Costing Flashcards
What is a Final Account?
The conclusion of the contract sum and signifies the amout the employer will pay the contractor. Represents the settlement of all claims and triggers the CA to issue the final certificate
Includes:
- Loss & expense
- Other claims due
What is a proposed structure of a final account?
Variable costs: Provisional Sums, approximate quantities, prime costs, day work allowances. Ensure agreed at FA
Variations: instructed changes
Contract instructions: ensuring all variations claimed by contractor have been considered by CA /A
Loss & Expense: recorded entitlements to L&E, usually formalising previously agreed
Fluctuations: depending on contractual provisions
Risk Allowances: Client owned, Contractor owned, Transparent risk (rarely used, contractors see as entitlement)
How does the definition of Final Account differed under various contracts?
NEC
- Doesn’t refer to final account. Assumes adjusted as project proceeds
- More emphasis on timescales relating to agreed variations
JCT
- Defined under clause 4.12 (D&B) or 3.5 (SFC)
- Timings vary under the different forms
FIDIC
- International market - own timescales
- Clause 14 refers to payment and subclause 14.11 refers to final account
Under a JCT SBC, when is a Final Account to be issued? How does this compare with NEC?
- 3 months after receipt of Contractor information
- Information from contractor should be received no later than 6 months after issue of practical completion certificate
- NEC - FA is an ongoing procedure so no final account period as such
What are contra-charges?
Where employer recovers costs from the Contractor that the Contractor has caused the Employer to incur. Construction Act states must comply with pay less mechanisms of contracts
What are the different types of defect?
Patent Defects - apparent with reasonable inspection, prior to final certificate. Where different contractor repairs, the cost is contra-charged
Latent Defects - claimed against during limitation period
What information should be supplied by the Contractor to support Final Account preparation?
- Substantiation to variation figures
- Subcontractor quotes where applicable
- Daywork Sheets
- Loss & expense claims
- Build up to fluctuations
What would you typically exclude from a Final Account?
- VAT
- Liquidated Damages
- Interest
What would you do when agreeing Final Accounts?
- Review the contractor’s submitted information to ensure that any variations which have not already been agreed have been instructed and have been valued correctly. If I dispute any of the information submitted, I arrange a meeting with the contractor to discuss the issue and attempt to reach agreement.
- Only use the valuation rules as a last resort.
- Adjust for any agreed amounts of loss and expense due to the contractor.
- Ensure expenditure of all provisional sums has been instructed and include the agreed values after omitting the provisional sum.
- Ensure all approximate quantities included within the bills of quantities have been remeasured and agreed following instruction
What would you advise the Employer if you were unable to reach agreement on the final account with the contractor?
- I would advise of the position of each party and the key differences
- The Employer may wish to discuss a deal in order to quickly agree the final account if they were a private sector client, butI would need to take formal instruction before negotiating anything outside of the contract terms
- If the client wasn’t willing or was unable to consider a deal, I would advise that mediation would be a sensible means of alternative dispute resolution in the first instance
- Adjudication would be the typical first formal step if mediation could not resolve the differences
How long do you get to settle a final account under the forms of contract you are most familiar with?
JCT Standard Building Contract - The contractor has 6 months from the date of Practical Completion to submit all the necessary details for the QS to make the final adjustment to the contract sum, and the QS then has 3 months in which to make the final adjustment.
JCT Design and Build Contract - The contractor has 3 months from the date of Practical Completion to submit their Final Statement. If they do not provide it within this period the Employer notifies the contractor that he has a further 2 months in which to submit it or the Employer will submit his own Final Statement in lieu of that of the contractor.
What is the Final Statement conclusive of under a D&B contract?
- All extensions of time due have been awarded
- The quality of materials and goods specified are to the satisfaction of the Employer
- All claims have been settled
- Unless challenged within 28 days of the due date for final payment the Final Statement is conclusive and cannot be challenged.
What are the benefits of using bills of quantities?
- Provides a detailed breakdown of the works that allows for transparent pricing of each item
- Allows for straightforward tender evaluation on a like for like basis
- Clear and simple post-contract cost control
- Easy to value the works carried out to date
- A good source of cost data
What are the disadvantages of using bills of quantities?
- Lengthy and expensive production process
- Only as good as the information provided
What is the difference between a bill of quantities and a schedule of rates?
Schedule of rates sets out staff, labour and plant hire rates used for pricing cost reimbursable work.
Does not contain any quantities
Generally prepared by designers rather than cost consultants
Used for small projects or alteration works where nature is known but not the quantity
What is the difference between a bill of quantities and a schedule of works?
Bills of quantities are a breakdown of each individual component of a building based on detailed design information, allowing them to be priced individually. QS produces
Schedule of works states an activity to be carried out which is priced holistically. Used more typically for maintenance such as alterations and new work. Designer produces and reviewed with QS
What are the advantages of using Schedule of Works?
- Responsibility of quantities is transferred to Contractor (client attitude to risk is a driver in using)
- Can be used to inform works programme and progress on site
- Creates a rolling final account
What are the disadvantages of using Schedule of Works?
- Require clarity in the detail in contract drawings, specification or schedule of works to avoid claims of lack of clarity
- Can be difficult to assess tender returns
- Possible for contractors to front load prices
What are the different means by which bills of quantities can be measured under NRM2?
- Elemental breakdown structure
- Work section breakdown structure
- Work package breakdown structure i.e. groundworks, ironmongery
What is a CSA?
- Pricing document prepared by EA on D&B contract
- Can be prepared in BoQ / SoW format but unlikely due to level of design. Can be used for negotiation of CS but doesn’t form part of contract
- Requirement for tenderers to return in the same format
- Referred to in Article 4 of JCT
What are the advantages of using a CSA?
- Where items are missing from CSA but within ER’s, Contractor is obliged to complete at those costs
- Allows for comparison of tenders
- Used as a basis for assessing contractor progress and payments
What are the disadvantages of using a CSA?
- Front loading can occur if all OH&P’s are applied to items early in construction eg. Substructure
- Valuation of design development, the contractor may reduce the design at a later stage to one that just meets the ER’s
What types of pricing schedule are you aware of?
BoQ, Schedule of works, Schedule of Rates, CSA
How do schedule of works differ from a CSA?
Schedule of works priced holistically, not with quantities. Priced as an item rather than quantities
CSA is priced in a way specified within the ER’s. Can take different forms depending on the level of information available
