the the previous valuation from the current valuation, less any deductions. The resulting total and retention figure are then included in the interim certificate issued to the client for payment by the contract administrator.

Under management contracts the works package contracts will be administered and valued by the management contractor or the construction manager to which the management staff costs and fee will be added prior to onward transmission to the client after sign off by the client’s certifying authority.

= Find out more =

=== Related articles on Designing Buildings Wiki ===
*Contract administrator.
*Construction contract certificates, notices and instructions.
*Interim certificate.
*Off site materials.
*Pay less notice.
*Payment notice.
*Preliminaries.
*Provisional sum.
*Relevant event.
*Set off.

[[Category:Contracts_/_payment]]
[[Category:Design]]
[[Category:Client_procedures]]

User:David Trench

2013-09-09T10:26:12Z

David Trench:

David Trench CBE FCIOB is one of the UK's leading project managers, and has been awarded a CBE for services to the construction industry. The many projects he has delivered successfully include the construction of the Millennium Dome, completion of the British Library and the redevelopment of Ascot Racecourse.

David was a founding Director of Trench Farrow, acquired by WYG in 2006. In 2004 he founded C P Recoveries Ltd (CPR) which provides strategic project management for major construction projects. He is a fellow of the Chartered Institute of Building.

David is Co-founder and Chairman of Designing Buildings Wiki.