Cost Flashcards
What is the difference between the fluctuation clauses under JCT SBC 16? Why might you
recommend a Client to use the fluctuation clauses B or C?
A) Contribution, levy and tax Fluctuations. Option A is the Default option
B) A + The contract sum is based on the cost to the contractor of labour and materials current at the base date. Option B applies to a basic list of materials and labour. MC tells Employer the price of mats/labour at base date and the employer covers the difference when the MC actually buys the materials so covers the MC’s risk (Generally used when there is known highly fluctuating item price)
C) Formula adjustment: essentially a ‘hybrid’ where, instead of using the actual increases in labour, materials and equipment, the contract stipulates a formula, so that the contract sum may be adjusted, by applying the formula with a series of indices to calculate the increase or decrease for the relevant part of the work. Used on long term projects
What are the ways in which a contract sum can be adjusted giving examples under JCT SBC16?
Architects Instructions Acceleration Variations Provisional Sums Loss and Expense (head office costs, Interest) Fluctuations
What is a Schedule 2 quotation? If a variation has been calculated by a Schedule 2 quotation is the
contractor entitled to a loss and expense claim? Why?
Variation - Acceleration quote
When submitting the Quotation to carry out the acceleration of an agreed programme, the contractor needs to make it clear what time will actually be saved by implementing the strategy and measures outlined in this proposal, and what costs are involved in making this possible, outlining the specific breakdown of costs; ‘direct costs, consequential loss and expense and an allowance for the cost of preparing the quotation.’, is a requirement of submitting the Acceleration Quotation.
If a rate in BQ is really low and is subject to a variation which increases the quantity is the MC able
to increase his rate for the additional quantity? Why?
No the MC cannot increase his rate as is based on the BQ rates
If it is agreed that a variation is to be valued on a daywork basis can the time claimed be reduced if
the PQS thinks that the contractor has taken too long? Why?
No but you can challenge the rate
Only if the employer can prove that the Contractor has taken too long
Explain the difference between defined and undefined provisional sums
Defined - Expected to have made Allowance for
Undefined - No Allowance for Programme and Prelims
What are the valuation rules under JCT 2016?
The valuation rules are a reference to JCT Clauses 5.6 to 5.10 in which it is set out how to value variations and what criteria is used to differentiate between the assessments
Using BQ Rates - Same item, Similar Quantities, Similar Conditions
Using Pro Rata rates - similar item but different quantities or different conditions
Star rates - Fair and reasonable rate
Dayworks - Unfavourable for client, favourable for contract as generally higher rate than the contract bill
Can you explain how you value preliminaries for an Interim Valuation (IV) under JCT SBC 2016?
Fixed Cost A - Bring to site including delivery and set up costs
Time Related Costs - Depend on element to when this is charged. E.g. Site management has no fixed cost and a time related cost is spread over the whole of the project
Fixed Cost B - Costs to remove and take down prelim items
What are the requirements for paying Materials On Site and Off site under JCT SBC 16?
Materials On site
Fixed By next Val
Become Employers property
Materials Off site
The contract identifies ‘listed items’ whose value is to be included in interim payments and states that when the value of such materials has been included in an interim payment, title will pass to the Employer. There are also particular conditions that need to be satisfied before payment will be made which include:
• The listed item is in accordance with the contract. • Proof that they are vested in the contractor and covered by an insurance policy covering them against loss or damage caused by specified perils until they are delivered to site. • At the place of storage listed items are clearly and visibly marked as belonging to the employer and set aside from other materials. If required, the contractor must provide a bond from an approved surety (in a form provided by JCT) which enables the employer to recover the amount it has paid to the contractor if he is unable to obtain the relevant goods
Explain the payment timetable for JCT SBC 2016
If no IVD set - 1st IVD 1 month after commencement on site
The Interim Valuation date is when the Application for payment is due. Payment schedule in Contract for this. Due date is 7 days after the IVD with Final Date for payment being 14 days (Default) after the due date. The CA has 5 days after the due date to issue an interim certificate. Not less than 5 days before the Final Date for Payment can the Employer issue a pay less notice
Explain the payment timetable (JCT) for MC, SC and SSC.
MC valuation date is the 1st (Example) Due Date 8th Payment Due 22nd
SC Valuation date is the 1st Due Date is 13th Payment Date 27th
SSC Valuation date is the 1st Due Date is 18th Payment Date (13 days so paid in same month) 31st
How is the PWDD valued under Option A ?
Price Work Done Date - Total Price for Completed Activities. Only when the work is completed should it be paid
How does the MC receive payment for preliminaries under NEC4 option A? How does the MC
receive payment for materials on site under NEC4 option A?
Preliminary items for fixed cost should be listed in the activity schedule and only paid at their “completion”
Materials onsite are allowable if detailed in the activities schedule however this is rare.
Under each of the options in NEC4, how does the MC receive payment for materials on site?
Option B - Only paid if there is a specific bill item
Option C-F - Under C-F to show records of MOS bricks have been paid for by MC so can be included in valuation
Who is responsible for assessing the amount due under NEC3? Can this be changed, if so how and
why? How has this changed under NEC4?
NEC 3 - The project manager is to access if Main contractor doesn’t submit an AFP. MC doesnt have to submit an application
NEC 3 was Onerous on PM - Z Clause was often used stating that the main contractor had to submit
NEC 4 - Payments - Contractors must submit applications for payments, rather than the project manager being obliged to assess if they don’t. This will lead to less arguments and hopefully a more collaborative approach to payment
