A Construction Industry Guide Book: in Surveying

A Construction Industry
Guide Book
in Surveying
(Reference Material Only)
First Publication date July 2010

October 2011
Construction APC Guide
Published in November 2009 – London, United Kingdom
This guide book has been prepared with the intention of assisting candidates in preparing for the RICS
Accredited Professional Competence interview process.
Although every care has been taken in compiling the information content within this guide book, the
contents, facts, information, opinions or any views stated within this guide book are in no way linked
to the Royal Institution of Chartered Surveyors.
The author makes no representation, express or implied, with regard to the accuracy of the
information contained in this guide book and cannot accept any legal responsibility or liability for any
errors or omissions that may be made.
All rights reserved. No part of this guide book may be reprinted or reproduced or utilized in any form
or by any electronic, mechanical, or other means, now known or hereafter invented, including
photocopying and recording, or in any information storage or retrieval system, without the permission
in writing from the author.
The following abbreviations have been used throughout the context of this guide book :
AI – Architect’s Instruction JCT – The Joint Contracts Tribunal

APC – Accredited Professional Competence KPI – Key Performance Indicator
BOQ – Bills of Quantities LAD – Liquidated and Ascertained Damages
CA – Contract Administrator LOI – Letter of Intent
CABE – The Commission for Architecture and the MC – Main Contractor
Built Environment
CDM – Construction Design Management NEC – New Engineering Contract
CDPS – Contractor’s Design Portion Supple ent NHBC – National House Building Council
CM – Construction Management PFI – Private Finance Initiative
CP’s – Contractor’s Proposals PC – Prime Cost
CW – Collateral Warranty PI – Professional Indemnity
D+B – Design and Build PS – Provisional Sum
DDA – Disability Discrimination Act QS – Quantity Surveyor
EOT – Extension of Time RIBA – Royal Institute of British Architects
E‘’s – E ployer’s ‘e uire ents RICS – Royal Institution of Chartered Surveyors
H+S – Health and Safety VE – Value Engineering
ICE – Institution of Civil Engineers
Construction APC Guide 2|Page

October 2011
INDEX
App
Subject Pg Appendix Docs
Nr.
Appraisal Options 4 Appraisal Structure Layout A2
Benchmarking 6
Cashflow Cashflow Information A3
CDM Regulations 8
Contract Amendments 10
Contract Bonds, Guarantees, Collateral
12
Warranties
Contract Documentation 15
Letters of Intent
Contract Strategy 18
Cost Estimate 24
Defects and Design Liability 25
Determination 26
Dispute Resolution 27
Extension of Time & Loss and/or Expense 29 JCT Timetable Contractual Dates and Certificates A4
Financial Reports, Interim Valuations and
34
Final Accounts, Fluctuations
Fire Insurance Valuations 40
Insolvency 41
Insurances 43 JCT Insurances A5
Liquidated and Ascertained Damages 46
Measurement Code of Practice 47
Party Wall Act, Rights, Easements,
48
Covenants
Payment Provisions and Structure 50 Payment Process Structure A6
Procurement Process 51
Project Management and Consultancy
61
Services
RIBA Stages
Project Monitoring 64
Provisional Sums , PC Sums 66
Quality Assurance 67
Risk Management 68
Sectional Completion and Partial Possession 70
Section 106 Agreement 71
Sub Contractors 72
Sustainability 73
Part L Regulations
Tender Document Process 75
Use classes order 80
Valuation of Variations 81 Table for Valuation of Variations A7
Dayworks 82 Change Order Procedure on Projects A8
VAT Recoverable and Capital Allowances 83
Whole Life Cycle Costing 86
APC Process and Questions A1 APC Process and Questions A1

October 2011
Appraisal Options
Refer to Appendix document for – Appraisal Structure Layout
Appraisal approaches to accommodate different options in the development of a property project :
• Option Evaluation Criteria – Determine the evaluation criteria against which the options will be assessed
• Option Identification – Identify and define the options to be evaluated
• Data Collation – Collate the relevant data in each of the selection criteria areas aiming for a consistent level of detail
for each option
• Option Appraisal – Evaluate the options against the set criteria in a structured format
• Option Selection – Select the preferred option
In practice there are a range of recognised appraisal evaluation methodologies which are used in different situations
depending on the complexity of the project and the objectives of the client. Examples of these methodologies would
include:
• Capital Cost – The most basic of approaches is to select an option based on simple capital cost. This tends to be
appropriate when there are minimal life cycle implications and when performance criteria are clearly defined. This
approach is often used once the baseline specification has been established and so that price’ eco es the do inant
factor.
• Whole Life Cost – A more sophisticated way of appraising options is to consider life cycle costs, commonly over a 30
year period. This is generally used where the client has an interest in the whole life of the asset or component. Capital
costs, maintenance costs and replacement time are all important factors to be considered prior to selecting the
optimal solution. In life cycle models a discount factor is commonly applied to reflect the differential value of
investment in the present and in future years. The methodology is standard in PFI / PPP projects where the bidder has
a long term interest in the project.
• Pay Back Period – In certain business situations a high importance will be placed on the payback period of a project
and this may be used as a key decision factor in the appraisal of options. The capital and operational costs of the
project would be modelled against the period of time required before the income from the system exceeds the
expenditure. The shorter the payback period, the more attractive the option.
• Full Co ercial Business Case – At a project level it is common to undertake a full commercial business case
appraisal of major project options. An example would be the modelling of two options for a mixed use development
where the proportions of leisure, commercial, retail and residential use can be varied. Within a full commercial
business case the impact of these decisions on whole life cost, revenue and residual values can be considered to give
an overall comparison of options. Nor ally a sensitivity analysis’ process takes place to co pare the different options
and variables.
• Value Manage ent Structured Option Appraisal – In this scenario the functionality delivered by the option is
evaluated separately fro the life cycle cost to deter ine an e pression of value’, here value e uals function over
cost. The value management approach to assessing function is particularly appropriate where there are soft
performance objectives, such as enhancing reputation, which are hard to put a financial value against. The functional
performance criteria are often weighted so that when each is evaluated and the scores combined, the total
performance rating reflects the different importance placed on each of the evaluation criteria.
The first step in this value management approach is to determine the key criteria against which each option will be
rated. These are in turn linked to the objectives of the client. The criteria would also need to be given a relative
weighting and although not explained here, there are methodologies for determining these weightings. In this
example the criteria could include:

October 2011
Appraisal Options
Key criteria linked to objectives of the client
• % - Quality of Project
• % - Ergonomics
• % - Building adaptability to accommodate long term change in demand / use
• % - Inspirational architecture, providing a land mark building and community focal point
As noted above there are a number of these different methodologies and it is important to select the appropriate one
dependent upon the particular project being considered.
Each scheme is scored against each criteria and the scores combined using the weightings to give an overall rating of
how well each option performs against the set objectives.
Yield Formula Calculation :
Area x Rent per Sq Ft divided by % Yield = Appraisal Value of Income
- Calculator
10,000ft x £50/Sq Ft divided by 5% = £10 Million
- Rule of Thumb :
10,000ft x £50 = £500,000
£500,000 divided by 5 = £100,000 x 100 = £10 Million

October 2011
Benchmarking
Bench arking is a syste atic process of easuring and co paring co pany perfor ance through KPI’s – Key
Performance Indicators which sets out criteria for this measurement process so as to give rise to better performance.
In summary, Benchmarking involves comparing anything that is measurable and which comes from a verified source.
Project Benchmarking can involve whole or elemental Project Costs as well as to compare the performance of
buildings on a like for like basis ie.
- Speed of construction
- Net / Gross areas efficiencies
- Wall-to-floor areas
- Weights and specs of building elements
- Preliminary costs
- Cost reducing and value engineering
- Industry best practices and maintaining competition
- Better understanding of customer needs
Project cost benchmarking should also take into account the effect of material price increases throughout the project
phases.
Information sources :
- BCIS
- Trade manuals eg. Spons, Laxtons
- Building Magazine Cost Models
- Market testing processes
Factors to consider when analysing project benchmarking information :
- Location of Project
- Size and nature of job eg. Area, number of storeys, storey heights, Existing or New Build
- Access to the site
- Existing ground conditions
- Type of Building – Use and accommodation requirements
- Target Completion Date – use of TPI indexes to monitor indexation
- Level of Specification, Quality, Grade eg. 5 star hotel
- Other : (may be listed as exclusions within Cost Estimate)
o Site Conditions
o Planning Constraints
o Specialist Services
o Utilities
When reporting to a Client, a statement of Assumptions as well as Exclusions must be included.
Key Performance Indicators

Clients of the construction industry want their projects delivered:


On time

On budget

Free from defects

Efficiently
Safely
The purpose of KPI’s is to ena le easure ent of project and organisational perfor ance throughout the
construction industry. This information can then be used for benchmarking purposes, and will be a key component of
any organisation’s move towards achieving best practice.

October 2011
Benchmarking
It is a measure of performance associated with an activity or process critical to the success of an organisation. The
information provided by a KPI can be used to determine how an organisation compares with the benchmark, and is
therefore a key co ponent in an organisation’s ove to ards etter practice.
Key Performance Indicators :

- Client Satisfaction – (product) – how satisfied the client was with the final product/facility
- Client satisfaction - (service) – how satisfied the client was with the service of the consultants and
main contractor
- Defects – whether or not the scheme has been delayed through defects
- Predictability – (cost) – how the predicted construction costs compares with the actual construction
costs
- Predictability – (time) – how the initial predicted timescale for the project compared with the actual
timeframe
- Safety – reportable accidents per 100,000 employed per year

October 2011
Construction (Design and Management) Regulations 1994
These regulations apply to every construction project lasting more than 30 days and employing 5 or more persons.
Notification is necessary if :
 The construction phase is longer than 30 days

and/or
The construction phase involves more than 500 person days of construction work
otherwise no notification is required.
If the project is not notifiable and the largest number of people working on the project at any one time does not
exceed four – Then only Regulation 13 (designer duties) applies.
If the project is notifiable and demolition or dismantling works are involved or notifiable and more than four
people are involved on the project at any one time – Then all the CDM Regulations apply.
Where the Regulations apply then a CDM co-ordinator and a Principal Contractor needs to be appointed who
must both be competent to undertake the responsibilities laid down on them which are as follows:
CDM Co-ordinator
Prepare a comprehensive and project specific Health and Safety Plan, providing information and setting framework
of Health and Safety management on site.
- Notify the Health and Safety Executive

- Prepare and deliver at the end of the contract the Health and Safety File, containing operation manuals, as
built drawings
Principal Contractor
- Check, adopt and develop the Health and Safety Plan

- Ensure adequate information and training to employees
Desig er’s Risk Assessment
There is a duty on designers to avoid, combat or provide protective measures against potential health and safety
risks associated with the design, construction or maintenance of buildings and other construction work.
Designers should systematically identitify, record and ensure to avoid any potential risks.
QS responsibilities as designers
QS’s ay have responsi ilities as designers and therefore ust ensure to identify risks, assess and anage the
processes that might result out of the QS actions eg. Particular items within the preliminary section of the tender
documents including :


Site access and egress

Temporary works

Restrictions on working hours

Occupation of the building
Sequencing of works

October 2011
Construction (Design and Management) Regulations 1994
Designers have a reasona le’ duty to undertake health and safety risk assessments on their designs and materials
specified.
Specifically designed temporary works – The responsibility of designers to risk assess the design of temporary works is
normally limited only to those that are specifically designed by them. Other temporary works such as formwork,
scaffolding etc. are normally the responsibility of the contractor.
The CDM Co-ordinator is responsi le for revie ing the contractor’s outline construction phase health and safety
proposals, but may undertake this in conjunction with other members of the design team.
- Post tender intervie s ay need to e carried out to clarify the contractor’s proposals
- CDM Co-ordinator to advise the client accordingly
- Client should confirm acceptance of the approved Health and Safety Plan in writing and only once the CDM
Co-ordinator has notified the Health and Safety Executive of the intention to start works may the contractor
commence on site ie. F10 Notice needs to be in place

October 2011
Contract Amendments
Advantages of using standard forms of contract:
• Ter s and conditions in standard for s of contract are discussed and agreed by representatives across the various
sectors in the construction industry, resulting in a more balanced and fair approach to all parties
• The contract clauses are likely to have evolved over a period of ti e and take into consideration case law
developments
• Standard for s of contract, through regular usage, are familiar to those who work in the industry. This means that
contract administration processes should, therefore be better understood by the participants
• Reduces Client’s legal fees
Inserting Contract Amendments within a Contract can be done by appending a Schedule of Amendments and inserting
a note in the Articles of Agreement. Alternatively, each alteration can be physically made to contract clauses by
inserting the revised wording as appropriate. In both cases the employer and contractor should countersign each
alteration.
Contra Preferentu ’ is a legal principle hich deter ines that an a iguous ter hich is i posed and included
within a contract by a party will be construed against that party that imposed it.
JCT 05 with CDP
Examples of some draft contract amendments to incorporate
- Schedule of Contract amendments

- Amendments to ensure that JCT takes preference over any Additional Particular terms and conditions which
should be set out per a standalone Recital
- E‘’s taking precedence of CDP Proposals
- Name change of contracting parties
Incorporating additional documents and/or terms and conditions, Preliminaries/General Requirements and any
Particular Conditions of contract :
- Article 10 (Schedule of Amendments)
The amendments to the JCT Standard Building Contract Without Quantities 2005 set out in the Schedule of
Amendments annexed hereto are hereby incorporated into this Contract and the provisions of the Articles of
Agreement and the Conditions will have effect as so amended. If there is any discrepancy or conflict between
the Schedule of Amendments and any other provisions of the Contract, the Schedule of Amendments shall
prevail.
- Add new Article 11: Additional Documents. The new Article 11 should say:
The Employer and the Contractor shall comply with any terms, conditions or agreements contained in the
follo ing docu ents:
[include list of documents]
- After the list of documents, add the following
If there is a discrepancy or conflict et een the docu ents listed a ove in this Article 11 and any other
provisions in this Contract, the other provisions of this Contract shall prevail.
Note: Do not include background information and/or details of negotiations but rather list items as positive
statements.
Construction APC Guide 10 | P a g e

October 2011
Contract Amendments
E ployer’s ‘e uire ents / Contractor’s Proposals
JCT SBC/XQ envisages the inclusion of ER’s and CP’s within the Building Contract. The ER’s show the
e ployer’s re uire ents in respect of the design and construction of the CDP, and the CP’s contain the
Contractor’s proposals for the design of construction of such orks. They are oth contract docu ents and
the JCT envisages that they are both present when the contract is signed. We need to be able to identify
these documents, and to help with this the ER’s and CP’s need to be correctly referred to in the Eighth and
Ninth Recitals respectively.
When using a traditional for of Contract ith Contractor’s Design Portion ele ents of work, it is quite
co on in the industry that the Contractor is una le to co prehensively co plete the full Contractor’s
Proposals at the time of Contract signing – this could be because of further design co-ordination processes
required or that the Contractor needs to rely on the procurement process throughout the construction
phase, to involve the necessary specialist sub-contractors.
In case that the ER’s are included in the Specifications in various different places but are not labelled as such
and that there are no CPs, but (as is common) the Contractor has agreed to comply with the ERs in the
Specification instead of providing separate CP’s then the following amendments to the Eighth and Ninth
Recitals should be made:
Eighth Recital: Employer’s Re uire ents Those ite s included in the Specification hich sho and
descri e or other ise state the e ployer’s re uire ents for the design and construction of the
Contractor’s Designed Portion.
Ninth Recital: Contractor’s Proposals The E ployer’s ‘e uirements (as described in the Eighth
‘ecital shall also constitute the Contractor’s Proposals.
Ninth Recital : CDP Analysis
In the case that the CDP Analysis is also included in the Priced Document (as referred to in the Third
Recital in the Contract).
Delete current drafting of Ninth ‘ecital: CDP Analysis, and insert the follo ing: Those docu ents
included in the Priced Document which detail the analysis of the portion of the Contract Sum
relating to the Contractor’s Designed Portion.
Name Change of contracting parties
In the case that there has been some restructuring in the Contractor Group and that the Contractor is now
different company and name :
In the event that a number of the Contract Documents (particularly those referred to in the Eleventh Recital)
contain the original Contractor’s company name or brand. A quick fix would be to insert a new Article as
follows:
Article : The Contractor

Any reference to (Contractor’s old co pany na e including its branding throughout this Contract shall be to
the Contractor.

October 2011
Contract Bonds, Guarantees, Collateral Warranties
Performance Bond
rd
- Given by a bondsman, surety or guarantor, bank for the performance of a duty by a 3 party ie. to make good
the default by a third party
- The principal debtor is the Contractor
- Beneficiary is normally the Employer
- Bonds are normally called in for insolvencies
- Costs of bonds are approximately 0.1-0.2% of the contract sum or 1-2% of the value of the bond
- Client factors that need to be taken into consideration with regards to assessment of risk ie.
o Financial standing of the contractor
o Length of the contract ie. the longer the period then the greater the risk
o Technical difficulty of the works
o Type of Employer ie. one off or multi contract
Types of Bonds :
- On Demand Bonds or Unconditional Bond

o Allows a beneficiary (employer) to demand payment without proof of default
(Not considered good practice and is not commonly used)
- Conditional or Default Bonds
o Only payable once the condition has been met
o Can only be called for when the Employer can prove a default on the part of the Contractor
- Retention Bonds in lieu of Cash Retention
o Used to ensure that the Contractor makes good defects
o Given at the beginning of the contract for say 3% to 5% of the gross cumulative value of interim
payments – then reduced to half at PC – Expires at Final Completion
Contractor’s prefer onds rather than retentions as
 Enhances their cashflow
 Reduces risk of non-payment in case the Employer goes Insolvent
- Tender Bonds
o Risk of tenderer withdrawing his bid
o They are more typically used by a Main Contractor to ensure that a sub-contractor enters into an
agreement
o Costs are approximately 1-5% of the tender sum
- Advance Payment Bond
o Employer undertakes to ensure advance payments before Contractor starts work (perhaps needed
to cover the Contractor’s high o ilisation costs
Standard terms of the bond
- Contain the amount of the bond (Value is normally 10% of the contract sum)
- Circumstance giving rise to a valid call on the bond (must include insolvency)
- Cut off date for liability (Practical Completion Date)
Disadvantages of Bonds
- Undermines the selection process of competent Contractors

- Impose unnecessary additional costs
- Contractor’s overdraft facilities could e reduced
- Could involve re uire ent of personal inde nities fro Contractor’s Directors
Association of British Insurers (ABI) explanatory guide to model form of bond
On 22nd September 1995 the ABI published its model form of contract Guarantee Bond following a lengthy period of
consultation with government and local authority advisers, commercial users, construction and engineering industry
bodies, major construction companies and insurers, to respond to the criticisms of archaic bond wordings made by the
House of Lords in the case of Trafalgar House and to meet the commercial needs of users identified by the Latham
Committee.
October 2011
The form was amended in July 2002 to incorporate reference to The Contracts (Rights of Third Parties) Act 1999 in
Clause 7. Subsequent amendments are merely cosmetic.
Aims of the Model Form
The aim of the ABI has been to produce a model form of bond which meets the objectives set out in the report of the
Latham Committee and which is therefore:
• In short for
• In clear, odern language
• Operates as a guarantee of pay ent on contractor default and not erely on de and
• Provides the e ployer ith an entitle ent to da ages i ediately at the point where the contractor becomes
liable to pay damages under the contract
• Mini ises the risk of litigation
• Contains a clear e piry date
and in addition to introduce one industry standard model form of guarantee bond which provides clarity of purpose
and equity to Employer, Contractor and Surety. Its use should cut out the many hundreds of different bond wordings
currently in use and save all parties considerable time and legal expenses in the issue of bonds
Parent Company Guarantees
- An undertaking by the Holding Company ie. Parent Company to fulfil the obligation of the subsidiary
company in the case of default
- Not limited in value
- Some companies have a Company Policy not to issue PCG’s
- No cost to provide PCG but may restrict the companies trading ability
- Care ust e taken hen analysing the ording of PCG’s as there is no standard for and o ligations
stipulated can vary widely
Collateral Warranty
- Agreements that run alongside another contract

- Used to create a direct contractual link between parties where one would otherwise not exist
rd
- Used if one party becomes insolvent or to be sued by a 3 party
- Provides redress in the event of faulty design
- Used in the case of a sub-contractor undertaking a Design Role where the Main Contractor has no
responsibility – Employer therefore wants to have recourse against the sub-contractor in case of faulty design
- Allows eg. Tenant to direct action against Contractor without involving the Employer
- To be enforceable they must:
o Be executed as a Deed or be under Seal
o Be supported by Consideration
- step in rights’ are frequently required by Funders - in case Employer becomes insolvent
step in rights’ – Allows a new party to take place of one of the contracting parties and accept the same rights
and benefits – Therefore allows benefit of CW to be transferred if one party becomes insolvent
- Under a D+B contract the Employer would want CW’s from the Main Contractor for the Design and
Construction of the Project
- CW’s are also normally required from the Main Contractor, Professional Team members and principal sub-
contractors

October 2011
New Bill : Contracts (Rights of Third Parties) Act 1999 introduced by the House of Lords in respect of Changes made to
the Privity of Contract’ ie. Where recourse is only li ited to parties of the contract
rd
- 3 Party may in his own right enforce a term of the contract if :
o Contract expressly provides that he may
o The term purports to confer a benefit on him
rd
- The 3 party to be identified by name or as a member of class or by description eg. All future tenants or
occupiers
- Does not permit burdens to be imposed
- Benefits Employers eg. Can sue the sub-contractors directly for delay, design or defective work
Standard CW forms are available eg. British Property Federation, JCT, RIBA or alternatively bespoke CW’s can e
drawn up by Solicitors
- CW’s should not i pose a greater o ligation than those already covered in the Principal Contract
- Number of Assignments should be stated within the CW
- Extent of liability – Net Contribution Clause to be determined and confirmed
- Limitation period eg. 6 or 12 years if executed under hand or by Deed
- Other terms to be confirmed :
o Exclusion of Economic and Consequential Loss
 Loss of profit
 Loss of rent
 Damage to contents
 Business disruption costs
o Professional Indemnity Insurance
 Professional indemnity cover is normally stipulated within the wording of a CW
o Copyright
o ‘e uire ent for Fitness for Purpose’ in the design rather that just Reasonable Skill and Care’
Collateral Warranties issues regarding insolvency and Payment :
Notwithstanding the insolvency of the paymaster unless appropriate provisions are made when a defect is found the
beneficiary of the collateral contract can still make a claim using the guarantee (as it is a binding contract). Such a
claim would still be valid even if payment has not been paid to the unfortunate contractor or subcontractor for the
work installed.
Protection can be provided from such risk by requiring the following wording to be inserted into the document. The
contractor (or subcontractor) their assignees, successors, guarantors, or bondsman shall not be liable to the
beneficiary (or their assignees or successors) unless the contractor (or subcontractor) has been paid the total value of
their agreed final account.

October 2011
Contract Documentation
Contract Fundamentals – At the most basic level, a contract is a legally enforceable agreement, normally between two
parties. This sort of formal legal agreement is therefore different from other informal agreements that may be made,
for example an understanding on site to loan a tool to another party hen it is not in use y one’s o n tea . It is
important to recognise this distinction between legal contracts and other agreements , as well as identifying the
parties to these contracts and the purpose of the contract.
Contracts are always created for a reason and this is normally to form a commercial relationships between the
numerous entities that make up the construction industry so they can work together, construct buildings and keep
sustainable business operations. Because contracts bind parties and are enforceable via the courts they are the
foundation of most commercial arrangements in the construction industry.
There are many forms of contract involved in a construction project.

Agreements for consultant services and construction works, agreements for subcontract works, the supply of labour
plant and material, the employment of staff and the various service agreements required to run a construction site
such as electricity and water, financial agreements funding construction projects, the selling on of a building to
purchasers and the giving of third party collateral warranties are all contracts.
Priority of Documents
- Legally, the wording in the documents that have been prepared specifically by the Parties for the Project will
normally take precedence over the standard wording in the JCT standard forms Note: Articles, Recitals,
Conditions and Appendix cannot be amended by overriding statements in the BOQ or Specification
- For avoidance of doubt the Contract should specify the order of priority of documents eg.
o Project specific information, supplementary conditions take precedence over standard clauses
o Specification takes precedence over notes on drawings
o Figured dimensions take precedence over scaled dimensions
Legal Terms
Elements of a Contract:
- Offer
o Made by a customer to purchase goods or
o Contractor’s Tender Su ission
(Note: An offer can be rejected as a tender is only an invitation to treat)
- Acceptance
o Made in Writing, Orally or Implied by Conduct ie. Once accepted it forms a binding contract
o Counter-offer – acceptance must be unqualified
o If final contract is not agreed then courts normally award payment of a reasonable sum on a
quantum merit basis
- Consideration – Each party must perform certain obligations eg. payment of money or provision of goods or
service
Terms of Contract :
- Express terms – as negotiated by the parties

- Implied terms – in absence of express terms
o Implied by statute ie. Sale of goods, supply of services etc
o Implied by Common Law ie. Custom and practice in particular sector of trade
Legal Recourse :
- Contract under Hand – 6 years validity

October 2011
- Contract as a Deed – 12 years validity

- Action in Tort (for negligence or claimant suffering damage) – must be made within 6 years of action or final
longstop = 15 years
- Frustration of Contract – due to some external event, performance of the contract becomes impossible,
illegal or radically different to what was originally envisaged
Types of Contractual Arrangements :
- Fixed Price Lump Sum Contract

- Measurement Contract – re-measurement of approximate quantities
- Cost Re-imbursement Contracts (cost-plus or prime-cost contracts)
Used when full extent of works cannot be determined and is not known
o Contract Sum arrived on the basis of Prime Costs, Labour, Plant and Materials plus a % Fee to cover
overheads and profit
 % Fee can be either
 Cost plus % Fee
 Cost plus a Fixed Fee
 Cost plus a Fluctuating Fee
Construction Industry Scheme – CIS Tax = 18%
Contractor only pays sub-contractor if he has a Tax Certificate or Certifying Document or a Registration Card (normally
is in the form of an identity card – check that it must be valid)
CIS4
- Makes payment but must deduct the statutory tax deduction (18%)
- Contractor must show his statement of
o Direct cost of materials
o Any other persons to be included in the payment
- Employer must deduct statutory tax from the value of cost not directed to cost of materials ie. Labour
- The Employer must then provide the contractor with a copy of the CIS 25 voucher that he has to send to the
Inland Revenue to show that the tax has been deducted
CIS5 or CIS6
- Employer makes payment without statutory tax deduction
Letters of Intent
A letter of intent does not bind the contractor to carry out any work whatsoever and is therefore not a substitute for
the preparation and execution of a building contract.
It can be used as an E ployer’s intention to a ard the contract giving authority to the Contractor to co ence orks
which the Employer undertakes an obligation to pay.
The issue of a letter of intent may therefore allow some breathing space for preparation of the contract documents
and/or agreement of outstanding items. The contractor should therefore be willing to sign a contract as per originally
tendered terms even though the contract is not ready for signature until after the work has commenced.
Risks to the Employer
- Contractor obtains a firm commitment from the Employer to start on site and therefore can continue to
postpone agreement of outstanding contract atters eg. Perfor ance ond, PCG’s etc.
- Employer has disadvantage in negotiating outstanding items as the Contractor knows he will incur abortive
costs if deciding to use another Contractor
- If Contractor’s su -contractor becomes insolvent before contract signing then the Contractor will try to avoid
responsibility
- Risk of Contractors insolvency with no protection under the contract

October 2011
Types of LOI
- Without Obligation : expresses intention which is non-binding and considered to be a re-assurance letter
- Limited Authority : expresses intention which is binding through restitution
o Used when there are still a number of outstanding contract matters
o Contractor carries out preliminary work for a reasonable payment to a maximum liability
o Careful consideration ust e given as to hether the E ployer’s negotiating position ay e
prejudiced
- Unlimited Authority : express intention which is binding through restitution
o Used when the details of the contract have been finalised and ready for signing within a few days
o Contractor commences work immediately without limitation
- Issued to a Nominated sub-contractor : express intention which is binding through restitution
o Used when still in negotiations with Main Contractor and Employer wants to commence a specialist
long lead sub-contractor that may have a critical effect on the programme eg. Piling works
o Employer must incorporate a provision for incorporating the sub-contractor agreement within the
main contract or else novate the agreement within the main contract
Note: Restitution – LOI can create a condition where the contractor can claim for work undertaken
Contents of Letter
- Confirm the basis agreed upon which the contract documents will be prepared ie. Refer to contract
conditions
- Request and authorise contractor to commence work
- Undertaking to pay for work carried out based on Contract Rates : either
o Limited sum
o Unlimited amount
o Else Quantu Merit Basis’ : Contractor is entitled to clai oney for ork actually co pleted
Differences between JCT 98 and JCT 2005
- Easier language, simpler format

- Some new titles to the Contracts
Design and Build ; Contractor Design Portion Elements :
- Contractor is not responsi le for checking design ade uacy ithin E‘’s ie. on receipt of CP’s
o CA must respond ithin days y returning CP’s arked :
 A – Contractor can proceed with work
 B – Contractor can proceed ut ust incorporate CA’s co ents
 C – Contractor must re-submit an amended design
o This is to rectify any discrepancies within the documents ie. change at no cost, however the
Contractor’s o ligation of Design ithin the contract still applies
- Contractor to provide design documents as necessary from time to time or as otherwise stated
- Contractor must carry PI cover as stated in particulars
- Provision for Main Contractor and Sub-contractor CW’s
rd
- 3 Party rights now included in contract
Items omitted :
- No performance specified work – now forms part of CDPS within article 7

- Contractor’s Price State ent e cluded
- CIS and vat provisions excluded
- No nomination of sub-contractors or suppliers
o Three sub-contractors may be listed and they remain as domestic sub-contractors
- Arbitration no longer the default option
o Adjudication or Litigation is the preferred Dispute Resolution Process

October 2011
Contract Strategy
Selecting the most appropriate form of construction contract can depend on the following factors :
- Composition of team
- Agreement of terms
- Tender Documents
- Type of Contract ie. Lump Sum, Measurement, Cost re-imbursement
- Ancillary documents
o Domestic and named sub contractors
o Sectional completion requirements
o CDP
- Statutory obligations
- CDM regulation requirements
Matters influencing choice of Procurement Strategy
- Nature of project eg. Refurbishment, repair and maintenance, new build

- Scope and size of the Project including complexity and location
- Control required by the client eg. Design, project involvement, responsibilities
- Final Cost – Certainty or element of re-measurement
- Programme eg. Fast track, overlap design and construction
- Restrictions or Constraints – phasing, occupation, sequencing
- Changes anticipated during construction
(Refer to JCT Practice Note Nr. 5)
The procurement route and form of contract will be influenced by the nature of the works and certain project key
risks. For example, the speed of the project and the extent of control over the design which the client requires will
influence decisions between procurement routes such as design and build versus traditional. Other factors will affect
the contract form, for example commercial developments such as offices and retail often use the JCT forms of
contract while civil engineering and transport related work generally favour the ICE and NEC ECC forms. The JCT forms
place more risk with the contractor with regards to ground conditions as this is seen to be less of an issue with
commercial developments. With civil engineering works, ground conditions are generally more uncertain and under
the ICE and NEC3 forms, the client takes on more of this risk.
From the nature of the works and the client requirements, the appropriate procurement strategy can be formulated
for the project. Once this overall strategy is decided then one can start to consider the form of contract taking into
account the background factors mentioned above.
The Use of Standard Forms - Because of the large number of contracts required for even the simplest construction
project, standard forms of contract are used in the vast majority of instances. A standard form of contract is a ready
made and ready to use contract that can be bought off the shelf or via the internet. Such standard from contracts are
normally drafted by professional industry bodies such as the Joint Contracts Tribunal (JCT), the Institute of Civil
Engineers (ICE) and Institute of Mechanical Engineers (IME).
The use of standard forms brings a range of benefits including the following:
• They are agreed y various national construction odies and inherently include an i ense ody of industry kno
how and experience
• They are drafted to e flexible and used for a wide variety of construction scenarios
• They have evolved over a long period of ti e and are therefore tried and tested, including eing tested in the courts
• They are drafted y professionals
• They ill e fa iliar to construction professionals and therefore there is no learning curve required
October 2011
Contract Strategy
The alternative to a standard for of contract is to draft a one off contractual agree ent, often called a espoke’
contract. The cost of drafting such a contract taken with the additional time for the parties to fully understand its
terms generally makes them an unattractive option. There is the benefit that they can be heavily tailored to the
situation and arrangements required if the situation is unusual, but in reality such situations are not common when
dealing with general construction works.
Types of Contract
Traditional
Traditional Contract / Procurement – Historically, this was the most common approach to construction with the
project separated into design and construction stages, with consultants leading on design and the contractor taking
full responsibility for the management and execution works. A key attribute of such traditional forms is a consultant
acting on behalf of the employer as contract administrator.
These contracts are complex, often using legal jargon and difficult to understand. There is a rigid separation of the
parties and their rights, obligations and risks, sometimes resulting in a lack of co-operation and encouraging defensive
and adversarial behaviour with time and cost problems being left to the end of the project to be resolved. This
presents a risk of protracted final accounts and disputes.
Risks are normally passed down the supply chain to contractors and subcontractors and there is usually little
opportunity for overlap of design and construction stages. This has led to much criticism that these contracts polarise
the parties resulting in inefficiencies (particularly costs to the client) and encourages disputes.
Although there is some truth to the above points, these problems are probably common to many industries and
contracts. It is also worth noting that most traditional forms have a long history (over 60 years for the JCT and ICE
forms) and are therefore tried and tested and are focused on the client’s ain re uire ents of ti e and cost
certainty.
Traditional forms include most of the JCT and ICE suite, the GC/Works forms and M/F contracts.
- Lump Sum Contracts (with or without quantities)

o Based on drawings, specifications, schedules of work
- Measurement contracts
o Based on drawings and approximate quantities, schedules of rates
o Contract sum finalised after completion ie. Re-measured
- Cost re-imbursement
o Based on Prime (Actual) Cost of labour, plant, materials plus Amount to cover OHP ie.
 Cost plus % fee
 Cost plus fixed fee
 Cost plus fluctuating fee
Non-Traditional Contracts / Procurement
The last 20 years has seen the emergence of a variety of new construction standard forms that claim to overcome
many of the problems of traditional contracts and traditional procure ent. So eti es referred to as colla orative’
or partnering’ for s of contract, these contracts are very different to traditional for s.
Non-traditional / collaborative contracts attempt to overcome the problems of traditional contracts by introducing
some form of collaborative working and trying to unite the various project parties avoiding polarisation. These new
forms claim to increase cost and time certainty and remove traditional construction inefficiencies. These are yet to be
proved particularly in the courts and during an economic downturn. The bottom line with these forms is that they are
relatively new in legal and contract management terms. The courts have hinted that the collaborative nature of these
forms will be taken into consideration when considering the express obligations in a construction contract.

October 2011
Contract Strategy
Non-Traditional forms include the NEC3 suite, the ACA forms and the new (in 2008) JCT Constructing Excellence form.
The NEC3 is probably the most popular non-traditional form at present but requires a very proactive and programme
orientated form of contract administration. The PPC2000 is a true multiparty contract with all the key consultants,
main contractor and specialist sub-contractors signing up to it. This is a sophisticated and complex contract and
requires considerable change to existing contract management thinking. The JCT Constructing Excellence is probably
the simplest of the three forms highlighted and may be best for smaller projects and where the parties are not ready
for radical contract management required by the NEC3 and the PPC2000.
Design and Build
o Turnkey contract or package deal – Design and construct

o Contract ith Contractor’s Design
o Contractor’s Design for specific ele ents only ie. Contractor’s Design Supple ent Portion – normally
a performance specification included by consultants
This is probably the most popular form of procurement at the moment and design and build forms are available from
most of the contract producing bodies. Many standard forms (particularly the JCT forms) also allow the contractor to
provide discrete parts of the design although these forms are not true design and build contracts. The PPC2000 is also
a form of design and build contract although in a very different contract set up to traditional contacts.
The NEC3 suite does not have a specific design and build form but the Engineering and Construction Contract (ECC)
form does allow the contractor to provide design but this needs to be clarified within the Works Information. The ECC
lacks the design and build contract mechanisms of design and build contracts. Such mechanism would have to be
included in the Works Information or alternatively it may be easier to use a traditional design and build form such as
the JCT Design and Build form.
Construction Management
o Based on Drawings, Specification, Contract Cost Plan

o Previously bespoke forms of contract but now incorporated within JCT 05 suite
Management Contracts
Management Forms - Management forms of contracts provide for the engagement of a party whose sole objective is
to manage the works with the vast majority of activities procured through sub contracts. They are very specialist
forms of contract and not used very often at present although were very popular in the 1980s and early 1990s. They
are recommended by some specialist consultants and contractors and may be appropriate on large, complex and fast
track projects. Specialist advice should always be taken if the client wished to use this type of contract. Two-stage
tendering, which is popular at the present, does have some similarities to management contracting.
Framework and Term Service Arrangements
Where a client has on-going or rolling construction programme, such as planned maintenance work by a local
authority or the building of houses by a housing association, then a framework or term service arrangement is often
appropriate. Such contracts have many advantages including introducing an element of continuity for those
contractors on the framework and avoiding repeated tendering (a particular problem for public sector clients subject
to public procurement regulations). For the client, there is probably more cost certainty in that prices are agreed
upfront and there are savings on tendering costs.
Framework arrangements generally consist of two contracts. The first is the underlining contract which is usually for a
period of time (commonly four years in the public sector) and does not guarantee any work. From this contract further
works contracts (sometime called call-off contracts or works orders) are agreed as and when the client requires
construction work.

October 2011
Contract Strategy
Term service contracts are a single contract with the client and contractor agreeing a plan or schedule of works to be
performed over the period of the contract. This form of contract is probably best for maintenance type programmes
where the scope of works is predictable and can be planned in advance.
Until recently, many framework agreements were bespoke forms often prepared by solicitors. However a few
standard forms have appeared on the market (particularly the JCT, ACA forms and the NEC).
NEC Contract
- Contract is simple to understand ie. No cross referencing of clauses and no legal language
- Flexible ie. Can accommodate large and small projects – through Main Clauses Options A to F (Pick and Mix),
then has secondary clauses for the contract conditions
- Focuses on collaborative team working – ethos to partnering ie. Non-adversarial approach to contracting
- Stimulus for good project management approach
Clear roles and duties :
- Employer
o Is only a legal party and has no involvement within contract
- Contractor
o Responsible to deliver the works in accordance with the works information
- Project Manager
o Administers the contract and has full authority (can delegate his powers to some degree)
o Achieves the Employers objectives
o Early appointment during design process
- The Supervisor
o Administers testing and defects
- The Adjudicator
o Name identified within contract
o In agreement by both parties
- Sub-contractors
o No nominated sub-contractors
- Others
o Designers, client representatives, consultants
A programme must be submitted and included within the contract. Note that a ¼ of the price can be retained until a
programme is issued within 21 days
- Used for monitoring the process of the works incl milestone and key dates, show time risk, float and critical
path
- Used to evaluate compensation events
- Regularly updated
Contract Main Structure
- ECC main contract conditions – Contract Data

o Part 1 – Provided by Employer
o Part 2 – Provided by Contractor
- Schedules of Cost Components eg. Activity Schedule, BOQ, Schedule of Costs
- The Works Information
o Description of the works
o Plant and materials specifications
o H+S Plan
o Contractor’s Design for chosen parts of the orks
o Completion Date
o Services of others occupying work area during the construction
o Sub-contractors
October 2011
Contract Strategy
 Lists
 Statement of works
o Programme
o Tests
o Title of materials that the Contractor will have
- Site Information
Main Features of NEC / JCT Comparisons
- Design Liability
o Unlike the JCT here skill and care’ the NEC uses Fitness for Purpose’
o Design acceptance by PM before proceeding
- Pricing mechanism is flexible and chosen as per main option
o Incentive schedule to incentivise performance
o Performance indicators
- Compensation of events
o NEC enforces mandatory continual review of assessment of cost and time implications, therefore no
provision for later review of claims ie. Continual running account throughout progress of the works
- Early warnings notice
o Increase in prices
o Delay to completion
o Sub-contractors impairing performance
Note: If the Contractor does not notify of event within 8 weeks then he loses his right to EOT and
L&E
- Defects
o NEC gives reciprocal obligation to Contractor and Supervisor alike to notify each other of defects
before or after completion
o Defects to be rectified within a period as specified within the contract
- Risk Register is established at the outset of the project listing all foreseeable risks
Advantages :
- Promotes partnering, non-adversarial, simple and flexible

- No claims or arguments – Decision of Compensation Event is final and binding
- Employer always has an indication of the Final Cost’ and Co pletion Date’ throughout project orks
duration
- Contractor benefits as his cashflow, programme and profit is known throughout
- Incentive to perform, VE, Bonuses for early completion
- Quality performance done separately through Supervisor
Disadvantages :
- Contract is very management intensive and requires more time to administer ie. Increased administration
costs
- Learning curve required if new to users
- Possibility exists to overpay the contractor
- Very little precedent case la ’ history
- If PM does not respond in time then Employer must pay what has been claimed by the Contractor

October 2011
st
JCT 2011 Contract effective from 01 October 2011 – updated to include :
- New payment legislation

- The revised Terrorism cover provisions that were included in JCT 2009
- Statutory reference to Bribery Act
- Entries in respect of PI insurance relating to asbestos and fungal mould have been removed
- A revised insolvency definition in the termination section
- The provision for appointment of the principal contractor under CDM Regulations has been extended to
cover that function under the Site Waste Management Plans Regulations 2008
- Entries in respect of professional indemnity insurance relating to asbestos and fungal mould have been
removed
- Revised retention provisions in the sub-contracts

October 2011
Cost Estimate
Predicts out turn costs including preliminaries, design contingencies etc.
Dependent upon the information available it may be appropriate to issue the first draft estimate as a range rather
than a single estimated figure.
Feasibility Estimate – Costs per m2 or costs per functional unit
These estimates are prepared during RIBS stages A and B (Inception and Feasibility). At this stage of the project there
is likely to e little or no infor ation other than the type of uilding and it’s appro i ate floor area or functional
requirements.
- Rates per m2
- Cost per Functional unit
Levels of accuracy expected to be between 10 to 15 percent.
Cost Plans
Prepared during RIBA stage C onwards once drawn information is available and the works can be separated into
elements or sections.
Cost Checking normally get done throughout the ongoing stages of the project – QS to confirm that the current design
solutions are in line with previously set targets. Cost Plans are therefore updated as further info becomes available as
well as to cater for V.E, Risk Items ie. Reconciliations.
Information submitted with a Cost Estimate :
- Estimate Cover
- Contents page
- Executive Summary
- Basis of Estimate (info used, areas, mix)
- Assumptions
- Exclusions
- Schedule of Rates
- Pricing pages
If required, further information may include :
- Reconciliation with previous estimates – Schedule of changes

- Benchmarking exercise
- Specification
- Reduced copy of generic drawing layouts
- Cashflow
- Capital allowances / VAT implications
- Risk analysis

October 2011
Defects and Design Liability
Co tractor’s O ligatio is to carry out and complete (provide and construct) the works in accordance with the terms
of the contract ie. Provide everything that is indispensably necessary to achieve the result and match the Specification
detail provided.
Quality and standards of workmanship shall be to the reasonable satisfaction of the CA and can therefore be subject
to testing as necessary.
Fitness for Purpose
- For the Building : Contractor’s obligation to use skill and care’ and that when building is completed it must be
fit for it’s intended purpose’, however the Contractor cannot have more liability than that of the Architect
- For the Design : Consultants must use all and due reasonable care’
Investigation of defects – CA issues instruction for opening of work if he suspects defects. Contractor opens work for
inspection by CA and dependant on whether defects caused by construction process etc, further instructions are
issued.
Latent Defects Liability Period – Commences after issue of Practical Completion Certificate – duration period
dependant on what has been stipulated within Contract conditions appendix, usually 6 months
- Any defects, shrinkages or other faults arising during this period due to defective workmanship or materials
must be rectified by Contractor at his own expense
- Includes damage from frost occurring before P.C
- CA issues list of defects schedule 14 days after liability period – release of 50% retention
- CA issues Completion of making good certificate once works have been rectified
- Contractor receives balance 50% of retention
Latent Damages Act – The law has a longstop period ie. Legislation covering 15 years
Design Responsibility – as defined by the law
- Designer’s duty to use reasona le care and skill ie. Professional Negligence Insurance ust e provided
- Guarantee that the design ill e fit for it’s purpose’
- Must be compliant with Statutory Requirements
Architect has overall design responsibility for the design of a Project and cannot delegate any part of this design
responsibility
Contractor must rely on Architect to approve any detailed design function and also needs to inform Employer of any
defects in the design.
Performance Specified Work – Specification must ensure required performance to be achieved.
Note : Perfor ance Specified Work no for s part of the Contractor’s Design Portion Supplement within the new JCT
2005 form of contract
- Limited to simple work which will not affect the appearance of the building
- Advantage of the technical expertise of the specialist contractor
- Use of Provisional Sums
- Contractor’s State ent required to fulfil the requirements and to confirm his design responsibility and
acceptance / objections
Contractor’s Design Portion Supple ent
- Significant design input eg. Roof design of the building forming a major part of the works
- E‘’s need to e defined including specifications etc.

October 2011
Determination
Note : Employer cannot issue notice of determination without warning notice from CA
By Employer
- Suspension of carrying out the works without reasonable cause

- Failure to proceed regularly and diligently
- Failure to conform to AI or to remove defective work
- Unauthorised assignment / subletting / subcontracting
- Corrupt practices
- Insolvency
Consequences
- Employer can employ others to complete the works using the Access, plant and materials and can offset costs
of further work required
- Employer can insist on taking assignment of sub-contractors
- All contractor’s e uip ent to e re oved if instructed y CA
- Payment only once works have been completed
By Contractor
- Lack of payment ie. 7 days after 14 days payment due

- Interference by Employer of any necessary certificate
- Suspension for continuous period
o Late issue of information
o Late supply of materials
o Opening up of works – latent defects
o Failure to gain access
- Insolvency or corruption
Consequences
- Contractor and sub-contractors to remove all equipment, materials

- Contractor entitled to payment
o Value of work completed at the time of determination
o Value of work begun but not completed at the time of determination
o Materials ordered
o Costs for removal from site
o Outstanding L&E claims
o L&E caused by determination
By Employer or Contractor
- Works being suspended due to

o Force majeure
o Loss or damage due to one or more specified perils
o Civil commotion
o Negligence of statutory authority
o Hostilities involving UK
o Terrorist activity

October 2011
Dispute Resolution
Alternative Dispute Resolution
Used to describe a number of methods of settling disputes by private means ie. No litigation or arbitration, therefore
using a neutral advisor to facilitate settlement.
Aims :
- Shorter resolution time

- More cost effective
- Encourages parties to address other options to resolve differences
Mediation (Non-Adversarial)
- Mediator takes no active part and simply attempts to facilitate the process for the parties to resolve their
dispute and reach agreement
- Non-binding
- Flexible approach – each party prepares a written summary before mediation which is presented to each
other in presence of a mediator
- Mediator then enters into shuttle’ negotiations and akes recommendations’ with each party separately :
o Outlines each parties strengths and weaknesses
o Final session to draw up and execute agreement
Conciliation (Non-Adversarial)
Similar to mediation but conciliator does not make any recommendations.
Executive Tribunal (Non-Adversarial)
More formal where parties make representations to a panel comprising individuals from both sides plus a neutral
person to negotiate and settle disputes.
Non-Binding Adjudication (Non-Adversarial)
Confidentiality agreement normally signed between parties and advisor.
Adjudication (Adversarial Approach)
- Adjudicator is normally named in the contract

- Decision is binding until overturned through arbitration or litigation
- Parties must make all information, documents available as required by Adjudicator
- Adjudicator makes his decision in accordance with contract and law
o Acts impartially
o Avoids unnecessary expense
o Is protected from liability provided he discharges his functions
o Can make site visits, tests
o May appoint experts, assessors, legal advisors with the consent from both parties
Process :
- Serve notice for Adjudication

- Referral notice to adjudicator and submit a statement, summary and material for consideration
- Appointment of adjudicator within 7 days
- Decision made within 28 days and must be published to both parties
- Decision could be deferred by 14 days or longer if agreed

October 2011
Dispute Resolution
Arbitration (Adversarial Approach)
- Dispute ust e genuine, si ilar to justicia le at la ’ as if it ere judged in court

- There must be a binding contractual agreement by parties to submit dispute to arbitration
- Contract agreement must make reference and nominate professional body and suitable person
- Each party can be represented by a lawyer
- Arbitrator may enforce an order by the courts to obtain information from parties
- Procedures are set on a series of Arbitration rules
- Courts have power to remove an Arbitrator and give ruling, therefore either party can apply to the court to
give notice
- Possible for right of appeal to High Court
Advantages of Arbitration over Litigation :
- Cost – cheaper than Litigation

- Speed – Quicker than Litigation
- Legal cases are technically complex
- Convenience – Arbitration can be arranged to suit parties
- Privacy – Legal cases are automatically available to the public
Litigation
Advantages:
rd
- Ability to join 3 parties into the action eg. Sub-contractors
- Better to have complex legal cases decided by a judge rather than an arbitrator without legal qualifications
- An individual could qualify for legal aid
- Ar itrators tend to split the difference’ et een parties, therefore if a party believes his claim to be correct,
he could claim 100% through litigation
Disadvantages:
- High legal costs

- Lengthily process
Expert Witness – Appointment normally by Solicitors, Adjudicators
- Needed for technical and cost assistance

- Requirements
o Independent, impartial, honest, professional
o Expert in his field, practical experience – competent
o Acknowledge if subject is out of his expertise
- Briefing process – Report submission
o Facts, clear and to the point
- Confidence and Intelligence Toughness throughout proceedings
- Confidentiality
Negotiation notes :
- Be less opinionated or express your views less frequently

- E press your vie s and encourage others to do the sa e in an une otional’ ay that leads to genuine
dialogue
- Before entering into discussions ask yourself what it is that you really want?
- Think about what you want to say, try to focus on the facts, not conclusions or stories
- Try see things from the other parties perspective and point of view, hile understanding hat drives’ the
- Try reach an agreement that both parties are satisfied with
- Try make people aware of the consequences of their adversarial approach
- The best way to resolve disputes is to avoid them altogether

October 2011
Extension of Time & Loss and/or Expense
Date of Possession – of the site is given to Contractor once he begins work – The Contractor therefore proceeds
regularly and diligently with the works until the Completion Date set for the Works
- Deferred possession of the site (6 weeks standard if not stipulated) inserted within Appendix conditions
- Unless the contract says otherwise, the Contractor has absolute discretion as to how the work is planned and
performed, provided that it is completed on time – Therefore there is no contract obligation for the
Contractor to update and issue a project programme unless he wants to use this for his own purposes
Note: ICE conditions makes provision for Contractor to provide programme and works method statement
Practical Completion
- Co pletion for all practical purposes’ to allo E ployer to take possession of the works and to use them as
intended
- Contractor has co plied sufficiently’ ith supply of as- uilt’ dra ings in relation to CDP ele ents
- Contractor has co plied sufficiently’ ith supply of H+S File
- If there is no completion date then the Contractor is expected to complete within a reasonable time period
Sectional Completion – Works is handed over in phases – sections need to be identified within the contract appendix
and each section has it’s o n Co pletion dates and LAD’s set out.
Partial Possession – Employer can take possession of a portion of the works eg. To use for storage of his own goods,
however provided that this does not jeopardise Insurance arrange ents and does not o struct the Contractor’s
activities – CA needs to issue P.C certificate.
Effects of Practical Completion :
- Employer takes possession

- Contractor’s responsi ility for insuring the orks ends
- Contractor not lia le for LAD’s
- Contractor entitled to 50% retention and release of any bonds taken out – Interim Certificate Payment
- Defects liability period begins
- Contractor must issue all relevant information for Final Account process within 6 months
- Contractor to repair at his o n e pense any defects as per the CA’s Defects list until issue of the Final
Certificate of making good defects
Extension of Time
Relevant Events – Delays due to no fault of Contractor
- Force Majeure
- Exceptionally adverse weather conditions (dependant on timing and sequencing of work activities)
- Loss or damage caused by Specified Perils ie. Lightning, fire, explosion, storm, riot, floods
- Civil Commotion, strike, lock-out
- Statutory requirements, Government power
- Terrorism
- Contractor’s ina ility to secure goods, la our or aterials
- Employer Non-compliance with CDM regulations
- Opening up for inspection / testing of works
Relevant Events – Delays caused by Employer or Clients Team
- Delay in initiating start date or Employer fails to give access to the site
- Delay in supply of information
- Variations for postponement of work
- Supply of materials by Employer
- Employer direct contracts
- Suspension by Contractor due to Employer non payment or withholding payment

October 2011
EOT Claims
- EOT can be granted by CA retrospectively

- CA must grant EOT within 12 weeks of claim however only if it is reasona ly practical’
- Contractor must have at all times have used his best endeavours to prevent delay during the progress of the
works, however caused
Loss and/or Expense
Direct Loss and/or Expense includes both for loss of money as well as for expenditure of money.
Direct – Actual losses incurred as a direct result of the circumstances giving rise to the entitlement.
Indirect or Consequential Loss or Damage.
Claim preparation
- Statement of claim
- Chronology of relevant events
- Contractual justification
- Evaluation of time and cost consequences
- Reference to items of correspondence and contract records
Substantiation of claims eg. Variation claims
- Contractor to show that AI was properly issued and carried out by the Contractor
- Date of issue and receipt of AI variation
- Content of variation
- Time at which it was necessary to carry out the work
- Prove that carrying out of the work unavoidably affected the regular process of the works
- Extent of work must have been more than trivial
- Evidence of Direct Loss and/or Expense
Nature of Supporting Evidence
- Cost records
- Programme / Progress schedules
- Correspondence and records of meetings
- Site diaries
- Narrative of claim
General procedures
- Contractor must apply in writing with supporting information with reference to each specific matter
- Contractual claims must be made upon a provision of the Contract through Entitlement (Demand for a right)
- Must e ased on Contractor’s Actual Loss and/or E pense incurred
- EOT claims can lead to an expense / loss claim
- CA must ascertain or delegate function to QS – Ascertain what has actually been suffered directly as a result
of the matter
- Loss of Profit must be proven as an actual lost opportunity of making profit elsewhere
Note: The Contractor must always prove that he would have obtained profitable work during the period of
the delay that would have funded his overhead
- The Contractor should be put into the financial position which he would have been in , had the delay or
disruption not occurred
- Contractor should show and demonstrate how he tried to mitigate delay / loss

October 2011
Damages / Costs that could be involved :
o On-site establishment costs ie. Immediate costs – running of the site, Preliminaries
o Head office overheads
o Contractor’s loss of profit
o Inefficient working or uneconomic use of labour or plant
o Activities associated with winter working eg. substructure
o Standing ti e for Hired and Contractor’s plant
o Increased Costs
o Inflation if applicable under the standard form contract
o Interest of Finance Charges
o Cost of preparing Claims
Heads of Loss
o Prolongation
o Disruption costs
o Increased site overheads
o Increased office overheads
o Increased cost of materials
o Wasted management time
o Loss of Profit
o Finance charges
o Loss of Bonus
rd
o Sums paid in settlement of 3 party claims
o Costs of claim collation
Ascertainment of claims – Burden of proof lies with the party making the claim
Acid Test – Could an estimator properly price the effect of the change if this were the data in front of him at tender
stage
- If YES then QS ascertains and makes adjustments

- Else if NO then CA to determine Liability
Prolongation claim :
- The actual cost to the contractor of being on site for the extra period of time must be established
- Must bear in mind at which position in the contract programme the delay in the works has occurred
Concurrent Delay :
- If the Contractor claims for EOT using a relevant event and if the Contractor was already in delay due to other
matters, then the difference in ti e et een the delay clai ed ite and the overall Contractor’s delay can
be awarded as a concurrent delay
- Note: Concurrent delays are difficult to prove and may lead to prolongation Loss and/or Expense or
disruptive costs
Increased costs :
- If it is a claim in respect of a delay in completion, then not only the period of delay should be considered –
The correct measure would be the difference between what the contractor would have spent and what he
actually has spent over the whole period of the works resulting from the delay
- It is not acceptable for the contractor to use Formulas ie. The contractor must show that the increase in costs
have been the inevitable consequence of the cited occurrence

October 2011
Mitigation of Loss :
- A Contractor cannot recover damages if it would have been possible to avoid damage by taking reasonable
measures
- A Contractor cannot cover damages if he has avoided in taking measures even if these were considered
greater than reasonably considered
- A Contractor can recover cost of taking reasonable measures to avoid or reduce his potential damages
Types of claims :
- Contractual claim – covered by the terms of the contract

- Global Claims to cover several claims over the whole of the contract period
- Extra Contractual Claim – Enforceable by law but covered within the contract
- EX Gratia Claim – No legal basis, consideration on grounds of hardship etc
- Legal claims – Through Tort
List of Relevant Matters :
- Deferment or prevention of possession or access/egress to the works

- Failure of Consultants to provide information
- Opening of works for testing / inspection
- Divergence in Contract Documents
- Failure by Employer for Work or supply of goods by Employer
- AI issued in relation to the postponement of any part of the works
- AI’s re uiring variation / Undefined Provisional Su s e penditure
- Inaccurate easure ents ithin BOQ’s
- Non-compliance by Employer of CDM Regulations
- Suspension by Contractor due to non-payment by Employer
List of Relevant Events / Matters affecting both EOT & Loss and/or Expense claims
- Variations
o Provisional Sums
o Postponement of work
o Opening up for inspection / testing of works
o Discrepancy or Divergence between Contract Documents
- Failure by CA to issue Information
- Work not part of the contract
- Failure by Employer to provide goods or work by direct sub contractors
- Effect of CDM Regulations
- Failure by Employer to provide access and/or egress to the works
Financial Remedies for Breach of Contract
Quantum merit claims – Contractor seeks payment of the reasonable value of work done eg.
- Request for services and no prices have yet been agreed

- Extra work falling outside the scope of variations
- If contract is void and work has been done
Non-payment – When Employer has a cross claim against the Contractor
- Legal – if a cross-claim does not provide a defence then Employer must pay in accordance with the contract
and take cross-claim to court or arbitration
- Counter-claim can be set up by Employer
- Set-off – eg. Employer sues contractor for damages and then Contractor raises a claim for changes to the
conditions of work undertaken – These claims therefore have to be closely linked

October 2011
- Abatement – E ployer alleges that the contractor’s clai is unjustified in that the work done is not worth
what has been claimed for
Sums that are certified by CA via Interim Certificates are regarded as Cash, Bills of Exchange and must be honoured ie.
Cannot be held on account of cross-claims.

October 2011
Financial Reports, Interim Valuations and Final Accounts
Interim Valuations
Gross valuation Amount to be Assessed
Deduct previous Gross Paid
Less : Retention
= Net Payment for the month
QS assessment of the value of works when the CA considers a valuation necessary for the issue of his Interim
Certificate.
Note: QS valuation does not take into account of defective works which is the sole contractual responsibility of the CA
– A specific note should therefore be included on valuations to this effect.
List of valuation dates should be agreed at the beginning of the contract.
Normally the process follows a monthly cycle
- Contractor to submit his Application for Payment

- 7 days allowed for QS Assessment of the works and issue a Valuation Assessment to the CA and Employer
- CA to issue Interim Certificate within the 7 day period
- Payment is due 14 days from issue of Interim Certificate
- Employer within 5 days after the date of issue of the Interim certificate can specify the amount of the
payment he proposes to make, to what the amount relates and the basis on which the amount is calculated
- Employer not later than 5 days before the final date of payment is due, can give a written notice to the
Contractor which shall specify any amount proposed to be withheld and/or deducted from that amount
If Employer fails to pay then he is in breach of contract and Contractor may :
- Issue a notice to determine the contract and suspend the works (giving 7 days notice)
- Entitled to receive interest on the debt until payment is made at 5% over the base rate current when the
debt became overdue
Interim Valuations after Practical Completion :
- Certificate of Making Good Defects issued

If then it becomes apparent that a significant sum is due to the contractor and the Final account is still far
from complete then
- A further Interim valuation can be made ensuring that there is not a very large balance due in the Final
Account
Items that should be included in Valuations :
- Works properly executed

- Materials on site and materials off-site
- Architect’s Instructions / Variations
- Fluctuations
- Dayworks including signed vouchers : name of staff, time spent, plant and equipment, materials used
- Expenditure on Provisional Sums
- Nominated or Listed Sub-contractors / Suppliers
- Statutory Authorities
- Costs associated with insurance premiums or claims
- Design Fees eg. D&B contract novation agreement
- Preliminaries
o Re-imbursement of Preliminaries to be agreed :
 Fixed or % basis eg. Crane, Welfare etc
 Time related items eg. Lighting, staff
October 2011
Items that should not be included in Valuations :
- Unacceptable works confirmed by the CA

- Premature materials
- Extension of time costs
- Loss and/or Expense
Materials off-site should e included if these aterials have een listed’ y the e ployer ithin the contract :
- Contractor must provide CA with reasonable proof that the materials is vested in the contractor so that when
the E ployer pays the interi certificate that these aterials eco e the E ployer’s property
- Contractor must provide a bond if stated in the appendi for uni uely identified listed ite s’
- Contractor must provide proof that the listed items are suitably insured against loss or damage for their full
value under an insurance policy, and indemnifying the Employer against damage to the materials during the
period between when the materials transfer to the property of the contractor until they are delivered to the
site
- Listed items should be adequately stored, set aside and clearly marked as for the purpose of delivery to site
- Architect is responsible to check that the materials off-site are suitable and meet the requirements for the
specification
- Vesting certificate – property passes onto E ployer’s na e at so e point even off-site)
JCT Clause 13A’ JCT Schedule ’ Quotation :
- CA issues an instruction to the contractor that a variation is to be dealt with under this clause ie. Quotation
- Contractor must submit quotation within 21 days from receipt of instruction
- Quotation must include for
o Value of the work
o Any EOT or L&E
o Cost of preparing the quotation
o Other information as requested eg. Method statement
- CA must then confirm instruction or cancel the instruction within 7 days
Disagreement on valuations – Pay on account a fair and reasonable value. Then discuss with client and seek resolution
with Contractor. If still not agreed then either party may refer to dispute resolution process.
Global Claims – for a Loss arising out of a number of causes or events ie. Total Cost Claims
It can be summarised as the Anticipated Cost for the Job minus Actual Cost including for delay, disruption, L&E
Retention - % of the gross valuation retained by the Employer to cover the risk of the client having to rectify defects in
the works, which the contractor fails to properly make good.
Percentage is normally 3% of the contract value however different values may be stipulated within the contract
appendix.
Alternative to Retention is to have a Retention Bond provided by the Contractor’s ank here the ank agrees to pay
the Employer if he makes a claim against the bond.
Retention is reduced to half at Practical Completion and is released upon receipt of a Making Good Defects Certificate.
Items not subject to retention:
- Opening and testing of works

- Loss and/or expenses
- Statutory Obligations
- Provisional Sums
- Insurance and Insurance premiums
- Final payments to Nominated sub-contractors
- Fluctuation Payments
October 2011
Financial Reports
Financial Reports are an interim update on the financial status of a project with when the contract was first awarded,
identifying the financial effects of changes occurred and estimating the effect of anticipated changes to occur, thus
giving a forecast of the final account ie. A report detailing the Projected Final Account.
Use of Financial Reports :
- Cost control is the management process that takes place between reports ie. Important tool in decision
making
- Keep Client and design team informed on the financial status of the project
- Provides interim update on cost certainty by showing which items have been agreed
- Cost reports normally also include a cash flow forecast
The purpose of change control is to provide a method of assessing and managing change, giving details of consequent
cost, programme and scope effect. Effective change control procedures enables the monitoring and reporting of cost
changes where they affect the out-turn cost and enables the project team to monitor and appraise programme
implications and impact. The Client is made aware of the consequences of a potential change and the effect this will
have on the overall project, this allowing an informed decision to be made with a full understanding of the impact of
implementation.
Key issues to be considered when advising the client upon the Cost Report procedure to be adopted :
- What are the client’s o jectives in ter s of onitoring change?

- Who are the key decision makers in the design and approval of changes?
- What are the trigger levels of authority in respect of value, programme and quality?
- What is the procurement process and how will this affect change control during the design and
construction phases?
- At what point in the design process of this particular project is it appropriate to start measuring
change and why?
- Confirm with the client and/or project manager what costs need to be included within the change,
e.g. professional fees, VAT, etc.
- Who takes responsibility for raising the Change Proposal, dependent upon the type of change?
- How will the change control procedure link with contract instructions and contractor procedures (e.g.
‘FI’s during the construction period?
Measures to be taken to effectively control costs during the construction phase of a project :
- Proactive risk and contingency management

- Implementing a robust change control process
- Management of provisional sums within budget
- Regular cost reporting which is also forward looking
- Rolling final account with closure process for financial impact of change
Implementing the Change Control Procedure :
- Communicate the procedures with the rest of the consultant team and include within the Project Execution
Plan :
o Timing and frequency of issue
o Interfaces ith other parties, such as the contractor and client’s finance tea
o Any additional requirements of stakeholders, such as funders
o Distribution list and means of issue
o Method of presentation of report
- Change Proposal proformas to be issued to the design team with instructions for use
- A schedule of change control meetings to be agreed with the project team
- A register of change controls and a tracker to be maintained
October 2011
- Change proposals to be fully co-ordinated prior to costing and submitting to the client for approval
- Monitoring to ensure the correct procedures are being implemented, e.g. to ensure potential changes are
raised at an early stage, the full consequences of changes are established and changes are only instructed
following client sign off
Information to be included on the Change Proposal Form :
- Full description of the proposed change and the reason for the proposal
- Cost implications, including breakdown and basis of cost
- Any risks attached to the proposal
- Implications of functionality and quality, in conjunction with design team
- Programme implications, outlining how these were derived
- Buildability or CDM issues
- Description of the documentation, drawings, etc used and attached to the Change Proposal Form
- Implication to project team fees and resource levels
- Confirmation of design co-ordination by design team
- Confirmation of funding of change control (e.g. whether funded from contingency, provisional sums,
additional funding, etc and through the change control report, it’s effect on the forecast out-turn cost
- Date required for approval
- Implications of late approval and/ or rejection of the proposed change
- Approvals box
Cost Monitoring is a reactive process and simply reports cost effects after the event, whereas Cost Control is a
proactive process so as to try make decisions before the events.
Typical Content of a Cost Report
Executive summary, which may include:
- Current budget and forecast

- Contract Sum
o Measured Works, Preliminaries etc
o Provisional Sums
o Prime Cost Sums
o Total Contract Sum
- Contingency position
o Contingency Draw-down Graph
o Level of Contingency depends on
 Particular stage of the project
 Completeness and quality of design information
 Type of procurement and nature of the works eg. New build or refurbishment project
- Level of cost certainty’, i.e. agree ent of provisional su s
- Total commitment and expenditure to date
o Percentage of orders placed v/s Programme percentage elapsed
o Adjustments on Provisional Sums
o Account for AI’s / Variations
o Anticipated Changes
o Contractor’s Clai s forecast
- Final account progress - Anticipated / Forecast of Final Account
o Less Expenditure to date ie. Valuations to Date
o = Difference to Target Budget
- Last report
- Change from Last report
- Contract position
- Cash flow position
- Progress in the period and current financial position

October 2011
- Outstanding information
- Major risks or causes for concern
- Next steps and recommendations
Analysis of contingency and risk status
Register of approved changes/ instructions and pending changes
Summary of provisional sums and progress against these
Value engineering or opportunities register
Risk register
Professional Fees if applicable
Forecast of inflation if applicable
Notes and exclusions
Final Account
Final account is a statement of the final cost of the contract works ie. The contract sum, plus or minus any variations
incurred during the project – as agreed between the QS and Contractor and forms the basis of the CA issue of the Final
Certificate.
Within 6 months of Practical Completion the contractor must submit all necessary claims and application for payment.
Within onths of receiving Contractor’s clai the QS , CA ust Ascertain adjust ents and L&E
During negotiations with contractor :
- Define clearly your targets and objectives

- Decide where to draw the line in order to reach agreement
- Predict opposition targets and points of resistance
- Develop strategy tactical approaches
Outline structure is dependent on each scheme :
- Contract Sum
- Adjustments
Omit : Contingencies , Provisional Sums incl Contractor’s OHP , re-measured works / quantities. Defects
not made good
Add : AI’s, Day orks, Fluctuations, Loss and/or E pense clai s, Discrepancy adjustments, contra charges,
insurance items
- Contract Sum as Adjusted – Total final Account
Less : Retention Amount up to Practical Completion Stage

Sum of amounts already stated in previous Interim Certificates
- Balance due to Contractor from the Employer excl. Vat
Note: Final account Statements to be signed and dated by QS and Contractor

October 2011
Audit Influence
Client’s ay re uest that the accounts e audited, therefore the auditor needs to follo a trail in the adjust ents and
why these adjustments have been made ie. What are the add/omit adjustments, quantities involved, how they were
priced.
Final Certificate must be issued not later than 2 months after
- The end of the Defects Liability Period

- Issue of the Certificate of Making Good Defects
- Statement of Adjusted Final Account
Effect of Final Certificate :
- Shows the adjustments made to the Contract Sum

- Contractor cannot raise any further claims for EOT or L&E
- Architect has given approval on all issues required by him/her
Both parties can challenge the Final Certificate within 28 days of issue
- Final Certificate is then only conclusive with respect to those matters that have not been challenged
- If no further steps are followed up within 12 months then Certificate has conclusive effect
Fluctuations
Provides a mechanism for reimbursing Contractor for changes in prices over which they have no control.
JCT allows for Schedule 7 Fluctuation Options –
A – Contribution, Levy and Tax Fluctuations
- Only amounts payable arising out of Act of Parliament or Delegated Legislation

- Percentage addition stipulated within Contract Appendix
B – Labour and materials cost and tax Fluctuations
C – Formula Adjustment

October 2011
Fire Insurance Valuations
Estimate value of rebuilding a building due to fire damage.
- Day 1 Declared value

o Demolition costs
o Construction costs estimate
o Photographs taken
o Site visit to assess
o Design drawings and specifications
o Includes professional fees
o Includes fixtures and fittings
Plus Middle Process :
o Procurement process for design, documents, building regulation approvals

o Inflation during period until the construction progresses ie. Estimated programme duration
o Relocation and temporary accommodation costs
o Check if building is listed or if has a preservation order
Therefore : Out-turn costs are established
- Sum Insured – Insurance assessors then assess the value which must include Day 1 – Declared value (as per
above)
Note: Check any VAT implications

October 2011
Insolvency
- Inability to pay debts as they become due for payment

- Either Voluntary or Compulsory Liquidation or Receivership
- Insolvency Act 1986 – Appointment of an Insolvency Practitioner
Individuals - Bankruptcy
Lasts years , individuals property is vested in Insolvency Practitioner’ ie. Trustee.
Property is sold and dividends of property used to pay creditors.
Individual voluntary arrangement
- court order prevents creditors from taking proceedings

- meeting held to consider proposals for higher return than bankruptcy
Companies
Liquidation - Liquidator values, markets and sells companies assets which is then paid to creditors in order of priority.
Administration – Attempting to rescue a company so that it can survive – by obtaining order from the court.
Receivership – When the debenture holders of a company (someone who loaned money to a company) consider that
the security of covering their money is in jeopardy and appoint a Receiver
- Secured debenture – loan secured against company assets (generally property)

- Unsecured loan
Fixed Charge Receivership – Creditor has taken charge of a specific property eg. Land
- Only for fixed charge receivership can surveyors act as receivers
Company Voluntary Arrangement – Contract between company and creditors to agree settlement and percentage of
their debts.
Winding up a company can be voluntary or involuntary – present a petition to the court – court appoints a Liquidator
to :
- Sell assets and recover money owed to the company

- Pay creditors
Vesting and seizure – Once materials have been incorporated (Fixed) into building then they become property of
freeholder and cannot be removed by Contractor
- Vesting certificate – property passes onto E ployer’s na e at so e point even in the case of materials off-
site)
- Seizure – on default of the contractor the Employer takes possession of materials or plant to complete the
works
Key points:
- Are there creditors involved – what are their stakes, priority order etc.
- Is a court order necessary, do you need an insolvency practitioner, can creditors take initiative
- What is the co pany’s position with regards to assets
- Receivers and Administrators are personally liable on contracts unless excluded – therefore their legal status
needs to be checked
- What effect has the procedure on the contract including set-off
- Any existing litigation

October 2011
Insolvency
Procedures under the JCT Contract
- Automatic Determination of the Contract

- Contractor must notify Employer in writing
- Employer has the option to re-instate the original contractor through a new agreement or arrange a separate
contract through another contractor
o Old contractor therefore to assign the works to the new contractor
o Old contractor to remove existing plant and equipment
o Final account for the old contractor to exclude costs of re-setting up etc
Signs of Insolvency
- Slowing down of the works

- Supply of materials drying up
- Increase in defective work
- Complaints / Non-payment from sub-contractors
- Changes to Contractor’s Senior Manage ent
- Contractor requests more frequent payments
- Unusual visits to the site eg. Contractor’s Bank, Agents etc.
Actions at the signs of Insolvency
- Correspondence to the Contractor re: Defects, materials supply, complaints etc.

- Keep information confidential as could drive contractor into more serious difficulties
- Keep valuations and payments done as normally and correctly (undervaluing could drive contractor to more
serious difficulties)
Actions at Determination
- Identify Insolvency Practitioner’

- Inform Clients, Consultants, Insurers
o Claim from Performance Bond Holder
o New insurances to be taken out
- Employer options available to be decided
- Stop all payments to Contractor
- Safeguard the site and the works ie. protection of works from weather
o Remove site records to a safe place
o Notify police
- Take inventory of temporary buildings, plant, materials, work completed and conduct appraisal incl materials
off site
- Review of sub contractors ie. claiming that they have not been paid
- Establish if there are any other contracts between contractor and employer

October 2011
Insurances
Types of Insurances within the JCT Contract
Insurance - Policy taken out at a premium to protect against an event that causes a loss.
Indemnity – An undertaking or security offered by one party to another to absolve them of any risk or responsibility.
Liability Insurance
- Insurer indemnifies Client against damages or injury

- Insurance is taken out in order to cover the indemnities and to cover for legal liabilities owed to others eg.
Public Liability, Employer Liability
Loss Insurance
- Insurance cover for compensation of Loss or Damage either by accident or somebody else’s negligence eg.
All Risk Insurance
List of JCT Contract Insurances
(JCT 05 Clause 6.1 to 6.3) (JCT 98 Clause 20.1 to 20.3) – Injury to Persons and Property’ and Inde nity to E ployer’
6.1. / 20.1. Liability of Contractor – Personal Injury or Death

6.2. / 20.2. Liability of Contractor – Injury or damage to Property
6.3. / 20.3. Injury or damage to Property – Works and Site Materials Excluded
(JCT 05 Clause 6.4) (JCT 98 Clause 21)– Insurance against Personal Injury and Property Da age’
- Basically covers the inde nity and contractor’s lia ility of a ove clauses 6.1 to 6.3 / 20.1 to 20.3
Contractor’s Insurance for
- Personal Injury or Death ie.

Employers Liability Insurance (which is compulsory under the Act)
rd
Public Liability Insurance (against 3 Parties)
- Injury or damage to Property
Insurance for Property excluding the Works and Site Materials
(JCT 05 Clause 6.4) (JCT 98 Clause 21.2)– Insurance for the Lia ility of E ployer’
- Which is not covered y the Contractor’s Inde nity

- Under Joint Na es’ Policy
- Optional Insurance under the Appendix Conditions
(JCT 05 Clause 6.5.1) (JCT 98 Clause 21.2.1)– Insurance for Da age through Non-Negligence’
- Optional insurance taken out by the Contractor in Joint Na es’

- Insurance amount stipulated within the Appendix
Covers the following items:
- Items that are not the responsibility of the Contractor eg.

o Faulty Design
o Non-negligent Damage to Adjoining Properties due to
 Collapse
 Subsidence
 Heave
 Vibration
 Weakening or removal of Support or Lowering of Ground Level
o Items excluded from the Contract
October 2011
Insurances
(JCT 05 Clause 6.7,6.8) (JCT 98 Clause 22)– Insurance for the Works’
- All Risks Insurance of the Works

- Under Joint Na es’ Policy
- Terrorism cover included ie. Fire and Explosion
- Covers Specified Perils
- Insurance normally taken out for the full re-instatement value of the works and plus percentage to cover
professional fees
JCT 05 Schedule 3 Option A / JCT 98 22A – New Buildings All Risks Insurances of the Works by Contractor
JCT 05 Schedule 3 Option B / JCT 98 22B – New Buildings All Risks Insurances of the Works by Employer
JCT 05 Schedule 3 Option C / JCT 98 22C – Insurance by the Employer of Existing Structures and Works in or
Extensions to them
(JCT 98 Clause 22D) – Insurance for E ployer’s Loss of Li uidated Da ages
- Insurance su is the level of LAD’s

- Excludes :
o Practical Completion achievement
o Specified Perils
o CA issue of EOT
Optional insurance taken out by the contractor but Employer can also effect this insurance direct to protect his own
interests.
LAD’s are paya le ithout proof and Insurance co panies re uire proof of the actual loss , therefore very fe
insurance companies offer this type of insurance – Rarely taken out due to cost of premiums and there is not direct
value.
(JCT 05 Clause 6.11) – CDP Professional Indemnity Insurance
- Taken out y the Contractor’s or Su -contractors to protect their design responsibilities

- Normally tied in with Collateral Warranty requirements
Terrorism Cover
Background : During ’s due to terroris , insurance co panies advised govern ent that they ould no longer
provide protection against damage by fire or explosion due to terrorism.
Result : Government agreed to act as reinsurer of last resort’.

st
Therefore: apart from the 1 £100k bourne by the insurers, the terrorism cover would be excluded from All Risks
Insurance Policies and could be bought back by payment of standard rate.
Insurance premiums were referenced to certain zones in the UK by government eg. Pool ‘einsurance’ Co pany
Li ited hence Pool ‘e’.
JCT All Risks Insurance re uires insurance cover against specified perils’ and all risks’ ho ever caused.
In order for the JCT contract insurance obligations to e fulfilled therefore the E ployer ust then Buy-Back’
Terrorism cover from government.
Amendments in the JCT Appendix state that : If terrorism cover by government Pool Re ceases to exist while works are
in progress up to practical completion, then
- The Employer has the option to either determine the contract OR

- May require the Contractor to complete the works as set out in the terms

October 2011
Insurances
Run-off cover – PI cover that maintains the policy on an annual basis even after the consultant ceases trading or after
retirement – usually covers a period of 6 years.
Subrogation – eg. Employer has an insurance policy and claims from the insurance company for an event
- Insurer pays the Employer for the loss

rd
- Insurer can legally sue the 3 party for losses using the name of the client
Therefore :
- Construction contracts provide the option for insurances to e taken out under Joint Na es Policy’
- This is because subrogation is not possible against any party named under the same insurance policy
Checking the validity of Insurance Policies
Contractor must make available copies of the insurance policies if requested by CA.
QS to check:
- Validity of insurance
- Validity of date
- Scope of Policy ie.
o Exclusions
o Excess
o Endorsements
Employer should still consult with Insurance experts as CA is not responsible ie. CA is just a channel of communication.
Process of an Insurance Claim
- Once loss or damage has been noted

- Contractor gives notice in writing to both Architect and Employer explaining extent, nature and location
details
- Contractor is still paid for value of the works
- Insurers inspect the works and contractor continues to make good the damages
- If contractor takes out insurance, he instructs insurer to pay Employer direct
- Employer then pays contractor through interim payments
- Although not required by JCT normally a Re-instatement Certificate is issued to keep the damaged work
distinct
- Employer has the right to deduct professional fees if applicable
Consequential Loss (D&B Contract)
- Is limited to the amount entered within the Appendix

- Optional requirement
Contractor’s lia ility for loss of use etc.
- Design Warranty / Failure

- Loss of Use
- Loss of Profit
- E cept ite s under LAD’s
- Except for work on Dwellings

October 2011
Liquidated and Ascertained Damages
Liquidated and Ascertained damages include:
• Genuine pre-estimate of a clients loss should the completion date be missed
• Cost usually e pressed per eek or part thereof; or per pro-rata thereof; and identified in the contract
• Da ages cannot e construed as a penalty’
Process of developing a figure to insert into the contract and the method of calculating the damages - including issues
such as:
- Loss of rent or other income but should exclude any loss of profit as there is no guarantee that property
would have been in use should the delay not have occurred
- Finance costs
- Additional Professional Fees
- Fines from statutory bodies
- Costs imposed by other parties on the client
- Costs incurred by the client as a consequence of not having the building available (Renting alternative
accommodation, storage, rent of other premises, abortive costs etc)
- Any other costs that justifiably the client will incur if they do not have the building on the agreed date
o Fluctuations
o Commissioning of work by others, continuing construction supervision costs, fees necessary
Note : The figure cannot be construed by the courts as a penalty and thus the client needs to be realistic in what he
identifies as potential costs. QS needs to demonstrate that they will question and interrogate the reason and logic
behind each of the costs in order to ensure they are comfortable that they should be included.
I plication of inserting nil’ in the appendi against the Liquidated and Ascertained Damages clause?
If Liquidated and Ascertained Damages are left blank then the client can pursue unliquidated damages if they wish to
do so, but would need to do this through the courts.
Can the client still deduct Liquidated and Ascertained Damages even if he does not actually incur the loss identified in
the initial calculation?
In essence yes – providing the calculation is not deemed a penalty and is a genuine pre-estimate.
The Employer cannot re-visit and increase LAD’s if the actual loss suffered is in fact greater.
Can a quantity surveyor deduct Liquidated and Ascertained Damages from the valuation due to the contractor?
No – the QS, along with the other project team members can advise the client of the situation with regards to
Liquidated and Ascertained Damages, but cannot actually deduct them. This is the clients responsibility.
CA must issue Certificate of non-co pletion efore LAD’s can e clai ed and Employer must give Contractor written
notice of the intention to deduct LAD’s.
Unliquidated damages tend to be something that are pursued through the courts and generally are demonstrated
through the client proving actual loss in a specific set of circumstances.
When Liquidated damages are not stipulated upfront and the project is delayed then the Unliquidated damages are
based on the actual loss of the Employer and need to be proven at the time of the loss.

October 2011
Measurement Code of Practice
Preparation


Mark and colour drawings, underline specifications

Prepare Query list and assumptions / exclusions
Outline a Taking-off List’
 Preamble Notes
o used to convey specific, limiting information to the Contractor only
o Indicates code of measurement plus any modifications to the code
o Precise definitions and tasks which are intended to e covered y the ite s as a general
specification’


Reference Drawings

SMM7 Descriptions
Transfer items to BOQ or Schedules of Work
SMM7 Contents
 
 
A : Preliminaries / General Conditions L : Windows, doors, stairs
 
C : Existing Buildings M : Surface Finishes
 
D : Groundwork N : Furniture / Equipment
 
E : Concrete P : Fabric Sundries
 
F : Masonry Q : Paving, planting, fence
 
G : Structural Steel / Timber R : Disposal Systems
 
H : Cladding / Covering X : Transport Systems

J : Waterproofing Y : M&E Measure
K : Linings / Dry walls
Engineering Code of Measurement system – CESSM


Definitions

General Principles
Works Classifications
o Coding and numbering of items
 General items
 Ground investigations
 Geotechnical
 Demolitions
 Earthworks
 Concrete
 Pipework
 Metal / Timber
 Piles
 Roads
 Tunnels
 Brickwork
 Painting
 Waterproofing
 Simple building works


BOQ preparation / Pricing / Completion
Method Related Charges
o Method related
o Time related
o Fixed charge
o Prime cost items
o Provisional sums

October 2011
Party Wall Act , Rights and Easements , Covenants
Party Wall Act
Lays down procedures for resolution of disputes and general procedures in relation to :
A. Construction of a ne all’ including all of a uilding over or up to the oundary et een properties
B. Carrying out of works affecting existing party structures
C. Excavations within certain distances of neighbouring buildings
Hence, building owner therefore needs to serve notice on adjoining owner
A. New structures
Must serve notice to adjoining owner if to build on line of junction so as to straddle the line
- Must give at least one months notice before building work is to commence
- State the intention
- Describe the intended works
B. Work to Existing Structures

Increased rights to parties to carry out certain defined works across whole width of wall
- Underpinning
- Cut onto existing structure eg. To install DPC
- Cut away overhanging structures if necessary / obstructing
At least 2 months prior, owner must serve party wall notice on any adjoining freeholder or tenant of more
than one year
C. Excavation and Construction

Excavation near to boundary of adjoining property
- Any excavation within 3 metres of any part of adjoining structure where the excavation will be deeper than
the foundations of the adjoining property structure foundations
- Within 6m of adjoining building/ structure and where part of the excavation will extend lower than a plane at
an angle of 45 degrees from the bottom of the existing adjoining structure foundations
Rights and Easements
Right attached to one particular piece of land which allows the owner of that land (dominant land) to use the land of
another (servient land).
Types:
- Rights of way
- Rights of light
- Use of water supply, drainage, discharge water etc.
- Rights of support
- Rights of fencing
Acquiring an Easement :
- Statute – Local Acts of Parliament

- Express Grant – By Deed retained when transferred
- Quasi-Easement – Use to using land for the purpose
- By Prescription – rare under common law eg. If can prove right of way etc.
Extinguishment :
- By statute
- Express release – deed or written agreement
- Abandonment – Evidence required, non use is not enough
- Unity of Ownership – Land comes under same ownership
- Frustration – Illegality occurred, situation changed dramatically
October 2011
Party Wall Act , Rights and Easements , Covenants
Enforcement :
- Abatement – Emergency measure, pull down obstruction yourself

- Damages – in substitution / addition to an injunction
- Injunction – interim / final
Covenants
A promise made between two parties, whether positive or negative :
- Covenantor – Person who bears burden, promises to do or act, or not to do or act

- Covenantee – Person who has benefit of the act
Types:
- Restrictive Covenants – Prohibits a person from doing something on a property

- Positive Covenants – Impose a positive obligation to do a particular act
Differences:
- The urden of a positive covenant ill not ind a covenantor’s successor in title , e cept in certain
circumstances
- Specific performance of a positive covenant can be ordered, but not on a restrictive covenant

October 2011
Payment Provisions and Structure
The Housing Grants and Regeneration Act 1996 (Construction Act) requires that all Construction Contracts include
payment provisions at least equal to the following :


Payment by instalments or Stage payments (unless contract is less than 45 days duration)

The Contractor is to be informed of the amount to be paid and the date when it is due for payment

The Contractor is to be given notice if the Employer intends to withhold any payment
The Contractor has the right to suspend performance of the contract (ie. to leave the site) if payment is not

made within a specified period and he also has the automatic right to refer the matter to adjudication
Pay hen paid’ clauses ithin contracts are unenforcea le
The primary obligation by the Employer is to pay the Contractor the sum which forms the consideration for the
contract, unless there are reasons for withholding eg. Set off or abatement for delay or breach etc.
Contractual Grounds to withhold payment :
 Cost in relation to AI’s hich contractor fails to comply



Employer takes out insurance in case contractor fails
LAD’s
 E ployer’s loss as a result of Deter ination


CIS Deductions
Direct payments to direct sub-contractor’s if ain contractor fails to pay
 Retention
Accurate valuations need to be done and agreed between the Employer and Contractor :
Interim Certificates :


Are not acceptance of quality or workmanship

They are not binding in the future, therefore sums in one certificate may be omitted in the next
Main purpose is to make sure :
a. Client is paying no more than required by the contract
b. Contractor paid correct amount for work done
Interim Certificates to include following information :


Project title, particulars
Certificate number

Gross Total value of work done = Previous plus work done currently

Adjust for any Loss and/ or expense claims

Value of materials on site and off-site

Price fluctuations

Retention deduction
Insurance premiums
Less : Amount paid on previous certificate
= Net Total Amount paid under present certificate excluding vat
Contractor’s Entitle ent and ite s to e considered for interi valuations :
Items that are subject to Retention :


Value of work done including variations
Materials on site
a. Must be for use on works for that site
b. Must be stored and properly protected
c. Contractor must have the title and must own the goods and be able to prove so ie. title retained
d. Must be brought to site at the appropriate time
e. Must be the correct specification

October 2011
How to Assess :
 Visual inspection on site
 Check delivery tickets
 Ask for invoice
 Value the cost of supply’ of aterials only and not the value for installation
 Contractor to confirm the reservation of title
 Unfixed materials delivered to site may not be removed without written consent of CA
 Once materials delivered onto site have been included on an interim certificate, these are

to become the property of the Employer
Materials off-site
a. Must be listed within the contract schedules
b. Items may be included in interim certificate while still off-site
c. Materials must be complete and ready for incorporation within the works
d. Contractor must insure for full value against loss or damage- proof of insurance is to be shown
e. Proof of ownership and Title retention
f. Must be marked and labelled to show as being the property of the Employer
g. Must be protected and set aside
Vesting Certificate is used for transfer of title and ownership of goods
 Contractor’s Profit on direct su -contracts, P.C items
Items that are NOT subject to Retention :


Statutory Fees, charges and rates

Setting out
Inspection and tests – opening up of work


Royalties

Defects

Insurance Premiums

Loss and Expense Payments (arising out of the disturbance of regular progress of the works)

Final payments made to direct sub-contractors

Fluctuations
Cost to Employer for making good defects
Retention
 Retention is necessary in order to give client a security that the Contractor will ensure that defects are made

good

Alternative is for Contractor to issue a Bond in Lieu of Retention
Retention is deducted from each Interim Certificate, Retained by Employer, not subject to interest, however
Employer must keep in a separate bank account
a. Usually 5% of project value

b. On smaller projects 3% of project value

Half of Retention is released at Practical Completion

Balance 50% of Retention is released upon Certificate of Completion of Making Good Defects
Statement of Retention balance must be stipulated on every Interim Certificate
Advantages :


Cash is at Employees disposal if defects are not made good or Contractor goes insolvent
Incentive for contractor to make good any defects and perform his obligations

October 2011
Retentions are not popular because :


Undermines the spirit of good faith

Causes cash flow problems to contractors and sub-contractors
Contractor charges a premium to counter retention and interest being held
Preliminaries :


Initial site set-up costs

Fixed Cost Related Items eg. Plant and equipment etc

Time Related Items eg. Site supervision
Combination of fixed and time related items eg. Tower Crane and Driver
a. Costs
b. Time

October 2011
Procurement Process
Project Matrix :
Traditional Contracting
Design + Management Construction
Single Build Contracting Mangmt
Stage Two Stage
Quickest construction
Contractor
Earlier start on site - method, overlap of
responsible for Earlier start on
Programme risk overlap Design and Design and
Programme site - overlap
Advantages lies with Construction, MC Construction, Flexible
based on full Design and
Contractor responsible for letting of packages to
known scope Construction
programme suit Client's project
of works
conditions
Shorter overall
Benefits early programme, quicker
Early input,
start on site and than traditional, Work Suited for Fast Track
buildability by
shorter overall packages let just-in-time, Projects
Contractor
programme suitable for Fast track
projects
Acceleration clause
TIME
option
Slow method Depends on ER
due to Risk of tender detail content
Over-run of
Separate Packages and Tender
Client is ultimately programme due to
Design slippages due preparation time
Disadvantages responsible for losses abortive work and
process and to phased required,
due to EOT interface clashes with
Construction, nature of Changes for
packages
Long lead in Project Tender
time alternatives
Contractor can
claim EOT due
to Late Info
issue
Not suited for
Fast Track
Projects
Cost Certainty
Fixed upfront
thru Fixed Lump
Total Cost
Can enter into Sum Contract
Certainty Packages are tendered Packages are
Advantages GMP for 2nd upfront prior to
before competitively tendered competitively
stage contract let - risk
commitment to
lies with
build
Contractor
Relies on
Relies on Tender Cost
Competitive
Plan
Tendering
Can monitor
works via
Clerk of Works
using PS
No
Contract Sum
competition
not Costs could be CM costs 15% higher
COSTS
due to 2nd
necessarily high due to due to phased nature
stage Uncertain Final costs
Disadvantages Final Cost - premium costs and interface of work
negotiation - until all packages let
Monitor for Contractor packages, duplication
possible for
variations, risks of prelims
inflated costs
EOT
by Contractor
Contractor Expensive
charges tendering Additional admin costs Uncertain Final costs
premiums for process for for Client until all packages let
unknown risk Contractors
High upfront
Design Costs
before
Contract is let
Possibility of
MC not obliged to Additional admin costs
doubling up of
control costs for Client
Design fees

October 2011
Good quality
Early Early buildability
requirements
buildability and innovative Client in control of Client in control of
Advantages upfront ,
input from input from Design Design
control by
Contractor Contractor
Client
Design is well
Early buildability and Early buildability and
co-ordinated
innovative input from innovative input from
before
Contractor Contractor
construction
QUALITY
Good quality
control on site
Client has less
Responsibility Responsibility
control on Relies on MC Relies on CM
wrt split wrt split
Disadvantages quality of Design experience and Team experience and Team
Design from Design from
specially on finer ability ability
Construction Construction
detail
Quality of
workmanship
No upfront
may suffer,
Buildability Difficult co-ordination Difficult co-ordination
Novation of
experience by between packages between packages
consultants
Contractor
might mean
conflicts
Risks can be
Time and Cost negotiated
Single point of Reduces inflated prices CM units Design team
Advantages Risk lies with before 2nd
responsibility on projects and sub-contractors
Contractor stage contract
let
Roles and
Most risk lies
responsibilities
with Contractor
clearly defined
Contract link
via CA, Unknown Risks
Architect thru need to be
RISK
to Contractor stipulated within

and Sub- ER
contractors
Client responsible for Client responsible for
Risk on
Leads to an default, insolvency and default, insolvency
premium
Disadvantages Adversarial non performance by and non performance
charges during
relationship sub-contractors, by sub-contractors,
2nd stage
Collateral Warranties Collateral Warranties
Provisional
Sums required Multiple point of
for unknown responsibilities
work
Client can
appoint
Least - Least - Employers Client must appoint MC Experienced Client
Client Delegation to Delegation to Agent as on basis of expertise required to take active
Involvement Architect, Architect, representative, and team ability, deals role and have
Consultants Consultants therefore need with Consultants adequate resources
not be
experienced
Client able to Changes are

Flexibility, make changes Better scope costly - Flexibility for changes if
Highest Flexibility for
and can for Client Contractor has accommodated within
Ability to changes, Client
evaluate Changes advantage on work packages,
Change / decisions can be
variations but before 2nd evaluating costs Acceleration clause
made for later trades
Variations adds extra stage as less detail possible
costs available
Suitable for Suitable for

Complexity More suited to Suited to large complex Suited to large
complex complex
of Project simple buildings projects complex projects
projects projects
Prelims and %
Good Packages let
margin fixed Difficult to
competition MC fee tendered or competitively,
upfront but compare
Competitive thru well
negotiation of Contractor's
negotiated, Packages let maximises Clients
documented competitively buying power, Subbies
2nd stage Proposals
tender docs take risk for QTY's
required

October 2011
Responsibility of
Design between Client contracts Sub-
MC contracts Sub-
Lacks Consultants ER contractors direct, CM
Contractual Adversarial contractors direct, Break
contractual and Contractor's acts as Clients
Conditions Approach clause option for Client
certainty Proposals must consultant, selected
to terminate MC
be clearly on basis of best team
defined
Turnkey projects
Cost
Higher and attract CM costs 15% higher
Management CM costs 15% higher
unknown costs competitive due to phased nature
Out-turn of Budget - due to phased nature
rely on 2nd price options and interface of work
costs Lump sum, and interface of work
stage tender however cost packages, duplication
Measurement packages
negotiation dependant on of prelims
or Cost Plus
risks
Benefit of
Benefit of Cost Benefit of Cost
Time and Benefit of Time and Benefit of Time and
and Quality at and Time at
Summary expense of
Quality at
expense of
Quality at expense of Quality at expense of
expense of Cost Cost
Time Quality
Cost
Risk Allocation


Identify risks

Assessment and analysis

Ability to Manage the risks
Pricing and Payment structure
Supply Chain Management


Improve Quality and Durability

Define Client Users

Establish Supplier Relationships

Integrate Activities

Manage Costs

Continuous Improvement
Mobilise and Develop People
The Current Price-led approach to procurement is unsustainable.


Driving prices down will result in the cheapest solution rather than the best value
While appearing to serve short term indicators such as tight budgets and accountability often fails to deliver long
term value
Future procurement strategies are likely to facilitate more collaboration between designers and specialists in order to
achieve more innovation and better time and cost predictability ie. Innovative solutions and prefabricated methods to
meet Client and Project needs.
The challenge – To persuade inexperienced Clients to appreciate high value of their Projects rather than focusing upon
initial Cost.

October 2011
Procurement Process
Summary Notes of Procurement Routes
Traditional Procurement


Full documentation required before tendering

Client appoints consultants who are in control of the design

Contractor carries out the works through sub-contractors
Single Stage
o Co petitive tenders ased on BQ’s, dra ings, specifications, schedules of ork, pricing schedules
 Two Stage Tendering
st
o 1 stage
 Fixed upfront costs
 Establish level of pricing for Preliminaries (staff costs), OHP, Attendances, Schedule of Rates
st
on partially developed design information through a competitive 1 stage tender procedure
 Establish Pre-construction fee
 Contractor prices estimated value of the works dependant on design information available
nd
o 2 stage negotiation process on fully developed design
 Risk due to contractual uncertainty
 Contractor may attempt to recover costs from low 1 stage tender
st
 Premium due to single negotiation process with single contractor

 Contractor input :
 Management and methods of working
 Buildability advice
 Value Engineering
 Programming
 Procurement of sub contractors

o Contractors prefer 2 stage tenders as lower risk and costs of tender preparation
Contract can be let as :
o Lump Sum Contract
o Measurement (Approximate Quantities)

o Cost Reimbursement
Considered as an Adversarial approach to contracting
Advantages :


Time and cost risk lies with contractor

Quality requirements are clearly defined at tender stage

Competitive tendering

Client controls design and quality
Client has ability to make changes which will be valued at contract rates
Disadvantages :
 Separate design and construction activities therefore not suitable for earlier commencement through
overlapping of design and construction – Design information required before tendering


Budget needs to be controlled and EOT possible
Not suitable for fast track projects
Design and Build
 Employers requirements
o E‘’s can e si ple –
 Accommodation schedule eg. Floor areas, heat values, building performance standards
o E‘’s can e detailed -
 Consultant full design drawings and specifications
 Details of site, access, boundaries, noise, traffic, environmental restrictions

October 2011
Procurement Process
 Accommodation requirements
 Purpose for the building use ie. Fitness for purpose
 Provisional Sums
 Planning details / restraints
 Requirements and restrictions regarding contractors proposals
 Contract conditions etc
 Performance specifications
 Contractor’s Proposals
o Detailed Design Specification and Drawings or confirmation that contractor accepts and is
responsible for design
o Design, Procurement and Construction programmes
o Construction sequences and method statements including phasing diagrams
o Cash flow forecasts
o Investigation surveys required / proposed
o Quality control manual
o Contract Sum Analysis
o Planning and Approval conditions
o CDM H+S Plan

o Temporary works and access

Fixed lump sum price
Design responsibility once the consultants are Novated needs to be agreed
o Implied warranty of suitability for the required purpose of the works – kno n as fitness for purpose’
obligation
o Contractor’s o ligation – reasonable skill and care for the design works
 Guaranteed maximum price – incentive to contractor to share savings made below the GMP
 Contractor’s Proposals take precedence unless a end ents ade
Advantages :


Single point of responsibility

Certainty of cost however not necessarily the cheapest

Opportunity to overlap design and construction process therefore Early start on site

Expertise from the contractor and design buildability

Less relationship interfaces results in less claims and disputes
Client minimal involvement and need not be experienced
Disadvantages :
 E‘’s ust e clear and una iguous to ensure correct interpretation – else contract amendment can be

made to suit client

Lack of client control over final design and quality
No flexibility for changes therefore not conducive to complex schemes – High contractor costs if changes


Premiums involved within costs for unknown risks

Extensive tendering process as contractors prepare full proposals
Difficult to evaluate different contractor proposals
Management Contracting
 A Management Contractor effects contracts with sub contractors for work packages but does not carry out

the work himself

Client appoints MC at an early stage through tender or interviews

MC can provide construction expertise and buildability

MC forms part of the design team and must co-operate with them

Client pays costs plus management fee

Overall design responsibility held by client consultants
Break and acceleration clauses within contract so client can accommodate external influences

October 2011
Procurement Process


QS prepares cost plan as the Budget
MC not expected to achieve cost certainty and is not held liable for losses occurring through the event of

disputes or default by trade contractors
MC is under no contractual o ligation to achieve co pletion on ti e ho ever he ust use est endeavours’


Client takes risks and bears costs of losses
Overlap in design and start on site, Packages are let just-in-ti e’
 Success of project depends greatly on the MC team, experience and approach
Advantages :


Overlapping design and construction activities resulting in shorter programme

Suitable to fast track and complex projects

Buildability experience from contractor at an earlier stage

Flexibility for change throughout tendering of packages

Client in control of design through consultants

Single point responsibility

Non-adversarial contracting process
MC carries out most of the administrative work and appoints direct sub contractors
Disadvantages :


Uncertainty of cost at outset until last package has been procured

MC not responsible for cost control - QS obliged to monitor ongoing costs through budget control
Risks associated with sub letting work eg. Disputes, performance leading to EOT claims – Client responsibility


Relies on the ability and experience of MC team
Unsuitable for inexperienced clients
Construction Management
 Similar to Management Contracting however the main difference is that the employer places direct contracts with

each trade contractor while the Construction Manager manages the construction process on a consultancy basis

Employer is willing to take an active role in the management process

Design co-ordination remains responsibility of Consultants
CM provides invaluable construction advice and experience on programming, fabrication and assembly of building

processes including the management of tender and design information flow
CM is named in contract to co-ordinate the works and ensure timely completion however CM not held

responsible for cost or time
Client nor ally ensures that trade contractors issue CW’s


QS normally manages cost budgets and control
Client pays CM a management fee plus re-imbursable costs
Advantages :


Overlap in design and construction resulting in shorter construction programme
Changes can be made without necessarily affecting costs – Trade packages just in ti e’


Competitive tendering on trade packages

Sub contractors take risks on quantities

Client involvement with administrative tasks on project eg. Payment to sub contractors

Suits large complex projects
Non-adversarial contracting process
Disadvantages :


Price certainty only once last package has been let

Interface and co-ordination between trade packages
Contra charges and responsibility for damages

October 2011
Procurement Process


Quality control on site

Difficulties surrounding completion and defects liabilities amongst trade contractors

Relies on the ability, experience and influence by CM
Client required to be experienced in construction and commit adequate resources – multi point accountability


CM process normally attracts higher overall costs +- 15%
Possibility of duplication in preliminaries costs
Partnering
 Management approach by organisations to achieve a mutual business objective through collaborative

approach, maximising resources to achieve best value at lowest cost and to benefit end users
Openness and trust – reduce conflict, non-adversarial
 Continuous measurement / Perfor ance techni ues KPI’s Bench arking
 Culture of team working relationships – successful team (competent, training, motivation
 Profit / Risk Sharing incentives and penalties
o Project Partnering – Single project
o Strategic Partnering – Number of Projects
o JCT views partnering to rely on an underlying contract ie. Partnering Charter (Framework or

Agreement
Non-binding based on appropriate standard form of contract outlining :
o Common understanding of roles, responsibilities
o Mutual objectives and obligations by each party
o Problem resolution
 Therefore allows focus on partnering key objectives etc.
Advantages:
 Encourages good design, development practices making best use of the functionality of buildings for end users,

thus increasing customer satisfaction

Positive staff development, innovation and technical development

Duplication is eliminated meaning less costs

Less confrontational role throughout the procurement process
Better buildability and design integration – earlier involvement of contractors
Disadvantages :


Reduced risk may affect competitiveness of the contractor who relies on fewer clients

Client may wonder if he is paying a premium and becomes disillusioned
Lack of understanding between parties
Key Performance Indicators (KPI)


Number of Defects

Quality

Program completion on time

Cost reduction and cost certainty

Number of accidents (eg. zero target)

Cost Saving Proposals, VE

Communication effectiveness
Reasonable profits and Profit Sharing

October 2011
Procurement Process
Partnering Contracts


NEC

PPC 2000
Procure 21 – used within the public sector, NHS (Health sector)
o Incorporates a Procedures Toolkit’ and then just has the contract asic rights and duties, key
personnel, obligations, partnering charter agreement
KPI – Key Performance Indicators used to evaluate the Best Value and not necessarily the Lowest Cost.
Integrated Team Involvement ensuring Optimal Design to Benefit End Users and Best Use as End Result ie. Maximise
Functionality and Efficiency through Long Term Relationships between Consultants, Contractors, Clients and End
Users.
PFI – Private Funding Initiative


Involves private sector funding and expertise

To generate greater value for money

To transfer risks onto the private sector
Reduces impact on public sector borrowing needs through private funding
PPP - Public Private Partnership
Government becomes a Purchaser of Services
Advantages :


Cost certainty

Transfer of risk to Private Sector

Improved Asset Management by government
Reduces government borrowing – Private sector funding of capital
 Value for money
Disadvantages :


Long tender and negotiation periods

High tendering costs
Difficult to implement changes

October 2011
Project Management and Consultancy Services
Structure of Responsibilities within Construction Projects
Client / Employer


Has representatives or advisors eg. In-house manager who appoints a Project Manager
Advisors develop Feasibility Appraisal
Stakeholder – End users, general public, tenant, workforce
Project Manager – Normally appointed at early stages of the development
 Overall planning, control and co-ordination of Project from inception to completion or as per appointment
conditions
Aim: To meet clients requirements and completion on time, within cost limit and required quality
Consultants
Architect – Design (Art) and Management (Science)
Financial Management – Quantity Surveyor
Engineering - M&E , Civil , Structural
CDM Co-ordinator
Clerk of Works – Site inspector or resident engineer
Main Contractor – Overall responsibility for construction
Sub-Contractors – Partial responsibility for effecting construction work through trade packages or specialist works
External Consultants – NHBC or Building Control Officer, Environmental and Fire Officers, Planning Consultants, Rights
of Light and Party Wall Surveyors
Design Team Duties and Responsibilities
 Conflict and disputes amongst consultants need to be avoided – good communication and teamwork essential
Consultancy
 The role undertaken by a reasonable competent person qualified professionally with Indemnity Insurance to act

within their best ability
However the Consultant does not promise or make any commitments while performing his duties ie. He only acts
with reasonable care and diligence and competence
Professionalism


Distinct Body of Knowledge and Competence

Barriers to Entry eg. RICS APC process

Serving the public before financial reward (Code of Conduct)
Mutual Recognition (Network of professionals)
Professional Services Agreement Contract
 Memorandum of agreement – usually takes form of the consultants standard governing body template
documents
o Definition of Services
o Fees within a schedule of Agreement
o Consultant / Client responsibilities and duties
o Assignment and sub-letting
October 2011
o Payment provisions
o Copyright
o Liabilities and insurances
o Suspension and determination
o Dispute resolution
Stages of Project Management
Define the Project
Feasibility
 RIBA Stage A : Appraisal including Project Constraints and Viability

Identification of client’s re uire ents and possi le constraints on the development. Preparation of studies to
enable the client to decide whether to proceed and to select the probable method.
a. Commercial analysis ie. Cost estimate
b. Cost Benefit
c. Design considerations
d. End users
Stack appraisal for Client Decision – Yes / No
 RIBA Stage B : Strategic Briefing
Preparation of Strategic Brief by or on behalf of the client confirming key requirements and constraints.
Identification of procedures, organisational structure and range of consultants and others to be engaged in
the project.
a. Project History, Market Value and Appraisals
b. Performance requirements
 Functional
 Economical
 Legal, Planning
 Procurement
 Restrictions, Licences
 Community Appeals
 Environmental Considerations
c. Risk Analysis / Assessment
Client’s Brief / Objectives to be set


Confirms criteria
Project team Selection and Appointment
a. Project Handbook, roles and responsibilities – leadership
b. Strategic Project Programme
Writing the brief
The ultimate success of your project depends on the quality of your brief; ie. your ability to clearly describe to
your architect the requirements and functions of your building, and proposed methods of operation and
management. It is wise to ask your architect to assist you in preparing a final brief. Your architect will need to
know:
Your aims
Your design style: Are you looking for a design in keeping with the existing building? Do you want a
contemporary or high tech design? Are you concerned about having a sustainable/ecological design?
Your reasons for embarking on this building project: What activities are intended for it?

October 2011
Your authority: Who will be making the decisions? About the designs? About costs? About day-to-day
matters when the project is underway?
Your overall expectations: What do you hope to achieve by this project? A more comfortable place for you to
live in?
At the initial meetings, your architect will listen carefully to your intentions and create a brief, addressing not
only design aesthetics but also the function of the building. Timings and budgets for your project will be
defined at an early stage and only after you have approved initial sketches will the ideas be developed
further.
Pre-construction period
 RIBA Stage C : Outline Proposals – Estimate of Cost

Commence development of Strategic Brief into full Project Brief.
Preparation of Outline Proposals and estimate of cost

Review of Procurement route
RIBA Stage D : Detailed Proposals – Full development Application
Complete development of project brief
Preparation of Development Proposals

Application for full Development Control approval
RIBA Stage E : Final Proposals – Co-ordinated documents, all elements – Detailed Cost Plan
Preparation of final proposals for the project sufficient for co-ordination of all components and elements of

the project
RIBA Stage F : Tender Production Information, Statutory Approvals
Preparation of production information in sufficient detail to enable a tender or tenders to be obtained
Application of Statutory Approvals

Preparation of further production information required under the building contract
RIBA Stage G : Tender Documents
Preparation and collation of tender documentation in sufficient detail to enable a tender or tenders to be

obtained for the construction of the project
RIBA Stage H : Tender Action / Process
Identification and evaluation of potential contractors and/or specialists for the construction of the project
Obtaining and appraising tenders and submission of recommendations to the client.
Construction Process
 RIBA Stage J: Mobilisation – Site Handover

Letting the building contract, appointing the contractor
Issuing of production information to the contractor

Arranging site hand-over to the contractor
RIBA Stage K: Construction Process through to Practical Completion
Administration of the building contract up to and including practical completion
Provision of the contractor to further information as and when reasonably required.
a. Evaluate contractor’s progra e critical path, float on activities
b. Cash Flow Forecast and monitoring of payments for works completed throughout construction
process

c. Cost reporting functions
RIBA Stage L : After Practical Completion
Administration of the building contract after practical completion
Making final inspections and settling the final account.
Inspections, Final Account, Building Management Administration, Commission
a. Post Completion Review – Close out Report Stage ie. Project Audit and Performance Study

October 2011
Project Monitoring
Project Monitoring is the identification, evaluation and management of the risks associated with the development
process eg. The risks to a lender of finance that is to be used for development or investment, or the risks to an
occupier when ensuring fit-out or construction is undertaken in accordance with the requirements stipulated.
In general, the skills required by the surveyor to deliver this service include : the ability to benchmark and review
construction costs, programmes, level of professional fees, adequacy of drawings and specifications to ensure the
project can be delivered. Surveyors also need to ensure statutory consents are met eg. That planning conditions are
cleared, H+S plans are issued, surveys undertaken, insurance levels correct, procurement route and contract chosen.
Risks can fall under two general categories ie.
- Change in value of the scheme between project commitment and completion eg. Values change when rents
fall or rise and when yields vary
- Risks associated with the construction process eg. Inappropriate procurement route, professional team
structure, poor project management
Main risks faced by lenders on projects :
- Cost escalation
- Programme overruns
- Insolvency of Developer
- Insolvency of design team
- Inadequate warranty and building contract provisions
- Insufficient contingency levels
- Unrealistic cash flow projections
The role of the Project Monitor is proactive rather than reactive, and involves the analysis of the main project risks
prior to commencement and during construction.
Project Monitoring Key Stages
Stage 1 - Initial Report / Due Diligence
A general review of the development proposals to provide an audit of the project at the early design stages. The
report structure will normally be agreed in accordance with the Funders requirements.
A preliminary assessment report would include the following :
- Statutory applications, approvals, licences and consents ie. Planning Approvals, Environmental Approvals,
Building Regulation Approvals, Listed Buildings Consents, Public Health Approvals, Fire Authority Approvals
and compliance with the CDM Regulations
- Audit on the agreed design drawings and specifications, projected programme, buildability and compatibility
of materials for construction
- Appointment of professional team consultants including the description of their duties and instructions
- Anticipated construction costs and cash flow projections and Development Appraisal
- Adequacy of warranties and insurances for the project
- Review the risk elements on the project and ensure that there are suitable methods for management
procedures and controls
Aim of the initial report :
- Review of the project

- Benchmark the project
- Analyse the project
Stage 2 – Progress Reporting
Once construction commences, the Project Monitor will process monthly drawdowns against the loan facility. Periodic
progress reports will contain issues such as :

October 2011
Project Monitoring
- Drawdowns
o Recommendations of sums to draw down
o Preparation of monthly cost reports and site progress reports
- Monthly progress reports
o Agree with developer and Funder the report requirements
o Regular feedback and communication procedures
o Attendance to all site and Client project meetings, including frequent site inspections
o Assess any potential changes to the agreed plans, building contract or costs
o Progress of works against programme
o Quality of workmanship
o Status of contractual documents required ie. Insurances, warranties, bonds
o Status of Planning Discharge of Conditions
- Cost Reporting
o Review of actual expenditure incurred against the cash flow and cost plan budgets
o Financial impact of changes and anticipated changes
Stage 3 – Practical Completion
Review the Practical Completion Certificate issue process and review any schedule of defects during the defects
liability period until remedial work has been completed.
Ensure the proper and accurate release of Retention funds.
Review the relevant H+S and Operation and Maintenance Manuals and Drawings.
Stage 4 – Close Out Reporting
Once the development is completed, a final report is prepared which confirms that the development has been
completed in accordance with the relevant documentation and agreements / conditions.
Included ithin the final report, an outline of lessons learnt’ could e added ith co ents on ho these could
improve performance and add value to future commissions.
The final report should outline any unique key issues associated with the scheme and how they were handled or
should be better handled on future schemes.
Benefits of Project Monitoring
- Risk assurance
- Risk management
- Financial planning
- Financial control
- Programme management
- Planned delivery
- Cash flow management

October 2011
Provisional Sums , PC Sums
Provisional Sums
 Work that has not yet been finalised (ie. still undergoing design process, decision making) or for costs that are

unknown at the time bills are prepared

Employer is not obligated to spend these contingencies
Can only e e pended through AI’s
Defined Provisional Sums
a. Works that are not yet fully designed but include following information
 Nature of construction work
 How and where work will be fixed
 Quantity to indicate extent and scope of work
 Any special limitations eg. Access, working hours
Note: Contractor is deemed to have included allowance within his programme, planning and pricing
of the full preliminaries
Undefined Provisional Sums
b. Where the information as for defined PS’ is not availa le
Note: Contractor not deemed to have included in programme, planning or priced in preliminaries
Prime Cost Sums
 Used for works which are to be carried out under the direction of the main contractor by others ie. sub-

contractors or statutory authorities or specialist materials
Main contractor has no control over the pricing of this work, therefore the contractor states his percentage
to cover his overheads and profit

October 2011
Quality Assurance
System of Best Practice
Quality – Providing a service that meets the customers expectations and requirements
Grade – Low or high specification
Quality Management System


Marketing Tool

Supportive evidence in disputes / legal cases
Lowers PI Insurance
3 Phases involved :
 Understand Client’s Brief Custo er Focus

 Ensure Progress according to Client’s ‘e uire ents ie. checking measurement and improvement through

learning process
Execution – Reports, Cost Plans etc.
Annual Monitoring of Progress
 KPI’s Key Perfor ance Indicators



Customer Audit feedback through assessment
Internal Team Audits

October 2011
Risk Management
The aim of Risk Management is to aid the success of Projects through a methodical approach, by reducing the impact
of risks and analysing the probability of them happening ie. To improve certainty.
Preparation : Establish the context and objectives of the Project
- Context in relation to Project
Identify the Risks
- Workshop, brainstorming – Team meetings

- Query lists
- Compile Risk Register
Analyse Risks
- Determine likelihood and consequences

- Estimate level of risk
Assessment
o Qualitative techniques
o Quantitative techniques
Risk Matrix
o Monte-Carlo Simulation
o Sensitivity Analysis
Risk Exposure : Probability versus impact

o Probability – Likelihood of an event happening
o Risk Impact – Is the result of impact acceptable or unacceptable
Example
80% probability of winning £20k x 0.8 = £16k
20% probability of loosing £50k x 0.2 = £10k
Therefore difference of + £6k seems acceptable risk
o Else : Scales 1 (Low) to 5 (high)
Risk Outcomes
o Optimistic
o Most likely outcome
o Pessimistic
Risk Attitudes
o Risk averse
o Risk neutral
o Risk taking
Evaluate Risks
- Compare against criteria

- Prioritise risks
Manage, allocate and treat Risks
Decision making
- Eliminate risk – changing decision or alternative options

- Transfer risk or share risk
- Insure and absorb risk
- Implement Plans
October 2011
Risk Management
- Ongoing Monitoring throughout project and update risk register accordingly
Types of Risks
- Project risks : Cost and Time implications

- Consequential risks : Unforeseen circumstances
- Business and Political risks : Market Conditions, Inflation or Planning Conditions
Value Engineering versus Value Management

Value Management :
Function and Cost – All encompassing process, looking at the whole building in terms of value to the client with
regards to satisfying the basic functions required at the Best Value for Money Spent.
Value Management is the wider term used to describe the overall structured team-based approach to a construction
project. It involves clearly defining the client’s strategic o jectives, considering opti u design solutions ithin the
conte t of the client’s usiness o jectives and deciding hich of these provides the opti u lifeti e value to the
client, as well as a review of the whole process after occupancy. Value Management includes value engineering as part
of this process.
Value Engineering :
Encompassed with Value Management to examine the individual elements of the building to achieve function at the
most optimum cost.
Value Engineering is a syste atic approach’ to delivering the re uired functions or co ponents to the re uired
uality at the least cost’, i.e. a ethod of ensuring that the client gets the est possi le value for oney in ter s of
safety, performance and delivery targets. It is a structured form of consensus decision making that compares and
assesses the design solutions against the value systems declared by the client.
Difference : The point of application of the processes within the project stages.
Value Management is normally done at the earlier planning stages of the project and Value Engineering is a process
subsumed within the Value Management process.
When to do Value Management and Value Engineering :
Savings potential are greater at the following stages of the development :
- Scope and concept of development stage

- Design and pre-construction stages
Lesser potential for achieving Savings occurs once the project progresses into post construction stages and
operational and maintenance phases.
Formal Value Engineering study usually co prises a carefully structured Jo Plan’ hich includes function analysis.
The Job Plan typically comprises the following stages:
A Information
B Function Analysis
C Idea generation
D Idea evaluation and selection
E Proposal development and validation
F Implementation
Stages B - D and often E are conducted within a workshop environment.

October 2011
Sectional Completion and Partial Possession
Sectional Completion
Sectional Completion arises when the Employer requires the works to be completed in phased sections. In order to
facilitate this procedure the JCT contracts are modified to incorporate a sectional completion supplement :


The completion date has to be stated for each section instead of a single date

The defects liability period has to be stated for each section

An additional entry stating the value of each section has to be included
The period of ti e for the e ployer’s insurance for loss of LAD’s for each section has to e stated for each

section

The date of possession for each section has to be stated for each section
The rate of LAD’s has to e stated for each section
 The CA must issue Certificate of Practical Completion for each section
Upon the issue of a Certificate of Practical Completion for each section :


The defect liability period comes into operation for that section

Defects, shrinkages or other faults caused by frost are to be made good by the contractor

The contractor or employer are relieved of their insurance duties in respect of that section
Employer is entitled to recover LAD’s
 Half retention is released for that particular section
Partial Possession by the Employer
Client request for partial possession of completed portion of the works before Practical Completion Date – Agreement
must be obtained by the Contractor (which shall not be unreasonably delayed or withheld)
 Contract Administrator must provide a written statement identifying the parts of the works and date to be

taken possession
Practical Completion of the relevant parts shall be deemed to have occurred and commencement of Defects

Liability period
Contractor’s insurances for that part of the orks ter inate and E ployer ust insure accordingly
 LAD’s ust e reduced to reflect the reduced nu er of units or ork left to e co pleted calculated as a
ratio of LAD’s left v/s nu er of units left
Client therefore needs to consider advantages over disadvantages of taking partial possession of the works eg. Defects
process, LAD’s reduced, insurances to e taken out.
Client not to jeopardise contractor or sub-contractors ongoing works due to restricted movement, access to the site –
Else EOT, Loss and/or Expense claims.
Difference between Sectional Completion and Partial Possession :
 Sectional Completion dates and sections of the work need to be described and stated within the contract

documents viz. Sectional Completion Supplement
Partial Possession is by Agreement between Employer and Contractor

October 2011
Section 106 Agreements


Agreement between owner of property and Local Planning Authority

Agreement requires owner to provide some infrastructure works / public open spaces
Agreement if implemented will run with the land ie. Applicable to anyone that subsequently purchases the land
Normally each council authority will have their own methods of determining Section 106 payments which then are
normally incorporated within an Agreement ie. Heads of Terms.
A Section 106 Toolkit is normally used to analyse the different characteristics and formulas for calculating the total
Section 106 payments on a project.
Different categories within the Section 106 Toolkit include :
- Areas and unit numbers for residential developments

- Areas of spaces available for Office, Retail, Public Realm, Open Space
- Public Realm items :
o Carriageway surfaces
o Footway paving
o Public seating, furniture etc.
o Street lighting
o Cycle stands
o Landscaping
o Waste facilities
- Transport items :
o Pedestrian crossings
o Traffic signals, lights
- Allowance to provide for Education – Primary and Secondary schools
- Archaeological Constraints
- Affordable Housing requirements
- Community facilities and conservation
- Administration charges

October 2011
Sub Contractors
Note: The JCT 05 contract includes some major changes to the way that sub contractors are appointed within a main
construction contract :
- Nominated sub contractors and suppliers provisions have been removed
Under the JCT 05 the following arrangements have been provided to accommodate sub contracts :
- Main Contractor selected su contractors previously in JCT kno n as do estic su contractors

- Listed sub contractors (previously in JCT kno n as no inated su contractors
NB: Refer to Appendix documents for further information pertaining to sub contractors
General Terms
Novation : A contract that transfers both rights and obligations from one of the original parties to a new party eg.
Contract exists between A and B
Then through Novation, Contract A is novated to C
Assignment : An original party eg. Developer transfers only the contractual rights to another party eg.
Collateral Warranties to purchasers and tenants ie. The purchasers and tenants have then got the right to
bypass the client and claim from the main contractor and designers
Vicarious Performance : A party ay ish to have it’s contractual o ligations carried out y another party, hile still
remaining legally responsible for the performance of those obligations. However this is not permitted where the
contracting party is selected for some personal qualification, skill or competence eg. Geological investigations.
Repudiation : When a sub contractor without justification repudiates the sub contract – Results in responsibility for
completing the works and causes disruption to the main contract programme, disturbs other sub contracts and causes
overall delay.
- Need to establish whether the fault has been caused by the main contractor
- Collateral Warranties are relied upon to prevent this from happening
- Ultimately the employer will eventually bear the loss and be responsible for costs, even though the main
contractor is responsible for sub contractor during the works as this responsibility changes once the sub
contract repudiates
Domestic Sub contractors are selected by Main Contractor with written consent by CA
Listed / Named Sub contractors are selected by Main Contractor from a list of 3 persons named in the contract
- If the number falls below 3 then Main Contractor may select his own firm or add further names to the list

October 2011
Sustainability
Sustainable development can be defined as that hich meets the needs of the present without compromising the
a ility of future generations to eet their o n needs. The three principles of sustaina ility are social, environ ental
and economic.

Social
The development should respond to the needs of the wider community. For example, does the development
provide good local amenities, public transport with welfare facilities, education facilities and a reasonable
spread of shopping facilities in close proximity? The developer could also consider a mix of unit types with
mixed tenancies.
 Is the development making efficient use of resource, including labour and ensuring the design and
Economic
construction meets the current and functional needs of the users? Does the development represent overall
value for money? Has a whole life cycle cost and value analysis been undertaken? Does the development
funding adequately support ongoing maintenance and replacement?
 This is about preventing harmful and potentially irreversible impacts on the environment by the careful use
Environmental
of natural resource, minimising waste and energy

Aim : To implement minimum standards and make energy efficiency ratings mandatory
6 Categories :
 Energy efficiency (Ratings) – Part L Building Regulations



Water efficiency (Part G building regs)

Surface water management

Site waste management

Household waste management
Use of materials
Some targets to achieve Sustainability :
 To minimise heat emission from buildings

o Reduce CO2

o Produce energy efficient buildings
Environmental Protection and Impact
o Use less resources

o Re-use existing buildings
Ensure Economic and Social Growth

o Obtain better productivity out of buildings
Incorporating Whole-Life Cycle Costing process
o Reduce operational costs
Costs can add approximately +10% of Construction Costs
Key considerations of the building design, such as passive energy design to reduce energy consumption :


Building orientation

Building geometry and layout

Solar shading

Low emission glazing

Thermal performance

Maximising daylight

Providing natural ventilation where possible
Airtight building envelope where appropriate to minimise uncontrolled air loss

October 2011
Sustainability
Renewable Technologies :
Low and zero carbon technologies and their suitability to meet Part L carbon emission reduction criteria:


Combined heat and power (CHP)

Biomass boilers

Ground source heat pump

Borehole cooling

Solar thermal water heating

Photovoltaic panels

Wind turbines (onsite)

Rainwater harvesting
Solar power / water heating
Sustainable Design and Construction :


New build v/s refurbishment

Energy, thermal, ventilation

Use of renewable technologies

Maximising daylight

Airtightness

BMS systems to monitor consumption of energy

Building materials (reduce toxic by-products)
Waste management and recycling
th
Part L Regulations changed on 6 April 2007
Aim : To increase energy efficiency in new buildings, to save energy and to minimise CO2 emissions which includes
mandatory air pressure testing to buildings.
Costs can add approximately +3% to 5% of Construction Costs
Dwellings :
 SAP – Standard Assessment Protocol

o U values – Thermal transmittance (m² of fabric)
o Y values – Thermal conductivity (rate of heat passing thru)
 Ecohomes and BREEAM ie.
o Pass
o Good
o Very good
o Excellent
Non-dwellings : SBEM – Simplified Building Energy Model
Energy Certificates Building Energy Perfor ance’
Grades A to G
Expressed as a number from scale 1 to 100, the higher the number the lower the running costs
Measures heating, HVAC, Lighting, Pressure Ratings etc.

October 2011
Tender Document Process
With Quantities : Dra ings and BOQ’s
Without Quantities : Drawings and Specifications OR Drawings and Schedules of Work
Traditional Routes


Contract Drawings
Contract Specifications or Schedules of Work or BOQ’s including priced schedules and specifications


Pricing Document : Priced activity Schedule or Contract Sum Analysis
Day orks priced y Contractor’s plus % for profits and overheads
o Labour
o Material

o Plant

Schedule of Rates

Dayworks
Provisional Sums
Civil Engineering Projects ie. BOQ (without Quantities)
Objective : To identify work only with enough pricing information to then re-measure the quantity and work carried
out upon completion
 List of Principle QTY’s



Preambles and Specifications

Dayworks
BOQ’s (Approximate Quantities)ie. Work Items Note: Not intended to describe fully the nature and extent of the
work in a contract – only identifies the work for tender purposes


Schedule of Rates
Grand Summary
Bill of Quantities
 Contain full and final description of the works including specification

o JCT – Define the hole of the Contractor’s O ligations for Quality and Quantity of ork
o ICE or NEC – BOQ’s have a narro er role due to appro i ate uantities and re-measurement of
works. They are used only to obtain price comparisons and Contractor selection, then they are used

for re-measurement using the Rates provided

Must confirm which Method of Measurement is used
Employer takes risk on measurement quantities and any errors are treated as variations under the contract
Preliminaries
 Clauses containing the extent of the Contractor’s O ligations and Lia ilities ith regards to the
o Contract Conditions and Appendixes
o Conditions for the performance of the works incl plant and site facilities
Drawings


Forms a model of the designers ideas

Explain the nature of works for achieving the end product

Record of what has been done
Setting out of the works
Types of Specifications
a) Descriptive Specifications eg. D&B, E‘’s, CDPS

October 2011
 To define the scope, design intent, procedures for completed design, quality control and to provide the

Contractor with a fair indication of the solutions that will be acceptable
Contractor is to use his specialist expertise to complete the detailed design (in consultation with the design team),
manufacture and install the works by providing the necessary warranties and guarantees
b) Brand name or equally approved
c) Prescriptive - Reference specification eg NBS or BS
 Do as I say’ as in traditional type of Consultant dra ings and specs
d) Performance Specification
 Design team have no visual requirements (not to concerned about the aesthetics) but wish the contractor to
select suitable materials and install them to meet certain criteria that performs and meets with legislation and
standard re uire ents ie. give e so ething that orks’
Criteria for Performance Specification :
 Overall Strategy – General information

o Description of component and element of the works eg. Roof
o Type and Quality
o Identify standards, quality marks eg. BR or BS etc
o Purpose and Use
o Required max and min Lifespan
o Method of Maintenance Strategy
o Guarantees, Insurances required
 Composition and Manufacture

o Design
o Fixing
o Assembly
 Functional Requirements
o General Appearance
o Shape, Dimension and Weight
 Physical Properties
o Physical, Chemical, Biological
o Structure, Material
o Water penetration
o Thermal properties
o Strength
o Acoustic
o Fire
o Durability
 Measurement and Testing – Quantification of properties

o Measurable tests
o Performance data
 Statement of Limiting Values

o Max or min Tolerances, Limitations
 Final – Builders Work required
 Working Characteristics and Method of Operation / Maintenance

October 2011
o Note: A statement is required from the Contractor confirming his acceptance and his design liability
responsibility
o Contractor to include for all the works and scope necessary to comply with the performance
specification
JCT with Co tractor’s Desig :

The Employer wishes the Contractor to do all or part of the building design.
Co tractor’s Desig Portio Supple e t :

The Employer wishes the Contractor’s design input to e su stantial in an identifia le portion of the Works, ut not
for the whole works.
Performance Specification:
Sometimes the Employer will instruct the Contractor to carry out specified work to meet a defined Performance,
which necessitates some design input by the Contractor (Note : Changes to JCT 2005 – Performance Specified Work
no for s part of the Contractor’s Design Portion Supple ent .
Tender Documents for Alterations
Alteration and Repairs
 Analyse works on site and deter ine Se uential Building Process of Works’ ie. Decide on the approach for

building the job on a logical order eg. Room by room, floor by floor, existing work, repairs, elemental trades

Co-ordination of work specification descriptions and locality position within existing building
List of items of work – then specification follows
Dilapidation
 Specification for repairs

- Reinstatement / Remedy of Defects – works required to retrofit premises to original state, else monetary
compensation
Schedule of Dilapidation – List of Defect items ie. Comparison with lease document existing conditions survey

-
E tent and nature of ork is governed y The Covenant Wording Lease’ and perhaps the re uire ents of
proposed new tenant
Tendering
 Single stage tendering

o Competitive tender from selected list of tenderers for the whole of the works
Two stage tendering
st
o 1 stage covering pricing of preliminaries based on preliminary design information
nd st
o 2 stage is negotiated with the successful 1 stage tenderer and normally based on further
developed design information and the contractor tenders all the relevant sub-contractors packages
while QS compares pricing to the Project Cost Plan
nd
o 2 stage can also incorporate a substantial part of the main works eg. Basement construction and
main structure of building
o Advantages
 a le to gain contractor’s e pertise and uilda ility advice during the
nd
stage
 early appointment of contractor and to work alongside design team
o Disadvantages
 Premium paid for negotiation as the preliminary document is inadequate and

circumstances change significantly

Negotiation basis
Joint Venture Tendering

o A partnership between two or more Contractor companies
Serial Tendering

October 2011

o An arrangement whereby a series of contracts (normally of the same size) is let to a single contractor
Term Contract
o Employer agrees to order an indefinite amount of work during a fixed period as and when the
Employer decides to carry the work out
Pre-Qualification
Canvass the market place for suita le contractors ie. trauling the pool’.
Invite prospective list of tenderers to submit a response to the pre-qualification questionnaire.
Follow up on relevant references.
Technical Factors :


Experience of similar contracts

Reputation for quality

Reputation for timeous completion

Reputation for claims

Labour

Plant

Management structure

Policies on sub-contractors

Productivity capacity

Quality Assurances

Health and Safety procedures

Area of specialisation and technical expertise

On site supervision and work methodologies
Environmental policies and industrial relationships
Financial Factors :


Financial accounts see section explaining Financial Ratios etc.

Size of company, Financial stability

Current workload and future projected work

Quality Assurance

Health and Safety

Company Expertise
Industrial and Environmental Policies
Drawing up the list using a Matrix Analysis


Allow a weighting average out of 100 for each factor
Give each contractor a rating for each factor
o Weighting out of 100 / 100 X Rating = Awarded figure
o Then add up all the awarded figures for each contractor and compare the totals
Tender Process


Issue tender Documents

Mid tender interviews

Tender queries / addendums

Post tender interviews
Tender Evaluation and analysis

October 2011
o Commercial Evaluation
o Qualitative factors
 Complexity
 Quality
 Qualifications
 Cultural fit
 Management team
 Work process and methodology
 Note: Contractor’s kno a out

o costs’ ie. What they pay for resources
o prices’ ie. What they charge for their product
o value’ ie. What the client is illing to pay for the uilding
Should also take into consideration the current market tendering conditions and amount of work available to
contractors.
Approved Contractor’s list is sometimes used by large companies that constantly procure work. These databases
should be updated regularly.
Contractor’s so eti es su it an inflated price called a cover id’ in the case that he cannot take on the job but
does not want to impose on the team or client in case of future enquiries.

October 2011
Use Class Order
A use class order (Town and Country Planning (Use classes), made under Sections 333 of the 1990 Act by the Secretary
of State, specifies particular groups of uses for property premises.
4 parts :
Part A – uses generally found in a shopping area
Class A1 – Sale of food and drink that is not heated eg. coffee shop
Class A2 – Financial and Professional Services excluding health or medical
Class A3 – Sale of food and drink for consumption on the premises or of hot food for consumption off the premises
Part B – business and industrial use
Class B1
- As an office other than a use within Class A2

- Research and development of products and processes
- Any industrial process, which can be carried out in any residential area without disturbing the amenity of the
area by reason of noise, vibration, smell, fumes, smoke, soot, ash, dust or grit
Class B2- Industrial process other than one falling within class B1 or B3
Class B3 – Special industrial group registered under Alkali and Works Act
Class B4 to B7 – omitted
Class B8 – Storage or distribution
Part C – residential class
Class C1 – Hotels and Hostels , Guest house where no significant element of care is provided
Class C2 – Residential Institutions where care is provided to people eg. Hospital, nursing home, residential school,
college or training centre
Class C3 – Use as a dwelling house ie. household consisting of not more than 6 people
Part D – non-residential institutions and leisure class
Class D1 – medical or health services, crèche, day nursery, education, display of art, museum, public library, public
hall, place of worship
Class D2 – Assembly and leisure ie. cinema, concert hall, bingo hall, casino, dance hall, swimming bath, skating rink,
gymnasium, indoor or outdoor sports recreation
Sui Generis
Uses for which no classes are specified
- Theatre, amusement arcade or centre, fun fair

- Washing and cleaning of clothes in coin operated machines
- Garage sale of fuel or sale of motor vehicles
- Taxi business or hire of vehicles
- Scrapyard
- Prisons or remand centres

October 2011
Valuation of Variations
Variations can only occur if there is a contract in existence or work being carried out through an initial LOI.
Variations therefore allow for changes without having to re-negotiate the contract.
Therefore there should be a provision within the contract for the contractor to be paid and to allow extension of time
for completing added works.
Variations cannot substantially change the nature of the root of the contract, hence they must fall within the scope of
work when anticipated at the time ie. Do they change the tendered methodology / techniques.
There are different ways in which Variations might occur :
 Clients may change their minds before work is completed eg.

o Changes to accommodate last minute arrangements / deals

o Extra work required
Designers might not have finished Design and Specification work before contract was let eg. On complex

buildings or refurbishments

Changes in legislation and other external factors

Expenditure of Provisional Sums or Prime Cost Sums
Variations can apply to both
o The Content / Quantity of Work
 Alteration, modification of the design, quality or quantity of the works including
 Additions, Omissions or Substitutions
 Alteration of Standard of Materials
 Removal from site of materials or goods for purposes of the work
o The Method of doing the Work / Sequencing of Works
 Allows for variations in the means of achieving the works eg.
 Access
 Limitations of working space
 Limitations of working hours eg. Acceleration
 Order of completing works / Sequencing of the works
Authorisation of Variations – By the client in writing usually through the Contract Administrator
Else, through :
 Implied Obligations – Payment entitled under common law rules of contract at request of one party ie. Implied

promise to pay
Waiver / Estoppel – If client requests for work which is contrary to the contract ie. He has waived his obligation or

he is stopped from denying to pay for work
Late signing of contract – Variations are taken account as per the terms of the tender if they made provision for
variations to occur
Note: Not all instructions are necessarily variations – any AI’s are erely clarifications of a situation or covers project
administration processes.
ICE Definition of Variations : The Engineer may issue variations about almost anything and is not limited to what is
described in the Bills as these are mechanisms for selecting the contractor only and do not contain a full description of
the work. ICE is based on a re-measurement of works.

October 2011


Contractor and Employer might negotiate an agreed sum
CA follows express terms as laid out by the contract for deriving a value
o JCT Contract rules
o Measured work
 For additional or substituted work of a similar character to that of rates and prices in the
contract ills Star ‘ate’
 If work is similar in character, but executed under different conditions, or there is a
significant change in uantity, the Bill ‘ates’ used and a Fair allo ance for difference in
the conditions or uantities’
 If ork is not si ilar character ork to that in the Bills, then it is to e valued at Fair ‘ates
and Prices’
o Omitted work
 Only work that is intentionally excluded from Bills and not the work that was accidentally
left out. The Bill ‘ates’ can e used for valuing work omitted
o Unmeasurable work
 Day ork Basis’ - For additional or substituted work
 Prime cost amount
 Percentage addition for profits
o Contractor should provide vouchers to quantify an allowance for each
item:
o Time spent on the work
o Names of workers

o Plants and materials used
Contractor claims as per the terms of the contract – Subject to approval by CA
Else Dispute Resolution procedure to resolve a disagreement.
Dayworks – are used for works that are not capable of being measured
Method of Payment based on :
 Prime Cost of :
o Labour
o Materials and Goods
o Plant
o Plus a Percentage for :
o Incidental costs, Overheads and Profit
Vouchers ie. Dayworks Sheets should be submitted to CA at end of each week. These represent a record that work has
been done, therefore works still need to be valued as normal


Specifying time spent for labour

Invoice cost after discounts etc for materials incl cost of delivery to site plus appropriate handling charges
Rates for plant as provided for in the building contract Preliminaries
Note: Any additional time for overtime work must be instructed by CA and prices, rates agreed beforehand between
parties.

October 2011
VAT Recoverables on Construction Projects
The works that relate to the residential new build should be at 0%.
Works which relate to refurbishment (commercial to residential) should be at 5%.

Calculation
A sensible split of the works needs to be carried out to determine how much of the work should be at 0% and how
much at 5%.
There is no set format to decide this; a sensible measured basis should be used.
i.e. if the demolition is taking place to enable new build then this should be at 0%
or if the work relates to site wide infrastructure a square footage basis between new build and refurbishment should
be used to prorate the invoice etc Therefore @ 5%.
Alterations to listed buildings that are designed as dwellings or used for qualifying residential or nonbusiness
charity purposes, together with those that are being converted to such use, are not subject to VAT as long as the
work is done by a VAT registeredbuilder and the works have listed building consent. VAT remains payable on repairs
and other works which do not require consent.
VAT on listed buildings is a complex area, therefore professional advice should be sought before proceeding.
All VAT charged is recoverable assuming that it has been charged by the contractor at the correct percentage.
Capital Allowances
Capital allowances and how they relate to clients and projects :
 Capital allowances are a for of ta relief and si ilar to the concept of advanced depreciation’ hich allo s
a company to write off more than the actual depreciation incurred. They are offset against an investor’s ta
liability which arises from the profits of their business activities. In effect, they reduce the amount of tax paid

by the investor
The main forms of allowances currently available are enhanced capital allowances, plant and machinery
allowances, industrial buildings allowances and hotel buildings allowances. Enhanced capital allowances are

available for energy efficient and environmentally beneficial technologies
The rates applicable to each type of allowance vary from a rate of 100% per annum for enhanced capital

allowances to 4% per annum for industrial buildings and hotel buildings
In order to be eligible to claim capital allowances the investor must be subject to UK tax, have incurred
capital expenditure on qualifying assets and use the qualifying assets in the course of their trade (which can
include property letting as well as property occupation). Allowances can be claimed on refurbishment works,

new-build projects and property acquisitions
Claims are made to HM Revenue & Customs in support of the investors tax computation. Claims are subject
to enquiry and negotiations with HM Revenue & Customs and/or the Valuation Office Agency
Undertaking a capital allowances analysis of a completed project - information required to prepare a claim and the
types of expenditure which they would identify within the claim as qualifying for allowances :
 A copy of the final account would be required, including breakdowns of the agreed contract sum and all

variations to identify qualifying expenditure
Other project information including as built drawings and as built mechanical and electrical specifications
should also be obtained. The M&E specifications are particularly important to be able to identify enhanced

capital allowances
The above information would be sourced from the project team, including the cost consultants, architects

and M&E engineers
Other client direct expenditure details would be required, including consultant professional fees and fixture
and fittings outside of the main contract. These items can also attract allowances. For example, project

preliminaries and professional fees can be apportioned over qualifying and non qualifying costs
The contract documentation would be analysed for qualifying expenditure and presented in a claim format
that clearly identified the different types of allowances available

October 2011
Capital Allowances
 Items qualifying for enhanced capital allowances include energy efficient lighting and rain water harvesting

installations. Full details of qualifying items are available on the ECA website
Assets qualifying for plant and machinery allowances would include air conditioning systems, heating,

sanitary goods and lifts
Industrial buildings allowances and hotel buildings allowances are available for industrial and hotel properties

in qualifying use. For example, this would include an industrial building used for manufacturing
Where appropriate, revenue expenditure should be separately identified within the claim. Examples of
revenue expenditure include repairs to existing structures and redecoration works
Preparation of a claim for allowances for submission to HM Revenue & Customs, which must then be negotiated to
reach agreement to the allowances claimed :
 The first point to establish is the client’s eligi ility to clai allo ances. This ould involve esta lishing
whether they are a UK registered company, paying corporation tax, or a partnership or private individual and

subject to income tax
It would also be necessary to establish the nature of the interest they hold in the property and that that

interest is the relevant interest on which to claim capital allowances
Assuming the property has yet to be constructed, it would be important to establish the construction period
and how this fits against the client’s financial year ends. This infor ation ould ena le the candidate to
establish the timing of the claim and any requirement for submission of interim claims for allowances within

the relevant years in which expenditure was incurred
The client’s preferred route of contact ith HM ‘evenue & Custo s ould need to e esta lished. It ould
also be important to ask the client if they have any existing pre-agreements regarding the treatment of
expenditure. Additionally the client may have existing tax advisors or internal guidelines which would dictate

how certain aspects of the claim should be prepared
If the advice was given early in the development programme then opportunities should be sought to
influence the M&E specification to maximise the opportunities to claim enhanced capital allowances,
provided that this did not detract from the project objectives. This could take the form of a cost benefit

analysis to ensure any additional cost of installation was offset by the earlier 100% allowance achieved
Engagement would be required with the professional team during the course of the project to ensure that

information is obtained to fully substantiate the claim during any HM Revenue & Customs negotiations
Common issues that may be subject to HM Revenue & Customs negotiations would include items such as the
electrical distribution installations, cold water installations and the apportioned professional fees and

preliminaries
There were a number of changes to the capital allowances regime notified in the 2007 budget, some of which
involve the phased withdrawal of particular allowances. Several of these changes significantly alter the
regime and the candidate should be able to demonstrate a reasonable level of knowledge of the areas of

change and the impact on clients
Two key tests that have evolved from case law that HM Revenue & Customs apply are:
a. Business-use test – How is the item used in the trade of the taxpayer
b. Premises test – Has the item become part of the building or premises
Capital allowance applies to :
- Plant and machinery – general fittings
By concession can also apply to :
- Sanitary fittings
Does not apply to :
- Items that can be removed eg. carpets

October 2011
Capital Allowances
What constitutes plant and machinery
- Air conditioning, Ventilation plant and ductwork

- Boilers, Chillers and associated pumps and ancillaries
- Hot water services calorifiers, pumps, pipework and ancillaries
- Lifts and escalators and associated structures
- False ceilings if used for return air path for the ventilation system
- Security systems
- Fire fighting systems ie. Sprinklers, hose reels and dry risers
- Fire safety installations ie. Fire detection and alarms, fire doors and barriers
- IT systems for computer equipment and power supplies thereto
- Power supplies to plant and equipment but not for general office use
- Dedicated lighting installation to enhance ambience, but not general lighting
- Demountable partitions but not fixed studwork and plasterboard
Capital Allowance Rates
- Plant and Machinery : 25%

- Long Life Assets : 6%
- Industrial Building 4% per annum for 25 years
o Based on the original construction cost of the buildings or the net purchase price if lower
o Allowances received have to be repaid if the building is sold within 25 years from the date of first
use
- Hotel : 4% per annum for 25 years
o Must have 10 or more letting rooms
o Services provided must include breakfasts, evening meals, bed making facilities, cleaning rooms
o Letting bedroom should not be let to same person for longer than a month
- Research and Development: 100%
- Enterprise Zone : 100%
o Life of a zone is 10 years
Enhanced Capital Allowance Regime encourages Invest ent in Technology Efficient E uip ent’ to reduce car on
emissions :
- Combined Heat and Power Plant

- Energy Efficient Boilers and Pumps
- Energy Efficient Lighting
- Pipe Insulation, Screens etc.
Flats above shops : Recently 100% for residential use, however
- Must have been constructed before 1980

- Less than 5 floors
- Sale of lease if within 7 years cancels allowance provisions

October 2011
Whole Life Cycle Costing
The whole life cycle costs of a facility are the costs of acquiring it ie. (Including consultancy, design and construction
costs and e uip ent , the costs of operating it and the costs of aintaining the facility over it’s hole life through to
it’s disposal – that is total ownership costs.
Therefore initial design and construction costs should be evaluated against ongoing maintenance and operating costs
throughout the life cycle of the building.
Time and effort spent on the design stage will save significant amounts of money at later stages.
Output Specifications setting the functional requirements should not be prescriptive and should avoid setting out
process or details of how the end product is to be achieved, so that :
- Focus the end-user’s ind on hat functions the facility is to perfor

- Allow the supply team the greatest opportunity to innovate and find ways of enhancing the function of the
facility while reducing its whole life cycle costs
The key objective is therefore to obtain value for oney for uality and hole life cycle costs hile eeting the user’s
requirements.
Process :
- Develop budget cash flow forecasts from

o Initial capital costs through to operating income and expenditure
o Disposal or replacement costs, residual values
- Discounted cash flow at % discount rate to achieve net present value
Operating costs Per Year (Refer to budgets obtainable from OSCAR ie. Total service charge by building location and by
building size) :
Offices in Greater London (Estimate rates as at November 08)
Air conditioned
- m² = approximately £63-29 / m² per year

- ft² = approximately £5-88 /ft² per year
Non A/C
- m² = approximately £53-60 / m² per year

- ft² = approximately £4-98 /ft² per year
Industry News : July 2008
The first international standard for life cycle costing has been adopted in the UK following industry development and
consultation in 17 countries. It is expected to have a major impact on all future construction procurement, particularly
major investment, PFI and PPP projects. The international standard is accompanied by the publication of UK guidance
on its practical application, published by BSI British Standards.
New ISO Standard for lifecycle costing developed to offer guidance within the industry - BS ISO 15686-5 Buildings and
constructed assets – service life planning.

October 2011
APC Process and Questions
Index
Introduction to the APC Process
General Topics
1. RICS
100. General Topics
200. Contract
300. Cost Estimating, Procurement, Tendering
3a. Specific Questions on Procurement
400. General
Construction APC Guide A1 | P a g e

October 2011
Introduction to the APC Process
This guide is intended to be used as a basis in developing a structured approach for the APC preparation process.
Candidates will no doubt have to invest further time in researching various subject material and obtaining knowledge
over a broad range of construction disciplines in order to be able to respond to questions and discussions within the
APC Interview.
The interview process is normally undertaken by a chairman and two assessors for a duration period of one hour.
During this time the candidate will have to prove their competence and abilities in order to be considered as a
qualified Chartered Surveyor.
The first part of the interview consists of the introductions between the candidate and chairman / assessors and then
follo ed y the candidate’s inute presentation of their Critical Analysis Project.
Even though at first one might feel nervous and not knowing what to expect, it is very important to engage with the
panel members from the outset and to come across as being confident and excited at this opportunity to demonstrate
the benefit of all the hard preparation work done while leading up to this final interview day.
The panel will no doubt introduce themselves to you in a professional manner and will re-assure you that they
understand your position - they will spend a few minutes talking to you so as to try and make you feel more
comfortable and at ease.
The next 10 minutes is taken up by the candidate’s presentation which should be well rehearsed and should capture
the panel e er’s attention and interest in the su ject atter. The assessors ill pro a ly take notes throughout
the presentation and it is orth including key hooks’ of su ject content so that they can later prompt further
engagement and discussion.
It is quite important to concentrate on the appropriate posture, body language and maintain eye contact with all
members of the panel throughout the duration of the interview.
The candidate should spend time deciding on the best form of presentation technique so that they will be in complete
control throughout this process and so as to utilise this initial opportunity in setting the tone for the whole interview
process.
The next 10 minutes will consist of questions from the assessors about the critical analysis and presentation.
Candidates should realise that the assessors normally will have reviewed the full content of the critical analysis
document previously submitted and would have formulated their questioning accordingly.
Therefore the first 20 minutes of the interview effectively could be under the candidates control and should
materialise into a positive and meaningful discussion on the project particulars and key issues presented.
The remaining 30 to 35 minutes are in the gift of the assessors and will involve questions and problem scenarios
across the breadth and depth of surveying. A lot of the questioning will involve focus on the JCT contract forms and
towards the end of the interview the assessors will cover the RICS ethics and code of practice.
Candidates should listen to each question carefully, and if not understood should ask for the question to be repeated
or referred to the end – if questions are referred, the candidate should make notes accordingly as the assessors will
inevitably come back to these later on. If the candidate is not sure of the answer then they should be upfront and
refer to further research required to be done on the subject, however, it will not be suitable to follow this tactic on
more than just a few occasions.
Some questions or project scenarios will prompt further queries from the candidate so as ascertain the key outline
requirements and so as to present the choices available and correct advice to be given.
The assessors are looking for candidates that are safe’ and able to represent RICS in a professional capacity.
During the build up to the interview, it could be very beneficial that candidates try to arrange themselves within
groups with other potential candidates and to regularly hold study sessions on an informal basis, prompting verbal
dialogue and opinions on the different subject material available. This process prompts a rehearsed approach in
dealing with different problem cases and being familiar with how to formulate responses to general topic questions.
It ould also e very useful if the candidates are a le to arrange ock-intervie ’ sessions ith ore e perienced
RICS members either within the workplace or via external contacts in the industry. That way, the candidate would be
more familiar with the interview process and should help familiarising themselves with the experience on the day.

October 2011
General Topics
Be familiar with relevant current topics within the construction market, by reviewing regular magazines and news
articles of key issues within the industry.
‘ICS pu licise a hot topic’ section ithin the RICS library website.
It is important for candidates to know about current trends in the construction markets and to keep abreast of the
latest news and events within the RICS organisation.
Be prepared for broad questions such as :
- What are your long term ambitions beyond gaining chartership?

- How do you keep up to date with events and general industry issues?
Further Reading Material
CDM Guidelines
JCT Practice Note 1 CIS
JCT 05 Guidance notes
JCT 05 Guidance notes 2
JCT Contract Forms
NEC Contents and Typical Contract Forms
Mediation JCT Practice Note 28
JCT Practice Note 5 Procurement of Contracts
RICS Code – Service Charges in Commercial Property
OSCAR Offices Total service charge by building location and by building size

October 2011
RICS
1. What is the ‘ICS otto’ and hat does it stand for?
2. What are the different levels of RICS membership ?
3. Why do RICS have codes of conduct ?
4. Explore and prepare for the different possible questions relating to the RICS Ethics and Codes of Conduct.
5. Your aspirations with regards to what you would do and how you value becoming a member of RICS.
6. Understand hat Lion heart’ is a out ithin ‘ICS.
7. Understand hat Matri ’ is a out ithin ‘ICS.
8.Who do you owe a duty of care to?
9. What do you understand by PI insurance?
10. What is run-off cover?
11. How would you prepare a fee calculation for a project?
12. Do RICS members have to use the RICS scale of fees?
13. What would you do in the case that a client told you that your competitors fees were lower and therefore
expected you to lower your fees?
14. Would you accept fees for work not yet undertaken?
15. How would you deal with conflicts of interest – Give an example of a situation that would be considered as a
conflict of interest?
16. What are the re uire ents of life long learning’ for erly CPD and hat type of activities ualify for this ?
17. What do RICS members need to do when first starting up a company?
18. If a RICS company is in the form of a partnership, what is the proportion of partners that need to be RICS qualified?
19. If a friend or family member asks you for advice in looking after a private job works, how would you respond?
20. What are the procedures for dealing with a complaint?
21. If a client phones you up and says that he would like you to take over from his current surveyor services, what
would you do?
22. If you were offered tickets for a show would you accept them :
- If it was a client offering
- If it was a contractor offering
23. What other faculties are there within RICS ?
24. How would you treat money held by your company on behalf of a client?
25. What would you say is a benefit of being a member of RICS ?
26. What could you get expelled from the RICS ?

October 2011
General Topics
101. The traditional role of the project manager has been carried out by the Architect / Engineer, who should fulfil this
role in the future and why?
102. How do you see technology affecting the profession in the future?
103. What is your perception of your role within :
- the project team

- on site
104. Construction is not attracting enough youngsters into the industry. What would you say to a class of
schoolchildren to get them interested in becoming a QS?
105. What is DDA. How does it affect Clients?
Value Engineering
106. How can value management be used?
107. What is value engineering?
108. What is the difference between value management and value engineering?
Sustainability
109. What does sustainability mean?
General
110. What is you view on multi-disciplinary practices from the employers point of view?
111. Do you see any drawbacks to having all of the consultants under one roof. Do you feel it is wise to have the QS
linked to the architect or engineer?
112. What is project and strategic partnering?
113. Tell me about the housing grants and construction regeneration act?
114. What is your understanding of facilities management ?
115. What is the difference between capital allowances and revenue relief?
- Describe what can be claimed under capital allowances within a construction project?
116. There have been a lot of claims in the construction industry recently - how can we reduce confrontation in the
industry?
117. What do you know about landfill tax?
. E plain the process involved ith whole life-cycle’ costing and ho this affects the design of uildings?

October 2011
Contract
Insurance
200. What forms of insurance are available on a project – Discuss the different forms of insurance within the JCT 2005
form of contract?
- Explain the difference between an indemnity and an insurance?
201. What other insurance’s ay e re uired?

- Why is there a joint names policy insurance?
202. Explain non-negligent insurance?
203. What is decennial insurance?
204. If you were walking round the site and were hit by a scaffold tube would you be insured?
205. What insurance would cover your injury?
206. If there were a fire on site and part of the works were damages and some materials on site, how would the
employer cover the loss?
207. Explain the process of an insurance claim through the JCT contract.
208. A contractor is about to start on site and upon checking his insurance cover for the site you discover this cover is
not up to the level specified in the tender documents and as required by the employer. What would you do?
Dispute Resolution
209. What are the different types of dispute resolution procedures?
210. What is adjudication?
211. What is the difference between adjudication and arbitration?
212. What is the difference between Alternative Dispute Resolution and adjudication?
213. Do you know the difference between conciliation and mediation?
214. Is adjudication binding?
215. Is arbitration binding?
216. How do sub-contractors use adjudication to their advantage?
217. How do the courts look upon parties going straight to arbitration?
Nomination / Listed Sub contractors
218. Explain how the JCT 2005 deals with the nomination process as previously under JCT98?
Partial Possession/Sectional Completion
219. Can a client take part of a building over before hand over?
220. What is the difference between partial possession and sectional completion?
221. What else happens to the responsibilities of the parties after sectional completion?

October 2011
222. What information should be provided to a contractor where sectional completion is required?
Provisional Sums
223. What is a provisional sum? Give an example
224. What is the difference between a defined and undefined provisional sum?
225. What is the difference between provisional sums and prime cost sums?
Liquidated and ascertained damages
226. What are liquidated and ascertained damages?
227. How do you calculate LAD's and who does it?
228. What is the difference between liquidated and un-liquidated damages?
229. What ould happen contractually if nil’ LAD’s ere inserted into the contract?
230. When would LAD’s be deducted?
231. Would you as the QS deduct LAD’s?
Bonds and Warranties
232. Can you tell me what collateral warranties are, what types of warranties you get and when you would use one?
233. What are Performance Bonds? What limits normally apply to them?
- What is the difference between a collateral warranty and a performance bond?
234. Can you explain the difference between an on-demand bond and a conditional bond?
- Is there an alternative to using a performance bond?

- What is the difference between a performance bond and parent company guarantee?
235. Under a collateral warranty, how are step in rights executed?
236. Tell me about the rights of a third party? Has there been any recent legislation regarding this?
Other Contract Questions
237. As with standard JCT forms of contract, what are the general obligations of the Contractor?
238. As with standard JCT forms of contract, what are the general obligations of the Employer?
. Ho should an Architect’s Instruction e issued and hen should the Contractor co ply ith instructions?
240. What are the Architect’s contractual rights regarding aterials or goods that are not in accordance ith the
contract?
241. Can the Architect instruct the exclusion of site operatives?
242. How are valuations valued?
243. Explain the procedures and times for the payment process?
244. Explain the Employers notice to withhold payment?

October 2011
245. How does retention work?
246. What is the procedure for including off-site materials for payment?
247. Explain how Practical Completion is achieved and what are the effects?
248. What are the procedural requirements of the extension of time clause within the JCT form of contract?
249. What are relevant events and relevant matters?
250. Explain the process for dealing with loss and/or expense claims?
251. What are the grounds for issuing a notice of default?
252. How would you spot the dangers of insolvency?
253. What happens in the event that a Contractor becomes insolvent?
254. Define Insolvency?
255. Explain the different forms of letter of intent and what these are used for?
256. Within JCT 98, what’s the difference et een Contractor Design Portion Supple ent and Performance Specified
Work? How has this changed within the JCT 05?
257. If an area of brickwork was found to be defective on a project – what would happen ? Who would pay to
correct the work ?
258. What would be included in a loss and expense claim?
259. Who is responsible under JCT 98 for ascertaining the true amount of loss and expense?
260. What way would you work out head office overheads and should they be included?
261. How do you calculate the loss and expense for an Extension of Time?
- Would you pay for a claim on account?
262. What is the difference between assign ent’ and novation’?
263. Give advantages and disadvantages of using a bespoke contract ?
264. What would you advise you client if they were considering making amendments to the standard form of contract
forms ?
265. Explain the process with regards to valuing off-site materials?
266. What measures could you implement on a project to manage and control variations?
. What is the difference et een disruption’ and delay’?
268. Explain the risks in using JCT with quantities and JCT without quantities ?

October 2011
Cost Estimating, Procurement, Tendering
300. If a client wants to build an office block, how would you prepare a Cost Estimate and what information would you
include?
301. Estimates :
How do you go about doing an elemental estimate ?
What type of exclusions would you include in a cost estimate?
302. How would you undertake a benchmarking exercise?

- How would you confirm rates for a Cost Estimate exercise?
303. What ould you do if your Cost Esti ate as still over the client’s re uired udget?
304. Explain how you would undertake a risk management exercise during the early stages of a project?
305. What is the difference between a cost plan and a feasibility estimate?
306. How can a cost plan provide cost control on a project?
307. What’s incorporated within a monthly cost report?
308. Name various methods of producing a cash flow, and why produce one?
309. How would you calculate inflation on a project ?
310. What is the difference between TPI and BCI and how are they calculated?
311. What do you understand by the term Best Value ?
312. What are the advantages of Partnering?
313. Are there any disadvantages to Partnering?
314. What is the difference between JCT and NEC forms of contract?
315. Describe how you would work out what form of procurement to use on a project?
316. What are the key criteria used when analysing different procurement routes?
317. Explain how you would work out what type of contract form to use on a project?
318. Name a few of the JCT forms of contract and when they would be used?
319. Outline the main advantages and disadvantages of different types of procurement routes available ?
- The assessors will probably outline a project scenario eg. If a client wanted to carry out a refurbishment
project in central London, how would you advise him of the procurement and contract strategy ?
Refer to specific questions on procurement further below
320. What is the difference between Construction Management and Management Contracting procurement ?
321. How do you go about putting tendering documents together?
322. What documents do you send out for tender?
323. How would you go about preparing a tender list ?
324. How long should a tender period last for?

October 2011
325. How long should tenderers keep their tender valid for ?
326. What would you include in your tender report to the client ?
327. How are errors dealt with in tender documentation?
328. Where would you include any such adjustment ?
329. What do you do with a tender that is returned late?
330. Your client goes ahead and opens the late tender and it is the lowest, your client wants to place his
contract with this contractor, what advice do you give?
331. What do you understand novation’ to e?
332. Is there any way the client can maintain a link with the design team after novation?
333. What documents make up a design & build contract?
334. On a design and build project, if there appears to be a discrepancy between the Employer's Requirements and
Contractors Proposals, which takes precedent ?
335. Why would Design and Build not be best suited to a refurbishment project?
336. How could you ensure that Tenderers would submit a tender and not drop out during the Tender Period?
337. How would you inform tenderers of any changes to the tender documents?
338. How would you analyse Design and Build tender returns?
Specific Questions on Procurement
3a. What is procurement ?
3b. Why is procurement important?
3c. Why is procurement not a straightforward process?
3d. Where do we start the procurement analysis process and what are the options?
3e. Explain the process of best value procurement?
3f. Explain the key criteria associated with procurement?
3g. Describe each of the following contractual routes and their advantages and disadvantages ?
- Traditional lump sum
- Design and Build
- Design and manage
- Management contracting
- Construction contracting
3h. What do you understand about Prime Cost Contracts?

October 2011
3i. What do you understand by PFI ?
3j. Explain the process compare advantages, disadvantages between single stage and two stage tendering?
3k. What do you understand about Guaranteed Maximum Price Contracts?
3l. What is supply chain’ management ?
3m. What do you understand by Partnering Framework Agreements?
3n. What are the effects of procurement routes with regards to timing and programming of a project?
3o. Describe the main contract forms that need to be taken into consideration throughout the procurement
process?

October 2011
General
400. What is CDM ?
401. What role does the CDM co-ordinator play in CDM ?
402. What are the main roles of the main parties identified in CDM ?
403. Does the QS have any responsibilities under CDM ?
404. What part of the BOQ would be most affected by CDM ?
405. Can you give examples of Project Management techniques ?
406. What characteristics does a Project Manager need ?
407. What do you understand of the term Capital Allowances?
408. Provide us with examples of items that you would get Capital Allowances from?
. What is considered as float’ ithin a contract programme and who does this belong to?
. What is considered as critical path’ ithin a contract progra e?
411. What is the cost difference between pre-cast and in situ concrete ?
412. How would you compare the advantages and disadvantages of steel framed versus concrete structure forms of
construction?
413. Can you explain what the Joint Fire Code is ?
414. What is a wall / floor ratio’ and Net : Gross efficiency’ - How do these influence the cost of buildings?
415. What is the most economical shape of a building ?
416. With regards to mechanical and electrical services – what percentage of the overall works would you expect
these costs to be ?
417. What do you know about CABE?
418. Explain the detail contained within a Fire Insurance Claim?
419. What do you understand by a right of easement?
420. What do you understand by a covenant?
421. Describe the RIBA outline plan of works?
422. Describe the different use class orders for properties?
423. Ho ould you i ple ent a risk anage ent’ process ithin a project?
424. What are the different rates of vat applicable to construction projects ?

October 2011
Appraisals
- Scheme Details
- Determine – Highest and Best Use’ for the site
- Estimated Scheme Durations
Calculations % Ratios
o Development Costs 100
 Site Purchase Costs 38

 Legal, Agents, Stamp Duty Fees 0.5
 Construction Building Costs 45
 Professional Fees (15% to 18% on Construction Costs),
7
Marketing Agents, Promotion Costs
 Finance Interest Charges say 4% 7
 Inflation Costs N/A
 Other : S106, NHBC, Planning, Archaeology, Office 2.5
o Development Value 120
 Project Income 
 
 
Sales
Rental Income
 Capital Allowances Values 

Surplus Profit on Development 20
Calculation Methods :
Discounted Cashflow Method
I = Interest Rate Yield
To determine Return of Investment @ Net Present Value
Rule of Thumb Method :
Income per Annum
Development Cost
= ROI Percentage ie. Cap Rate
Term and Reversion Methods

October 2011
CASHFLOW
1. Provides Client ith a forecast of likely e penditure ie. the Client’s financial co it ent
over the duration of a project
2. Can be used as a comparative tool to monitor the actual certification process against
construction programme
CUMULATIVE Acceleration
VALUE
Build up Runs down
at Start final months
CONTRACT PERIOD
Typical graph depicting an S’ Curve
Types of Cash Flow :
- Monthly basis throughout the duration of the construction programme
- Based on progra e ilestone’ dates eg. Stage Pay ents
- Based on the Procurement of Packages
Construction APC Guide A3 | Page

October 2011
JCT Time Table Contractual Dates and Certificates
Issue of Last Date for Issue Certificate of

Date of Date of Certificate of End of Defect Issue of Completion of Final Certificate
Possession Completion Practical Liability Period Schedule of Making Good
Completion Defects Defects
2 Months
2 Months
2 Months
Contract Period of Delay Defects Liability Period 14 Days
6 Months 3 Months 28 Days
12 Weeks
Last Date for Last date for Last Date for Statement of Last Date for Interim
Granting EOT Late Date for Receiving Docs Ascertainment of Certificate and Adjustment
Applied for Review of EOT for Adjustments Outstanding L&E and of Sub-contractor Contract
To Contract Sum Adjustment Contract Sum Sum
n
The Defects Liability Period is 6 months if none is stated
A4 | P a g e Construction APC Guide

October 2011
Indemnities and Insurance
Liabilities – Indemnity
Employer Liable
Injury to Persons,
Contractor Primary only if Negligent,
Damage to
Liability only if Negligent Primary Liability
Property
Insurance (For the Works)
Contractor Employer
Insurance to Cover Insurance to Insurance to Cover Insurance to Cover

Contractor’s Cover E ployer’s Damage to the Works – damage to Works
Liabilities Liabilities By Contractor caused by Fire etc.
Insurance for
Damage through New Buildings by
Non-negligence – Insurance for Fire, Employer
Damage to Specified Perils
Adjoining
Property,
Damage to
Property other
than the Works
Insurance as Insurance for Full Existing Buildings –
specified by way Reinstatement Value By Employer
of PS in Contract plus % for Professional
– Joint Names Fees – Joint Names
Insurance for
E ployer’s Loss of
Liquidated Damages
Persons Property Excluding
Works
Employees – Third Parties –

Employers Liability Public Liability
Insurance - Insurance
Compulsory
Cover for amount

stated in
Appendix

October 2011
Certification and Payment Timetable
Period of Interim Certificates (1 month)
Payment
Architect’s Interim 14 days from issue of Interim Certificate
Architects Interim
Certificate Contractor gives Employer 7 Days Notice of
Certificate
Intention to Suspend the Works until Payment received
-In case of Late Payment then Interest at base plus
Contractor’s 5% Else Dispute Resolution Process
Application for
Payment
7 Days 14 Days 7 Days
Next Application
5 Days 5 Days for Payment by
Contractor
Due Date Notice of Notice to Due Date

Payment Withhold
in writing in writing
By Employer : Specifies By Employer : Specifies the

the Amount of Payment Amount of Payment to
Proposed Withhold or Deduct :
-What it relates to -Descri ing Grounds eg. LAD’s,
-Basis of Calculation Retention
A6 | P a g e Construction APC Guide

October 2011
Variation Valuation Process
Varied Works Other Work

Obligations
Quotation Capable of being

Not Capable of
Requested Measured and Fair Valuation
being Measured
Valued
Dayworks
Accepted Additions Omissions Prime Cost,
Vouchers
Not Accepted Bill Rates
Dispute Resolution
Similar character but

Similar character, Not of similar
different conditions or
conditions, QTYs character
QTYs
Bill Rates with fair

Bill Rates allowance for Fair Rates
differences
Note : Option is always open for the Contractor and the Employer to simply Agree a Price.

October 2011
Change Order Procedure
Change Control Meetings Contractor to advise on Changes and Raise a Change Order Procedure
(Initially for the first few
months to be held on a - Forecast list of changes
weekly basis, thereafter o Design Development
on an as required basis) o Site co-ordination/clashes
o Changes to Base build documentation eg. Drawings,
specifications
o Client Requests
- Contractor to list and manage process showing critical decision
dates
Consultants to consider changes
Consider Programme Implications
Contract Administrator to co-

ordinate information and issue
Cha ge I fo Pack’ Obtain Client Approval
Contractor to price or provide rates
– QS Cost Assessment
Else: Short Circuit Process
- Contractor to issue a RFI

- QS Cost Estimate
- Contract Administrator to obtain verbal approval from Client
Contract Administrator
OR
Issue AI
- Contractor Administrator to Issue AI if within capped
Incl Costs, rates etc on
allowance
instruction form
- Contract Administrator to issue e-mail confirmation followed
by weekly AI forms
Contractor to instruct Sub Contractors accordingly

Notes:
1. All ‘FI’s , AI’s, Change Info Packs and any other correspondence regarding Change Orders or
Variations to the Contract to be copied to the CDM Co-ordinator
2. QS to monitor impact of Change Orders on the Project Cost Plan
3. Contract Administrator to take into account all Contract Conditions and amendments when
assessing re uests for AI’s

October 2011
Proposed Forms for the Change Control Process
Three main forms to be proposed as follows :
Form 1 : Contractor Change Request Form ie. RFI
Outline Format
- Reference Number system and date columns etc

- Which Consultant the RFI is to be addressed to
- Reason and description of the works to be changed
- Contractor / QS estimated cost value for the change = Indicate if costs are agreed costs
- Signatures and Approvals
o Acknowledgement of change by the relevant Consultant
o If value of change is below Capped Value then
 Approval signature by Contract Administrator
o If value of change is above Capped Value then
 Client signature if costs are agreed
Once each ‘FI ite has een co pleted then Contract Ad inistrator to s eep’ up all ite s and
issue the contractual AI form and include confirmed costs if these have been agreed.
QS to assess all costs ongoing and add to Cost Report accordingly.
Form 2 : Project Cha ge For ’
Form to be developed by Contract Administrator and to be used for specific changes on the project
and those changes whose costs are above the Capped Value.
Outline Format
- Reference Number system and date columns etc

- Reason and description of the change
- Which Consultant is handling the detail with regards to the change
- QS / Contractor estimated cost value for the change = Indicate if costs are agreed costs
o Client signature required before change is instructed
o CA signature to acknowledge that change can proceed

October 2011
Proposed Forms for the Change Control Process
Form 3 : Client Summary sign-off sheet for all AI’s a d cha ges
Form to be developed in line with Cost Report system.
All costs to be confirmed by QS and agreed with Contractor before Client signs off – This process will
assist the conclusion of the Final account process as the project progresses, rather than relying on
agreement at the end of the project.
Split AI change categories as follows :
A : Drawing Revisions as they occur
B: AI’s elo Capped Values
C: AI’s a ove Capped Values – refer to Form 2 sign-off
Outline Format
- Reference Number system and date columns etc – reference to AI’s, ‘FI’s, Project Change
Form , Drawing Number changes
- Reason and description of the change
- QS / Contractor agree actual cost value for the change
o Client signature column and date signed
Note:
1. All ‘FI’s , AI’s, Project Change Forms and any other correspondence regarding Change
Orders or Variations to the Contract to be copied to the CDM Co-ordinator

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A Construction Industry

(Reference Material Only)

First Publication date July 2010

Construction APC Guide

Published in November 2009 – London, United Kingdom

AI – Architect’s Instruction JCT – The Joint Contracts Tribunal

Construction APC Guide 2|Page

APC Process and Questions A1 APC Process and Questions A1

Construction APC Guide 3|Page

Refer to Appendix document for – Appraisal Structure Layout

Appraisal approaches to accommodate different options in the development of a property project :

• Option Identification – Identify and define the options to be evaluated

• Option Selection – Select the preferred option

Construction APC Guide 4|Page

Key criteria linked to objectives of the client

• % - Building adaptability to accommodate long term change in demand / use

Yield Formula Calculation :

Area x Rent per Sq Ft divided by % Yield = Appraisal Value of Income

Construction APC Guide 5|Page

Factors to consider when analysing project benchmarking information :

When reporting to a Client, a statement of Assumptions as well as Exclusions must be included.

Key Performance Indicators

Construction APC Guide 6|Page

Key Performance Indicators :

Construction APC Guide 7|Page

Construction (Design and Management) Regulations 1994

 The construction phase is longer than 30 days

otherwise no notification is required.

- Notify the Health and Safety Executive

- Check, adopt and develop the Health and Safety Plan

Desig er’s Risk Assessment

Construction APC Guide 8|Page

Construction (Design and Management) Regulations 1994

Construction APC Guide 9|Page

Advantages of using standard forms of contract:

• Reduces Client’s legal fees

JCT 05 with CDP

Examples of some draft contract amendments to incorporate

- Schedule of Contract amendments

- Article 10 (Schedule of Amendments)

- After the list of documents, add the following

Construction APC Guide 10 | P a g e

E ployer’s ‘e uire ents / Contractor’s Proposals

Ninth Recital : CDP Analysis

Name Change of contracting parties

Article : The Contractor

Construction APC Guide 11 | P a g e

Contract Bonds, Guarantees, Collateral Warranties

- On Demand Bonds or Unconditional Bond

Standard terms of the bond

- Undermines the selection process of competent Contractors

Association of British Insurers (ABI) explanatory guide to model form of bond

Contract Bonds, Guarantees, Collateral Warranties

Aims of the Model Form

• In clear, odern language

• Mini ises the risk of litigation

• Contains a clear e piry date

Parent Company Guarantees

- Agreements that run alongside another contract