Escolar Documentos
Profissional Documentos
Cultura Documentos
Please note: References to the masculine include, where appropriate, the feminine.
Appendix A, Section 2.3 is reproduced from the Building Cost Information Service publication,
Standard Form of Cost Analysis: Principles, Instructions and Definitions (1969).
© RICS Business Services Limited (RBS) December 2003. Copyright in all or part
of this publication rests with RBS, and save by prior consent of RBS, no part or parts
shall be reproduced by any means electronic, mechanical, photocopying, recording or
otherwise, now known or to be devised.
The fact that our profession serves a changing world increases the need for
it to rely on well thought-out and reliable practices and procedures. Events
move at an ever-increasing pace, imposing a requirement for quicker
response times. Modern communication methods such as facsimile and now
e-mail result in the need for information to be available almost instantly.
This is made more difficult by an industry growing in complexity and which
is subject to increasing customer expectations in terms of service and
quality.
Major D.R. Bassett, Royal Engineers, for his contribution to the research
underpinning the construction time charts in Part 3, Section 1; Central Unit for
Procurement, HM Treasury (now Office for Government Commerce), for
permission to use CUP guides extensively in the drafting of Part 1, Section 1
and Part 3, Section 1.
Index 1
INTRODUCTION
A5 The document is drafted on the basis of UK law and practice, although much
of it is relevant to practice elsewhere.
B Arrangement of Content
B1 After sets of Definitions and Abbreviations which apply throughout, the
Handbook is arranged in five Parts. The first four Parts represent sequential
phases of the construction process. The last Part, Part 5, provides Additional
Guidance and Information. Each part is followed by Further Reading, to
which the numbered cross references in the Parts apply.
Part 1: The Client seeks to help surveyors to work with clients. It discusses the
establishment of their construction objectives and constraints, leading to the
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I NTRODUCTION
Part 3 relates to Construction Planning and Procurement, i.e. to the time the
construction contract is placed.
C Status of Content
C1 For convenience, Guidance and Information is integrated. Each paragraph is
prefixed with a G or an I to indicate its status.
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INTRODUCTION
On the other hand, it does not follow that a Member will be adjudged
negligent if he has not followed the practices recommended in this Handbook.
It is the responsibility of each individual surveyor to decide on the appropriate
procedure to follow in any professional task. However, where Members
depart from any practices recommended in this Handbook, they should do so
only for good reason. In the event of litigation, the Court may require them to
explain why they decided not to adopt a recommended practice.
D Currency of References
The cases cited and the editions quoted were up-to-date at the time of writing.
However, readers should check current rulings and additions.
E Invitation
RICS Books would welcome comments upon and suggestions for additions
and amendments to this Handbook. They should be provided in writing to
RICS Books Publishing, Surveyor Court, Westwood Business Park,
Coventry, CV4 8JE.
F Subscription Service
Any change of address should be notified to the address appearing below:
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PART 1, SECTION 1
G 1.1.1.2 The type of client will affect the criteria which must be met if the client is to
be satisfied with the project.
I 1.1.1.4 This is not to say that owner occupiers are unconcerned about time. Indeed,
certainty of completion date may be a key issue. Nor is it fair to suggest that
developers are unconcerned about building performance or cost. There are
market conditions where both of these issues may become important.
(a) Cost-related
• minimise capital cost
• maximise capital cost/value ratio
• maximise capital cost/worth to client ratio
• achieve necessary income cash flow profile
• minimise management costs
• minimise maintenance and insurance costs
• minimise tax liability
• respect capital cost constraint
• be energy efficient.
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(b) Marketability
• maximise prompt or future disposal (freehold or otherwise).
(c) Use-related
• optimise operational requirements of intended occupier(s)
• provide greatest flexibility in potential uses
• reflect intended occupier’s requirements/preferences/ability to afford
• meet social/management/occupier’s special needs (e.g. disabled).
(d) Environmental
• minimise health and safety risks
• choose materials which reflect sustainability
• aesthetically please (e.g. impression on occupier’s customers)
• minimise any alterations to specific features
• reflect planning authority’s brief/policies
• minimise potential opposition
• reflect corporate style or personal preferences of proposed
occupier/employees
• maximise comfort of occupants
• minimise inconvenience to others during construction.
(e) Timing
• construct within a defined period
• minimise risks of delay during construction.
G 1.1.1.6 The importance of each of these criteria will be relative to the objectives of the
client, the business case for the project and to the extent to which he/she is
able to cope with risk (see 3.1.2.9). It is important that the client seek
investment appraisal advice in respect of the project and that the appraisal
considers ‘what if’ questions to ensure that the impact of changes of key
components in the appraisal is clearly understood. A chartered surveyor will
be able to assist the client in these matters. However, the giving of advice on
some of the requirements listed above is, of course, outside the competence of
the surveyor. Where such a particular requirement is important to the client
and outside the client’s expertise, the client should be advised to seek other
professional advice.
G 1.1.1.7 Many construction projects suffer from poor definition due to inadequate time
and thought being given at an early stage1. This is often because there is a
sense of urgency fuelled by the desire for an immediate solution. Investing
time at the beginning of a project in developing a complete definition taking
account of all the requirements will reduce the likelihood of changes later. The
later that changes are made in a project, the more they are likely to cost in both
direct and knock-on effects (see 3.1.4.14 and 3.1.2.14(f) & (g)).
1
Construction Industry Board, Briefing the Team, Thomas Telford Publishing, London, 1997.
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PART 1, SECTION 1
G 1.1.2.2 This advice can be offered by a member of the client’s design team or can be
a separate function. It may be more difficult for a design team member to
remain impartial in carrying out this process and it is recommended that any
expert retained should be solely for this purpose. This function can be
identified as the role of the principal adviser and may encompass:
I 1.1.2.3 Possible sources for the appointment of independent advisers include suitably
qualified and experienced construction professionals such as chartered
surveyors.
(b) how it fits into the client’s corporate plan (e.g. it may be part of a larger
planned development);
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PART 1, SECTION 1
(c) number of people that are to occupy the building, together with their space
requirements;
(e) standards;
G 1.1.3.2 This is the initial control document for the early planning of the project;
without it, little constructive work can be done. If all the information required
for the project brief is not readily available, it is better to issue it in an
incomplete form and to update it progressively1.
G 1.1.4.2 The success of any project will depend upon the motivation given by the
client. Experienced clients may take a leading role in the procurement process;
less experienced clients will need to seek advice or to appoint advisers to
assist them. Where projects are of a large or complex nature it may be
advisable to consider the appointment of a project manager.
G 1.1.4.3 Effective management is vital in any construction project. The client’s prime
role is to establish a structure for the management of the project and to make
sure that it works. A crucial part of any effective management structure is
efficient communication. To perform effectively, all parties must have timely
1
Construction Industry Board, Briefing the Team, Thomas Telford Publishing, London, 1997.
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PART 1, SECTION 1
access to all information relevant to their tasks and the project’s objectives and
status (see 3.1.4.11).
G 1.1.4.4 The client has substantial influence on the design of the project in respect both
of functional efficiency and of overall appearance, and, therefore, has to take
particular care to:
(a) understand fully the purpose of the building; ensure that the requirements
of the users are accommodated; and communicate those requirements to the
designers (see 3.1.1.10); and
(b) appoint designers with proven ability in designing buildings which satisfy
users’ requirements and harmonise with and contribute to the quality of the
built environment. The selection of the right people is emphasised as a key to
success (see 3.1.4.8).
G 1.1.4.5 The accompanying figure indicates the activities in the procurement process
and when activities are usually performed. As can be seen, the client’s role is
significant, with a wide range of activities to perform and implement before
both the design and the construction processes. In the performance of these
activities, the client can expect to be supported and advised by his/her adviser
or (if appointed) the project manager. More detail for each of these activities
can be found in the section of this handbook indicated in brackets in the
figure.
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PART 1, SECTION 1
Client’s Role Develop business case for Procurement strategy Design overview Commissioning
project (3.1.1.9) (3.1.1.13) (3.1.4.12) (3.1.1.17)
Appoint adviser Design overview* Cost control overview Occupation and takeover
(3.1.1.6) (3.1.4.12) (3.1.4.13) (3.1.1.18)
Contractual arrangements*
(3.1.4.10)
Implementation policy
(3.1.4.2)
(a) setting and prioritising the project objectives within the business plan;
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(b) to supply the technical expertise, to assess, procure, monitor and control
the external resources needed to implement the project (see 3.1.4.3–5).
(a) the project brief is comprehensive and clear and has the full support of the
users1&2 (see 3.1.1.12);
(b) any constraints demanded by the project funder(s) are known and their
impact understood;
(c) the critical assumptions made in preparing the initial estimates and
programmes are valid, realistic and achievable (see 3.1.1.9);
(d) cost estimates are comprehensive and include all capital and resource
costs;
(f) substantial sensitivity analysis and ‘what if’ studies have been carried out
to assess the effect of possible changed criteria on the viability of the project;
and
(g) plans are in place for adequate project management including systems for
cost, time, quality and change control.
G 1.1.5.4 The client should also co-ordinate and resolve conflicts between all interested
sections of the client organisation including (see 3.1.4.6):
1 Kelly, J., MacPherson, S., and Male, S. (1992), The Briefing Process: A Review and Critique, RICS, Department of
Building Engineering and Surveying, Heriot Watt University. This document is out of print.
2
Construction Industry Board, Briefing the Team, Thomas Telford Publishing, London, 1997.
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(b) specialist groups – responsible for technical systems within the building,
e.g. communications, computers;
(d) finance and accounts – who will plan and control expenditure and pay bills
as they arise; and
(e) legal advisers – who will advise on and monitor the client’s formal
relationships with outside parties.
G 1.1.5.5 The client is responsible for ensuring that all necessary decisions are made on
time. Timely decisions are necessary to avoid delays and increased costs: the
decision-making process requires as much planning and management as any
other activity. This will include (see 3.1.4.11):
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selection should be based upon resources, reputation, and price; and services
should be clearly identified.
G 1.1.6.2 It should be emphasised that the role of the project manager should be to act
as part of the client organisation.
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PART 1, SECTION 1, APPENDIX A
Construction Industry Board, Selecting Consultants for the Team: Balancing Quality
and Price, Thomas Telford Publishing, London, 1997
European Construction Institute, Partnering in the Public Sector: a Toolkit for the
Implementation of Post-Award, Project Specific Partnering on Construction Projects,
ECI, Loughborough, 1997
Kelly, J., MacPherson, S., and Male, S., The Briefing Process: A Review and Critique,
RICS, Department of Building Engineering and Surveying, Heriot Watt University,
1992. This document is out of print.
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Appendix A (01/03)
PART 1, SECTION 2
Introduction
Value management (and within it, value engineering) is a structured method
of eliminating waste from a client’s brief and from the design on a
construction project before binding commitments are made. Used to deliver
more effective and better quality buildings, for example, through taking
unnecessary costs out of designs, value management ensures a clearer
understanding of the brief by all project participants and improves team
working. According to the Construction Task Force report, ‘Rethinking
Construction’ (published by the DETR in July 1998) it is practiced by up to a
quarter of the construction industry in the UK. The report also estimates that
while the objective of value management is to increase value, it can also
reduce costs by up to 10 per cent.
Value management is the wider term used in the UK to describe the overall
structured team-based approach to a construction project. It involves clearly
defining the client’s strategic objectives, considering optimum design
solutions within the context of the client’s business objectives and deciding
which of these provides the optimum lifetime 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.
This section of the handbook looks at the carrying out of a value engineering
exercise during the early design phase of a project, i.e. an evaluation of design
solutions against the client’s brief. Value engineering, as described here, can
be a stand-alone exercise (a value engineering workshop) or may be part of an
overall value management process.
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1.2.1.2 A value engineering exercise can only relate design proposals to a client’s
business requirements if early value management studies have encapsulated
these requirements within the brief. If a value engineering exercise is carried
out in isolation from any strategic review of the project requirements, it can
only act as a functional assessment of the technical design solutions and their
relative cost. However, even in this limited function it can still be very useful.
G 1.2.2 Applicability
1.2.2.1 The technique of value engineering can be employed on any project. However,
more complicated and higher value buildings are likely to benefit the most
(see figure 1). This is because it is more difficult to develop the design brief
in such instances and consequently a design solution may be adopted without
being questioned, usually because of time constraints placed upon the
designers.
High
Essential
Complexity
Optional
Low
Low High
Value
1.2.2.2 Many client organisations will only undertake value engineering on schemes
over a certain value. For example, Railtrack will carry out the technique on
projects valued at £250,000 or more and Northumbrian Water will only
consider it for projects worth over £1m. Despite this, there is no reason why
the process should not be applied to smaller schemes. Furthermore, value
engineering will be invaluable where repetitive schemes are being considered
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1.2.3.1 The greatest benefits can be obtained by commencing the VE process at the
earliest possible stage. Once it has been established that the client’s needs will
best be met through a construction project the purpose of the first VE exercise
should be to inform the brief. When an experienced client has prepared the
brief, or a value management exercise has already examined the client’s
requirements, the value engineering exercise (which will address the proposed
design solutions) is best done towards the end of the ‘scheme design’. Several
workshops may be necessary at each of the crucial decision-making stages of
a project:
1.2.3.2 This section of the handbook considers the evaluation of a design at the end of
the scheme design phase, but the process will be the same whenever it is
carried out. The ‘objectives’ of the project should remain the same throughout
the process and they should be validated at the beginning of each workshop.
The objectives of each workshop may be different. If the project objectives do
change the whole direction of the project will need to reassessed.
1.2.3.3 It is important that time for the value engineering process and any resultant
redesign is included in the scheme design programme at the outset.
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1.2.4.2 The value engineering participants should represent the principal stakeholders
in the project namely, the client, the building users and the design team
(designer, engineers and quantity surveyor) and also the contractor, where
applicable. It is important that each of the participants have the authority to
make decisions at the workshop. It may also be appropriate to include clients’
advisers, for example, letting agents or rating valuers.
The participants should be those who can make decisions and provide
information related to the specific aims and objectives of the workshop. These
may include:
1.2.4.3 The optimum size of a value engineering panel would depend upon the
complexity of the project as well as the skills of the facilitator. However, it is
considered that panels of more than twelve members are difficult to manage.
Panels with fewer than four members could be considered ineffective.
However, it is important that all stakeholders are represented even if this
results in a larger group.
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1.2.5.1 The length of time taken over the value engineering workshop will depend on
the complexity of the project and the level of design detail that has been
completed.
1.2.5.2 The ‘40-hour workshop’ is the classic industrial value engineering standard.
However, two-day workshops at key points during the design process are
more common in the UK construction industry.
1.2.6.1 Prior to the workshop, it is most important that an agenda is agreed by the
panel and distributed by the facilitator.
The client’s value criteria will have been developed in the first value
management workshop. With each successive workshop these criteria will be
developed further into a function diagram. This should be included in the
workshop handbook. If it is to be developed further this will take place as part
of the information stage of the workshop.
1.2.7.3 The FAST system uses a ‘function diagram’ which identifies the basic
function ‘what is required’ on the left-hand side and more detailed secondary
functions working from left to right until all the means of achieving these
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functions ‘how are they to be fulfilled’ are identified on the right. See figure 2
for an example of a FAST diagram. It should be understood that this is a
broad-brush technique.
Subsequently it was recognized that all functions did not fit into the flow logic
so it was decided to separate out the functions that are always active, whether
the product is operational or not. It was also decided to separate out those
functions that only occur one time regardless of repetitiveness of the process.
This diagram describes what a product, element or component must do and is
known as a Technical FAST.
It was then recognized that, ideally, it is the customer who should determine
the value of the product and that the FAST diagram should include the
customer/user in the development of value study projects. The resulting FAST
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All FAST diagrams should include a scope line on the left-hand side of the
diagram. The scope line limits the area of the project on which attention is
being focused. The scope is the portion of the project that is selected for the
value study.
The FAST model displays functions in a logical sequence and tests their
dependency. It does not indicate how a function should be performed.
There is no such thing as a correct FAST model, only a valid FAST model.
1.2.7.4 Most practitioners insist that functions are defined in terms of ‘active
verb/measurable noun (or phrase)’ combinations, for example, ‘minimize
energy consumption’. This improves clarity, helps all panel members develop
a shared understanding and promotes the examination process. These should
be interrogated by asking ‘why’ the client requires this in order to examine
how it should be achieved.
A Value Tree is a diagram that describes the business driver (mission) for a
project or need and the criteria that need to be satisfied in order to achieve it.
A Value Tree should be developed at an early stage in order to inform the
brief. However, it can be developed at any stage in order to confirm the brief.
It will generally be carried out by the client organization in order to establish
whether a project is the solution to their needs. The criteria are then developed
further into the functions required in order to achieve them. The scope line for
a project will begin to the right of the Value Tree.
1.2.7.7 Appendix A gives an example of part of a Value Tree and a FAST diagram for
a health centre.
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PART 1, SECTION 2
1.2.8.1 As the FAST diagram progresses and different solutions are found, it becomes
possible to establish alternative costs for achieving a given function.
However, it is important that all functions are clearly defined if costs of
alternative proposals are to be meaningful. Also, it should be remembered that
it is the design solutions to the functional requirements that are being priced
and compared to the value and importance that the client puts on that function.
For example, the client can identify the value of savings from reduced energy
consumption or may rank this as important for other reasons. The value
engineering team’s task is to put a price on the various design solutions
suggested that will achieve this end. It is creativity in finding the most
economical solution that is the essence of the value engineering exercise.
1.2.8.2 Fees and value added tax (VAT) and other financial and fiscal matters may
also need to be considered.
(a) The ‘information phase’ identifies the spaces, elements and components in
terms of the functions they fulfill. It asks the questions about what is the prime
function of an element?; what are it’s subsidiary functions?; what does it
cost?; what is it’s value? It is at this stage that the FAST diagram is developed
and it is against the background of this information that the value engineering
evaluation will be made.
(b) ‘Speculation’ is the brainstorming stage which will generate the ideas from
which solutions will be developed. It is important that each member of the
panel thinks positively. The facilitator will ensure that no one is allowed to
become overly critical of another member’s contribution in order that ideas
flow. All ideas should be logged at this stage. However, in order to encourage
idea building, they should not be analysed or rejected. It is important that the
underlying functions of suggestions for improvement are listed for evaluation
later. Design solutions should not be developed at this stage to ensure that
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Life cycle costing can be an important factor in the process when considering
optional solutions but the criticality of this aspect will hinge on the client’s
philosophy.
(e) ‘Presentation’ takes the form of a report prepared by the facilitator which
records in some detail all elements of the study and concludes with those
options to be incorporated in the developed design. This report is normally
presented to the client by the value engineering panel at a meeting held within
one or two weeks of the date of the workshop.
1.2.10.2 The workshop should focus on expensive items or ‘mismatches’, for example,
parts of the FAST diagram which are important to the client but which have
been allocated little money or have cost a lot of money but do not contribute
to the function.
1.2.11.1 Areas for research/change identified at the workshop could be grouped into
three categories:
(i) those that are removed/changed and result in reduced cost;
(ii) those that are added/changed and result in additional cost; and
(iii) those that are identified for investigation but not implemented
1.2.11.2 The financial benefit should then be identified against all elements within
categories (i) or (ii).
1.2.11.3 A major benefit of the workshop which will be enjoyed by the panel members
is a better understanding of the project functions and common ownership of
the team-based designs solutions which have evolved.
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PART 1, SECTION 2
1.2.12.1 The value engineering panel’s decisions are recommendations that need to be
accepted by all stakeholders. Those stakeholders that are not part of the panel
are likely to have a right to comment before decisions are adopted.
1.2.12.2 Once the workshop’s proposals have been sanctioned by the client, decisions
should be fed back to the design team, briefing those members whose work is
affected as to why the changes were made.
1.2.12.3 If necessary, amendments to the design brief, design programme and scope of
professional team’s brief should be incorporated into these documents.
1.2.13.1 It is important for any client to carry out a project review to demonstrate how
project objectives have been achieved and particular problems overcome. As
part of the project evaluation process, it should be established whether the
project represents best value for money and whether or not key design changes
made as a result of value engineering have achieved the benefits expected.
These should always be set against the cost of carrying out the exercise.
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PART 1, SECTION 2, APPENDIX A
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Appendix A (revised 10/01)
PART 1, S ECTION 2, A PPENDIX B
For two of these projects the client opted for a design and build contract for
the services installations (mechanical, sprinklers and electrical).
In an effort to reduce costs and ultimately add value to the schemes, the client
set a target of reducing the costs on these projects by 10 per cent, with no
material effect on quality or health and safety.
To set a benchmark for this reduction model cost plan costs for a typical store
(derived from historical records) were modified to suit the new scheme
layouts. Allowances were included for any items that were classified as ‘site
specific’ (e.g. acoustic requirements stipulated by the district surveyor). Cost
plan figures were based on the client’s current specification.
Due to the volume of developments undertaken by the client and the repetitive
nature of the works, the savings generated by value engineering can be
incorporated in any future schemes.
The original design was based on previous solutions and included ‘traditional’
ventilation.
At the ‘information phase’, the functional requirement, including the need for
ventilation, was examined against the client’s desire to reduce capital costs.
This identified that a high proportion of the cost of the mechanical installation
related to the provision of ventilation to the sales floor of the store (plant,
distribution ductwork, diffusers, etc.)
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Appendix B (12/99)
PART 1, S ECTION 2, A PPENDIX B
At the ‘development phase’, the proposed method was discussed with other
members of the design team to ensure that any impact on the other building
elements, the project programme and the interface with other subcontractors
were taken into account.
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Appendix B (12/99)
PART 1, SECTION 2, APPENDIX C
Building Cost Information Service. Elements for Design and Build, BCIS Ltd, 1996
Connaughton, John, N., Green, Stuart, D., Construction Industry Research and
Information Association. Value Management in Construction: A Client’s Guide,
CIRIA, London, 1996
Green, Stuart, D. and Popper, Peter, A. Value Engineering: The Search for
Unnecessary Cost, Chartered Institute of Building, Berkshire, 1990
Kelly, John and Male, Stephen. A Study of Value Management and Quantity Surveying
Practice, RICS Books, Coventry, 1988
Kelly, J.R. and Male, S.P. A Study of Value Engineering and Quantity Surveying
Practice, Heriott-Watt University, Edinburgh, 1989
May, Susan, C., College of Estate Management. Value Engineering and Value
Management: A CPD Study Pack, College of Estate Management, Reading, 1994
Mole, Kelly, Fernie, Grongvist and Bowles. The Value Management Benchmark:
Good Practice Framework for Clients and Practitioners. Thomas Telford Publishing,
London 1998
The Surveyors’ Construction Handbook Part 1, Section 2 Effective from 1/12/01 Page 1
Appendix C (revised 10/01)
PART 1, SECTION 2, APPENDIX C
Royal Institution of Chartered Surveyors. Value and the Client (papers presented at a
conference held at the RICS on 29 January 1992), RICS, London, 1992
Smith, J., Jackson, N., Wyatt, R., Smyth, H., Beck, M., Chapman, K., Shirazi, A.,
Hampson, K., Royal Institution of Chartered Surveyors. Can Any Facilitator Run a
Value Engineering Workshop? RICS, London, 1998
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Appendix C (10/01)
PART 2, SECTION 1
Introduction
This Section of the Handbook sets out procedures which enable pre-contract
cost management of building projects to be carried out from the client’s brief,
through the various design stages to the acceptance of a contractor’s tender.
Control of costs can only be achieved by the actions of the whole project team,
including the client. The quantity surveyor’s role is to facilitate the design
process by systematic application of cost criteria so as to maintain a sensible
and economic relationship between cost, quality, utility and appearance which
thus helps in achieving the client’s requirements within the agreed budget.
The procedures are not designed for use with civil engineering projects, but
should provide a framework appropriate to civil engineering needs.
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PART 2, SECTION 1
Cost management is the total process which ensures that the contract sum is
within the client’s approved budget or cost limit. It is the process of helping
the design team design to a cost rather than the quantity surveyor costing a
design.
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G 2.1.1.2 OBJECTIVES
(a) To ensure that the client obtains an economical and efficient project in
accordance with the agreed brief and budget;
(b) to make the design process more efficient, thus reducing the time needed
to produce a successful design;
(c) to ensure that all requirements arising from the client’s brief to the design
team are included in the cost planning process (e.g. the engineering services
should also be subject to the cost planning process); and
(d) to advise the client and members of the design team of cost-in-use or
life-cycle costing techniques.
G 2.1.1.3 GENERALLY
(a) A general principle applies throughout the cost planning process that any
agreed budget or cost limit is seen as the maximum cost, and the quantity
surveyor should, at all times, work with the other design team members to
satisfy the client at a lower cost if possible, whilst still maintaining the desired
objectives for quality and function.
(b) If, at any time, sums have been included in the approved budget, for
example, for abnormal site costs which subsequently are found to have been
wholly or partially unnecessary, the consequential saving should always be
notified to the client.
Stage D: Scheme Design Carry out cost checks and update cost plan
if necessary
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PART 2, SECTION 1
This might affect both the client’s requirements and the chosen design
solution and changes would, therefore, affect the budget and the cost plan.
2.1.3 Budget
I 2.1.3.1 DEFINITION
Budget is the total expenditure authorised by the client which is the
responsibility of the design team at the end of the feasibility stage (Design
Stage B).
G 2.1.3.2 OBJECTIVES
(a) To establish the limit of expenditure necessary to meet the client’s brief.
The client’s and project’s status with regard to VAT (Value Added Tax) will
also need to be established;
(b) to provide the client with a statement of the likely area and quality of
building, which is achievable within the limit of expenditure;
(d) to provide the client with alternative budgets for different occupation dates
and qualities of building, if appropriate.
(a) The ideal requirements from the client and members of the project team
to the quantity surveyor are given below. On projects where this level of
information is not available, the quantity surveyor should state clearly any
assumptions made. It is possible to produce a typical elemental estimate for
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Note: If the quantity surveyor is not responsible for cost planning the
engineering services, this should be clearly stated in the budget and cost plan.
The information from the quantity surveyor to the design team is as follows:
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PART 2, SECTION 1
(d) Once the budget has been established, it provides the first cost plan for the
project, and the framework for the actual design to be developed.
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(a) Quantity
• in addition to the briefed areas, a statement of the allowances (e.g.
circulation) used to calculate a gross floor area;
• the number of storeys of a possible solution;
• the storey height(s);
• the square index or wall/floor ratio (see appendix C to this section);
• the density of vertical division or partition/floor ratio (see appendix C
to this section);
• proportion of window area;
• floor loadings;
• thermal resistance values of fabric;
• air change rates;
• heating and hot-water loads;
• lighting levels;
• total electrical load;
• areas of the brief with special functions of significant cost;
• road area and number of car parking spaces;
• paved pedestrian areas; and
• length of boundary walls or fencing.
(b) Quality
• A general statement of quality and specification which relates to the
rates used for the budget calculation. This should cover specifically at
least the following: foundations, roof, external walls, floors and
vertical circulation, internal vertical division, internal finishes,
lighting and other services. External works should include roads,
paths, landscape, boundary walls and fences, and service mains,
planting and the like.
G 2.1.3.6 INFLATION
(a) The prediction of future inflation may not be necessary for some clients,
and a statement of cost at current prices may be adequate. Where an
assessment of inflation is required for more than a few months ahead, a range
of probable inflation is best provided. This can be calculated using
predictions published, for example by BCIS or the Department of Trade and
Industry. The assumptions upon which the prediction is made should be
stated.
(b) Some clients, particularly in the public sector, have their own inflation
controls. Where the client requests that a particular level of inflation be
included in the budget, the quantity surveyor should inform the client if he or
she believes it to be unrealistic.
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apparent that the whole of the agreed budget will not be required, the client
should be informed.
I 2.1.4.1 DEFINITION
The cost plan at outline proposals stage is a statement of the probable cost of
the project at Design Stage C which sets out the cost targets for the main
elements of a building, together with their approximate quantity and quality
parameters.
G 2.1.4.2 OBJECTIVES
(a) To describe, together with the outline proposal drawings, the chosen
distribution of the resources within the budget to provide a balanced design to
meet the client’s needs;
(b) to set cost targets for the main elements so that, as the design develops, the
targets can be checked and adjustments made so that the overall cost of the
project is managed within the budget;
(c) to provide the design team with controls which communicate the costs,
quantity, quality and time parameters to be followed; and
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The basic information requirements from the quantity surveyor to the design
team are as follows:
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PART 2, SECTION 1
(a) Quantity
Confirmation of information provided at budget stage with the addition of:
• the areas of the accommodation divided into use classification (e.g.
office/classroom space, sanitary accommodation space, plant-room
space, circulation space), totalled to give gross floor area; and
• a schedule of those items for which lump sum allowances have been
incorporated and a note on the sources of this information.
(b) Quality
• a statement of quality and specification, in a similar format to that
provided at budget stage, expanded to incorporate additional
information. The parameters should follow those included at the budget
stage, and where possible, be based upon the outline drawings and
preferred specifications.
(a) In establishing the outline cost plan, it is recommended that the quantity
surveyor take account of proposals made by the other members of the design
team and their effects upon both the design and construction programmes.
Should a change be proposed to the outline cost plan, or to the scope of the
work, the following procedures should be implemented:
• all relevant members of the design team should be informed;
• the designer should confirm his agreement, in principle, to the
proposal;
• no proposal should be incorporated into the cost plan without the
agreement of the quantity surveyor, and his confirmation or otherwise
that the proposal can be met within the elemental target;
• where the proposal involves additional cost over the elemental target,
or would cause the total budget to be exceeded, the quantity surveyor
should identify to the design team alternative savings that are available
in order to maintain the overall budget;
• the quantity surveyor should take into account, when considering a
proposed change, any likely effect on the design and construction
programme;
• in all considerations of alternative proposals, the use of consultants for
additional work should take into account any consequential addition to
professional fees. In particular, this applies to consulting engineers,
whose fees are calculated only on specific parts of the project; and
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G 2.1.4.8 INFLATION
Any changes in inflation forecasts should be reported periodically.
I 2.1.5.1 DEFINITION
The cost plan at scheme design stage is a statement of the cost of a selected
design at Design Stage D which details the cost targets for all elements of a
building, together with the quantity and quality parameters described by the
scheme drawings and specifications.
G 2.1.5.2 OBJECTIVES
(a) To set out for the design team the actual distribution of resources described
by the scheme design;
(b) To set cost targets for all the elements so that, as the detail design develops,
the targets are checked and adjustments made in order that the overall cost of
the project is managed within the budget; and
(c) To provide the whole design team with a control document which
describes, in detail, the costs, quantity, quality and time parameters which
have been adopted.
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PART 2, SECTION 1
The basic information requirements from the quantity surveyor to the design
team are as follows:
(b) The preliminary engineering and specialist services scheme drawings and
outline specification notes will be required from the consulting engineers,
from which approximate quantities of equipment can be measured and priced
using all-in rates. Pipework and cables will normally still need to be priced on
an overall basis relating to floor area or service points at this stage. This
ensures that the likely implications of the builder’s work are understood by the
design team and the costs are taken into account.
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(a) Quantity
confirmation of the information provided at outline proposal stage
(b) Quality
a statement of quality and specification based on scheme drawings in
sufficient detail to provide control of the production information drawings by
the designer and consultants
G 2.1.5.7 INFLATION
Any changes in inflation forecasts should be reported.
G 2.1.6.2 OBJECTIVES
(a) To confirm that as the design develops, the cost remains within the budget;
and
(b) To reduce the abortive design work and lost time caused through
proceeding too far in the design process before realisation that the budget will
be exceeded.
2.1.6.3 PRINCIPLES
(a) The methods will vary according to the stage reached in the design process.
Normally, however, this takes the form of measurement of approximate
quantities from the consultants’ drawings to provide a check on the quantity
and quality of parameters set down in the appropriate cost plan. The gross
floor area should always be the first check at any stage.
(b) The dominant considerations in deciding the priorities for cost checking
elements are as follows:
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PART 2, SECTION 1
(b) It is important for the quantity surveyor to maintain records of the cost
checking process, and to set down in summary the value of the elements cost
checked compared with the cost plan targets. Identification of the drawings
and information upon which the cost check has been based is also important.
(a) Action after receipt of tenders is that required at the tender stage (Design
Stage H) in analysing each tender and updating information for the client and
consultants.
G 2.1.7.2 OBJECTIVES
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(b) Information required from the designer, architect, building surveyor and
other consultants;
• a provisional list of potential areas of saving (to be considered during
tendering period and before tender acceptance); and
• a detailed list of drawings and other sources of data from which to
determine actual savings, if required.
The basic information requirements from the quantity surveyor are as follows:
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PART 2, SECTION 1, APPENDIX A
A2 SOURCES
Note: Current editions of price books are available from RICS Books.
The following points should be considered carefully when using any of the
above information:
• differential rates of inflation on various aspects/elements of the
building;
• acute shortages in specific trades at different times;
• regional variations;
• market conditions applicable to information based on project specific
information such as elemental cost analyses and bills of quantities;
• external published information;
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Appendix A (05/03)
PART 2, SECTION 1, APPENDIX A
• consideration of the tender period of the analysis and its relationship to the
current project’s tender period;
• high levels of inflation demand constant checking and revision of rates and
prices;
• the assumption that cost information in elemental cost analysis is tendered
price information, whereas a significant amount could be in prime cost or
provisional sums;
• initial quotations from specialists are likely to be low;
• building regulations can be statutorily amended, e.g. energy conservation
measures have increased the ‘U’ value (a measurement of thermal
resistance) requirements for insulation properties of roofs and walls. Care
must therefore be taken to ensure that the analysis used is consistent with
current building standards;
• firm price or fluctuating contract terms;
• special planning conditions applying either to the analysed or to the
current project; and
• site-specific constraints in either the analysed or current project.
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PART 2, SECTION 1, APPENDIX B
B1.1 To communicate clearly the basis of the budget and cost plans to the client,
designer and consultants.
B2 FORMAT
B2.1 The presentation of information to the client and design team should be of a
high standard. Budget and cost plans result from the application of a high level
of professional skill, and the format of documents should reflect the
importance that the profession attaches to this service.
B2.3 Additional information to be sent to the design team once the cost plan is
prepared is set out in the ‘Report to the Design Team’. The main parameters
affecting the cost targets should be clearly set out.
B2.4 The level of detail to be included in these documents should relate to the size
and complexity of projects. Simple projects may require less information than
shown in the example; complex projects significantly more.
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Appendix B (05/03)
PART 2, SECTION 1, APPENDIX B
Project
Location
Site works:
Alterations:
On fee %
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Appendix B (05/03)
PART 2, SECTION 1, APPENDIX B
zzz
TIME
Preliminary/Final Programme (weeks)
as Budget Cost Alternative 1 Alternative 2
0 0 0
Client decision to accept budget and proceed
Formation of contract
Construction commencement
Alternative 1
Alternative 2
As Budget Cost
Alternative 1
Alternative 2
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Appendix B (4/98)
PART 2, SECTION 1, APPENDIX B
BASIS OF BUDGET
Areas
Quality Standards
External elevations:
Internal finishes:
Lighting:
Site works:
Other (specify):
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Appendix B (4/98)
PART 2, SECTION 1, APPENDIX B
Alternative standards
Firm: ____________________________________________
____________________________________________
____________________________________________
____________________________________________
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Appendix B (05/03)
PART 2, SECTION 1, APPENDIX B
BUILDING
Quantity
Gross floor area m2
Floor/roof zone m.
Density of vertical division (length of partitions and internal walls measured over
door openings m.)
Structural
Ground bearing pressure kN/m2 Ground water level
Environmental
Fabric ‘U’ values: Roof W/m2°C
Walls (average) W/m2°C
Ground floor W/m2°C
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Appendix B (05/03)
PART 2, SECTION 1, APPENDIX B
REPORT
REPORT TO DESIGN
TO CLIENT TEAM
AND DESIGN (continued)
TEAM (continued)
Lighting levels
(Specify spaces, lux level and load in W/m2)
Special areas with higher than average service or other costs (specify)
Other
External Works
Area m2
Other
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Appendix B (4/98)
PART 2, SECTION 1, APPENDIX B
REPORT
REPORT TO DESIGN
TO CLIENT TEAM
AND DESIGN (continued)
TEAM (continued)
1 Substructure
2A Frame
2B Upper floors
2C Roof
2D Stairs
2E External walls
2F Windows and external doors
2G Internal walls and partitions
2H Internal doors
2 Superstructure
3A Wall finishes
3B Floor finishes
3C Ceiling finishes
Internal finishes
4 Fittings
5A Sanitary appliances
5B Services equipment
5C Disposal installations
5D Water installations
5E Heat source
5F Space heating and air treatment
5G Ventilating systems
5H Electrical installations
5I Gas installations
5J Lift and conveyor installations
5K Protective installations
5L Communications installations
5M Special installations
5N Builder’s work in connection
5O Builder’s profit and attendance
5 Services
Building sub-total
6A Site works
6B Drainage
6C External services
6D Minor building works
6 External works
7 Preliminaries
Total (less contingencies)
8 Contingencies
Construction costs
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Appendix B (4/98)
PART 2, SECTION 1, APPENDIX B
REPORT
REPORT TO DESIGN
TO CLIENT TEAM
AND DESIGN TEAM (continued)
(continued)
1 Substructure
2A Frame
2B Upper floors
2C Roof
2D Stairs
2E External walls
2H Internal doors
3A Wall finishes
3B Floor finishes
3C Ceiling finishes
5A Sanitary appliances
5B Services equipment
5C Disposal installations
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Appendix B (4/98)
PART 2, SECTION 1, APPENDIX B
REPORT
REPORT TO DESIGN
TO CLIENT TEAM
AND DESIGN TEAM (continued)
(continued)
5D Water installations
5E Heat source
5G Ventilating systems
5H Electrical installations
5I Gas installations
5K Protective installations
5L Communication installations
5M Special installations
6A Site work
6B Drainage
6C External services
Page 10 Part 2, Section 1 Effective from 1/6/98 The Surveyors’ Construction Handbook
Appendix B (4/98)
PART 2, SECTION 1, APPENDIX B
REPORT
REPORT TO DESIGN
TO CLIENT TEAM
AND DESIGN TEAM (continued)
(continued)
COST TARGETS
Building: .......................................................... Price base: ............................................ 19 ...............
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Appendix B (4/98)
PART 2, SECTION 1, APPENDIX C
This is a simple method of expressing the relationship of the external walls to internal
floor area. It is the ratio of the area of external walls (including windows and doors) to
the gross internal floor area.
SQUARE INDEX
This is an alternative way of expressing the relationship between the floor area and the
external walls. It describes the degree to which the perimeter length of an actual
building exceeds that of a building of the same area which is a perfect square. Any
single storey building can be described, as can also multi-storey buildings, with a
constant shape on each floor.
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Appendix C (4/98)
PART 2, SECTION 1, APPENDIX C
The quantities calculated in this, or similar ways, can then be used with selected
element unit rates to calculate budgets and cost plans for projects in the earliest stages
of design, or for checking the approximate cost difference of alternative design
solutions.
† A percentage can be used to split ‘wall’ from ‘window’, e.g. window and door area
= external walls × w = 945 m2 × 30% = 284 m2.
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Appendix C (4/98)
PART 2, SECTION 1, APPENDIX C
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Appendix C (4/98)
PART 2, SECTION 1, APPENDIX D
BOOKS
Ahuja, H. N., Successful Construction Cost Control, John Wiley & Sons, New York,
1980
Ashworth, A. and Hogg, K., Willis’s Practice and Procedure for the Quantity
Surveyor (11th edition), Blackwell Science, Oxford, 2001
Ashworth, A., Building Economics and Cost Control: Worked Solutions,
Butterworths, London, 1983
Ashworth, A., Contractual Procedures in the Construction Industry (4th edition),
Longman, 2001
Ashworth, A., Cost Studies of Buildings (3rd edition), Longman, Harlow, 1999
Ashworth, A., Pre-Contract Studies: Development, Economics, Tendering and
Estimating (2nd edition), Blackwell, Oxford, 2002
Bathurst, P. E. and Butler, D. A., Building Cost Control Techniques and Economics
(2nd edition), Heinemann, London, 1980
Brandon, P. (ed.), Building Cost Techniques: New Directions, E & FN Spon, London,
1982
Brandon, P. S. (ed.), Building Cost Modelling and Computers, E & FN Spon, London,
1987
Buchan, R. D., Fleming, F. W. E. and Grant, F. E. K., Estimating for Builders and
Surveyors (2nd edition), Butterworth Heinemann, Oxford, 2003
Building Cost Information Service, Elements for Design and Build, BCIS, Kingston
upon Thames, 1996
Building Cost Information Service, Standard Form of Cost Analysis: Principles,
Instructions and Definitions, RICS, 1969 (reprinted August 2001)
Cartlidge, D. P. and Mehrtens, I. N., Practical Cost Planning: A Guide for Surveyors
and Architects, Hutchinson, London, 1982
Chudley, R. and Greeno, R., Building Construction Handbook (4th edition),
Butterworth Heinemann, Oxford, 2001
Ferry, D. J., Ferry, J. D. and Brandon, P. S., Cost Planning of Buildings (7th edition),
Blackwell Science, 1999
Egan, J. and Construction Task Force, Rethinking Construction, DETR, London, 1998
The Surveyors’ Construction Handbook Part 2, Section 1, Effective from 1/7/03 Page 1
Appendix D (05/03)
PART 2, SECTION 1, APPENDIX D
Hackett, M. et al., Pre-Contract Practice and Contract Administration for the Building
Team (9th edition), Blackwell, Oxford, 2002
Hall, F. and Greeno, R., Building Services Handbook (2nd edition), Butterworth
Heinemann, Oxford, 2003
Jaggar, D. and Morton, R., Design and the Economics of Building, E & FN Spon,
London, 1995
Jaggar, D. M. and Liverpool John Moores University, Civil Engineering Cost Analysis
(CECA), BCIS, Kingston upon Thames, 1997
Latham, M. and Department of the Environment, Constructing the Team: Joint Review
of Procurement and Contractual Arrangements in the United Kingdom Construction
Industry: Final Report July 1994, HMSO, London, 1994
Masterman, J., Introduction to Building Procurement Systems (2nd edition), Spon
Press, 2001
McCabe, S., Benchmarking in Construction, Blackwell Science, Oxford, 2001
Neil, J. N., Constructing Cost Estimating for Project Control, Prentice Hall Inc., New
Jersey, 1982
Seeley, I. H., Building Economics: Appraisal and Control of Building Design Cost and
Efficiency (4th edition), Macmillan, Basingstoke, 1996
Stone, P. A., Building Design Evaluation: Costs in Use (3rd edition), Spon, 1980
Stone, P. A., Building Economy, Design Production and Organisation (3rd edition),
Pergamon Press, Oxford, 1983
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Appendix D (05/03)
PART 2, SECTION 1, APPENDIX D
Wilson, R. M. S., Cost Control Handbook (2nd edition), Gower Publishing, Aldershot,
1983
ARTICLES AND REPORTS
Abdullah, R. Z. and Tyler, A. H., ‘Meeting the Problems of Cost Control Systems’,
Building Technology & Management, 24(4) August/September 1988, 14–16(3)
Baxendale, A. T., Integration of Time and Cost Control, Chartered Institute of
Building (Construction Papers 7), Ascot, 1992
Betts, M. and Gunner, J., ‘Consultant Cost Control in The Pacific Rim’, Cost
Engineering, 34 (1) January 1992, 17–24(8)
Bowen, P. and Edwards, P., ‘Interpersonal Communication in Cost Planning During
the Building Design Phase’, Construction Management & Economics, (1996) 14,
395–404(10)
Costing Services, Building Services, 14(11) November 1992, 25–31(7)
Farrow, J. J. and Rutter, D. K., Performance Setting and Monitoring on Building Projects
for Contractors, Chartered Institute of Building (Construction Papers 67), Ascot, 1996
Ferry, D. J. O. and Flanagan, R., Life Cycle Costing: a Radical Approach, CIRIA
Report 122, Construction Industry Research and Information Association, London,
1991
Gilmour, J. and Skitmore, M., ‘A New Approach to Early Stage Estimating’,
Chartered Quantity Surveyor, 11(9) May 1989, 36–38(2)
Kaka, A. P. and Price, A. D. F., ‘Modelling Standard Cost Commitment Curves for
Contractors’ Cash Flow Forecasting’, Construction Management & Economics, 11(4)
July 1993, 271–283(13)
Ministry of Education Building Bulletin No. 4, Cost Study, first edition March 1951,
second edition March 1957, third edition 1972
Ministry of Public Building and Works/International Tutor Machines Ltd, ‘Cost
Control in Building Design’, R and D Building Management Handbook 4, HMSO,
London, 1968
Morris, A., ‘A Rational Approach to Cost’, Building, 260(7889) 21 April 1995, 33(1)
Skitmore, M. et al., ‘The Accuracy of Construction Price Forecasts’, University of
Salford, Salford, 1990
Southgate, T., ‘A New Approach’, Chartered Quantity Surveyor, 11(3) November
1988, 35–36
Watson, B., ‘Cost Planning Engineering Services Contracts’, Cost Engineer, 28(4)
1990, 8–10(3)
Watson, K., ‘Procurement – the Key Area for Cost Control’, Construction Computing,
(52) April 1996, 12–13(2)
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Appendix D (05/03)
PART 2, SECTION 2
Introduction
It is becoming increasingly important that investment appraisal uses a whole
life approach in a more systematic way than at present. Major construction
clients are now insisting upon an analysis of life cycle costs and not just
capital costs.
The life cycle cost (LCC) of an asset is defined as the present value of the total
cost of that asset over its operating life (including initial capital cost,
occupation costs, operating costs and the cost or benefit of the eventual
disposal of the asset at the end of its life).
2.2.1.1 Following the recession of the early 1990s construction clients are generally
more streamlined and competitive and some recognise that their ongoing
property costs may provide them with the business ‘edge’ they need. There is
therefore increased attention to life cycle costing. The following Sub-sections
expand on this trend by covering recent changes in the industry and their
effect on LCC.
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PART 2, SECTION 2
increasing and with it comes the opportunity and need for LCC to be part of
the options appraisal criteria.
(a) ensure that any design he prepares and which he is aware will be
used for the purposes of construction work includes among the
design considerations adequate regard to the need:
It follows that the selection of materials for certain elements of a structure that
may involve maintenance, (particularly where access to those elements
involves working at height), complies with the spirit of Regulation 13. For
example, the selection of PVCu window frames with ‘easy clean’ hinges
involves limited maintenance and allows cleaning from the inside. Similarly
marble flooring is cheaper than cork tiles over a 60-year period and while the
decision to use marble is economically sound it also removes health hazards
1
Latham, M., Sir, (1994), Constructing the Team: Joint Review of Procurement and Contractual
Arrangements in the United Kingdom Construction Industry: Final Report, HMSO London
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PART 2, SECTION 2
associated with fumes and vapour when cork has to be resealed. In purely
capital cost terms, the selection of the materials referred to above may be more
expensive than their traditional counterparts.
The use of life cycle costing places initial capital cost in the context of future
maintenance expenditure, and helps justify decisions which have beneficial
health and safety implications.
It is therefore critical that the provider accurately predicts the cost in use of the
service or the facility over its operational life so that he can calculate the cash
flows generated by the assets over the term of the contract. Such data is vital
so as to negotiate the complexities of the contract to both parties’ satisfaction.
To assist this process some suppliers give guaranteed long-term costs, e.g. for
lifts and kitchen equipment. By reducing costs over this term it should be
financially viable for the private sector to provide a service to the public sector
and to achieve an acceptable return.
Life cycle costs and their accurate prediction, control and reduction are critical
to the successful performance of a PFI deal.
There is common feeling that property overheads are too large, with energy
bills contributing significantly to the operating costs. Energy costs are
potentially one of the most controllable items of overheads and life cycle
costing can be used as a tool for predicting the benefits of investment in
energy efficiency. Typical investments for analysis would be economic
thickness of insulation, energy efficient services, building energy
management system installations, intelligent buildings, energy conscious
refurbishment of buildings and passive cooling techniques versus air
conditioned design. For example, a manufacturer can supply a light bulb some
ten times more expensive than a normal one, however, it lasts longer, uses less
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PART 2, SECTION 2
electricity and performs better. Similarly, condensing gas boilers can save
10–20% of fossil fuel bills with pay back in five years.
It is also worth noting that oil is becoming increasingly harder to extract and
environmental concerns generally will increase in the very near future.
Sainsbury has been the first grocery retailer to produce an environmental
report and recognises that energy probably accounts for its single biggest
direct environmental impact. Significantly it is also the third largest
controllable cost in running a typical supermarket.
Buildings have not been traditionally designed for anything beyond their
immediate requirement. However, as more are being converted to alternative
uses it is probably only a matter of time before investors in property call for
properties to be constructed with a view to extending the building’s usable
life, e.g. conversion to house a growing less mobile and aged population. Such
consideration is more valid the shorter the predicted current building life, e.g.
some light industrial units for English Partnerships have been designed for a
ten-year life. Similarly, Hertfordshire County Council have housing and
nursing homes with a 20-year life expectancy.
Such a concept will require building layouts and structures to be more flexible
with maintenance, re-servicing and conversion to alternative uses being
simplified and made more economical. A cost in use study at design stage may
justify larger bay sizes, raised flooring or greater storey heights to demonstrate
continual viability for future generations.
A cost in use study would explore the economics involved of using a building
for its notional design life and for its intended use in the usual way. However,
supplementary investigations would explore potential alternative uses for the
building and the conversion cost (and possibly the cost in use for a further
notional period). If sufficient consideration were to be given at the initial
design stage for potential future uses of a building, it could be used to
demonstrate the continued asset value of the property and go a considerable
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PART 2, SECTION 2
Typically the relevant building life will be the period over which the
organisation, for whom the study is being conducted, will be expected to hold
an interest in the building, and would take into account the residual value.
At the end of the life of a building, the building (or component) and the land
will have a residual value. In the case of relatively short life cycles or high
value land, residual values can be very significant factors in determining the
optimum life cycle cost options. Residual values are briefly discussed in
Appendix A (and worked example 2.2.5.3 includes a residual value in the
calculation).
When the building life is assessed to be over 40 years, the precise life is not
critical for the purposes of life cycle costing (as discounting, explained below,
minimises the effect of such future payments). In cases where calculations are
based on a relatively short building life, say 20 years or less, the assessment of
the time horizons must be considered with special care.
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PART 2, SECTION 2
Interest rates are particular to the client and the degree of risk. It is therefore
essential to involve the client (and his accountant if appropriate) in the process
and reach agreement on the discount rate to be used.
Economists, accountants and clients will all have different views about future
levels of inflation and interest rates. Some forecasters may take the view that
as different categories of cost inflate at different rates, these differences
should be taken into account in setting discount rates. These diversities of
view ‘before the fact’ make it difficult to recommend any firm guidelines for
surveyors to adopt for selecting discount rates.
(a) use a rate which ‘implies’ inflation of future costs and values (in this case
future costs and values will be priced at today’s prices);
It is suggested that it is easier to deal with the former situation where future
costs and values are assessed at current prices. Three approaches on the
selection of discount rates are given for guidance purposes and in each the
future costs are priced at current prices.
This recommendation is based on the assumption that when inflation rates are
reasonably low, i.e. less than 15%, there is quite a stable relationship between
inflation and the bank base interest rate, implying a real discount rate of
between 4% and 5% (i.e. the interest rate is 4 to 5% greater than inflation). It
is recommended that in the circumstances, where no better information is
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PART 2, SECTION 2
No risk return 3%
Construction premium risk (8% × ½) 4%
——–
Average construction risk return discount rate 7%
——–
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PART 2, SECTION 2
In the ‘no risk return discount rate’ method, for example, the calculation
should be as follows:
1.08
= —— – 1
1.05
= 0.02857
= 2.857%
The same methodology should be adopted for actual calculations using other
methods. As an approximation however this may be ignored.
Once the discount rate is established valuation tables can be used to convert
future payments to present value. For example, the present value of £100 to be
paid in five years’ time at a discount rate of £4% =
Page 8 Part 2, Section 2 (4/99) Effective from 1/6/99 The Surveyors’ Construction Handbook
PART 2, SECTION 2
in the worked examples). However, all expenditure throughout the life of the
building could be included if the total building analysis were required.
Estimates for these costs will be based upon assumptions about future events
and should be clearly stated. Indeed an additional advantage of life cycle
costing is that it requires design assumptions to be stated explicitly rather than
implied.
Although current costs are generally used, it is important that future cost
assessment should reflect any expected divergence of a specific cost from the
level of inflation allowed in the discount rate. For example, it would be unwise
to assume that market conditions would remain unchanged for any extended
period when tender levels for building work are very depressed. Some
allowance should therefore be made to adjust current building prices to more
normal market conditions when pricing future building work.
The level of detail used will be dictated by the availability of information and
the requirements of the client.
The following costs for each category should be considered and where
necessary established with the client.
(a) Capital costs – include land, building, professional fees, furniture and
equipment, or permanent improvements thereto, which form assets for the
business to use in its operation, with an intended useful life of more than one
year. The significance of any tax benefits and grants should be established
with the client.
(b) Financing costs – the method of funding the project should include, inter
alia, the cost effect of alternative sources of funds, the future flexibility of
funds in terms of amounts and sources, and gearing. Consideration should also
be given to
• the accounting effect of capital employed;
• construction period finance charges and long-term finance costs; and
• the taxation implications of the various options.
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PART 2, SECTION 2
(c) Operation costs – include estimates of rent, rates, energy costs, cleaning
costs, building related staffing costs and other staffing costs.
(d) Annual maintenance costs – average maintenance costs are available but
once details of design are completed, a more relevant estimate can be
produced based on information obtained from manufacturers or maintenance
managers.
(f) Occupancy costs – the cost of performing the function for which the
building is intended (e.g. producing motor vehicles). Occupancy costs are
distinguished from operation costs, as they relate to costs attributable to a
specific process undertaken by the client, which may change within the life of
the building. As an example, a car manufacturer may change to the production
of heavy goods vehicles. This would impact on his occupancy costs, whereas
his building related operation costs could be relatively unchanged. Some
clients might not require the surveyor to take these costs into account, as not
relating directly to the building.
(g) Residual values and disposal costs – estimate of the resale value and the
cost of disposing of the building, plant, land and other assets after the expiry
of the life cycle. Many buildings, particularly those with an ‘open market
value’ will have a significant residual value. Care should be taken in assessing
this value as it can have a major effect on the life cycle costing calculations
(see Appendix A).
Tax relief is available on both capital and revenue expenditure. Capital costs
receive this relief by way of capital allowances which are deductible items
from the taxpayer’s taxation liability account. Maintenance costs are a charge
on the profit and loss account, which again reduces the tax payable.
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PART 2, SECTION 2
The impact of tax relief on the life cycle evaluation lessens proportionately
with the ratio of allowable expenditure to the total expenditure and the timing
of relief, which is dependent on the annual rate of taxation allowances. For
example, a new oil refinery will have a greater proportion of allowance than a
shop unit shell. It is also worth noting that capital allowances tend to be
greater on plant than on buildings, so making the use of efficient plant more
attractive than increasing the thermal efficiency of the building.
The impact of tax relief should be sensitively tested at the earliest possible
stage. A detailed estimate of the allowable expenditure should only be
prepared if tax relief is found to be significant.
2.2.3.1 The following example shows the net discounted cost, after tax relief, of
£1,000 spent on differing types of expenditure.
Where capital
Where capital allowances are Relief given
allowances are allowed on 100% on
allowed on 50% of of capital maintenance
No relief capital expenditure expenditure 100%
£ £ £ £
1
i.e. 50% of £1,000 × 25% reducing balance × 35% Corporation Tax with future allowances discounted at
10% per annum (a discounting calculation is required in order to establish the above figures).
Following the Finance Act 1985, capital allowances available that relate to
Real Property were as follows:
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PART 2, SECTION 2
Subsequent to the Finance Act 1997 first year allowances were changed and at
the time of writing were still being finalised.
Different types of allowances, initial, first year and writing down are
explained in the Glossary of Terms (Appendix D).
It should be noted that the significant part of capital allowance relief on a 25%
reducing balance basis comes in the first five to seven years. This is included
in the above example where the tax relief amount is a product of the
incremental annual writing down allowance, discounted.
Regional development grants (or their Northern Ireland equivalent) may also
be available. These are not treated as taxable and may be disregarded when
assessing the capital cost upon which tax relief is calculated.
Currently the running and maintenance costs of an asset are deductible in full
(i.e. 100% allowance) against taxable profits in the year of expenditure.
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PART 2, SECTION 2
(a) the Corporation Tax and allowances rate that will be current at the date of
construction of first use;
(b) the future Corporation Tax and allowance rate at the date of replacement;
(c) the Corporation Tax rate current at dates between date of construction of
first use and the date of replacement, against which revenue running costs can
be charged;
(d) whether the owner will be liable to tax during the period between the date
of construction or first use and the date of replacement, and if the owner will
have sufficient taxable profits to use the allowances generated in any one year.
(e) whether the item’s economic life will be shorter than the tax write down
period. This will either generate an added write down amount when it is
demolished, or if the item or building is to be sold at the end of its economic
life, its profit or loss on cost. These circumstances will generate a taxable
profit or loss on proceeds above or below the tax write down value and will
attract a balancing adjustment;
(f) the value of the balancing allowances, charges or taxable profits needs to
be considered against the relevant Corporation Tax rate;
(g) the impact of these adjustments therefore needs to be taken into account in
the life cycle costing assessment.
Caution is further necessary as there are specific restrictions. The recipient has
to prove to the Inland Revenue that he qualifies for allowances (i.e. the
entitlements are aimed at providing incentives for commercial organisations
and therefore expenditure upon residential property is largely excluded.
Entitlements are also restricted between connected persons).
2.2.3.5 DYNAMICS
The surveyor should therefore appreciate the variables and frequent changes
that occur in respect to the application of taxation allowances.
(a) the Government uses taxation to impose fiscal policy and influence the
economy and therefore statutes are introduced amending previous rates of
depreciation, regulations and entitlements;
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PART 2, SECTION 2
(c) the Inland Revenue practices and extra statutory concessions develop to
address specific issues or vagaries.
2.2.3.6 APPLICATIONS
Taxation allowances provide the opportunity for innovative funding
arrangements whereby the tax relief can be ‘exported’ to a party who can
enjoy more benefit from the entitlement.
Business Rates
Large plant and machinery regarded as an integral part of the building can
attract additional rates which can be influenced by design niceties (such as how
the plant is covered over). Expert advice should be sought in such a situation.
Page 14 Part 2, Section 2 (4/99) Effective from 1/6/99 The Surveyors’ Construction Handbook
PART 2, SECTION 2
(a) The present value for purchasing the doors is obviously the same as the
capital cost: £35,000
(c) For maintenance the present cost of £6,040 for new ironmongery and
repainting taking place in, say Year 12 at 4% discount
= £6,040 × 0.62459** = £3,773
The Surveyors’ Construction Handbook Part 2, Section 2 (4/99) Effective from 1/6/99 Page 15
PART 2, SECTION 2
Capital Costs
Aluminium Glazed £ 1750.00 m2 35,000 35,000
Hardwood Glazed
Vision Panels £ 1000.00 m2 20,000 20,000
Softwood £ 700.00 m2 14,000 14,000
Metal £ 850.00 m2 17,000 17,000
Contingency – – – –
Total Year 1 Capital Costs 35,000 20,000 14,000 17,000
Annual Running Costs
Aluminium Glazed £ 10.89 m2 218 4,927
Hardwood Glazed
Vision Panels £ 9.99 m2 200 4,520
Softwood £ 5.90 m2 118 2,670
Metal £ 17.99 m2 360 8,140
Total Annual Running Costs 13,068 4,927 11,988 4,520 7,080 2,670 21,588 8,140
Maintenance Year Present
Cost
OPTION 1 Repaint 4 340 340 291
Repaint 8 340 340 248
New ironmongery
Repaint 12 6,040 6,040 3,773
Repaint 16 340 340 182
Repaint 20 340 340 155
New ironmongery
Repaint 24 6,040 6,040 2,356
Repaint 28 340 340 113
Repaint 32 340 340 97
New ironmongery
Repaint 36 6,040 6,040 1,472
Repaint 40 340 340 71
Repaint 44 340 340 61
New ironmongery
Repaint 48 6,040 6,040 919
Repaint 52 340 340 44
Repaint 56 340 340 38
OPTION 2 Repaint 4 300 300 256
Repaint 8 300 300 219
New ironmongery
Repaint 12 6,000 6,000 3,748
Repaint 16 300 300 160
Repaint 20 300 300 137
New ironmongery
Repaint 24 6,000 6,000 2,341
Repaint 28 300 300 100
Repaint 32 300 300 86
New ironmongery
Repaint 36 6,000 6,000 1,462
Repaint 40 300 300 62
Repaint 44 300 300 53
Page 16 Part 2, Section 2 (4/99) Effective from 1/6/99 The Surveyors’ Construction Handbook
PART 2, SECTION 2
Total Running Costs 75,628 22,037 58,988 20,297 53,560 18,586 65,988 23,132
Total Net Present Value of Life Cycle Costs 57,037 40,297 32,586 40,132
The Surveyors’ Construction Handbook Part 2, Section 2 (4/99) Effective from 1/6/99 Page 17
PART 2, SECTION 2
2.2.5.2 BUILDING SERVICES DESIGN OPTION: AIR CONDITIONING AND UNDER FLOOR
TRUNKING VERSUS HOT WATER HEATING AND RING MAIN ELECTRICS
Page 18 Part 2, Section 2 (4/99) Effective from 1/6/99 The Surveyors’ Construction Handbook
PART 2, SECTION 2
Element: Services
Unit: 3,000 m2
Capital Cost
Air Conditioning U/Floor Trunking £ 250 m2 750,000 750,000
HW Heating & Ring Main Electric £ 150 m2 450,000 450,000
Contingency 5% 37,500 22,500
The Surveyors’ Construction Handbook Part 2, Section 2 (4/99) Effective from 1/6/99 Page 19
PART 2, SECTION 2
The following figure compares two options, firstly to provide the cleaning
gantry and secondly to omit the gantry. The capital cost and costs associated
with anticipated maintenance were calculated by using normal cost estimating
techniques.
Assumed criteria:
Taxation Calculation
The capital cost for plant and machinery receives a 25% reducing balance.
Maintenance and running costs receive 100% allowance.
The methodology applies for the rest of the 25 years as summarised overleaf.
The client initially considered that the gantry would pay for itself due to
savings in maintenance and cleaning cost.
However:
Page 20 Part 2, Section 2 (4/99) Effective from 1/6/99 The Surveyors’ Construction Handbook
COMPARATIVE COMPONENT LIFE CYCLE COSTING CLIENT:
PROJECT TITLE: Retail Development/Shopping Mall
JOB NO:
OPTION: Cleaning ‘with’ gantry – curtain walling to new facace
Costs TOTAL VAT 17.5% TOTAL Less tax NET TOTAL Present value PRESENT CUMULATIVE
Year Capital Financing Operation Maintenance Occupacy Disposal/ inc VAT allowance of VALUE PRESENT
residual value £1 VALUE
Annual Intermittent
@ 5%
0 30,000 – – – – – – 30,000 5,250 35,250 0 35,250 1.000 35,250 35,250
1 – – – 750 – – – 750 131 881 3,199 (2,318) 0.952 (2,207) 33,043
Page 21
COMPARATIVE COMPONENT LIFE CYCLE COSTING (continuation of table on page 21)
Page 22
6 Capital cost as plant and machinery with 100% tax allowance – £
FORECASTER’S ASSUMPTIONS i.e. 1st year 2,908
PART 2, SECTION 2
1 The capital cost includes allowances for preliminaries and associated builders 7 Maintenance and running costs with 100% allowance – ie 1st year 291
work. ———
total 3,199
2 Details of the maintenance requirements and cost estimates can be provided
8 Taxation allowances are subject to negotiation and agreement.
upon request.
9 Discount rate:
3 The life cycle costing is based on an agreed investment life of 25 years.
(i) Interest rate – 11% average over 25 years;
Page 24
6 Capital cost as plant and machinery with 100% tax allowance – NIL
FORECASTER’S ASSUMPTIONS
7 Maintenance and running costs with 100% allowance.
PART 2, SECTION 2
1 The capital cost includes allowances for opening lights now required, without 8 Taxation allowances are subject to negotiation and agreement.
capital allowances.
9 Discount rate:
2 Details of the maintenance requirements and cost estimates can be provided
(i) Interest rate – 11% average over 25 years;
upon request.
(ii) Inflation rate – 7% average over 25 years;
3 The life cycle costing is based on an agreed investment life of 25 years. (1 + 11%)
—————
There are various ways of presenting the data. One method widely accepted is
shown below, on two spreadsheets, a Planned Maintenance Programme, and a
‘costed’ Planned Maintenance Programme which establishes in this case the
present value of future costs.
(b) Brief
The client needed to establish the capital to be invested for a new build
housing project to cover all maintenance and repairs for the next 60 years. The
discount rate is 6%.
= £9,013
£9,013 × 0.41726* = £3,761
The data could also be presented as an annual sinking fund e.g. the amount to
be invested for each of 15 years at 6% compound interest in order to meet the
costs in Year 15 of £9,013 is:
The Surveyors’ Construction Handbook Part 2, Section 2 (4/99) Effective from 1/6/99 Page 25
PLANNED MAINTENANCE PROGRAMME KEY 1 = Inspect/Consider < = Inspect and Remedy T = Test until / = Inspect &
replacement
Page 26
EXAMPLE 1 = Renewal/Replacement < = until Replacement / = Decorate
Date Printed 02/12/98 Cumulative
CODE ELEMENT SUB-ELEMENT COMPONENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Cost
1.1 STRUCTURE 1.1.1. Roofs Timber < < < < < < 0
PART 2, SECTION 2
Page 27
PLANNED MAINTENANCE PROGRAMME (COSTED)
EXAMPLE Date Printed 02/12/98 Years Cumulative
Page 28
CODE ELEMENT SUB-ELEMENT COMPONENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Cost
1.1 Structure 1.1.1. Roofs Timber 50 50 50 50 50 50 300
1.1.2. Floors ) Timber ) 100 100 100 100 100 100 600
PART 2, SECTION 2
5.1 Sanitary Appliances 5.1.1. Sanitary ware Wcs, baths, whbs 5 5 5 5 5 5 5 5 5 5 5 5 5 5 450 5 5 5 5 5 5 5 5 5 5 5 5 5 5 450 1,040
5.2 Services Equipment 5.2.1. Kitchen sinks Stainless steel inc inc inc inc inc inc inc inc inc 160 inc inc inc inc 5 inc inc inc inc 160 inc inc inc inc inc inc inc inc inc 160 485
5.3 Water Supply 5.3.1. Water storage 125 125 125 125 125 250 875
5.3.2. Water pipes etc inc inc inc inc inc 125 125
5.3.3. Insulation inc inc inc inc inc inc 0
SER- 5.4.1 Internal drainage 5.4.2.1. Pipes & Fittns 60 60 60 60 60 60 360
VICES 5.4.2 Disposal inst 5.4.1.1. Pipes & Fittns inc inc inc inc inc inc 0
5.5 Heat source 5.1.1. Radiators/fires 20 20 650 20 20 650 1,380
5.6 Heat system 5.6.1. Boilers/equipment 40 40 40 40 40 40 40 40 40 750 40 40 40 40 40 40 40 40 40 750 40 40 40 40 40 40 40 40 40 750 3,330
5.7 Ventilation 5.7.1. Fans etc 5 5 5 5 5 5 5 5 5 200 5 5 5 5 5 5 5 5 5 200 5 5 5 5 5 5 5 5 5 200 735
5.8 Electrical inst 5.8.1. Power and lighting 100 100 1500 100 100 1500 3,400
Page 29
PART 2, SECTION 2
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PART 2, SECTION 2
• Value Added Tax on all capital costs would affect the financial benefits
of options 2 and 3 which require considerable capital expenditure;
• Capital Allowances would help support options 2 and 3.
The Surveyors’ Construction Handbook Part 2, Section 2 (4/99) Effective from 1/6/99 Page 31
CLIENT WATER COMPANY LIMITED
JOB TITLE CENTRALISATION OF AREA OFFICE STUDY
Page 32
JOB NO 3985
DATE 29th MARCH 1996
YEAR (SEPT 1996) 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 Total Value
PART 2, SECTION 2
£’000 £000
Capital Costs
Building Works 1176 0 0 0 0 0 0 0 0 0 190 0 0 0 0 0 0 0 0 0 300 0 0 0 0 0 0 0 0 0 393 0 0 0 0 0 0 0 0 0 310 2,369
Relocation Costs 15.5 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 16
Furniture 8.5 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 9
Value 1200 0 0 0 0 0 0 0 0 0 190 0 0 0 0 0 0 0 0 0 300 0 0 0 0 0 0 0 0 0 393 0 0 0 0 0 0 0 0 0 310 2,393
Capital Income
[(1.07) – 1]
—— × 100 = 3.88%
[(1.03) – 1]
The client has agreed that the discount rate can be rounded to 4%.
The Surveyors’ Construction Handbook Part 2, Section 2 (4/99) Effective from 1/6/99 Page 33
PART 2, SECTION 2
The adjacent buildings will continue to remain in use as offices during and
after the development.
The structural engineers have advised that no work is required to party walls,
other than temporary shoring.
(h) Summary
Net Present Value
£k
OPTION A
demolish existing building and rebuild to the
client’s specific requirements, incorporating
‘all air’ air conditioning systems; 3889
OPTION B
refurbish the existing building to meet as far as
practicable, the client’s requirements, re-using
systems wherever possible. 2177
———
% difference (A extra on B) 79%
———
The net present value is a key factor in the option appraisal. However other
less tangible benefits and disadvantages of each option should be carefully
considered in relation to the business objectives. It is also recommended that
a sensitivity analysis be carried out, for instance to look at different discount
rates and time frames.
Page 34 Part 2, Section 2 (4/99) Effective from 1/6/99 The Surveyors’ Construction Handbook
LIFE CYCLE COST SUMMARY
OPTION A 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Year
Costs £k £k £k £k £k £k £k £k £k £k £k £k £k £k £1 £k £k £k £k £k £k
Capital 2154 - - - - - - - - - - - - - - - - - - - -
Financing - - - - - - - - - - - - - - - - - - - - -
Operation - 104 104 104 104 104 104 104 104 104 104 104 104 104 104 104 104 104 104 104 104
annual - 27 27 27 27 27 27 27 27 27 27 27 27 27 27 27 27 27 27 27 27
intermittent - - - - - 6 3 - - - 62 3 21 - - 22 3 - - - 86
Occupancy - - - - - - - - - - - - - - - - - - - - -
Disposal/residual value - - - - - - - - - - - - - - - - - - - - -
Total 2154 131 131 131 131 137 134 131 131 131 193 134 152 131 131 153 134 131 131 131 217
Total (inc VAT) 2531 154 154 154 154 161 157 154 154 154 227 152 179 154 154 180 157 154 154 154 257
0 102 88 78 70 67 61 57 55 53 74 52 55 48 48 56 49 48 48 48 80
NET TOTAL 2531 52 66 76 84 94 96 97 99 101 153 105 124 106 106 124 108 106 106 106 177
Present value of £1 at 4% 1 .9615 .9246 .8890 .8548 .8219 .7903 .7599 .7307 .7026 .6756 .6496 .6246 .6006 .5775 .5553 .5339 .5134 .4936 .4746 .4564
Page 35
LIFE CYCLE COST SUMMARY
Page 36
OPTION B
Year 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
PART 2, SECTION 2
Costs £k £k £k £k £k £k £k £k £k £k £k £k £k £k £1 £k £k £k £k £k £k
Capital 904 - - - - - - - - - - - - - - - - - - - -
Financing - - - - - - - - - - - - - - - - - - - - -
Operation - 89 89 89 89 89 89 89 89 89 89 89 89 89 89 89 89 89 89 89 89
Maintenance:
intermittent - - - - - 17 3 - - - 45 3 21 - - 32 3 - - 69
Occupancy - - - - - - - - - - - - - - - - - - - - -
Disposal/residual value - - - - - - - - - - - - - - - - - - - - -
Total 904 104 104 104 104 121 107 104 104 104 149 107 125 104 104 136 107 104 104 104 173
Present value of £1 at 4% 1 .9615 .9246 .8890 .8548 .8219 .7903 .7599 .7307 .7026 .6756 .6496 .6246 .6006 .5775 .5553 .5339 .5134 .4936 .4746 .4564
CAPITAL
OPTION A OPTION B
The Surveyors’ Construction Handbook Part 2, Section 2 (4/99) Effective from 1/6/99 Page 37
PART 2, SECTION 2
OPERATION
OPTION A OPTION B
Cleaning
OPTION A 10500
Budget allowance £7.00 per m2
OPTION B
Budget allowance £9.00 per m2
OPTION A 75000
Budget allowance £50.00 per m2
OPTION B 63000
Budget allowance £42.00 per m2
Insurance
Building fabric replacement
OPTION A
Budget allowance 0.2% of building cost 4308
(£2154)
OPTION B
OPTION B 1808
Budget allowance 0.2% of building cost
(£904)
Page 38 Part 2, Section 2 (4/99) Effective from 1/6/99 The Surveyors’ Construction Handbook
ENERGY
(hrs per (%) (p/kwh) m2 w/m2 kwh* £ per m2 w/m2 kwh* £ per
annum) (a) annum annum
(b) (c) (d) (e) (f) (g) (d) (e) (f) (g)
Gas
Heating – Option A 2000 50 1.076** 1500 160 240,000 2582 1500 190 285,000 3067
Electricity
Small Power 2200 100 5.50 1500 10 33,000 1815 1500 10 33,000 1815
Power for mechanical services 2200 60 5.50 1500 58*** 114,840 6316 1500 20 3 9,600 2178
*NB: formula for kwh = area (d) × energy rate (e) × unit energy cost (c) × building usage (a) × diversity (b)
1000
Page 39
PART 2, SECTION 2
ANNUAL MAINTENANCE
OPTION A OPTION B
Page 40 Part 2, Section 2 (4/99) Effective from 1/6/99 The Surveyors’ Construction Handbook
INTERMITTENT MAINTENANCE
OPTION A
Year 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Costs £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k
Roof renewal – – – – – – – – – – – – – – – – – – – – 10
External decoration (fire escapes only) – – – – – 0.5 – – – – 0.5 – – – – 0.5 – – – – 0.5
Internal finishings:
carpets – – – – – – 3.0 – – – – 3.0 21 – – – 3.0 – – – 14
paintwork, etc. – – – – – 5.5 – – – – 5.5 – – – – 5.5 – – – – 5.5
Page 41
PART 2, SECTION 2
TAX
VAT CHARGEABLE
VALUE VAT RATE OPTION A OPTION B
£k % £k £k
VAT is chargeable directly on all running costs items and appears on the summary.
Corporation Tax
The client currently pays corporation tax at the rate of 31%.
This percentage has been assumed for all calculations.
Total £117.50
Tax allowance @ 31% £36.43
Page 42 Part 2, Section 2 (4/99) Effective from 1/6/99 The Surveyors’ Construction Handbook
TAX ALLOWANCE
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
£k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k
OPTION A
Capital allowances
From LCC summary (inc VAT) 154 154 154 154 161 157 154 154 154 227 157 179 154 154 150 157 154 154 154 257
Total 328 285 252 227 216 198 185 177 171 240 167 179 154 154 180 157 154 154 154 257
OPTION B
Capital allowances
From LCC summary (inc VAT) 122 122 122 122 142 126 122 122 122 175 126 147 122 122 160 126 122 122 122 203
Total 243 212 190 173 180 155 143 138 134 184 133 147 122 122 160 126 122 122 122 203
Apply current tax rate 31%
Page 43
PART 2, SECTION 2
Page 44 Part 2, Section 2 (4/99) Effective from 1/6/99 The Surveyors’ Construction Handbook
PART 2, SECTION 2
The Surveyors’ Construction Handbook Part 2, Section 2 (4/99) Effective from 1/6/99 Page 45
PART 2, SECTION 2
Page 46 Part 2, Section 2 (4/99) Effective from 1/6/99 The Surveyors’ Construction Handbook
PART 2, SECTION 2
No Income Tax ANNUAL SINKING FUND FOR THE REDEMPTION OF £1 CAPITAL INVESTED
RATE PER CENT
Years 2 3 4 5 6 7 8
1 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000
2 .4950495 .4926108 .4901961 .4878049 .4854369 .4830918 .4807692
3 .3267547 .3235304 .3203485 .3172086 .3141098 .3110517 .3080335
4 .2426238 .2390270 .2354900 .2320118 .2285915 .2252281 .2219208
5 .1921584 .1883546 .1846271 .1809748 .1773964 .1738907 .1704565
6 .1585258 .1545975 .1507619 .1470175 .1433626 .1397958 .1363154
7 .1345120 .1305064 .1266096 .1228198 .1191350 .1155532 .1120724
8 .1165098 .1124564 .1085278 .1047218 .1010359 .0974678 .0940148
9 .1025154 .0984339 .0944930 .0906901 .0870222 .0834865 .0800797
10 .0913265 .0872305 .0832909 .0795046 .0758680 .0723775 .0690295
11 .0821779 .0780774 .0741490 .0703889 .0667929 .0633569 .0600763
12 .0745596 .0704621 .0665522 .0628254 .0592770 .0559020 .0526950
13 .0681184 .0640295 .0601437 .0564558 .0529601 .0496508 .0465218
14 .0622020 .0585263 .0546690 .0510240 .0475849 .0443449 .0412969
15 .0578255 .0537666 .0499411 .0463423 .0429628 .0397946 .0368295
16 .0536501 .0496108 .0458200 .0422699 .0389521 .0358576 .0329769
17 .0499698 .0459525 .0421985 .0386991 .0354448 .0324252 .0296294
18 .0467021 .0427087 .0389933 .0355462 .0323565 .0294126 .0267021
19 .0437818 .0398139 .0361386 .0327450 .0296209 .0267530 .0241276
20 .0411567 .0372157 .0335818 .0302426 .0271846 .0243929 .0218522
21 .0387848 .0348718 .0312801 .0279961 .0250045 .0222890 .0198323
22 .0366314 .0327474 .0291988 .0259705 .0230456 .0204058 .0180321
23 .0346681 .0308139 .0273091 .0241368 .0212785 .0187139 .0164222
24 .0328711 .0290474 .0255868 .0224709 .0196790 .0171890 .0149780
25 .0312204 .0274279 .0240120 .0209525 .0182267 .0158105 .0136788
26 .0296992 .0259383 .0225674 .0195643 .0169043 .0145610 .0125071
27 .0282931 .0245642 .0212385 .0182919 .0156972 .0134257 .0114481
28 .0269897 .0232932 .0200130 .0171225 .0145926 .0123919 .0104889
29 .0257784 .0221147 .0188799 .0160455 .0135796 .0114487 .0096185
30 .0246499 .0210193 .0178301 .0150514 .0126489 .0105864 .0088274
31 .0235963 .0199989 .0168554 .0141321 .0117922 .0097969 .0081073
32 .0226106 .0190466 .0159486 .0132804 .0110023 .0090729 .0074508
33 .0216865 .0181561 .0151036 .0124900 .0102729 .0084081 .0068516
34 .0208187 .0173220 .0143148 .0117554 .0095984 .0077967 .0063041
35 .0200022 .0165393 .0135773 .0110717 .0089739 .0072340 .0058033
36 .0192329 .0158038 .0128869 .0104345 .0083948 .0067153 .0053447
37 .0185068 .0151116 .0122396 .0098398 .0078574 .0062368 .0049244
38 .0178206 .0144593 .0116319 .0092842 .0073581 .0057951 .0045389
39 .0171711 .0138439 .0110608 .0087646 .0068938 .0053868 .0041851
40 .0165557 .0132824 .0105235 .0082782 .0064615 .0050091 .0038602
41 .0159719 .0127124 .0100174 .0078223 .0060589 .0046596 .0035615
42 .0154173 .0121917 .0095402 .0073947 .0056834 .0043359 .0032868
43 .0148899 .0116981 .0090899 .0069933 .0053331 .0040359 .0030341
44 .0143879 .0112298 .0086645 .0066163 .0050061 .0037577 .0028015
45 .0139096 .0107852 .0082625 .0062617 .0047005 .0034996 .0025873
46 .0134534 .0103625 .0078820 .0059282 .0044149 .0032600 .0023899
47 .0130179 .0099605 .0075219 .0056142 .0041477 .0030374 .0022080
48 .0126018 .0095778 .0071806 .0053184 .0038977 .0028307 .0020403
49 .0122040 .0092131 .0068571 .0050396 .0036636 .0026385 .0018856
50 .0118232 .0088655 .0065502 .0047767 .0034443 .0024598 .0017429
60 .0087680 .0061330 .0042018 .0028282
Extracts from Parry’s Valuation and Investment Tables, A W Davidson (1989), (11th Edition) (Estates
Gazette) reproduced by permission of the College of Estate Management which owns the copyright.
The Surveyors’ Construction Handbook Part 2, Section 2 (4/99) Effective from 1/6/99 Page 47
PART 2, SECTION 2, APPENDIX A
A2 There will be one of two situations. Either the building will have reached the
end of its life, with no alternative use, or the building will have reached the
end of the life for its planned purpose, but does have an alternative use.
A3 In either situation the residual value of the building and/or the land may be
significant and will need to be carefully assessed as it may have a substantial
effect on life cycle costing calculations. Residual values will be of particular
significance if the time horizon used for life cycle costing calculations is
relatively short.
A5 Owners also need to be cognisant of taxation issues and whether these affect
their property/building decisions.
A6 There are strict guidelines for taxation adjustments that arise at disposal. If the
plant and machinery is ‘scrapped’ the remaining value is written off and a
balancing allowance brought into account. Alternatively if the building (and
the plant and machinery contained therein) is sold, the vendor should declare
whether allowances have been claimed. An adjustment to their after tax cost
will arise depending upon whether the disposal value is greater or less than the
written down value remaining on the vendor’s accounts.
A7 This area of tax advice is experiencing increased scrutiny from the Inland
Revenue and the District Valuer’s Department, as parties to property
transactions sometimes select/contract disposal values of tax relievable
components with specific tax planning objectives.
The Surveyors’ Construction Handbook Part 2, Section 2, Effective from 1/6/99 Page 1
Appendix A (4/99)
PART 2, SECTION 2, APPENDIX B
I Appendix B: Obsolescence
B1 Building life is influenced by obsolescence. Almost all its forms relate to
economic considerations. However, six different forms of obsolescence can
be categorised as:
• physical
• economic
• functional
• technological
• social
• legal.
B2 Buildings usually end their ‘life’ before the end of their physical life. The most
common reasons for buildings becoming obsolete are probably economic and
functional considerations. Buildings designed for a specific specialised use,
with little or no flexibility for changing their use, are therefore likely to have
shorter lives than buildings offering flexibility for the change of function of
the building.
B3 The table below gives definitions and examples of each form of obsolescence:
Deterioration of
suspended concrete
floors, containing high
alumina cement, in
multi-storey buildings,
affecting structural
stability.
Economic Life of the building How long will the The value of the land on
to when occupation building be which the building
is not considered to economic for the stands is more than the
be the least cost client to own or capitalised full rental
alternative of operate? value that could be
meeting a derived from letting the
particular objective. building.
The Surveyors’ Construction Handbook Part 2, Section 2, Effective from 1/6/99 Page 1
Appendix B (4/99)
PART 2, SECTION 2, APPENDIX B
Functional Life of the building How long will the Cinemas converted into
to when the building be used bingo halls, village
building ceases to for the purpose for railway stations
function for the which it was built? converted into private
same purpose as houses.
that for which it
was built.
Technological Life of the building How long will the Prestige office unable
until the building is building be to accommodate
no longer technologically introduction of high
technologically superior to level of computing
superior to alternatives? facilities.
alternatives.
Storage warehouse
unable to
accommodate the
introduction of robotics
for goods handling.
Social and The life of a How long will the Timber football stand
Legal building until the building meet replaced (following
time when human human desires, Bradford Football Club
desire or legal (with the exclusion fire disaster).
requirement of economic
dictates considerations). Multi-storey flats in
replacement for inner city demolished
reasons other than (following social and
economic community problems).
considerations.
Page 2 Part 2, Section 2, Effective from 1/6/99 The Surveyors’ Construction Handbook
Appendix B (4/99)
PART 2, SECTION 2, APPENDIX C
C1 CAPITAL COSTS
C1.1 Land
C1.2 Fees on acquisition
C1.3 Design team professional fees
C1.4 Demolition and site clearance
C1.5 Construction price for building work
C1.6 Cost of statutory consents
C1.7 Development Land Tax
C1.8 Capital Gains Tax
C1.9 Value Added Tax
C1.10 Furnishings
C1.11 Other capital costs
C1.12 Commissioning expenses
C1.13 Decanting charges
C2 FINANCING COSTS
C2.1 Finance for land purchase and during construction
C2.2 Finance during period of intended occupation
C2.3 Loan charges (public sector)
C3 OPERATION COSTS
C3.1 Energy
C3.2 Cleaning
C3.3 Rates
C3.4 Insurances
C3.5 Security and Health
C3.6 Staff (related to the building)
C3.7 Management and administration of the building
C3.8 Land charges
C3.9 Energy conservation measures
C3.10 Internal planting
C3.11 Equipment associated with occupier’s occupation
The Surveyors’ Construction Handbook Part 2, Section 2, Effective from 1/6/99 Page 1
Appendix C (4/99)
PART 2, SECTION 2, APPENDIX C
C5 OCCUPANCY COSTS
C5.1 Client’s occupancy costs
C6 RESIDUAL VALUES
C6.1 Resale value – building, land and plant and equipment
C6.2 Related costs – demolition and site clearance and disposal of fees and charges
C6.3 Capital Gains Tax and balancing charges
Page 2 Part 2, Section 2, Effective from 1/6/99 The Surveyors’ Construction Handbook
Appendix C (4/99)
PART 2, SECTION 2, APPENDIX D
D2 REVENUE EXPENDITURE
Expenditure incurred as a trading expense e.g. salaries, consumables,
occupancy and regular maintenance costs.
As explained in 2.2.3 there are various types of taxation allowances and the
proportion of initial expenditure which attracts tax relief is often varied by
successive Finance Acts.
D4 INDUSTRIAL BUILDING
Industrial buildings or structures which qualify for capital allowances are
defined in the statutes CAA 1968 S7 and CAA 1990 S18. These include
factories, manufacturing, storage, docks, tunnels and mines. There are specific
rules which apply where part of the building is used for a non-qualifying
purpose.
The Surveyors’ Construction Handbook Part 2, Section 2, Effective from 1/6/99 Page 1
Appendix D (4/99)
PART 2, SECTION 2, APPENDIX D
D8 BALANCING ALLOWANCE
Upon disposal of an asset a comparison between its value and the written
down amount remaining on the owner’s accounts is required.
If the asset is sold for a sum in excess of the vendor’s after tax relief cost, then
a ‘profit’ has arisen which is subject to an adjustment to the depreciation
allowance (i.e. reduction of tax relief), termed a ‘balancing charge’.
Alternatively, if the asset is ‘scrapped’ or disposed of at low value (compared
with the residual amount) then an additional tax relief is awarded, termed a
‘balancing allowance’.
Page 2 Part 2, Section 2, Effective from 1/6/99 The Surveyors’ Construction Handbook
Appendix D (4/99)
PART 2, SECTION 2, APPENDIX E
The Surveyors’ Construction Handbook Part 2, Section 2, Effective from 1/6/99 Page 1
Appendix E (4/99)
PART 2, SECTION 2, APPENDIX E
Page 2 Part 2, Section 2, Effective from 1/6/99 The Surveyors’ Construction Handbook
Appendix E (4/99)
PART 2, SECTION 2, APPENDIX F
Ferry, D.J.O., Flanagan, R., Life Cycle Costing: A Radical Approach, Construction
Industry Research and Information Association (CIRIA Report 122), London, 1991
Flanagan, Roger, Norman, George, Furbur, J. David & Townsend, Geoffrey M., Life
Cycle Costing For Construction, Surveyors Publications, London, 1983
Flanagan, Roger, Norman, George Meadows, Justin Robinson, Graham, Life Cycle
Costing: Theory and Practice, BSP Professional Books, Oxford, 1989
HM Treasury. Guidance Note No. 35: Life Cycle Costing, Central Unit on Procurement,
HM Treasury, London, 1992
Data Sources
British Standard 7543: 1992 Guide to Durability of Buildings and Building Elements,
Products and Components, British Standards Institution, London, 1992
Building Research Energy Conservation Support Unit. Energy Efficiency Best Practice
Programme. Building Research Energy Conservation Support Unit, Watford, WD2
7JR. Tel: 01923 664 258. Includes numerous good practice case studies, good practice
guides and energy consumption guides for different building types including costings.
CIB. CIB W80 report 96: Prediction of Service Life of Building Materials and
Components
CIBSE. CIBSE Guide, Section B18, Owning and Operating Costs. Chartered Institute of
Building Services Engineers, London. Gives indicative details of energy consumption,
maintenance costs and rough life spans for plant (currently being updated in more
detail).
The Surveyors’ Construction Handbook Part 2, Section 2, Effective from 1/6/99 Page 1
Appendix F (4/99)
PART 2, SECTION 2, APPENDIX F
HAPM Component Life Manual. E & FN Spon. Tel: 0171 204 2481, 1985.
Comprehensive life-span assessment for over 500 housing components based on
insured life assessments.
ISO Guide to Service Life Planning of Buildings (under preparation at the time of
writing but it will include a method of estimating the durability of individual building
components).
Jones Lang Wootton. Office Service Charges Analysis 1995, Jones Lang Wootton,
London, 1995. A review of 300 buildings including unit costs.
Kirk, Stephen J., Dell’isola, Alphonse J., Life Cycle Costing For Design Professionals,
(2nd Edition), McGraw-Hill Inc, New York, 1995. Includes 45 pages of maintenance
and replacement data (in dollars) covering all elements.
PSA Cost in Use Tables, 3rd Edition, London HMSO 1991. Includes elemental analysis
of cleaning, maintenance and repair costs.
RICS. Life Expectancies of Building Components. RICS Research Paper Series No 11,
1992. Preliminary results from a survey of Building Surveyors’ views.
Page 2 Part 2, Section 2, Effective from 1/6/99 The Surveyors’ Construction Handbook
Appendix F (4/99)
PART 2, SECTION 3
Introduction
The Building Cost Information Service (BCIS) elements were originally
produced for use in cost planning, i.e., the development of a design with a pre-
set budget and were published in the BCIS document, Standard Form of Cost
Analysis: Principles, Instructions and Definitions. However, since their
introduction elements have become widely used for structuring building
information in value engineering, specifications, contract drafting and tender
evaluation as well as for cost planning/cost analysis.
This section discusses some of the uses for elemental information and gives a
complete definition for each element. The elements are also referred to in
other sections of the handbook.
I 2.3.1 Elements
2.3.1.1 An element is a part of a building which fulfils a specific function or
functions irrespective of its design, specification or construction, for
example, the element ‘external walls’ provides the external vertical envelope
to a building, separating the internal and external environment, irrespective of
how it may be constructed.
2.3.1.2 Elements relate to the design process. Therefore, budget estimates are
normally prepared in elemental form and developing the designs are normally
described and costed in this manner.
2.3.2.2 The tender cost is broken down into the standard BCIS elements (see
Appendix A) using the definitions to determine which items should be
included in any particular element.
2.3.2.3 The elemental cost analysis can then be used to estimate future projects of a
similar type.
2.3.2.4 For further information on the preparation of an elemental cost analysis using
the BCIS elements, please refer to the BCIS publication, Standard Form of
Cost Analysis: Principles, Instructions and Definitions.
The Surveyors’ Construction Handbook Part 2, Section 3 (10/99) Effective from 1/11/99 Page 1
PART 2, S ECTION 3
In the procurement of design and build projects there has been an increase in
the use of elements to structure both employer’s requirements and the contract
sum analysis. However, the use of non-standard elements and definitions can
be confusing. Standard elements, on the other hand, encourage a structured
thought process and produce more coherent employer’s requirements. This
helps to avoid some conflicting statements that may arise in contract
documents if standard elements are not used.
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PART 2, S ECTION 3
If the contract sum analysis has been set out elementally it lends itself to
Alternative A, as elements and sub-elements provide easily definable stages.
The Surveyors’ Construction Handbook Part 2, Section 3 (10/99) Effective from 1/11/99 Page 3
PART 2, S ECTION 3
The use of an activity schedule broken down into BCIS standard elements
would also allow an elemental cost analysis to be completed relatively easily
and would be particularly useful if projects have been procured without bills
of quantities.
Page 4 Part 2, Section 3 (10/99) Effective from 1/11/99 The Surveyors’ Construction Handbook
PART 2, S ECTION 3, A PPENDIX A
1 SUBSTRUCTURE
2 SUPERSTRUCTURE
2A Frame
2B Upper floors
2C Roof
The Surveyors’ Construction Handbook Part 2, Section 3 Effective from 1/11/99 Page 1
Appendix A (10/99)
PART 2, S ECTION 3, A PPENDIX A
2D Stairs
2E External walls
2F1 Windows
Sashes, frames, linings and trims. Ironmongery and glazing. Shop
fronts. Lintels, sills, cavity damp-proof courses and work to reveals of
openings.
2H Internal doors
Doors, fanlights and sidelights. Sliding and folding doors. Hatches. Frames,
linings and trims. Ironmongery and glazing. Lintels, thresholds and work to
reveals of openings.
Page 2 Part 2, Section 3 Effective from 1/11/99 The Surveyors’ Construction Handbook
Appendix A (10/99)
PART 2, S ECTION 3, A PPENDIX A
3 INTERNAL FINISHES
3A Wall finishes
3B Floor finishes
3C Ceiling finishes
4A4 Equipment
Non-mechanical and non-electrical equipment related to the function
or need of the building (e.g. gymnasia equipment).
The Surveyors’ Construction Handbook Part 2, Section 3 Effective from 1/11/99 Page 3
Appendix A (10/99)
PART 2, S ECTION 3, A PPENDIX A
5 SERVICES
5A Sanitary appliances
Baths, basins, sinks, etc. WC’s, slop sinks, urinals and the like. Toilet-roll
holders, towel rails, etc. Traps, waste fittings, overflows and taps as appropriate.
5B Services equipment
5C Disposal installations
5D Water installations
Page 4 Part 2, Section 3 Effective from 1/11/99 The Surveyors’ Construction Handbook
Appendix A (10/99)
PART 2, S ECTION 3, A PPENDIX A
5E Heat source
The Surveyors’ Construction Handbook Part 2, Section 3 Effective from 1/11/99 Page 5
Appendix A (10/99)
PART 2, S ECTION 3, A PPENDIX A
5G Ventilating systems
5H Electrical installations
5I Gas installations
Town and natural gas services from meter or from point of entry where there
is no individual meter: distribution pipework to appliances and equipment.
5J2 Escalators
As detailed under 5J1.
5J3 Conveyors
As detailed under 5J1.
5K Protective installations
Page 6 Part 2, Section 3 Effective from 1/11/99 The Surveyors’ Construction Handbook
Appendix A (10/99)
PART 2, S ECTION 3, A PPENDIX A
5L Communication installation
Door signals
Timed signals
Call signals
Clocks
Telephones
Public address
Radio
Television
Pneumatic message systems
5M Special installations
The Surveyors’ Construction Handbook Part 2, Section 3 Effective from 1/11/99 Page 7
Appendix A (10/99)
PART 2, S ECTION 3, A PPENDIX A
6 EXTERNAL WORKS
6A Site works
6B Drainage
6C External services
Page 8 Part 2, Section 3 Effective from 1/11/99 The Surveyors’ Construction Handbook
Appendix A (10/99)
PART 2, S ECTION 3, A PPENDIX A
7 PRELIMINARIES
8 EMPLOYERS CONTINGENCIES
Notes
1 Substructure
(a) Where lowest floor construction does not otherwise provide a platform, the
flooring surface shall be included with this element (e.g. if joisted floor, floor
boarding would be included here).
(b) Stanchions and columns (with relevant castings) shall be included with
‘Frame’ (2A).
(c) External enclosing walls to basements shall be included with ‘External
walls’ (2E).
2A Frame
(a) Structural walls which form an integral part of the loadbearing framework
shall be included either with ‘External walls’ (2E) or ‘Internal walls and
partitions’ (2G) as appropriate.
(b) Beams which form an integral part of a floor or roof which cannot be
segregated therefrom shall be included in the appropriate element.
The Surveyors’ Construction Handbook Part 2, Section 3 Effective from 1/11/99 Page 9
Appendix A (10/99)
PART 2, S ECTION 3, A PPENDIX A
(c) In unframed buildings roof beams and trusses and floor beams shall be
included with ‘Upper floors’ (2B) or ‘Roof structure’ (2C1) as appropriate.
(d) If the ‘Stair structure’ (2D1) has had to be included in this element it
should be noted.
2B Upper floors
(a) Where floor construction does not otherwise provide a platform the
flooring surface shall be included with this element (e.g. if joisted floor, floor
boardings would be included here).
(b) Beams which form an integral part of a floor slab shall be included with
this element.
(c) If the ‘Stair structure’ (2D1) has had to be included in this element it
should be noted.
2E External walls
(a) If walls are self-finished on internal face, this shall be stated.
3A Wall finishes
(a) Surfaces which are self-finished (e.g. self-finished partitions, fair-faced
work) shall be included in the appropriate element.
(b) Insulation which is a wall finishing shall be included here.
3B Floor finishes
(a) Where the floor construction does not otherwise provide a platform the
flooring surface will be included either in ‘Substructure’ (1A) or ‘Upper
floors’ (2B) as appropriate. Access floors.
3C Ceiling finishes
(a) Where ceilings principally provide a source of heat, artificial lighting or
ventilation, they shall be included with the appropriate ‘Services’ element.
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Appendix A (10/99)
PART 2, S ECTION 3, A PPENDIX A
5B Services equipment
(a) Local incinerators shall be included with ‘Refuse disposal’ (5C2).
5E Heat source
(a) Chimneys and flues which are an integral part of the structure shall be
included with the appropriate structural element.
(b) Local heat source shall be included with ‘Local heating’ (5F4).
The Surveyors’ Construction Handbook Part 2, Section 3 Effective from 1/11/99 Page 11
Appendix A (10/99)
PART 2, S ECTION 3, A PPENDIX A
5L Communication installations
(a) Each installation shall be stated separately where appropriate.
(b) The cost of the work in connection with electrical supply shall be included
with ‘Electrical power supplies’ (5H2).
5M Special installations
(a) The cost of each installation shall, where appropriate, be shown separately.
(b) Items deemed to be included under ‘Refrigerated stores’ comprises all
plant required to provide refrigerated conditions (i.e. cooling towers,
compressors, instrumentation and controls, cold room thermal insulation and
vapour sealing, cold room doors, etc.) for cold rooms, refrigerated stores and
the like other than that required for ‘Space heating and air treatment’ (5F8 and
5F9).
6B Drainage
(a) To include all drainage works (other than land drainage included with
‘Surface treatment’ (6A2)) outside the building, to and including disposal
point, connection to sewer or to treatment plants.
6C9 Builder’s profit and attendance on external mechanical and electrical services
(a) Profit and attendances shall be stated separately for each installation
where appropriate.
Page 12 Part 2, Section 3 Effective from 1/11/99 The Surveyors’ Construction Handbook
Appendix A (10/99)
PART 2, SECTION 4
Introduction
This section describes some of the tasks and responsibilities that a surveyor
may be asked to undertake when appointed as an employer’s agent on a design
and build contract.
At its most basic, the role of the employer’s agent is to act on behalf of the
client in the matters specified in the contract. However, in practice there are a
wide range of tasks that a client may ask an employer’s agent to undertake.
This section is not about procurement options; it assumes that all optional
procurement strategies have been carefully considered by clients and their
advisors and that the decision has been made to adopt design and build. With
regard to procurement strategies, reference should be made to part 3, section 1
of this handbook (‘Developing an Appropriate Building Procurement
Strategy’) which provides extensive guidance on selection of the most
appropriate option for the procurement of buildings.
There are a number of ‘standard’ forms of design and build contracts, but
where specific reference is made in this section, it is to the current edition of
the Joint Contracts Tribunal (JCT) Standard Form of Building Contract With
Contractor’s Design 1998 (CD 98). This form of contract makes no provision
for a contract administrator (CA) and all matters which would have been
certified by the CA are ascribed to either the client or the contractor.
It should be noted that the prescribed duties of the employer’s agent are
restricted to ‘access to documents on site’ and ‘access to works, workshops,
etc.’. Importantly however, the contract also allows the client to delegate his
or her responsibilities under the contract and in practice this is usually what
happens.
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PART 2, SECTION 4
G 2.4.1 Background
2.4.1.1 Design and build is not a new concept. Many historic buildings have been
procured in this way and the technique has been used for simple industrial
shell buildings. However, in recent years the use of design and build has
extended to cover a significant number of building projects of all types.
2.4.1.2 It is thought that design and build has become more popular because clients
believed that in some circumstances the traditional route failed to deliver their
projects on time and to budget.
2.4.1.3 Proponents of design and build claim that it can deliver coordinated planning,
reduced professional fees, improved lead-in times, shorter construction
programmes and cost savings, as well as providing greater cost certainty for
clients through a single point of contact.
2.4.1.4 Responsibility for the development of the design, as well as the construction
of a project, is firmly placed with the contractor. This is perceived to clarify
any litigation or dispute between the parties to the contract.
2.4.1.5 Proponents of design and build also claim that it can allow tenderers to bring
their skills to the design which, through the competitive process, can deliver
benefits to the client in terms of buildability. Furthermore, tenderers can take
account of current availability of labour, materials and plant in their design
and pricing considerations.
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2.4.2.2 Throughout its life the JCT Standard Form of Building Contract With
Contractor’s Design has been subject to many amendments to account for
changes in the law, regulations affecting building development and increasing
expectations and involvement of clients.
2.4.2.3 In England and Wales the contract documents under this form are:
• the employer’s requirements;
• the contractor’s proposals;
• the contract sum analysis; and
• the articles and conditions set out in the form including optional
supplementary provisions and appendices.
2.4.3.2 The employer’s agent will normally be involved from the outset and will be
instrumental in producing the contract documentation, including the
employer’s requirements based on the brief developed with the client.
Thereafter, the agent can arrange or assist with the selection of tenderers and
arrange the formal tendering process. Subsequently he or she can review the
contractor’s proposals (including the developed design and the contract sum
analysis) to ensure that all aspects of the employer’s requirements have been
met with particular reference to quality, time and cost issues.
2.4.3.3 Where the employer’s agent has been delegated the authority by the client, he
or she is responsible for ensuring that the project is carried out in accordance
with the conditions of contract, employer’s requirements, contractor’s
proposals and contract sum analysis. The role will usually include monitoring
the construction process to ensure best practice, controlling expenditure and
overseeing contractor compliance with all current regulations. Typically, it
will also involve the administration of the project in terms of design and cost
by sanctioning all design issues and by instructing any changes. The
employer’s agent will be responsible for checking the contractor’s valuations
and confirming interim and final payment amounts to the client in accordance
with the contract conditions.
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2.4.3.5 The role of employer’s agent is not just one of monitoring the contractor’s
performance; good practice requires an active approach to ensure that the
contractor undertakes all of his or her responsibilities under the contract.
However, the employer’s agent should not hinder or prevent the contractor
from fulfilling his or her duties.
2.4.3.6 The employer’s agent should advise the employer on those roles that are
within his or her competency, which attract a duty of care similar to that under
traditional procurement methods and advise the employer on the appointment
of any other consultants required to fulfil any additional roles.
2.4.3.7 It has been held that an employer’s agent was responsible for failure to
comment on high risk design elements of the contractor’s proposals and an
ongoing failure to approve the contractor’s design development proposals. It
would be an unusual project arrangement if these essential tasks were not
delegated by the client to the employer’s agent. On the other hand, the duty to
approve the contractor’s design development and drawing should be included
expressly or by implication in the contract between the client and the
employer’s agent.
2.4.3.8 Design and build is fundamentally about the allocation of risk and
responsibility. Therefore, it is strongly recommended that the agent’s
contractual responsibilities as delegated by the client, together with any
additional duties the agent has agreed to undertake on behalf of the client, are
clearly defined and recorded, and that the client understands the position.
2.4.4.2 The appointed employer’s agent has an obligation to guide the client, provide
technical and professional advice and draft the employer’s requirements in
order to protect the client and to ensure the project is completed.
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2.4.4.4 The employer’s agent and the employer should agree between them the
standard of performance and the requirements of the building. The employer’s
agent should offer guidance on the effect that this might have on the
contractor’s flexibility in design and construction. Some clients may require a
detailed level of specification. However, if the employer’s requirements
become unnecessarily prescriptive as to the contractor’s basic construction
methods, the contractor may lose sight of the client’s real requirements. The
requirements should always be sufficiently detailed to ensure the client
obtains the building he or she needs. Therefore, great care should be exercised
by the employer’s agent in advising the client on the appropriate level of detail
to be provided in the employer’s requirements and that requested in the
contractor’s proposal.
2.4.4.5 The employer’s agent should try to encourage the client to concentrate on the
purpose, performance and desired end requirements of the project and to avoid
involvement in the construction method.
2.4.4.6 It is, however, most important that the client’s input is sufficiently detailed to
enable the production of clear and concise ‘employer’s requirements’ to
achieve the client’s objectives. The requirements should also be
comprehensive enough to avoid amendments during the construction process
as these can be very costly.
2.4.4.7 All relevant parts of the client’s brief should be given in the employer’s
requirements. Additional requirements arising from meetings during the
tender process should be incorporated into the requirements by amendment.
There should be no misunderstanding as to what comprises the employer’s
requirements. Similarly, any amendments to the contractor’s proposals after
they have been submitted should be incorporated. Any ambiguity between
these two documents could give rise to conflict at a later date.
2.4.4.8 Contractors are only responsible for that which they design or specify; in turn
employers or their consultants are responsible for all that they design and/or
specify, unless there has been a pre-agreed limitation to the contract. Thus, in
order for the employer to maximise the benefit from design and build, the
extent of any designing and specifying by prescription in the employer’s
requirements should be limited to those elements in which the employer
requires such control.
2.4.4.9 The Building Cost Information Service (BCIS) publication, Elements for
Design and Build offers guidance to employer’s agents on the use of building
elements for structuring the employer’s requirements and the contractor’s
proposals/contract sum analysis. Elements for Design and Build is considered
to be important supplementary reading. The list of elements, and their
definition, is also given in section 2.3 of this handbook.
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PART 2, SECTION 4
Note should also be made of the Code of Procedure for Selective Tendering
for Design and Build published by the National Joint Consultative Committee
for Building (NJCC) in 1995 and as amended from time to time.
• package deal;
• turnkey;
• develop and construct;
• two-stage tender;
• joint venture/negotiated; and
• design build fund and operate.
Package deal and turnkey are both expressions used to describe traditional
design and build, but with the absolute minimum of client involvement in the
design development (or the building operations). A turnkey contract
additionally requires that the building is fully fitted out to enable immediate
operation by the end user.
Develop and construct is the name given to the ‘variant’ where the client, as
part of the employer’s requirements, imposes a design and/or specification
developed to a greater degree than most (for example, listing specific
manufacturers’ products). The contractor is obliged to adopt this data and
should reflect this developed design information in the contractor’s proposals.
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Design build fund and operate (DBFO) contracts have been created as a result
of the private finance initiative. Although this form of procurement has been
listed as a design and build variant it should be remembered that the end user
never actually owns the building (unless otherwise provided). CD 98 is not
therefore appropriate as part of the primary agreement, although it could
feature in a subcontract. In most instances, the client will appoint a shadow
design team to ensure that user’s requirements are properly established and
communicated to the bidders. The shadow team checks the offers received to
ensure that the user’s requirements have been addressed and continues to
monitor design and development with the preferred bidder. Thereafter the
shadow team ensures that the building incorporates the specified user
requirements.
Irrespective of the design and build variant employed, the service of the
employer’s agent does not alter radically and can still be developed from the
items of service listed in appendix A.
I 2.4.6 Novation
2.4.6.1 Novation can be employed on any of the design and build variants and
involves the transfer of the client’s contract with his or her designer (or
designers) to the successful contractor, this arrangement having been included
in the tender documents. The contractor assumes the responsibility for the
payment of fees and associated value added tax (VAT), and receives the
benefit of continuity of design. Often when novation is implemented, it is not
applied to the quantity surveyor who remains with the client acting as the
employer’s agent during the design development and construction phase.
Novation is not defined in CD 98, although it is widely practised.
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2.4.6.2 Where designers are novated it is important for clients to understand that their
designers’ allegiance transfers from the client to the contractor. This transfer
of allegiance should be properly explained to the client prior to a decision to
implement novation. It is also important that the employer’s agent advises on
selecting appropriate designers and contractors and that the transfer of roles
occurs and is maintained.
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PART 2, SECTION 4, APPENDIX A
Reference should also be made to the BCIS publication Elements for Design and Build
which provides guidance on how to structure documents for design and build contracts.
The scope of services should be fully agreed between the employer’s agent and the
client at the outset of the commission and all interested parties should be informed as to
the extent of delegated authority.
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PART 2, SECTION 4, APPENDIX A
A2 PRE-CONTRACT
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A3 CONTRACT DURATION
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PART 2, SECTION 4, APPENDIX A
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PART 2, SECTION 4, APPENDIX A
• Ensuring that all snagging items are rectified before inviting client to
receive handover.
• Ensuring the provision of ‘as built’ information compiled in manual
form and supplied to the client at completion of construction process –
user’s manual and/or computer disk.
• Ensuring that all service installations are completed in accordance with
original approved design, attending final commissioning and procuring
test certificates.
• Arranging and attending handover sessions.
A4 POST-CONTRACT
• Receiving health and safety file from planning supervisor and delivering
to client.
• On partial possession and/or sectional completion, agreeing value
thereof.
• Ensuring compliance with any insurance requirements.
• Advising on values for building insurance purposes.
• Reviewing means of escape as built and ensuring procurement of fire
certificate by the contractor.
• Issuing notices of practical completion on client satisfaction or
beneficial occupation, if appropriate.
• Obtaining final clearance certificates from local authority in connection
with compliance with building regulations.
• Preparing post-contract schedules of defects after occupation and
arranging for rectification by contractor and on completion notifying
client.
• Issuing notices on making good defects at end of defects liability period,
examining the rectified works and certifying completion of making
good defects, where applicable.
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Appendix A (09/03)
PART 2, S ECTION 4, A PPENDIX B
The required level of detail will vary from client to client and contract to
contract but it is suggested that information on this checklist would be the
minimum requirement.
Where little design work has been carried out before tenders and proposals
are invited, a performance specification would be normally required.
However, where a great deal of design work has taken place a prescriptive
specification would be needed.
B2 CHECKLIST
(Note that this list is not intended to be exhaustive in total or in any section)
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PART 2, S ECTION 4, A PPENDIX B
Basis of design
Design standards
• legislation or standards
• details of standards which apply (for example codes of practice)
• statement of workmanship
• tolerances
• CDM regulations
Aesthetics
• specific aesthetic needs (other than planning requirements)
Integration of components
• relationship with each other
• methods of dealing with interfaces
• method of dealing with services installations. For example, level of
concealment of services and architectural treatments to exposed
surfaces
The specifications and design checklist (see Section B2.5) can be used in
preparing employer’s requirements or a specification for a contractor’s
proposal.
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Flexibility
• flexibility of accommodation
• flexibility of design
Energy
• energy conservation and heat measures
• insulation values
• Building research establishment environmental assessment method
(BREEAM) certification rating
• plant room layouts
Loading requirements
Building configuration
• written statement and/or drawing
• relationship of accommodation
• size of accommodation
• purpose
• layout
• dimensional constraints including clear heights under slabs and beams
• natural lighting - lux levels and method of measurement
• natural ventilation
• column grid arrangement including projections from walls, etc.
• clear ceilings/soffit heights
• tolerances
• vehicle access door heights and widths
• toilet/bathroom/locker room requirements
• kitchen/catering requirements
• restaurant/vending requirements
• plant room configuration
• noise breakout between rooms
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Appendix B (10/99)
PART 2, S ECTION 4, A PPENDIX B
Means of escape
Plantrooms
External works
• car parking
• leisure facilities
• environmental considerations
• visual effects
• waste disposal
• emergency vehicle access
• water features
• loading bays
• existing site features and treatments
• function buildings within externals
• site survey
1 Substructure
2 Superstructure
2A Frame
2B Upper floors
2C Roof
2C1 Roof structure
2C2 Roof coverings
2C3 Roof drainage
2C4 Roof lights
2D Stairs
2D1 Stair structure
2D2 Stair finishes
2D3 Stair balustrades and handrails
2E External walls
2F Windows and external doors
2F1 Windows
2F2 External Doors
2G Internal walls and partitions
2G1 WC cubicles
2H Internal doors
3 Internal finishes
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3A Wall finishes
3B Floor finishes
3C Ceiling finishes
3C1 Finishes to ceilings
3C2 Suspended ceilings
4 Fittings and furnishings
4A Fittings and furnishings
4A1 Fittings, fixtures and furniture
4A2 Soft furnishings
4A3 Works of art
4A4 Equipment
5 Services
5A Sanitary appliances
5B Services equipment
5C Disposal installations
5C1 Internal drainage
5C2 Refuse disposal
5D Water installations
5D1 Water mains supply
5D2 Cold water service
5D3 Hot water service
5D4 Steam and condensate
5E Heat source
5F Space heating and air treatment
5F1 Water and/or steam (heating only)
5F2 Ducted warm air (heating only)
5F3 Electricity (heating only)
5F4 Local heating (heating only)
5F5 Other heating systems (heating only)
5F6 Heating with ventilation (air heated locally)
5F7 Heating with ventilation (air heated centrally)
5F8 Heating with cooling (air heated locally)
5F9 Heating with cooling (air heated centrally)
5G Ventilating systems
5H Electrical installations
5H1 Electric source and mains
5H2 Electric power supplies
5H3 Electric lighting
5H4 Electric lighting fittings
5I Gas installation
5J Lift and conveyor installations
5J1 Lifts and hoists
5J2 Escalators
5J3 Conveyors
5K Protective installations
5K1 Sprinkler installation
5K2 Fire-fighting installations
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Appendix B (10/99)
PART 2, S ECTION 4, A PPENDIX B
Site investigations
• soil survey
• ground conditions
• topographical surveys
• existing services
• hazardous waste
• archaeological features
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• factory inspector
• environmental health officer
• employer’s building insurers (if appropriate)
• Traffic Planning Authority
• utilities
• National Rivers Authority
• Any other authority or statutory undertaker which has jurisdiction
with regard to the works
Adjoining premises
• rights of access to adjoining premises
Trespass, nuisance
• contractor to acquire rights as required and absolve the employer of
responsibility
If the responsibility for any of these matters is to be with the contractor the
client should include disclaimers in any information which is provided to
the contractor.
Information requirements
The employer’s requirements should give details of all records, drawings,
etc., required to be handed over on completion including:
• record drawings
• maintenance manuals
• CAD data disks
• design calculations
• staff training requirements
• warranties and guarantees
Exclusions
Give details of items not to be designed and/or constructed by the
contractor and the requirements and responsibilities for integrating these
into the works
Future developments
Provide details of any provisions required for future developments
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Appendix B (10/99)
PART 2, SECTION 5
Introduction
Over recent years many property and construction professionals have
diversified into areas outside their core discipline. Some have become
barristers; many have become planning supervisors; but the most common
and obvious diversification has been to take on the role of lead consultant or
project manager.
In the past, this role has largely been the domain of the architect. However, in
recent years many clients have increasingly used the services of the chartered
surveyor to carry out these duties.
For those embarking on this route care must be taken to ensure that the
additional duties required by the role of lead consultant are fully understood
and considered when undertaking the project, together with the associated
professional liabilities.
This section highlights some of the issues which the chartered surveyor
should consider before undertaking this role. It also identifies some of the
benefits for both clients and projects when appointing a chartered surveyor as
lead consultant. A schedule of the additional duties that are likely to be
required in excess of the main professional duties defined in appointment
documents (such as those for building and quantity surveying) is included at
the end of the section.
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PART 2, S ECTION 5
Client
2.5.1.2 The position of lead consultant is more of a coordinating role, ensuring that
other parties in the design, procurement and construction process of a project
provide the right input at the right time, and to take an overall view to ensure
coordination of all aspects of the project. However, the management of the
other consultants is ultimately down to the client and, therefore, is better
suited to more informed clients who may have their own in-house project
managers undertaking an overall management role.
Client
Lead Consultant
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2.5.2.2 As well as simply the design of the buildings, many other skills are required
to provide a functional space for a client and the chartered surveyor is often
more conversant with these additional activities.
2.5.2.3 The chartered surveyor is frequently called upon in matters associated with
land purchase, valuation, condition survey, development potential and
building cost. This front-end advice provides the opportunity to advise clients
and add value before the appointment of the architect, or in parallel with the
concept designs. This early involvement opens the door of opportunity for the
chartered surveyor to take up the reins as lead consultant.
2.5.2.4 Other benefits to a client can be derived where the ‘project’ requires a distinct
specialism and the design process is only part of a more specialised activity,
for example farms management.
2.5.3.2 Fees for these additional activities must be at the discretion of the provider.
They should take into account the level of additional time and resources
required in excess of the core professional services provided. It may be that
some of the lead consultant duties overlap with existing duties and that
economies may be obtained. However, the converse may equally apply and it
is essential that the chartered surveyor thoroughly reviews the actual
additional duties required before providing fee quotations.
2.5.3.3 With the constant changes in the way that buildings are procured and
designed, the chartered surveyor is in a prime position for providing real
added value to the process. For those individuals or practices who do not wish
to undertake the more encompassing role of project manager, but feel that
they can make a positive contribution by directing a particular project, then
the role of lead consultant fits the bill. However, care must be taken to ensure
that the necessary additional skills exist to be certain that the increased
responsibility can be taken on comfortably and to the ultimate benefit to the
client.
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PART 2, S ECTION 5
2.5.4.2 PURPOSE
During a construction project many issues can arise on which the client may
require professional advice from his or her consultants. The lead consultant’s
role is to provide the client with comprehensive professional support to ensure
that the client’s requirements are met with regard to legislation, standards,
cost and programme.
The client nominates a lead consultant for each capital project undertaken.
The lead consultant, who may or may not be an active design member of the
project team, will liaise with the client representative and will be responsible
for the following activities.
2.5.4.3 GENERALLY
(a) Establish the client’s brief and ensure that it is agreed with the client
and communicated to all designers.
(b) Monitor the service provided by all consultants to ensure that they are
carrying out their duties to the standard required at each work stage.
Submit all reports, plans and proposals to the client with the request for
approval to proceed to the next work stage.
(c) Deal with all queries and solve problems as they arise. Seek advice
from the client where necessary, but be aware that professional
responsibility for the proper management of all aspects of the project
lies solely with the lead consultant and project team members.
(d) Ensure that all drawn and specification material is forwarded to all
other consultants in accordance with the previously agreed project team
programme. Review, coordinate and confirm design drawings of all
project team members.
(e) Regularly review the design with the client and designers and formally
minute any agreed amendments. Inform the client of the impact of
these amendments on time, cost and design.
AB/1 Establish the scope of the project and ensure that all other members of
the project team have the same understanding.
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AB/4 Direct the activities of any supporting consultants such that the option
appraisal/feasibility study is fully investigated. Collate and prepare a
report for submission to the client. Attend presentation meetings as
required.
AB/5 Assist the client with the preparation of detailed briefing documents
with special input on technical, legal, statutory, financial and
programming requirements.
AB/7 Advise the client with regard to the general application of the CDM
Regulations and comply with Regulation 13(1).
C1 Arrange dates and venues. Chair and minute all regular design team
meetings (at least monthly up to tender stage).
C3 Arrange dates and venues with the architect and client representative
for brief development and presentation meetings.
D1 Arrange for any site investigations and consultations which are still
necessary.
D2 Review progress, brief and the client’s decisions. With the project
team’s assistance prepare and agree a detailed design programme of
work and flow of information.
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D3 Prepare the initial health and safety plan (if acting as the planning
supervisor).
E3 Compile and submit the Stage E report to the client which, in addition
to the usual reports and cost plans, should comprise:
• furniture and layout drawings;
• sample boards and recommendations for selection of materials and
finishes;
• reports from advising authorities;
• phasing and site management drawing showing the effects of
disruption on the operation of the establishment; and
• schedule of areas showing the direct relation to the areas in the
brief.
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G2 Ensure that planning and building regulation approval has been achieved.
H1 Ensure that all arrangements for temporary works and client site
preparation have been undertaken. Liaise with the property
manager/client for all temporary site management and services issues.
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K2 Visit the site as appropriate to inspect the progress and quality of work.
K3 Liaise and coordinate the work of all design consultants during the post-
contract period ensuring solutions are found to issues that may arise and
that the schedules for issue of later design information are met.
K4 Hold regular meetings on site with the head of establishment, client and
clerk of works to appraise them of progress and to establish and resolve
any concerns that may be arising.
K5 Attend regular site meetings with the contractor, other consultants and
clerk of works.
K7 Ensure that certificates are issued for interim payments on the RIBA
standard form to the client. Produce short financial reports on a
cumulative basis (cash flow predictions are required to be attached to
each valuation certificate). Produce a detailed financial report showing
the value of all actual and expected variations to be issued at three
monthly intervals throughout the construction process.
K8 Ensure that all the client’s handover procedures have been followed
before accepting the building from the contractor.
K9 Notify the client’s insurers that work is complete and arrange for
release of bonds.
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L5 Ensure that the issue of final certificate is made and that all consultants
complete construction certificate.
L7 Resolve any issues relating to emergency latent defects after the patent
defects period.
L9 Ensure that the health and safety file is completed and handed to the
client.
L10 Ensure that all fire safety certificates, building control certificates,
licenses, etc. are obtained and handed to the client.
L11 Review the project from start to finish and report findings to the client,
complete with observations on successes and failures. Ensure that all
parties involved are sent a copy of the report.
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PART 2, SECTION 6
Introduction
The term ‘sustainable’ was first used in the construction industry when it was
applied to sources of timber. At that time timber was declared to come from
‘sustainable sources’. Today, timber from ‘sustainable sources’ has been
replaced with the expression ‘well managed’ or even ‘managed’ sources
implying that there is a difference between being sustainable and being well
managed.
This definition appears quite clear in its meaning: we are charged with the
responsibility of ensuring that our activities do not damage the legacy which
we are passing on to our successors. Development can be taken in any context,
from the economic development of a nation to the construction of a simple
building. It confers upon us the responsibility to consider the impact of our
activity now and the legacy that we are leaving behind us. This can be
regarded as the principal of ‘common inheritance’ or, alternatively, ‘inter-
generational equity’.
The time frame element is therefore the difference between something which
is well managed and something which is sustainable. A source of supply for
timber may be well managed, but may only be so for 20, 30, 40 or 50 years.
Something which is sustainable has, theoretically, an infinite timescale and
therefore has inter-generational equity (where the term equity can mean a
resource stock, capital stock or a stock of technologies).
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The mineral resources that are used are therefore not sustainable in
themselves, and in order to demonstrate a sustainable, or at least a ‘more’
sustainable construction industry it is the industry’s responsibility, under the
definition, to ensure that the buildings being constructed from the finite raw
material resources are capable of inter-generation usage.
Today, development, economic and political stability depend entirely upon the
availability of oil as a fuel and a raw materials source. Although estimates of
available economic oil reserves continually extend, and we are likely to enjoy
the benefits of it for at least another 100 years or so, it is universally agreed
that human activity will have to change and the reliance upon oil will have to
decline as the availability diminishes and it becomes more costly to extract.
The development of an alternative renewable, sustainable, pollution-free
energy source is therefore vital to the sustainability of human development.
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This resource, which is available for their use, can either be in the form of raw
materials, capital wealth or alternative technologies. The important factor is
that the overall equity stock must not be diminished.
This leads to the conclusion that acts which damage the environment do carry
a penalty for future generations and therefore to ignore them is a risk. This risk
may not necessarily be a risk for the present generation, but one that is being
imposed on future generations. Under a philosophy of sustainability it is the
responsibility of the present generation to hand on to the next generation the
same total stock as it itself inherited so as to ensure the same overall balance
of advantages for future development as originally inherited. Providing that
each generation adheres to these principals, the element of timescale
judgement is removed as each successive generation looks after the next.
Under these criteria, knowledge and technical advances will still be made and
future generations will still be at least as well off as the present generations;
but the likely loser will be the industrialized economy which will have to alter
the way in which the indicators of economic development are measured. At
present, industrialized nations generally consider economic development to
mean an increase in Gross National Product (GNP) per capita. However, GNP
assumes all matters relating to the environment have zero value. If economic
values are attributed to environmental functions in relation to economic
development, the national economic balance sheets would take on a
considerably different complexion.
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Even organic materials are not immune. Brazilian Rio Rosewood, which was
very popular for making high-quality furniture in the 1960s, is now so
endangered that it appears on the Control in Trade of Endangered Species
(CITES) list as being illegal for fear of extinction. Mahogany is also on the
fringes of being listed and it is widely reported that there are no longer any
legal sources for the supply of the true Swietenia mahogany.
An example closer to home is the UK’s reliance upon imported timber having
used up its own supply. The history of timber production in the UK is an
interesting one which has seen the rapid depletion of forests from
approximately 90 per cent forest coverage at the time the Romans arrived to a
low point of less than 5 per cent of land coverage at the early part of this
century. Timber was first imported after the Great Fire of London and in 1668
it became necessary for Acts of Parliament to be passed to create forest
reserves like the New Forest in Hampshire to try to arrest the situation. World
War I saw timber in short supply again and resulted in the birth of the Forestry
Commission as a Government Agency in 1919. World War II resulted in
timber shortages again and the emergency created the major post-war
plantation of quick-growing conifers.
Humankind has a history of failing to adequately consider the impact that its
activities are having on the resource base and examples are easy to find.
In order to be able to assess the effect that we are having upon the environment
as a result of our activities a scientifically rigorous and consistent method of
analysis and bench marking is required. Such a method would have to
attribute units of measurement to each environmental impact and in turn to
relate these back to a datum to render the results meaningful on a human scale.
The Building Research Establishment (BRE) has undertaken more work than
most in this area. It has developed Envest, an environmental estimating
software tool which attributes Ecopoints to environmental impacts, with 100
Ecopoints being equivalent to the environmental impact of the average UK
citizen. Using a variety of comparison models and mathematical techniques
Ecopoint values have been attributed to building materials and systems, and it
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PART 2, SECTION 6
is now possible, via the software package, to calculate the total Ecopoints
score for building types, building operations, refurbishment and custom use.
From this data one form of construction can be analysed against another. It is
also possible to quantify the decision-making process using environmental
criteria, not only by building type and the method of construction that should
be used but also the decision whether to build new or to refurbish.
Environmental Impacts
In undertaking the assessment of environmental impacts and attributing
Ecopoints values to various activities and products, the following must be
considered carefully:
• climate change;
• fossil fuel depletion;
• ozone depletion;
• human toxicity to air and water;
• waste disposal;
• water extraction;
• acid deposition;
• eutrophication (or over enrichment of water courses);
• ecotoxicity;
• low-level ozone creation (summer smog); and
• mineral extraction.
All these factors have been considered, quantified, compared and weighted in
relation to the impact associated with a typical UK citizen and are shown in
table 1.
Table 1: Environmental Impact of UK Citizens
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As materials can be extracted in any part of the world and either processed into
building components locally or transported as raw materials, it is virtually
impossible to examine all of the possible environmental impacts that the
various activities are likely to have because the variables are just so great.
Perhaps the only constant method there may be in the winning and working of
materials, their transportation and processing into building components up to
the point when they are assembled into completed buildings is the energy
requirements of the various processes. The actual monetary value of energy
can also be different from country to country, therefore it is not possible to use
monetary value of energy as a unit of measure. However, the unit of energy
input itself can be used.
Embodied energy impacts associated with materials have also been assessed
quantitively by the BRE using Envest (see 2.6.3.2) which can also take
account of the building form and fabric typical replacement intervals and
other data held by the Centre for Sustainable Construction. The results
generated are quoted in Ecopoints per m² of element and factors such as
replacement intervals can also be factored in as part of a full cost and use
study.
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A major criticism that could be levelled at such a system is that it would starve
the construction industry of design flexibility. However, this could be
overcome by introducing a scale of energy taxation. This would enable those
that wish to exceed the design criteria of the regulations to do so, but they
would have to pay for the privilege. Conversely, those who produce buildings
and achieve significant savings beneath the bench mark could receive aid in
the form of grants as recognition for their efforts and ingenuity.
Some species of timber are better than others at resisting rot and decay. In
particular, Western Red Cedar and Douglas Fir, which are again being
considered as a viable alternative to PVC-u or aluminium.
Note: specifiers should exercise care with regards to the source of timber as all
is not always as it seems.
It is also now possible to obtain plaster and plasterboard made from waste
gypsum which is a by-product from fuel gas de-sulphurization.
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These are just a few examples of alternative material resources now available.
It is of course interesting to consider that as these materials gain popularity
and become specified as a matter of course, this will cause problems in
sourcing adequate quantities to satisfy demands.
There is a logic to the use of recycled materials (where the embodied energy
can be utilized again) as being perhaps the greenest contribution to be made.
Second-hand bricks, timber, roofing materials and assorted ironwork are
already available, unfortunately at premium prices.
There are many buildings of over 200 years of age that have found suitable
alternative purposes beyond that for which they were originally designed. It is
therefore possible to establish with a reasonable degree of certainty what the
vital component parts are in ensuring the success of a building for say a 200,
or even a 300 year design life.
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The methods of funding and, in particular, the timescale over which a building
is considered a viable proposition would need to be reviewed and an
alternative method of valuing the asset would need to be established. This
would reflect not just the economic value, but also the environmental resource
value invested in the construction, and the social impact and benefits that the
construction is likely to have for future generations.
The planning process could be slightly extended such that alternative uses are
identified and documented and form an integral part of the planning process.
This would require the procurers and designers of the building to demonstrate
how it could be used for identified alternative purposes and to ensure that the
design, as proposed, is sufficiently flexible for the alternative uses to be
achieved with minimal additional input.
Whilst some technologies have changed very significantly the base skills have
not and nor have the materials. It may be necessary for us to re-learn some old
skills in order to produce buildings of a long life expectancy but it is now
necessary for us to change from being a disposal society to a considerate and
conserving one.
• improving towns and cities and protecting the quality of the countryside;
and
The Government also felt that the construction industry can contribute to
achieving the sustainable development aims by:
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PART 2, SECTION 6
• design for minimum waste – specify materials with care, think about
using recycled materials, design out waste at all phases in the
construction and occupation process and involve the supply chain;
• set targets – measure and compare your performance with others and set
targets for continuous improvement.
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The sourcing of the materials and the methods employed in conversion and
production of building products must be the first priority in making progress
towards sustainable constructions. The way in which raw materials are
extracted and processed at source can have the most direct impact upon the
environment and must be closely examined as well as the actual material
manufacturers themselves.
The second area for examination would have to be the philosophy behind
procuring buildings and meeting user requirements, the method by which
buildings are funded, the method of valuation and justification, together with
the demands for greater longevity and flexibility.
Finally, the contribution that those actually constructing the building have to
make would need to be considered. The sustainable building should be a piece
of procession engineering, simply constructed but to the very highest of quality
standards with good detailing and nothing left to chance. The finished product
would have to be a monument to sustainable construction and inter-generational
equity making the optimum use of the energy and materials invested.
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Appendix A: Embodied Energy Content of Building Material
Lightweight 417
blocks
Concrete 625
Lightweight 833
concrete
Bricks 1222
Material
Plaster 1806
Part 2, Section 6
Appendix A (10/00)
Plastic 9300
Glass 15000
Steel 63000
Aluminium 195000
kWh/m3
Page 1
PART 2, S ECTION 6, A PPENDIX A
Excel Industries
13 Rassau Industrial Estate
Ebbw Vale
Monmouthshire NP3 5SD
Construction Resources
16 Great Guildford Street
London SE1 0HS
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Appendix B (revised 10/01)
PART 3, SECTION 1
Introduction
This section is intended to provide both clients and their advisers with
procedures which will assist them in the selection of an appropriate
procurement strategy for a building project.
The strategy developed for the purpose of project procurement should result
from an objective assessment of client needs and project characteristics, since
it is considered that there will be no single procurement strategy suitable for
all projects and all clients. Choice of an inappropriate strategy can, however,
result in a failure to meet client objectives, disappointment and potential
litigation.
In 3.1.2–3, the key issues are addressed together with the characteristics of a
variety of procurement strategies: the aim is to match client needs, the
particular project’s criteria and the chosen strategy.
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The type of client will affect the criteria which must be met if the client is to
be satisfied with the project.
This is not to say that owner-occupiers are unconcerned about time. Indeed,
certainty of completion date may be a key issue. Nor is it fair to suggest that
developers are unconcerned about building performance or cost. There are
market conditions where both of these issues may become important.
This Section addresses these issues and provides, through the form of a
checklist, a process to aid selection.
SCOPE
The section and the processes included should be used as a prompt and a focus
for the issues to be addressed during the development of procurement strategy.
It is not intended that the section will be used as a substitute for judgement.
G 3.1.1.1 INTRODUCTION
G 3.1.1.1 This subsection explains the client’s responsibilities through the life of a
project. Although it is written for building projects, much of the advice is
applicable to other types of project. In carrying out their role, clients,
depending on their knowledge and expertise, will need help from their
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consultants, project managers and other advisers, whose roles are also
explained in this section. It is advisable, wherever possible, that clients obtain
advice from an objective and independent adviser who will then not be
involved as a consultant on the project.
This subsection aims to assist both current and future clients in setting policy
and formulating strategy. It outlines their task and explains how it should be
carried out. It has been written with the lay client in mind, but will also assist
experienced clients and their advisers.
The success of any project will depend on the motivation given by the client.
Experienced clients may take a leading role in the procurement process; less
experienced clients will need to seek advice or to appoint an adviser to assist
them. Where projects are of a large or complex nature it may be advisable to
consider the appointment of a project manager, who will manage the whole
project on behalf of the client.
G 3.1.1.2 A building project represents a discrete piece of work with clear start and
finish dates, providing specified benefits at accepted cost. It is unlike any
other manufactured product because it has:
• the final product, although itself unique, is built up of many standard parts
assembled in accordance with a series of standard rules and practices;
• its construction involves major expenditure over a comparatively short
period of time; and
• the construction of a new building requires a large team of individuals and
firms with particular expertise to work together to complete the project
satisfactorily. This team will normally only be formed for this unique
project and then be disassembled. It is unlikely that the same team will
work together again, and if it does, the project is likely to be different.
Each project is, therefore, a prototype and involves a learning curve.
Project testing is rare.
G 3.1.1.4 (a) Effective management is vital in any construction project. The client’s
prime role is to define the project and to establish a structure for the
management of the project to make sure that it works.
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(c) The client can have substantial influence on the design of the project in
respect of both functional efficiency and of overall appearance, and, therefore,
has to take particular care to:
• develop a business case for the project identifying primary needs and
analysing costs and benefits
• understand fully the purpose of the building; ensure that the
requirements of the users are accommodated; and communicate those
requirements to the designers;
• appoint architects and engineers with the proven ability of designing
buildings which satisfy users’ requirements and harmonise with and
contribute to the quality of the built environment. The selection of the
right people is emphasised as a key to success.
(d) This subsection sets out the role and responsibilities of the client through
all stages of the project.
(e) The diagram on the next page indicates the primary activities in the
procurement process and when activities are performed. As can be seen the
client’s role is significant with a wide range of activities to perform and
implement before both the design and the construction processes. In the
performance of these activities clients can expect to be supported and advised
by their advisers or (if appointed) the project manager.
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G 3.1.1.5 PRIMARY ACTIVITIES IN THE PROCUREMENT PROCESS
Client’s role Appoint adviser (3.1.1.6) Procurement strategy (3.1.1.13) Design overview (3.1.4.12) Commissioning (3.1.1.17)
Develop the business case for the Design overview* (3.1.4.12) Cost control overview (3.1.4.13) Occupation and takeover
project* (3.1.1.9) Cost control overview* (3.1.4.13) Time control overview (3.1.4.14) (3.1.1.18)
Define client’s responsibilities Whole-life costs (3.1.4.15) Quality control overview (3.1.4.18)
(3.1.1.7) Value engineering (3.1.4.17) Change control overview
Project definition (3.1.1.10) Time control overview* (3.1.4.14) (3.1.4.19)
Page 5
PART 3, SECTION 1
(a) With the potential for the involvement of many consultants and/or
constructors in a project, and the range of contracts associated with their
employment, all but the most experienced client may need advice. The advice
offered should be informed and unbiased and it should be based upon a logical
analysis of the needs of the client, the type and character of the project and the
range of appropriate strategies available.
(b) This advice can be offered by a member of the client’s design team or can
be a separate function. It may be more difficult for a design team member to
remain impartial in carrying out this process and it is recommended that any
expertise retained should be retained solely for this purpose. This function
may encompass:
(a) The client should set policy and outline strategy including:
• setting and prioritising the project objectives;
• clarifying client attitude to project risk;
• establishing procurement strategy;
• arbitrating between conflicting demands; and
• evaluating the completed project against the objectives.
1
Construction Industry Board, Briefing the Team, Thomas Telford Publishing, London, 1997.
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(d) The client should also co-ordinate and resolve conflicts between all
interested sections of the client organisation including:
• user groups – who will work in the building;
• specialist groups – responsible for technical systems within the
building, e.g. communications, computers;
• facilities management – who will manage the completed building
including maintenance and security;
• finance and accounts – who will plan and control expenditure and pay
bills as they arise;
• legal advisers – who will advise on and monitor the client’s formal
relationships with outside parties.
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(e) The client is responsible for ensuring that all necessary decisions are made
on time. Timely decisions are necessary to avoid delays and increased costs;
the decision-making process requires as much planning and management as
any other activity. This will include:
• scheduling the key decisions to be made;
• identifying the decision makers and their required procedures;
• ascertaining the time required for making decisions;
• establishing a formal programme for decisions;
• pre-warning decision makers of forthcoming submissions – making
sure ‘items are on the agenda’;
• preparing on time fully detailed submissions and/or presentations in
full compliance with procedural requirements;
• following up submissions throughout the decision making process; and
• promptly communicating decisions made to the parties affected by
them.
Notwithstanding overall responsibility for the whole of the project, the client
will have an active personal involvement in the key activities explained in the
following subsections.
(a) The client’s purpose in initiating a building project may be driven by the
need for the project as a functional unit or long-term investment.
(b) The client will need to review project feasibility in terms of time and cost
against benefits which will stem from the proposed project. In doing so he/she
will have to consider the returns expected, the value (in use) of the projected
asset against projected land costs, construction costs, cost of fees, fitting out
and commissioning costs, operating and maintenance costs and the
opportunity cost of money.
(c) The importance of each of these issues will be relative to the objectives of
the client and to the extent to which the client is able to cope with risk.
(d) Further influences in the case of a development project may include likely
annual rental, period between rent reviews, and growth of rental value. In
terms of the project development, total development time and taxation issues
may also be influential on the decision process.
(e) It is important that the client seeks advice in terms of investment appraisal
of the planned project and that any appraisal considers ‘what if’ questions to
ensure that the impact of changes of key components in the appraisal are
clearly understood. A chartered surveyor will be able to assist the client in
these matters.
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• project description;
• function of building;
• equipment and special services/requirements;
• target programme; and
• site.
(b) Since there can be a tension between the long-term objectives set for the
project in the business plan and the short-term objectives set for the project by
the project team, the identification of priorities is very important.
(c) One way to achieve this is to consider ‘what if’ scenarios to establish the
importance of key factors:
• what if the project does not meet its functional requirements?
• what if the project is delivered late?
• what if the cost of the project exceeds the budget?
(d) By carrying out an analysis in this way relative importance can be given to
each aspect by weighting that aspect against a total.
For example:
%
Function 50 Each of these can be subdivided to produce clarity, e.g.
Completion 20 cost can be divided into capital and running costs, time
Cost 30 into speed or reliability of delivery date and function into
100 layout, environmental quality and specification.
(e) This is the initial control document for the early planning of the project;
without it little constructive work can be done. If all the information required
for the project definition is not readily available, it is better to issue it in an
incomplete form and progressively update it.
G 3.1.1.12 BRIEFING
(a) Once the project definition has been completed the briefing process will be
carried out. This is when the design team and cost consultants are able to flesh out
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the project prior to extensive design work. The process commences with concept
design building upon project definition and progresses through to a project brief
which should encompass the client’s aesthetic, spatial and service requirements.
(c) The Construction Industry Board (1997) have produced an excellent guide
called Briefing the Team which summarises the processes involved.1
(d) Following the development of the brief for the project the design process
will commence (see 3.1.4 – Implementation).
The client is responsible for selecting the procurement strategy most suited to
the project and deciding how it is to be administered. The client may need to
take consultant advice on which strategy is most appropriate considering the
prioritised objectives and attitude to risk. This is a three-stage process which
may be key to project success:
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G 3.1.1.15 (a) The extent of collaboration possible between those who design the project
and those responsible for delivery will vary with the strategy adopted.
(b) Selection strategies may include selection by competition for price; on the
basis of the quality of the bid as well as price alone; or by negotiation. In some
cases a high level of collaboration is possible enabling those responsible for
delivery to adopt a ‘Partnering’ approach to project delivery.
(c) Partnering is not so much a contract strategy as a way by which the project
team can be drawn together for their mutual benefit. Partnering is usually most
advantageous where the client has a range of projects to procure but can be
adopted for single projects.
(d) The principles associated with Partnering are based on inclusiveness and
depend upon a trust being established within the team. There is also a focus on
achieving the best outcome for the client as well as a satisfactory outcome for
each participant. The primary principles include developing mutual
objectives, simple approaches to dealing with disputes and a focus on
continuous improvement which can be measured.
(f) The Construction Industry Board have published a most useful guide to
partnering1.
(g) The number and style of contract documents will depend on the contract
strategy selected.
G 3.1.1.16 (a) Where direct consultant appointments are made each will be subject to a
separate form of contract, but where a design and build strategy is selected,
designers may be appointed by the contractor. In the case of construction
management, the client will be required to enter into many individual trade
contracts.
1
Construction Industry Board, Partnering in the Team, Thomas Telford Publishing, London, 1997.
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(c) The responsibility for contract administration will depend upon the
procurement strategy selected, and may fall upon the design team, the project
manager, a contract administrator, or the client him/herself. The client should
seek advice to ensure that the administration process is appropriately planned
and delegated.
G 3.1.1.17 COMMISSIONING
(a) Once the building work is complete the systems which will support comfort
must be commissioned to ensure they are working effectively and reliably.
(b) In relatively simple buildings the client can insist that this is a function
which the contractor must perform. Where buildings have sophisticated
systems controlling the internal environment or facilitating staff movement or
safety, commissioning can be established as an independent activity carried
out by specialists.
(a) The client is responsible for addressing the issues of occupation, staffing
and subsequent operation and maintenance of the building. This activity is
separate from the design and construction process, although it will affect it,
and will have its own time, resource and cost implications which should be
incorporated into the overall project plan.
(b) For large projects, the client may wish to arrange for the nomination of a
member of the department to act as occupation manager to manage this
activity or may appoint a facilities manager. Occupation plans should be
established during the design stages of the project and should cover:
• the operation of the building on a regular on-going basis;
• the hand-over and acceptance of the building from the contractor(s);
• the progressive final fitting-out (if any) and physical occupation of the
building with minimum disruption to the client’s operations.
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into between the project participants and the client. The procurement strategy
should be consistent with the objectives of the project and should enable the
risks to be controlled to achieve a successful outcome.
G 3.1.2.2 Procurement strategy is the outcome of a series of decisions which are made
during the early stages of a project. It is one of the most important decisions
facing the client. The chosen strategy influences the allocation of risk, the
design strategy and the method of employment of consultants and
contractors. Risks are also allocated by means of the associated contracts.
Procurement strategy has a major impact on the timescale and ultimate cost
of the project.
G 3.1.2.3 Generally, clients can choose from several different strategies. A successful
strategy is one which leads to a completed building which meets the client’s
objectives. The preferred aim is for contributing parties to work together for a
quality result rather than competing against each other.
G 3.1.2.4 Where the development of design does not maintain the pace anticipated, or
the programme is otherwise affected by unexpected occurrences, the selected
strategy must be reviewed. It is most important that the strategy is
reconsidered at key times in the progress of the project such as when planning
approval is given, before contract strategy is decided and before construction
contracts are let.
The main types of procurement strategy are summarised below (they are
covered in more detail in Appendix A).
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G 3.1.2.6 On some projects it may be necessary to use more than one strategy to meet
the project’s objectives. For example, a traditional approach may be used for
completing the building structurally with main services installed. This is
known as a shell and core contract. A separate strategy, for example,
construction management, may be used to fit out the building with ceilings,
raised floors, carpets, partitions and electrical fittings. The use of two
strategies allows the client more time to finalise the user’s detailed
requirements, without delaying the start of construction.
G 3.1.2.7 When the choice of procurement strategy has been made, the resultant
contract strategy and forms of contract should be chosen (i.e. the terms and
conditions of the contract). To avoid the need for fresh legal drafting each
time, various standard forms of contract are available, both for the
appointment of consultants and contractors. Construction professionals re
usually experienced in understanding these contracts and can advise on the
implications of their adoption. The range of contracts available is referred to
in 3.1.4 (Implementation).
(a) Construction (and refurbishment) projects are often complex with potential
for cost and time overruns or the finished building performing less well than
planned. To minimise such risks the client should select the procurement
strategy which matches the objectives of the project. These must be clearly
established and prioritised before any design or other work begins (see
3.1.1.10–11 – Project Definition, Establishing Primary Objectives).
(b) The client must decide the relative importance of the three main types of
criteria – time, cost and performance:
• time: earlier completion can be achieved if construction is started
before design is finished. The greater the overlap between the two, the
less time will be required to complete the project;
• cost: with the exception of simple ‘standard’ buildings and certain
‘design and build’ strategies, a final construction contract sum cannot
be established until the design is complete. Any overlap between design
and construction means that construction starts before the cost is fixed.
This increases the importance of accurate cost forecasting and the risk
to the client; and
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(c) Performance includes the function of the building, its quality and
appearance and other factors such as durability, cost in use and flexibility. The
relative importance of each objective must be given careful consideration
because decisions throughout the project will be based on balances between
the other objectives (see Figure 1).
The strategy should also reflect the client’s technical ability and resources and
the amount of control over the process which he/she wishes to exert directly
or through the project manager (if appointed).
FIGURE 1
THE RELATIONSHIP BE TWEEN P RIMARY CRITERIA
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(a) There is a finite amount of risk and responsibility associated with any
project and this should be an influencing factor on the selection of the
procurement strategy. The uncertainties of time, cost and performance are the
three main risks that are present in every project. Risks are usually considered
as uncertain future events, which may have significant effects, e.g. extra cost,
delay or damage to the performance of the finished project. Having set the
priorities for the project’s objectives, the client should consider the effect of
those objectives not being met and the resulting risks to which he/she could be
exposed.
(b) The risks which are considered to have potentially the greatest impact on
construction projects include:
• a project which will not function in accordance with the client’s
needs;
• a project which is of inadequate quality;
• a project which is completed later than required deadlines; and
• a project which costs more than the client’s budget or ability to pay.
In each case, the strategy can be to transfer the whole risk to another through
the medium of contract. This is possible but will attract high price premiums
or will expose the transferee to risks which they may not be able to ‘own’ or
insure and therefore the party transferring the risk will remain exposed.
(c) As has been already suggested, an adequate brief will reduce risk and
ensure functionality and quality standards. Equally, adequacy of programme
will reduce the risk of overrun and adequacy of cost estimates should ensure a
resultant cost which is within budget. Both construction time and construction
cost estimates depend upon sufficient design development, which itself will
depend upon an adequate brief and parallel investigation of ground conditions
and the particular requirements of statutory controls. In ensuring that the brief
is adequate, and that design is appropriately developed, the client can
successfully reduce some risk in a way that will not result in high price
premiums.
(d) Ideally, risk and responsibility should go together, so that the party
responsible for performing a task is accountable. Each risk should be allocated
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to the party with the greatest ability to own the risk and to manage its effects.
If, for example, the client considers it critical that the price for the building is
fixed before construction commences, the risk of meeting that objective could
be passed to contractors, making them contractually responsible for
completion to an agreed design and specification for a lump sum price.
(a) Responsibility for risk and the ability to control a project interact. The
more the client chooses to allocate risk to other parties, the less control the
client has over the way in which the project is executed. In the example above,
if the contractor has to meet the agreed specification within the budget and
time, the client has little influence over the way in which these objectives are
met. In practice, risk allocation is determined by the chosen strategy and
allocated by means of contracts between the client and those responsible for
managing, designing or constructing the project. The way in which risk and
responsibility are allocated by different contract strategies is indicated below
and shown in Appendix A.
(b) In all cases where risks are transferred in contractual terms, it is necessary
to ensure the ability of the transferee to own the risk. In the case of design
failure, for example, this is usually passed to the design team including the
architect and engineering consultants. Because of the nature of their
professions they should have insurances of sufficient capacity to meet the
maximum possible cost of correcting the design failure. The client should
ensure that such insurances are in place, adequate and paid for; where a project
manager or consultant adviser has been appointed, this is a role that may be
performed by him/her.
(c) Some design work may be carried out by subcontractors who may or may
not continue to pay design liability insurance premiums and usually will have
limited liability status. Liability for their design work is commonly passed by
warranties but these are less secure.
Equally, where time risks are passed to contractors their attempts to transfer
them to small subcontractors may fail where the capacity to own or accept the
risk is limited.
In situations such as these it may be possible to pass risks contractually but the
lack of security associated with the transfer may result in the risk being borne
by the party attempting to pass it. It is difficult to allocate blame in team
situations. The client should be aware of this weakness in terms of risk
allocation.
(d) While the transfer of risk provides an incentive for the receiving party to
minimise its impact, the client should avoid transferring risks when the
receiving party has no control over them or no capacity to absorb them.
Generally, the more the risk of cost and time slippage is allocated to other
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PART 3, SECTION 1
parties, the higher the tendered cost. In pricing the project, tenderers may
over-estimate the size of the risk or add a high safety margin to an accurate
estimate and thereby increase the project’s costs unnecessarily.
(a) Risks are inherent in the data used by the client in the preparation of the
brief, they are inherent in the characteristics of the project, and they are
inherent in the procurement strategy which is selected.
Since the latter will have a cost the client should also be advised of the
expense of managing risk.
Where lump sum price is fixed by the contract the responsibility rests with the
contractor. Where a contract sets standards of specification, meeting these
standards is the contractor’s responsibility (risk).
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FIGURE 2
S U M M A R I S I N G T H E P R I M A RY R I S K S , B Y E X A M P L E
(c) This short list segregates residual risk by procurement method. The extent
to which risk remains with the client can be established by a detailed analysis
of contractual agreements.
• Traditional
– building suitability
– risk of contractor insolvency
– risk of delay by consultant or the causes allowed by contract
• Design and Build
– building suitability
– design functionality and usability
– design insurance if contractor moves away from this type of business,
goes out of business or fails to pay premium
• Management Contracting/Construction Management
– as traditional procurement plus:
risk of cost overrun
risk of time overrun
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Thus, for example, attempting to enforce large scale liquidated damages for
late completion on a small-sized domestic subcontractor may fail for lack of
financial capacity within the small company.
Procurement strategy should therefore reflect the ability to place risk, and
where possible risk should be managed out.
• analysis – assessing and setting the priorities of the project objectives and
requirements;
• choice – considering possible options, evaluating them and selecting the
most appropriate; and
• implementation – putting the chosen strategy into effect.
Until construction contracts are let, the client, with help from his adviser, must
systematically ensure that the strategy is on course to meet the project’s
established objectives. This is important because objectives sometimes
change.
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• interest rates;
• inflation;
• changes in output of construction industry affecting tender price levels and
the availability of skilled labour; and
• legislation, particularly legislation affecting the design and construction of
projects. In many cases the client will have responsibility for legal
compliance, particularly in relation to health and safety matters and should
seek the advice of his/her advisers (including the design team) on such
issues as a matter of importance.
The client’s knowledge and experience of the company’s organisation and the
environment in which it operates are vital in assessing the appropriate
procurement strategy. Project objectives are influenced by the nature and
culture of the company, external influences and the expectations of
individuals affected by the project. The extent to which the client is prepared
to take a full and active role is a major consideration.
It is preferable to identify the total needs of the project during the early stages
but this is not always possible. Rapidly changing technology often means late
changes. Changes in the scope of the project very often result in increased
costs, especially if they arise during construction. Changes introduced after the
design is well advanced or construction has commenced often have a
disproportionate effect on the project, in terms of cost, delay and disruption,
compared with the change itself. The design process goes through a progressive
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PART 3, SECTION 1
series of ‘freezes’ as it develops but the client should set a final design freeze
date after which no significant changes to requirements or design are allowed.
Price certainty – influences the project timing and the procurement strategy
which should be used. Generally, design should be complete if price certainty
is required before construction commences.
(f) Timing
It is of vital importance to allow for adequate design time in terms of the total
project. If design is required to be complete before construction commences
(where perhaps cost certainty is required) this is particularly the case.
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F IGURE 3
CON STRUCT ION T IME S
The following times are based upon historical data and are only a guide. Projects of
relatively simple design may be constructed more quickly and more complex
designs may take longer.
30 90 30 100
25 80 25 95
20 75 20 90
15 70 15 85
10 65 10 80
5 55 5 70
30 120 30 135
25 110 25 130
20 100 20 120
15 90 15 110
10 85 10 100
5 70 5 85
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There is no reliable data available to indicate the time to be allowed for design.
As a general rule it will take between two thirds of construction time to one
and a half times construction time to design a building. The impact that this
will have on the overall programme will depend upon the choice of
procurement strategy and whether any overlap of design and construction is
allowed.
(i) Performance
If quality and performance are particularly important the client will probably
want to keep direct control over the development of the design. This can be
achieved by employing the design team directly.
When all the factors influencing the project have been identified and the
project requirements analysed, the final strategy for the project must be
developed.
It is likely that there will be more than one way to achieve the requirements of
the project. It is important to consider carefully each option, as each will
address the various influencing factors to a different extent. In developing
strategies, a potential danger is that only the most obvious course of action
may be considered – this is not necessarily the best in the longer term.
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• suitable in the light of the client’s needs, the project type and the client’s
exposure to risk; and
• feasible in the light of the client’s expertise, internal management
structure, resource and funding facility.
This process has been designed to establish a range of information about client
needs and about the particular project being considered, and to develop this
information in parallel with the characteristics of procurement strategies and
associated risk.
The relative importance of time, cost and performance (design) forms a key
criterion in the selection mechanism as does inherent risk and its
apportionment.
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G 3.1.3.3 METHOD
CHECKLIST 1: TIME
2. Does the answer to question 1.1 suggest a faster than ‘normal’ total project
time in the judgement of the adviser?
3. How long is it in months from the date of completion of this protocol until
the desired ‘move in’ date?
4. Define the reason for the identified completion or ‘move in’ date:
4.1 end of lease
4.2 sale of premises
4.3 new business opportunities
4.4 unsuitability of present premises
4.5 company restructuring
4.6 other.
5.1 Is the need for completion by a specific date or within a specific time more
important than certainty of construction cost before work starts?
5.2 Is the need for completion by a specific date or within a specific time more
important than spending an extended time on design?
7. If the building is completed later than the specified or desired time will the
client:
7.1 stay in existing premises?
7.2 find temporary accommodation?
7.3 close down?
7.4 don’t know.
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Upon the completion of this part, the following information should have been
established and should be transferred to Checklist 4:
CHECKLIST 2: DESIGN/PERFORMANCE
1. Has the client clear ideas about building functionality and its desired
design?
2. Does the site (if selected) pose any particular problems for the designer in
respect of:
2.1 shape or topography?
2.2 access?
2.3 storage space?
Upon the completion of this part of the process, the following information
should have been established and should be transferred to Checklist 4:
2(a) whether the client has clear ideas about his/her needs;
2(b) whether the site poses complex design problems;
2(c) whether the building design is complex;
2(d) whether functionality is particularly important; and
2(e) whether the client has a long-term view about the cost of the building.
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CHECKLIST 3: COST
3. Will the client need to have a fixed contract price for the construction
element of his budget or will a reasonably accurate budget be adequate?
Upon the completion of this part of the process, the following information
should have been established and should be transferred to Checklist 4:
CHECKLIST 4: ANALYSIS
If relative speed is required can the client accept less cost certainty?
See 1c, 3c.
If yes, this may mean that fast-track approaches may be suitable.
If no, a method of achieving cost certainty relatively quickly may be
through negotiation.
• Does the information provided indicate that the project is complex in
terms of design or in terms of site-related problems?
See 2b, 2c, 2d.
If so, adequate time should be allowed for a design process to occur
which will provide the client with an acceptable design solution.
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Having established whether the project is both feasible and viable, the
importance of time, cost and design has now been reviewed.
Design-led projects have the greater capacity for cost and time overrun,
whereas the potential capacity for design shortcomings may rest with
production-led systems.
3.1.4 Implementation
G 3.1.4.1 Having selected a procurement strategy for a project, the strategy should be
successfully implemented. The client should implement the strategy but may
do this with the advice of consultants or a project manager. In many cases they
will carry out most or all of the necessary functions in achieving
implementation and the client’s role will be to formally approve their actions.
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(a) In this section, the funding function has been assumed to be a matter for the
client. It is a vital function and by the time the procurement strategy is set,
sufficient funding should be available at appropriate times in the
pre-construction and construction process.
(a) Where physical resources such as land, plant and machinery have to be
provided by the client, it is self-evident that the client should ensure their
availability in a suitable form at the right time. Where alternative
accommodation is required, or where specific arrangements for decanting are
necessary, this is a matter for the client and/or the client’s organisation
although these are matters which can be handled by a project manager.
(b) Design and construction resources must also be appropriately selected and
in place at the right time.
(c) The criteria for the selection of the design team are outlined below and are
based upon the factors of capability, competence, staff and cost, with value for
money, rather than cost being the major influence in selection.
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(d) The criteria for the selection of contractors are referred to below and are
broadly the same, but this tends to be a much more complex process and the
criteria are dependent upon the procurement strategy selected.
The basis for selection of constructors can be price competition, based upon a
fixed design and specification or can, in the case of design and build options,
be based upon competition for design solutions too. Selection can also be by
negotiation with one or two constructors, or can be based upon a two-stage
process. Suitable documentation for the selection process must be prepared
and the client should seek the advice of consultants or the project manager
who may also be required to manage the process.
(e) A number of Codes of Procedure for the selection process are available and
are referred to in sections 3.1.4.8 and 3.1.4.9.
(a) The client has a dual management role, part of which is to manage the
client input; to co-ordinate functional and administrative needs; to resolve
conflicts; as well as to act as the formal point of contact for the project.
(b) This will require the creation of an organisational structure for the life of
the project to enable communication to occur and to facilitate effective
decision-making.
(a) Due to the complexity of modern building and the potentially large number
of parties involved in the process the client may wish to appoint a single
person to draw the process together and manage it to ensure that the overall
performance, time and cost requirements are achieved. The project manager
may be a member of the client organisation who is given sole, or predominant,
responsibility for the project. Project management practices also exist to
enable appointments to be made on a consultancy basis. In this case, selection
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should be based upon resources, reputation and price, and duties should be
clearly identified.
(b) It should be emphasised that the role of the project manager should be to
act as part of the client organisation.
(c) The client’s role upon the appointment of a project manager should
include:
• explaining the project objectives and their priorities, defining the
project and outlining parameters associated with time, cost,
performance and risk;
• defining the criteria for control and management of the project;
• managing the project manager’s performance of delegated
responsibilities;
• monitoring the implementation by the project manager of control and
management systems;
• ensuring that the project manager receives decisions on time;
• assisting the project manager in the resolution of problems;
• receiving and reviewing detailed reports on the project from the project
manager;
• establishing with the project manager a common approach to major
issues which arise; and
• maintaining with the project manager at all times an overview of the
project status in relation to the established objectives.
(d) The client’s relationship with a project manager will be crucial to the
success of the project and will require careful development and nurturing
within the following guidelines:
• the client, though taking the project manager’s advice should lead, not
follow;
• no matter how much responsibility is delegated to the project manager,
the client will retain ultimate authority and therefore must have
adequate knowledge and information about the project to be able to
exercise the authority properly;
• the client should agree with the project manager the precise extent of
any delegated authority together with those decisions reserved for the
client;
• where a project manager has been appointed the client should not
formally communicate directly with consultants and contractors
employed on the project – such communications will always be routed
through the project manager, although the contracts will be direct with
the client;
• no matter what may be said in private, the client should publicly
support the project manager and avoid any actions which could
undermine that manager’s authority over the consultants and
contractors.
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(a) The process of selecting and appointing the design team and the cost
consultant is carried out by the client but he/she may seek the advice of his/her
adviser. The terms and conditions of these appointments are governed by the
procurement strategy adopted for the project. (The client is also required
under the Construction (Design and Management) Regulations 1994 to
appoint a competent planning supervisor to ensure that the design team have
met their responsibilities under these regulations and to advise the client and
the constructors how they can comply.)
The former has the benefit of administrative simplicity and of single source
responsibility for design. The latter offers the chance of selecting the best firm
in each discipline but makes communication more difficult. The final
selection will depend on the particular features of the project.
(c) The selection of the design team and the cost consultant (and other
consultants as appropriate) will require the client to make a balanced
judgement on the following factors:
• capability – the experience of the firm in projects of similar size and
function and the availability within the firm of sufficient uncommitted
resources for it to meet the demands of the project; the demands of the
project programme may be particularly important;
• competence – the performance of the firm on past projects, to be
ascertained by detailed, confidential references from past clients;
efficient performance by design consultants cannot be taken for
granted;
• staff – the personal capability and experience of the key staff whom the
firm proposes to employ on the project; and
• the cost – quoted by the firm, unless large differences exist between
offers from competing firms this should not be critical.
(d) Value for money, not lowest price, should be the aim in the selection of
design team members.
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(g) Percentage fees based on the out-turn construction cost are not generally
recommended as they increase when cost overruns occur.
(h) Lump sum fees may be the most satisfactory form of remuneration
provided only that the scope, value and timescale of the project can be
established with reasonable accuracy before the appointments are made
and that the services to be provided by the consultants can be accurately
defined. Where lump sum fees are to be paid, the client will need to
establish systems for monitoring the consultants’ performance to ensure
that they provide the full, specified service and do not skimp their services
to save money.
(i) Where time charge fees are to be paid, the final amount of fees payable is
not fixed and there is a substantial risk that this amount may exceed initial
estimates.
(c) Assistance with the selection, documentation for tender and advice in
relation to contract issues can be obtained by the client from professional
advisers and particularly the principal adviser. There are a number of codes of
procedure to assist in this process, of particular assistance is the Code of
Practice for the Selection of Main Contractors2 which has been approved by
the National Audit Office. In broad terms, the factors which affect the
1
Construction Industry Board, Selecting Consultants for the Team: balancing quality and price, Thomas Telford
Publishing, London, 1996.
2 Construction Industry Board, Code of Practice for the Selection of Main Contractors, Thomas Telford Publishing,
London, 1997.
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PART 3, SECTION 1
(e) As with the selection of design and cost consultants, value for money,
rather than lowest price should be the aim in the selection of constructors.
Where clients regularly build, there may be a case for considering a special
arrangement with a construction firm as indicated in 3.1.1.15.
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(c) Controls are also important to ensure that cost is controlled within budget,
pace is controlled within programme, quality is controlled within standards
set, and systems are properly employed.
(e) Pace can be monitored against a programme or time plan and can be
controlled by the imposition of contract completion dates. Programming can
be provided by a project manager or developed with the advice of the principal
adviser.
(g) Controlling the client systems to ensure that they are appropriately applied
and not abused is a matter for the client’s management team – perhaps this is
the key management input from the client.
(b) Design is an important factor in ensuring good working conditions for staff
and convenience for members of the public who need to visit the building. A
well-designed building is a good investment. Good design can contribute to
economy and efficiency – by efficient layout and economical use of space, by
energy efficiency (in heating, insulation, mechanical services, etc.) by low
maintenance costs, and by ensuring flexibility to meet changing requirements.
(c) No one person has all the design skills for any but the very simplest project
and therefore the collaboration of many designers will be necessary. This is
particularly the case in specialist buildings or buildings which have
sophisticated mechanical and/or electrical installations.
(d) The formulation of an accurate design brief and the development of design
in strict accordance with that brief are key processes for the client (or the
project manager) to oversee. In practical terms, the client will require:
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PART 3, SECTION 1
(e) It will also prove valuable for the client to indicate clearly his/her
intentions in respect of the programme and for the design team to respond in
terms of their strategy for meeting this programme. Methods for updating
progress should also be sought by the client.
(f) As the majority of users, and indeed the client, are likely to find the reading
and interpretation of design drawings a difficult task, it is important to ensure
that the design team present their proposals in a form that can be readily
understood. (Computer aided design [CAD] may enable three dimensional
presentation.) The setting of the design and not just the design in isolation
should be taken into account. The client should feel able to say ‘no’ and ‘try
again’ and to expect alternatives within the fee.
(b) The techniques used to produce estimates vary according to the type and
level of data available when they are prepared. The general level of estimating
accuracy improves as the design of a project develops. Notwithstanding this
progressive improvement in accuracy, provided that cost control is being
exercised, the general level of accuracy of early estimates can be stated with
sufficient precision for them to be valid parameters for decision making and
for the management of the project.
(c) For estimates to be effective, the client should require that all estimates are
supported by:
• a risk analysis – an assessment of the potential risks, their probability
and the associated time and cost consequences if they should occur; and
• a sensitivity analysis – a statement of the comparative effects on the
total estimate of changes to principal data and assumptions on which
the estimate is based.
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(d) The amount included in estimates to cover the uncertain cost of risks based
on the analyses described above is known as the contingency. It is important
that contingencies are sufficient to cover risks and are not eroded to facilitate
any lack of cost control.
(e) A primary concern may be the cost of running and maintaining the
building. The term ‘cost-in-use’ is used to describe how these costs can be
estimated, enabling the client to take these matters into account when
considering total project costs and building design. In some cases higher
initial costs will result in lower running or maintenance costs during the life of
the building.
(f) The earlier cost control procedures are instituted, the more effective they
will be. By way of simplistic illustration:
• cost varies with (but not in direct proportion to) size: once the size of a
building is fixed, so is the general level of cost;
• the selection of the most economical design for basic elements such as
foundations, structural frame, external cladding and roofing, is of far
greater cost significance than the types of finishings; and
• the overall cost of mechanical and electrical systems and the
effectiveness of the cost control procedures which can be applied to
them is largely governed by early decisions as to the type of system
selected.
(g) The methods used for cost control differ radically between the
pre-construction and construction stages of a project. Cost control during the
former depends partly on formulating an appropriate procurement strategy but
more on controlling the design process within that strategy; during the latter it
is a function of effective management and avoidance of change after
commitment.
If the cost of an element as designed exceeds its allowance in the cost plan, the
excess can only be corrected by:
• redesigning the element to reduce its cost; or
• transferring money into that element from contingencies or from
another element yet to be designed.
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(i) Successful cost control during the construction stage depends on:
• ensuring that all design work is completed and fully co-ordinated
before any commitment to construct is made (this applies in a
progressive way when design and construction overlap);
• administering the contract efficiently and promptly in strict accordance
with its terms and conditions; and
• minimising changes to the design, for any reason, after construction has
started.
(j) Regular cost reports can be produced throughout the construction stage
from which potential overspending can be identified before it occurs with the
intent that corrective action should be possible. The client should, however,
recognise that such corrective action is not always beneficial, since:
• cost savings can be made only by reductions in standards or by
omissions of part of the work remaining to be finalised, that is largely
in the visible finishings and fittings, with the resultant possibility that
the requirements of the brief will not be met; and
• late cost savings are inefficient as any amount saved will be reduced or
may be negated by the costs of disruption inherent in making the
changes needed to generate the savings.
(k) All estimates and cost control procedures should take account of inflation,
i.e. the increase in construction cost from the date when the estimate is
prepared to the date when the work will be carried out. It is essential for
effective cost control that:
• allowances should be made for inflation in all estimates and that the
assumptions on which such allowances were calculated be stated;
• these allowances for inflation should be clearly identified within the
estimates and not be allowed to be used to correct other overspending;
• the assumptions on which inflation allowances are calculated be
reviewed as each new estimate is prepared and the allowances
corrected in accordance with such reviews; and
• a clear policy and method for drawing down inflation reserves be
established and observed.
(l) The client should distinguish between inflation and the effect on
construction prices of market conditions at the time of tender. In simple terms,
contractors adjust their tender prices by reducing or increasing their target
profit margins in accordance with their need to obtain new work. It is unwise
to base early estimates on an assumption of favourable market conditions at
the time of tender as the construction industry is subject to wide,
comparatively swift, changes in workload in accordance with economic
conditions.
(m) Things will go wrong on the project. The unexpected will happen. Such
unforeseen happenings are covered in the cost control system by the
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(a) The overall programme of activities which will constitute the project
should be developed at a very early stage in the procurement cycle. This
programme will form the time framework within which the designers and the
constructors should complete their activities, and within which other key
stages, such as land purchase, funding and planning permission should be
completed.
(c) The client should be aware of those tasks which are vital to completion on
time and those tasks where some flexibility may be available. Time for the
approval processes should be included as specific activities in the time plan
for the project. These are invariably vital as the need to obtain approval is
likely to be a prerequisite to further work on the project proceeding.
(d) The process of time control is in many ways analogous to that of cost
control. Thus a time control system can embrace:
• time budget – the overall project duration as fixed either by specific
constraints or by the selected procurement strategy; the period which,
once fixed, becomes a key parameter for management of the project;
• time plan – the division of total time into inter-linked time allowances
for readily identifiable activities with definable start and finish points;
the overall project programme; and
• time checking – monitoring closely actual time spent on each activity
against the allowance in the time plan; reporting divergence as soon as
it is observed.
(e) If the time taken for an activity exceeds its time allowance there are
essentially only two forms of corrective action available:
• the re-sequencing of later activities, which may involve abandoning
low priority restraints and/or phased transitions from earlier activities
to later activities logically following them; or
• shortening the time allowance for future activities by increasing the
resources to be made available for them.
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PART 3, SECTION 1
If neither is done, the overall time budget will be exceeded and the project will
finish late.
(f) The client should recognise that time control is as important during the
design stages of the project as the construction stage. Designers should work
to a series of deadlines at which different elements of the design should be
agreed (i.e. frozen) if costs and the overall programme are to be kept under
control.
(g) The client should consider developing (with the help of the project
manager if appointed) a time contingency (reserve), with strict procedures for
allocating the reserve to specific events. This concept is essential on projects
which are subject to external time constraints, for example, where a building
has to be available for occupation before the lease on another building expires.
(h) The client should take account at all times of fundamental relationships
between time, quality and cost:
• any extension of the overall timescale for a project always generates
additional costs to either constructor or client; every project contains
time-related costs whether these are openly stated or not. Who carries
such additional costs depends on the detailed contractual arrangements
between the parties; it is likely that some of them will be borne by the
client; and
• making up lost time by re-sequencing later activities may be achievable
but often only at the risk of compromising quality or cost control.
(b) The techniques associated with whole-life costing are often complex and
predictive. The project manager or project cost consultant will be able to
advise the client of the availability of their application in each case.
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PART 3, SECTION 1
used to ensure that the need for and scope of any construction is thoroughly
analysed before any further commitment to proceed is made. The aim is to
establish a clear statement of a project’s objectives matched to their relative
values.
(b) Value management is usually carried out at the concept and feasibility
stages of a project. The aim is to ensure that:
• a project is commissioned in response to a careful analysis of balance
of needs;
• a wide range of options and alternatives to meet that need is considered;
and
• the project objectives are made explicit and are commonly understood
by all parties.
(c) The client may wish to appoint a professional adviser experienced in these
techniques and who will provide support in writing the objectives and
subsequent brief.
(a) This occurs later in the development of the project and is concerned with
how value is achieved rather than what the relative values are as defined in the
project brief and objectives.
(b) Value engineering studies are pre-planned, formal reviews of the design
philosophy and the detailed solutions at one or more stages of the design
development. They are sometimes carried out by firms or individuals not
connected with or employed on the project and are short exercises intended to
review the detailed design solutions against the objectives and to establish
whether they can be achieved in a more cost effective manner.
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(b) The client may choose to appoint a clerk of works whose function is to act
as an inspector of work done to ensure quality, but who should recognise that
inspection and verification is the last line of defence. The key to quality
control on site is to specify clearly, and to monitor closely, the quality control
activities carried out by the contractor while work is being done.
(c) Many construction companies and firms of consultants within the building
industry have adopted, or are in the process of adopting, formal quality
assurance systems for their own work or services in accordance with ISO 9000
or equivalent standard.
(a) Clients should aim to make no changes once a particular design feature has
been decided because these are one of the more significant causes of cost and
time overruns in construction projects. The avoidance of change should be a
prime objective of the project strategy. If changes are unavoidable, they
should be dealt with as described in the paragraphs below.
(b) Client changes (as distinct from design development) are changes which
are made either by:
• the design team, with the approval of the client, to a design feature
which, it has been decided, should be frozen, or ‘improved’, or altered
to overcome design errors and inconsistencies; or
• the client after the design brief has been agreed. The most significant of
these are changes to the scope of the works.
(c) Client changes can be relatively minor, such as adding a few extra power
points, or can have major cost implications, such as the addition of an extra
storey.
(d) The cost of client changes depends on when they are made:
• before the construction contract has been let, the cost can be contained
to that of the changed feature itself, and perhaps some relatively small
resource cost; and
• after the construction contract has been let, the cost will be
disproportionate to the value of the change, it can disrupt the
contractor’s work and invariably gives rise to a higher cost than if the
change had been included in the contract as let. Many minor changes
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(e) Some client changes are unavoidable. Examples of such changes are:
• compliance with changes in legislation;
• requirements of the health and safety or fire prevention authorities;
• those required by unforeseen ground conditions; and
• previously unforeseen users’ requirements.
(f) The contingency in the project budget should be sufficient to take account
of the likelihood of such changes based on risk assessments.
(h) Changes proposed after the construction contract has been let can have
major time and cost implications and should be avoided if at all possible. If
they are not essential they should be deferred until the project is complete and
then reviewed to see if they are necessary and economically justified.
1
Stock Condition Surveys, RICS Guidance Note, RICS Books, Coventry, 1997.
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(b) The contractor assumes responsibility and financial risks for the building
works as described whilst the client takes the responsibility and risk for design
team performance. Therefore, if the contractor’s works are delayed by the
failure of the design team to meet their obligations, the contractor may claim
against the client for additional costs and/or time to complete the project. In
turn, the client could possibly seek to recover these costs from the design team
members responsible, if negligence can be proven.
(c) Clients are able to influence the development of the design to meet their
requirements because they have direct contractual relationships with the
design team. When construction begins, they usually have a single contractual
relationship with a main contractor and are therefore able to influence (but not
control) the construction process through a single point of contact.
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FIGURE A1
PROCUREMENT ARRANGE MENT – TRADITIONAL
CONTRACTUAL RELATIONSHIP
CLIENT
CONSULTANTS
(fee contracts)
SUPPLIERS
(various contracts)
SUBCONTRACTORS
(standard lump sum)
ADVANTAGES DISADVANTAGES
competitive fairness slow to start on site (no parallel working)
satisfactory public accountability open to abuse where design incomplete
procedures well known (resulting in less certainty)
changes reasonably easily arranged contractor not involved in design or planning
and valued (no buildability)
adversarial potential
SEQUENCE
Risk
Low cost risk due to lump sum contract
Medium time risk due to fixed contract date (but contractor has right to claim extensions)
Low quality/design risk where the majority of the work is designed by insured consultants
working directly for the client
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A2 MEASUREMENT CONTRACTS
Measurement contracts are used when the work required cannot be accurately
measured for the tender bill of quantities. The contract sum is only established
with certainty on completion of construction, when re-measurement of the
quantities of work actually carried out takes place and is then valued on an
agreed basis. Measurement contracts are sometimes referred to as
re-measurement contracts and are based upon the prices tendered by the
contractor. The most effective use of a measurement contract is where the
work has been substantially designed but final detail has not been completed.
Here, a tender based on drawings and a bill of approximate quantities will be
satisfactory. Measurement contracts allow a client to shorten the overall
programme for design, tendering and construction but usually with the result
of some lack of price certainty at contract stage because the approximate
quantities reflect the lack of information on exactly what is to be built at
tender stage. The scope of the work, the approximate price and a programme
should be clear at contract stage. Measurement contracts provide more risk
than lump sum contracts for the client but probably with programme
advantages. They are typically used with civil engineering works where there
can be significant uncertainty about ground conditions.
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FIGURE A2
PROCUREMENT ARRANGE MENT – ME ASUREME NT
CONTRACTUAL ARRANGEMENT
CLIENT
CONSULTANTS
(fee contracts)
SUPPLIERS
(various contracts)
SUBCONTRACTORS
(standard contracts)
ADVANTAGES DISADVANTAGES
pre-construction time saving potential low certainty of price potential
competitive prices no contractor involvement in planning
average public accountability or design
procedures well known potentially adversarial
easy to arrange changes
some parallel working
SEQUENCE
brief design
competition construction
Risk
Variable cost risk as the final figure will be uncertain until the design and often construction is complete
Medium time risk as the extent of work will vary and contractors can claim extensions to the period for construction
Medium quality/design risk in the sense that design may not be complete at the outset
A3 CONSTRUCTION MANAGEMENT
(a) Under a construction management strategy, the client does not allocate risk
and responsibility to a single main contractor. Instead, the client employs the
design team and a construction manager is engaged as a fee-earning
professional to programme and co-ordinate the design and construction
activities and to improve the buildability of the design. Construction work is
carried out by trade contractors through direct contracts with the client for
distinct trade or work packages. The construction manager supervises the
construction management process and co-ordinates the design team on behalf
of the client. The construction manager, who has no contractual links with the
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(b) On appointment, the construction manager will take over any preliminary
schedule and costing information already prepared and draw up a detailed
programme of pre-construction activities. Key dates are normally inserted at
which client decisions will be required. In adopting the construction
management system, the client will be closely involved in each stage of design
and construction. The client should have administrative or project
management staff with the time and ability to assess the recommendations of
the construction manager and take the necessary action. The client needs to
maintain a strong presence through a project management team that is
technically and commercially astute. This strategy is not, therefore, suitable
for the inexpert or inexperienced client.
(c) With this contract strategy, design and construction can overlap. As this
speeds up the project, construction management is known as a ‘fast track’
strategy. Although the time for completion can be reduced, price certainty is
not achieved until the design and construction have advanced to the extent that
all the construction work (trade) packages have been let. Also, design
development of later packages can affect construction work already completed.
The construction manager should therefore have a good track record in cost
forecasting and cost management. A package is made up of work for which one
of the trade contractors is responsible, e.g. foundations, concrete, electrical
installation or decorating. These packages are tendered individually, for a lump
sum price, usually on the basis of drawings and specification.
(d) The Latham Review1 recognised that construction management has been
used predominantly for large and/or complex projects, but suggested that
there is no intrinsic reason for this. Indeed, it is particularly recommended for
projects where there is a high degree of design innovation, where the client
wants ‘hands on’ involvement.
1
Latham, M., Sir, Constructing the Team: Joint Review of Procurement and Contractual Arrangements in the United
Kingdom Construction Industry: Final Report, HMSO, London, 1994.
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PART 3, SECTION 1, APPENDIX A
FIGURE A3
PROCUREMENT ARR ANGEMENT – CON STRUC TION MAN AGEM EN T
CONTRACTUAL ARRANGEMENT
CLIENT
Fee contracts
CONSULTANTS
including
Lump sum contracts CONSTRUCTION MANAGER
WORK or TRADE
CONTRACTORS
ADVANTAGES DISADVANTAGES
time saving potential for overall project time no cost certainty at outset
trade packages let competitively needs informed client, able to take an
buildability potential active part
breaks down traditional adversarial barriers needs a good quality brief
parallel working inherent relies on a good quality team
clarity of roles, risks and relationships for needs time and information control
all participants
late changes easily accommodated
SEQUENCE
brief design
construction
Risk
Medium cost risk since the actual cost is unknown until the last package is let
Medium time risk since no one organisation carries the risk for timed completion
Low quality/design risk because there is a close link between client, designers and constructors
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A4 MANAGEMENT CONTRACTING
(b) Management contracting is a ‘fast track’ strategy. All design work will not
be complete before the first works contractors start work although the design
necessary for those packages must be complete. As design is completed
subsequent packages of work are tendered and let. Cost certainty is thus not
achieved until all works contractors have been appointed. A high level of cost
management is therefore required.
(c) With the agreement of the client, the management contractor selects works
contractors by competitive tender to undertake sections of the construction
work. The client reimburses the cost of these work packages to the
management contractor who, in turn, pays the works contractors. The
management contractor co-ordinates the release of information from the
design team to the works contractors.
(d) Where the management construction team is not of the highest quality, or
where this fee is inadequate, the management contractor can be less than
proactive and the system can become a reactive ‘postbox’ approach. It is
therefore vital to select the management contractor carefully and to ensure that
the fee is appropriate bearing in mind market conditions. Similarly, resistance
to works contractors’ claims can be affected by the same circumstances.
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FIGURE A4
PROCUREMENT ARR ANGEMEN T – MA NAGEMENT C ON TRAC TING
CONTRACTUAL ARRANGEMENT
CLIENT
MAIN CONTRACTOR
(standard fee contract)
CONSULTANTS
(fee contracts)
WORKS CONTRACTORS
(standard lump sum contracts)
ADVANTAGES DISADVANTAGES
time saving potential for overall project time need for good quality brief
buildability potential poor certainty of price
breaks down traditional adversarial barriers relies on a good quality team
parallel working inherent may become no more than a ‘postbox’
late changes easily accommodated system in certain circumstances
work packages let competitively removes resistance to works contractors’
claims
SEQUENCE
brief design
construction
Risk
Medium cost risk since the actual cost is unknown until the last package is let
Medium time risk since total construction time is a consequence of package selection
Low quality/design risk because there is a close link between client, designers and constructors
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(a) Under a design and build strategy, a single contractor assumes the risk and
responsibility for designing and building the project, in return for a fixed-price
lump sum.
(b) A variant, known as ‘develop and construct’, describes the strategy when
the client appoints designers to prepare the concept design before the
contractor assumes responsibility for completing the detailed design and
constructing the works. Often this strategy is associated with a process where
the contractor takes over the client’s designer (architect) contract in a form of
‘contract switch’ or novation. The designer is then employed for the rest of the
contract by the contractor who is usually responsible for all of the design
including that done prior to the switch.
(c) Design and build is a fast-track strategy. Construction can start before all
the detailed design is completed, but at the contractor’s risk.
(d) As explained in 3.1.1, by transferring risk to the contractor, the client loses
some control over the project. Any client requirement which is not directly
specified in the tender documents will constitute a change or variation to the
contract. Changes are usually more expensive to introduce after the contract
has been let, compared with other types of strategy.
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(f) The contractor develops the design from the specification submitting
detailed proposals to the client to establish that they are in accordance with the
requirements of the specification. Clients are, therefore, in a strong position to
ensure that their interpretation of the specification takes preference over the
contractor’s.
(h) The client will often employ a design team to carry out some preliminary
design and prepare the project brief and other tender documents. Sometimes
the successful contractor will assume responsibility for this design team and
use them to produce the detailed design. If a design and build strategy is
identified as a possibility at an early stage, then the basis of the appointment
of the design team should reflect this possibility. If it does not, the client may
have to pay a termination fee to the design team. The client may wish to retain
the independent services of a cost consultant throughout the contract for early
cost advice involvement in the bidding process and cost reporting during
construction.
(j) Current forms of contract for design and build vary their treatment of design
liability.
(k) To be effective, the client’s requirements will need to be stated clearly and
accurately and delivered on time.
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money to impose a lesser, yet insurable, liability, which will be the subject
of an insurance payout in the event of a design fault, rather than an
insurance fitness for purpose requirement on a contractor of limited
financial assets.
Most importantly the client should ensure that adequate design liability
insurance is in place and maintained for the period of liability.
FIGURE A5
P ROCUREMENT ARRANGEMENT – DESIGN AND BUILD
Some options available, showing proportional involvement in the design proces by client and
contractor between package deal, and develop and construct.
Turnkey
Package deal
The range of options enables the procurement arrangement to be used for a wide range of
client types, and for clients to be involved to a greater or lesser extent.
Client involvement
Contractor involvement
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(p) The project organisation structure for design and build is shown in
Figure A6. Contractors may use their own firms’ resources for undertaking
the design (in-house design and build), or may more usually subcontract
these to one or more professional firms whilst retaining control.
FIGU RE A6
PROC UREMENT ARRA NGEMEN T – D ESIGN A ND BU ILD
CONTRACTUAL ARRANGEMENT
CLIENT
SUPPLIERS
(various contracts)
SUBCONTRACTORS
(standard lump sum contracts)
ADVANTAGES DISADVANTAGES
single point contact and responsibility client needs to contract before design
reduced total project time difficult for clients to prepare adequate brief
bids difficult to compare
design liability limited by standard contract
client driven changes can be expensive
SEQUENCE
construction
Risk
Low cost risk since most contracts will be let on a lump sum basis
Low time risk since the contractor will usually fix the time and be committed to it
High design/quality risk where the contractor controls design there are risks related to
both design suitability and to the capacity of the design-build firm to own such risks
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PART 3, SECTION 2
3.2 Introduction
The guidance in this section is intended to improve the way in which the
procurement of building services is handled by all building professionals
active in this field.
1. Substructure 19 8 6
2. Superstructure 62 44 33
3. Finishes 4 11 8
4. Fittings – 2 4
5. Services 15 35 49
This guide should be read in conjunction with ‘The Procurement Guide’ (see
Section 3.1). ‘The Procurement Guide’ provides both clients and their
advisers with a code of procedure to assist them in the selection of an
appropriate procurement strategy for a building project.
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PART 3, SECTION 2
It is common for clients and their advisers to put enormous effort into
developing overall procurement solutions and the role of the principal
contractor within these solutions and yet, very often, they do not take an active
role in procurement further down the contractual chain. This may be historic
in that principal contractors would traditionally be held responsible for
procurement of sub-contractors. However, this approach cannot always
ensure that the client’s requirements in terms of cost, quality and time are
always as high on the principal contractor’s agenda as they are on the clients.
This often leads to inappropriate procurement methods manifesting in poor
quality, claim-ridden projects.
It is not the intention within the framework of this guide to cover every
procurement option, and therefore the guide is written with the most
commonly used procurement strategies in mind. This guide is intended to
provide a framework to supplement the reader’s own skill and judgement
when advising and implementing the procurement of building services, rather
than definitive guidance for any one of the many routes available.
HISTORICAL DEVELOPMENT
Cost and procurement advice for building services has historically been
provided by building services consulting engineers and the provision still
exists within the Association of Consulting Engineers (ACE) standard
conditions of engagement to provide such a service. However, with the
increased complexity and cost sensitivity of this element, the role is now more
commonly placed in the hands of a specialist quantity surveyor.
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The building services designer is a member of the client’s design team (which
also includes the architect, structural engineer and other specialist designers).
The designer can be:
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PART 3, SECTION 2
(iii) A hybrid of (i) and (ii) above, with each being responsible for their
respective elements or stages of design.
The decision on which option to use should be based on important factors such
as:
• financial constraints.
The use of a table clearly stating the design activity and the assignment of that
activity to the party with contractual responsibility is likely to be the most
efficient way of avoiding conflict.
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Table 2: Allocation of Design Responsibilites
1.0 Surveys:
4.0 Design:
4.4 – Specification ✔
Page 5
Page 6
Table 2: Continued
6.1 – Format ✔
9.1 – Commissioning ✔
specification
9.3 – Accept/witness ✔
commissioning
Page 7
PART 3, SECTION 2
The tables should be compiled at the outset of a project by the employer or his
or her project manager and should be included as a contract document. In
practice, the completion of the tables in terms of timing will be dependent on
the procurement route chosen. For example, a pre-designed single stage
competitive tender would require the tables to be created as a basis for
appointing the building services engineer, as undoubtedly the level of design
responsibility will affect his or her fee. The tables should then be included as
part of the tender documents and included as a contract document in both the
employer’s contract with the principal contractor and its contract with the
building services engineer.
All three forms require the consultant (building services engineer) to exercise
all reasonable skill, care and diligence in the discharge of his or her duties. The
consultant does not warrant that his or her design will be fit for the intended
purpose.
The responsibilities of the consultant under full duties and performance duties
are easier to understand than abridged duties. The responsibilities under
abridged duties rest between the relative extremes of full duties and
performance duties.
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One very important difference between full duties and abridged duties is that
the latter do not require the building services engineer to produce coordination
drawings. His or her duties under abridge duties are intended to harmonize
with those of the architect up to a certain point and this would require some
element of design coordination by the building services engineer. However,
the extent of this is unlikely to be clear.
Abridged duties have been the source of argument and dispute between
building services contractors and design-only consultants for many years.
Therefore, when it comes to engaging a design-only consultant, it is very
important that the extent to which the consultant will produce coordination
documentation is clear, particularly to the building services contractor who
will rely on the information. This is especially important where abridged
duties are used. Although the consultant is not required to produce
coordination drawings (as defined in the 1981 ACE conditions) under
abridged duties, he or she will almost certainly coordinate design to some
extent in conjunction with the other members of the design team. BSRIA
technical note TN21/97 provides practical guidance on deliverables.
The 1995 conditions include the following guidance, ‘In connection with the
duties of building services engineers it should be noted that agreements A(2)
and B(2) list as normal services a level of services which corresponds roughly
to the abridged duties in the 1981 agreements 4A(ii) and 4B(ii). It is open to
the client and building services engineer to agree an equivalent of full duties
by importing some of the additional services into the normal services.
Similarly, an equivalent of performance duties may be agreed by listing in
A19 those services which are not to be included as normal services.’
Additional services is a list of services from which the client must choose and
add on to the normal services.
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PART 3, SECTION 2
The main differences between the 1981 and 1995 ACE conditions of
engagement are outlined in table 3.
Table 3: Main Differences Between Appointments in the 1981 and 1995 ACE
Conditions of Engagement
3.2.1.6 SUMMARY
• The designer is the party who is required to make the choice. Complete
design expertise rarely lies with a single party.
• The use of abridged duties from the 1981 ACE conditions agreement 4A
or their current equivalent needs very careful consideration. When
engaging a design-only building services engineer under abridged
duties, it is very important to have a clear definition of deliverables
expected from him or her.
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Having established where the responsibility for design can lie, the next part of
this section deals more specifically with the coordination of design, its
potential impact on a project and the importance of recognizing appropriate
procurement strategies to deal with this impact.
3.2.2.1 INTRODUCTION
Failure in the coordination of the building services design can create problems
with the building services installation and may have a serious impact on the
following areas.
Design coordination problems, which are not recognized during the drawing
process, may only become evident when the installation of the works is being
carried out. For example, if the ductwork was found to clash with a structural
element of the building, time may be needed for a design solution to be found
and implemented. The solution may require:
• preparation of a drawing/sketch;
• re-ordering of materials;
• re-programming.
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• engineering time;
The time needed to resolve the design coordination problem might cause a
critical delay to other trades or activities. For example, a ductwork problem
may prevent the ceiling installation from being completed to programme.
Furthermore, even when duties and responsibilities are defined in the contract,
misunderstanding can still arise if reliance is placed on custom and practice
rather than liabilities under the contract.
The process of design coordination should have a clear goal: to ensure that the
many different elements of construction fit together effectively to provide a
workable and economic solution.
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Whatever method is used the contract should address the duties of the parties
as follows.
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coordination drawings during the design and construction stage of the project
(see 3.2.1).
If the building services engineer has design coordination liability and he or she
intends to delegate to the building services contractor(s), the following factors
need to be clear:
The designer needs to be sure that the terms of appointment allow this or that
the client is in agreement with them.
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(e) Ability
Checks should be made to ensure that the building services contractor has
sufficient experience and resources to undertake coordination duties. A
method statement should also be obtained, detailing how the building services
contractor will undertake the process of design coordination.
(g) Programme
There should be sufficient time within the overall programme of the works for
the building services contractor to properly undertake coordination of the
design.
Once the responsibilities of the parties involved in the project are identified, a
process should be established to ensure that design coordination is being
carried out.
(iii) The design coordinator is responsible for the programme and method
of implementation of design coordination. This should be prepared
with the input of all parties to ensure that it is in harmony with the
overall construction programme.
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The following examples are typical problems that can give rise to
coordination difficulties.
Where the building services engineer is responsible for the selection of plant
and equipment, a provisional selection of certain equipment is often made.
This is in order to plan layouts and to provide information on space
requirements/loadings to the architect/structural engineer. The provisional
selection of plant is also necessary for information in preparation of cost
advice.
In tendering for the works, the building services contractor may propose an
alternative manufacturer for equipment to that chosen by the building services
engineer. The reasons for this can be varied, but usually it is because the
building services contractor receives more favourable commercial terms from
certain suppliers than others. The client may be in favour of this alternative if
the selected equipment achieves cost savings and/or improved delivery times
without the quality of equipment being reduced.
Questions often arise over design liability for the proposed equipment
‘meeting the design requirements’. Does it lie with the building services
contractor who proposes it or the building services engineer who approves it?
The answer in law appears to be that the person on whom the client relies to
make the decision must ultimately be responsible (see 3.2.1).
Changes in size, shape and manufacturer may not only lead to coordination
problems. It can also result in problems with functionality if the equipment
does not meet the specification.
In the event that the building services engineer does not undertake the
re-evaluation process, because either it is not in the terms of appointment or
the client is not willing to pay additional fees, the building services contractor
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should be responsible for the design and coordination associated with the
change. The client should be advised that the disadvantage with this option is
that there is no independent check that the equipment complies with the
specification. If the building services contractor suddenly takes on this design
responsibility it must be reflected in its terms of contract. The associated
changes to warranty agreements must also be made. However, the cost of
these changes may prohibit the proposed change of equipment.
Ideally, where the specialist company’s input is significant to the project, they
should be appointed at a stage which avoids assumptions being made
regarding the specialist’s requirements. Such assumptions can often turn out
to be incorrect.
Variations and changes to the works can have a significant impact on the
design coordination depending on their scope and timing. Such alterations
should be carefully considered.
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Where the contract is silent on an issue, terms may be implied by the courts,
common law, statute or by custom, irrespective of the parties’ intentions.
Where a building services contractor has no express design liability, the courts
are still likely to imply an obligation on to the building services contractor to
warn the client of any problems known to it.
(c) Tort
Negligent work and breach of statutory duty are normally considered as torts.
However, they can also have criminal penalties, particularly where injury is
caused to others. For example, the CDM (Construction (Design &
Management)) regulations 1994 do not differentiate between building
services engineers and building services contractors who undertake any
design duties, even if only restricted to design coordination.
3.2.2.8 SUMMARY
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3.2.3.1 INTRODUCTION
The earlier the building services contractor is appointed, the greater the
influence it can have on:
• design;
• coordination;
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• buildability;
• programming;
• value engineering;
• commissioning advice;
The building services contractor should only be appointed at this very early
stage if one or more of the following criteria is satisfied:
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In addition to these key considerations there are various minor advantages and
disadvantages. However, some clients may consider these to be of
importance. Tables 3 and 4 summarize these advantages and disadvantages.
This section reviews how the building services contractor’s appointment fits
within the various project procurement strategies. A comprehensive review of
the overall project procurement options can be found in section 3.1 (‘The
Procurement Guide’).
The most commonly used procurement route is the traditional route of complete
design prior to tender with either bill of quantities or pricing schedules tendered
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Advantage
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Disadvantage
The client and the client’s design team have less control ✔ ✔
over final design
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(iv) Nomination
This arrangement allows even greater control by the employer and
usually provides a degree of comfort to the building services contractor.
However, part of the burden of risk is shifted to the employer. It is
extremely rare to see this method in use today. It would only be utilized if
the employer is the most appropriate person to shift risk too.
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At stage one a schedule of rates and preliminary costs is agreed. These are
then used at stage two to build up the contract sum. However, problems
occur when a sum at stage two cannot be agreed. This method usually
results in a higher contract sum than other methods. The building services
contractor is then required to enter into a domestic sub-contract with the
principal contractor.
If the employer wants to retain control over the tendering process and selects
the building services contractor, a number of options should be considered in
relation to the number of sub-contracts required and the timing of the
appointment, in relation to the principal contractor’s appointment.
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When the principal contractor is under a design and build contract it is more
usual, particularly on larger contracts, for the principal contractor to select its
own building services contractor. This is because a higher degree of
cooperation and integration is required between them. Joint ventures are often
used where the building services element is significant. However, named
building services contractors can be used if the employer has a particular
preference.
When the main contract is traditional and the building services element is to
be designed by the building services contractor, the criteria in section
3.2.3.3(a) should be applied. It is recommended that the employer maintains
an element of control over the building services element where complex or
prestigious building services design is involved.
This route involves the building services being subdivided into works
packages. This could consist of two packages, i.e. mechanical and electrical,
or it could be further subdivided into pipework, ductwork, plant, plumbing,
and so on. It is usually only beneficial to package the work when the project is
large and complex and/or dependent on current market forces. If this method
is chosen it is vital that the coordinating contractor has the requisite
experience in coordinating the various trades involved and fully understands
the project. The design coordination responsibilities discussed earlier in 3.2.2
take on even greater significance with an increasing number of interfaces.
There are three main reasons for introducing packages into a construction
project:
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• Does the project easily divide itself into the separate work package? If
not, additional interfaces are being introduced which must be balanced
with any potential loss of control.
When deciding on the appropriate procurement route the most important point
to remember is that the more prestigious and complex the project, the greater
the cooperation required between the design team and the building services
contractor. Under these circumstances there is a greater need for the client to
control the appointment of the building services contractor.
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experience and input to ensure that the installations are properly controlled,
coordinated and programmed.
3.2.3.5 TENDERING
The main objective of any tendering process is quite simply ‘to employ a
contractor’. However, this is not the only objective. If it were, the client would
only have to invite the first contractor professing to have the required skills to
start work as and when it was convenient to proceed.
The following options can be considered when drawing up the short list of
tenderers:
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(b) Interviewing
Once a tender list has been drawn up, formal interviews should be undertaken
with the proposed potential tenderers. Interviewing can be costly and time
consuming for both the building services contractor and the design team.
Therefore, the length of interviews and the number of contractors interviewed
should be related to the size and complexity of the project.
(c) Pre-qualifying
In all cases the following list represents the minimum information that should
be collected about prospective tenderers:
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• quality of work;
• previous experience;
• insurance cover;
• financial stability;
• company location;
• what trades the building services contractor has in-house and which will
be sublet.
Once a preliminary list has been collated, the individual tenderers should be
issued with a scope of work and project programme. They should then be
asked if they are willing to tender. This should establish the current workload,
who is likely to carry out the work and the likely enthusiasm of the qualified
tenderers. It is wise to have a pre-tender meeting with the selected tenderers at
this stage. This gives the whole team a final chance to assess the building
services contractors prior to the tender documents being sent out.
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Tender periods can range between three weeks for a design-only contract to
ten weeks for a design and build project. Building services contracts should
have a tender period of four to eight weeks, depending on the parameters
mentioned above. If the design and build route is chosen, an appropriate
design period should be allowed for within the project programme to
minimize potential site problems.
The amount of influence the design team has on the selection of the building
services contractor will increase the longer the project team retains control of
the tendering process. As long as the appointment is controlled by the design
team it is also vital that this is managed by a professional who understands the
commercial and contractual process. This would normally be undertaken by a
quantity surveyor.
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Tender documentation which does not fulfil these criteria can lead to
confusion and to a proliferation of claims once the contract is awarded.
The design team must plan the interface of the building services contractor
with the other building trades, starting at the initial design stage. The earlier
the building services contractor is introduced into the design process, the more
likely it is that problems related to coordination of services and the physical
limitations of the structure can be avoided.
It is far cheaper to resolve these problems during the design period than run
the risk of escalating variations and claims for delay and disruption. In
addition, if the building services contractor is appointed early, it can advise on
services loadings, space planning, alternative schemes, coordination, interface
with the building trades, programming and value engineering (for guidance on
early appointment see section 3.2.3.2).
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(f ) Design role
(g) Programming
The lead-in period for the building services contractor must be sufficient to
allow adequate time for the design, working drawing production and
procurement of specialist plant. Far too often this period becomes compressed
and results in an increase in coordination mistakes or design errors because
there has been insufficient time to check the drawings properly.
It is naive to cover up design delays and force the building services contractor
to try to achieve impossible end dates. Such behaviour can result in an
adversarial situation and a ‘raised claims’ consciousness from an early point
in the contract.
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3.2.3.7 SUMMARY
• Consider the elements of risk and consider who is best suited to take
these (using recognized risk-management techniques). It may be
desirable to keep the decision-making process with the design team.
The aim of this section is to identify the problems associated with the
production of tender documents for the procurement of building services and
to develop potential solutions. When inadequate tender documents are
produced it is evident that the tender submissions will be of an equivalent,
poor standard. As a result, the tender returns are likely to be heavily quantified
technically, commercially and contractually. Poor tender documentation will
also give rise to inconsistencies between individual tender returns which
makes initial comparison of the bids on a like-for-like basis virtually
impossible. The ability to retain control over post-tender variations will also
be lost if the provision for such control is not adequately covered in the tender
process and defined within the contract.
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Due to the various forms of procurement available and the wide range of
situations, it is not possible to refer to specific circumstances here. This is
intended to be a general introduction.
• set out the procedures for making payments to the contractors and
valuing variations, i.e. post-contract cost management procedures;
• establish the degree of proof required for any claims made and the
required procedures;
• identify the risks under the contract and the works which the building
services contractor is expected to include within the tender; and
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coordinate the building services works with other trades is central to achieving
a trouble-free contract.
The design team’s responsibilities must be clearly identified within the tender
documents. If the project is fully designed, the building services contractor
may have no design responsibility. However, detailed design is generally still
required. This switch in design lead usually occurs with specialist
sub-packages such as the BMS, fire alarms, and so on which require further
design input. The other extreme occurs when only a performance specification
is produced by the client-appointed building services engineer and the
building services contractor is responsible for the design.
As the building services packages can provide the main arena for
confrontation throughout the project’s life, it is important that the tenders are
analyzed in a professional manner. Once all technical queries are satisfactorily
resolved by the design team, the quantity surveyor is the most suited team
member to undertake a complete commercial appraisal of the submitted
tenders and provide a clear recommendation to the client as to the successful
tenderer. The pros and cons of this approach are discussed in section 3.2.4.5.
• Preliminaries
The preliminaries section of the tender documents contain similar
information to that of the principal contractor in a traditional
procurement strategy. This allows the contractor an opportunity to price
items such as contract insurance, employer’s requirements, contractual
issues and the contractor’s own general items, i.e. hutting, site staff,
on-site equipment that cannot be allocated to a specific item, and so on.
• Preambles
Preambles deal primarily with workmanship, materials, special
attendances required and any assumptions made while taking off the
quantities, and so on. If bills of quantities are not being produced this
section may be incorporated into the specification.
• Specification
The specification produced by the design engineer relates directly to the
tender pricing document.
• Scope
The scope should not only cover the construction work but also design
and who carries the responsibility.
• Drawings
Always list out the drawings the contract is based on.
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• Conditions of contract
The type of contract, for example JCT 98, incorporating any required
amendments. Where the sub-contract conditions are to be negotiated
between the principal contractor and sub-contractor these can have a
significant effect on price. This is difficult for the employer to control.
• Precedence of documents
Somewhere within the tender documents the hierarchy of the documents
should be stated. This will help relieve some contractual conflict.
• Warranties
The wording of the preferred warranty should be provided within the
contract documents. If a standard wording is to be used, this should be
stated, e.g. COWA/F, COWA/P&T, MCWA/F or MCWA/P&T. A
design warranty may be required between the client and the
sub-contractor.
• Form of tender
The form of tender.
• PI insurance requirements
PI insurance is only required if design responsibility lies with the
building services contractor. With packages such as lifts, product
liability insurance may be acceptable.
• Programme
The overall project programme should be included within the tender
documents to provide the building services contractor with an idea of
how its works will be integrated with the other trades. Along with the
programme a key date schedule should be included. The tenderer should
be asked to produce an outline programme to be submitted with the
tender.
• Attendances
If the building services contractor is to provide any attendances on other
trades this should be quantified and described within the tender
documents. Likewise, it should be checked that any attendances
required by the building services contractors from other trades are
detailed in the appropriate documentation.
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Historically, the building services contractor has a close relationship with the
building services engineer, with the building services engineer producing all
the tender documents inclusive of a pricing document. This can still occur and
so each consultant’s scope must be analyzed to assess who is to provide the
pricing documents. This avoids the risk that two different pricing documents
(or worse none) could be contained within the tender documents. It is good
practice for the quantity surveyor to get an early draft of the specification and
edit out the contradictions between the building services engineer’s
specification and the pricing documents/project preliminaries. Once this has
happened, a draft pricing document can be produced and agreed with the
building services engineer. By discussing the format of the pricing document
openly with the building services engineer confidence is generated between
the parties that everything will be covered.
The pricing schedule splits the specification into various headings under
trades or elements. The tenderers should, therefore, submit a fully completed
pricing schedule which breaks down their lump sum tender into various
headings that should correspond to the sections of the specification. By
creating the pricing schedule in this format everyone knows and agrees the
scope of work which is included within each heading. The pricing schedule
should also contain a statement of the contractors rates used within the tender
inclusive of overheads and profit. If this is not clear, a breakdown should be
requested. This breakdown must show the build up to the contract price
including all tender adjustments.
When the analysis of the submitted pricing schedules has identified the
tenderers who are likely to be considered further, a fully quantified schedule
of rates should be requested from each of the tenderers under consideration. It
should be detailed within the pricing document how long the tenderer will
have to provide the fully quantified schedule of rates. This will depend on the
programme available and is usually two to seven days from a request being
made by the quantity surveyor.
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services engineer and the quantity surveyor is satisfied with the pricing and all
other commercial aspects of the tender. If, through the negotiations, anything
has changed from the tender documents, each tenderer must be made aware of
this change to maintain parity of tender. Once all this has occurred, the client
can be made aware of the final decision through a combined report from the
full design team. If this procedure is not followed there is the potential for
post-tender problems regarding supply and performance under the contract.
A section dealing with the tenderers overheads and profit and daywork rates is
required in the schedule. There are so many different rates that could be used
within the building services trades that it is recommended the quantity
surveyor asks the contractor to submit the latest trade rates that will be
employed on the contract.
Bills of quantities should only be used when a fully coordinated design and
specification has been prepared by the designers and a fixed lump sum cost for
the works is required. Bills of quantities are the traditional method of
procuring construction work within the UK where time permits. The specific
problems associated with the procurement of building services does not
exclude the use of bills of quantities, but the following are some of the issues
that should be reviewed to ascertain the benefit of producing bills:
• Design development may still be in progress when the bills are started,
necessitating variations as soon as the tender process starts. The cost
certainty intended by the use of bills is immediately lost when variations
start. If the design varies greatly during the contract period the building
services contractor could have a case for a re-rate or claim.
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• The use of bills results in the risk being retained by the client as far as
quantities are concerned. This may result in more competitive prices
being obtained as risk is more evenly distributed with the client taking a
greater burden or the building services contractor may exploit errors
within the document.
• As each tenderer has the same document to price the tender analysis
should be easier. The tenderers do however have discretion as far as rate
build up is concerned.
To briefly conclude this section, the building services contractor generally has
responsibility for detailed design work such as final cable routes, bracket
details, and so on which limits the information available for billing. Also,
history has dictated that the building services design is not far enough
advanced within the procurement timetable to provide the quantity surveyor
with sufficient information to produce bills of quantities. A summary of the
advantages and disadvantages of bills is given in table 6.
When dealing with pricing options there are two basic possibilities that can
occur:
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Advantages Disadvantages
More even spread of the risk Specific items of plant may have to be
uniquely specified which will reduce
competition
the document which may take the form of alternative suppliers, reduced
programme or variations on the contract clauses. This can be a cheaper
supply or where the after-sales support services in an area is better
provided for by an alternative supplier. It is for the building services
engineer to ascertain if the alternative achieves the specification. Any
option must include the full cost of ensuring design compliance. This
could be in the form of additional fees or additional coordination costs.
Both of these must be catered for in any tender document while still
maintaining a like-for-like comparison for tender analysis purposes. The
easiest method of obtaining this is by assuring that each tenderer prices what
will be called the base option. Each alternative can then be given as an
adjustment to the base scheme.
Clear direction should be provided within the tender document on how and
where options should be priced.
The most obvious way to deal with tender addendums is not to have any.
However, since design can often progress during the tender period, this is an
unlikely occurrence. If addendums are required they can be either sent out
during the tender period or provided to the two lowest tenderers to price after
tenders have been returned.
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If the design changes occur during the tendering period, addendums to the
documents should be sent out to each tenderer. The addendum should state if
the tender period is extended and each tenderer must acknowledge receipt of
the addendum. If mid-tender interviews have been arranged, the addendum
can be handed over and explained at this time. The addendum must still be a
precise document, clearly identifying the changes and scope, as it will form
part of the contract.
On receipt of a query, the name of the organization asking the query should be
removed and the question given a reference. Queries can then be forwarded on
to the appropriate consultant for comment. The quantity surveyor should read
each query and assess if another tenderer has asked it previously. A master
record of whom asked what question should be kept in order to provide an
audit trail for later reference.
• list of main suppliers used – where choice is with the building services
contractor;
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• method statements;
• cash flow – the cash flow translates the project programme into the
client’s anticipated financial commitment. If this can be agreed with the
successful tenderer early on in the project, there is an opportunity to use
this as a valuation tool provided the programme is adhered to. An agreed
cash flow can be invaluable when the client’s project funds are similarly
time related.
During the review process it will probably be necessary to clarify points with
the tenderers. This should be done through the quantity surveyor, as before.
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Once all the information has been gathered it will be necessary to establish a
comparable price. The final appointment decision should be made, not solely
on price but also considering the tenderers’ understanding of the project and
their ability to complete in time and to budget.
In this final analysis it is recommended that the tenderers’ procedures for cost
control and reporting are also examined. An up-front pro-active attitude on the
building services contractor’s part will result in potential problems being
identified early providing the design team with an opportunity to find a
beneficial resolution.
3.2.4.10 SUMMARY
• Make sure there is only one pricing document which directly relates to
the specification.
• Ensure the pricing schedule covers all the information required such as:
• overheads and profit;
• an all-in man hour rate;
• daywork rates inclusive of percentage uplifts;
• a fully quantified schedule of rates; and
• opportunity to price for alternatives.
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Notes
1) Department of Environment, Transport and the Regions (1998).
Rethinking Construction. London: DETR.
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PART 3, SECTION 2, APPENDIX A
Preliminary Items
In the following typical example all general and preliminary items would normally be
detailed in the main preliminary documentation. The following clauses are suggested in
relation to the inclusion of a pricing schedule and can appear either in the main
preliminaries or as part of the sub-contract tender documents.
General Items
a) It is a pre-requisite that the following pricing summary is completed in full with every
item priced. Failure to do so will invalidate the tender submission.
b) The following descriptions are not necessarily complete. The building services
contractor is referred to the tender drawings, specification and accompanying
documents for a full scope of work.
c) The building services contractor is to include in its rates for any temporary works
considered necessary.
d) The building services contractor is to include in its rates for all necessary fixings,
connections, fittings, bolts, etc. unless otherwise stated in this document.
e) The building services contractor is deemed to have included in its tender for all items
of materials, plant, equipment and labour whether or not specifically mentioned or
shown in order to carry out the necessary works in accordance with good practice and
procedures.
g) The building services contractor is to take into account all the requirements of the
contract documents and should price accordingly within the relevant section of the
tender summary.
Calculations of Preliminaries
j) The contractor shall detail below, or provide a separate document, detailing the build
up to all the preliminaries items priced in the pricing document.
k) The calculations shall show weekly rates, areas, periods of time, quotations and all
other details.
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PART 3, SECTION 2, APPENDIX A
Schedule of Rates
a) The contractor shall within 3 days of being requested, submit a fully priced schedule
of all items and quantities involved in the make-up of its tender. The sum total of the
schedule shall equal the price of the form of tender.
b) All prices included in respect of equipment and building services contractors must be
supported by the appropriate quotations.
c) The contractor is to detail its rates and percentages required for the following:
Extra over the above rate for any non-productive overtime work £ _____
(Expand to include all trades)
d) The percentages and labour rates entered above will be deemed to include for all
contractor’s overheads, expenses, establishment costs, administration, off-site
services and all items of expenditure related to off-site management and profit.
e) The percentages and labour rates above will be the same as used in the preparation of
the tender sum and schedule of rates.
f) The schedule of rates shall be used for the purposes of pricing any future variations
and assisting in the calculation of interim valuation payments.
g) If the contractor does not complete any of the above percentages or rates, they will be
deemed to be priced at NIL.
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PART 3, SECTION 2, APPENDIX A
Pricing Schedule
Electrical Incoming £ p
Standby Power
To Collection £
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Appendix A (7/01)
PART 3, SECTION 2, APPENDIX A
LV Distribution
Lighting Installation
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Protection
To Collection £
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Appendix A (7/01)
PART 3, SECTION 2, APPENDIX A
Data Installation
General:
Buildings work drawing Item
Electrical sub-contractor’s design and installation
drawings, including any necessary manufacturer’s
shop drawings Item
Testing and commissioning the complete electrical
installation, including compliance with the
commissioning manager’s requirements Item
As installed documents, drawings and O&M
manuals in the required format as specified by
the document production manager Item
Client instruction and operation training Item
Provision of samples and mock-ups as required Item
Provision of tools and spares Item
Any other items not listed above
(the sub-contractor to state) Item _________
To Collection £
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PART 3, SECTION 2, APPENDIX A
MECHANICAL INSTALLATION £ p
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PART 3, SECTION 2, APPENDIX A
MECHANICAL INSTALLATION
(Continued) £ p
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Appendix A (07/01)
PART 3, SECTION 2, APPENDIX A
MECHANICAL INSTALLATION
(Continued) £ p
Chilled water installations (Continued):
Chilled water system insulation Item
Refrigeration leak detection system Item
Water leak detection system Item
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Appendix A (7/01)
PART 3, SECTION 2, APPENDIX A
MECHANICAL INSTALLATION
(Continued) £ p
Condensate system:
Condensate drains from various equipment Item
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Appendix A (07/01)
PART 3, SECTION 2, APPENDIX A
MECHANICAL INSTALLATION
(Continued) £ p
General:
Trace heating to pipework system as necessary Item
Allow for all works/factory tests and demonstrations
of plant and equipment as specified Item
Preliminary items Item
Allow for mock-ups and samples specified Item
Test and commission the complete mechanical and
public health services installation in accordance
with the commissioning manager’s requirements Item _________
To Collection £
Mechanical and public health contractor’s design
and installation drawings including
manufacturers/suppliers shop drawings as necessary Item
Builders work drawings Item
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Appendix A (7/01)
PART 3, SECTION 2, APPENDIX A
MECHANICAL INSTALLATION
(Continued) £ p
General (Continued):
As installed documents, drawings and O&M
manuals in the required format as specified by
the document production manager Item
Client instruction and operation training Item
Provision of tools and spares Item
Any other items not listed above,
the sub-contractor to state Item __________
To Collection £
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Appendix A (07/01)
PART 3, SECTION 2, APPENDIX A
To Collection £
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Appendix A (7/01)
PART 4, SECTION 1
Introduction
The following related and subsidiary topics are, however, not addressed:
• the acceptance of defective work either before or after practical
completion;
• wider consideration of the matter of adjudication upon practical
completion;
• the law concerning latent defects and its inter-relationship with
contractual defects liability provisions generally;
• closer examination of the issues surrounding early completion (although
analysis of the general scheme of the subject under JCT forms is
included);
• the changing law concerning final certificates;
• the operation of fluctuation provisions after practical completion;
• the significance of practical completion in relation to performance
bonds; and
• the concept of temporary disconformity in building contracts.
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PART 4, SECTION 1
(d) Certification
• Eventually a point will be reached where completion can be certified in
the opinion of the architect, engineer or contract administrator.
Although not defined as such in the majority of standard forms (see
4.1.2), the most commonly held belief is that this should occur when the
employer can enjoy beneficial occupation and use of the building or
facility, and that the making good of any remaining works or removal of
snags will not unduly impede that occupation.
• Such an approach is supported by case law (see 4.1.5).
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(a) JCT 98 does not define practical completion. At clause 1.3 (Interpretation,
Definitions, etc.) the following unhelpful entry is made:
(b) Clause 17.1 is inextricably bound with the provisions relating to defects,
shrinkages or other faults appearing within the defects liability period, or frost
damage. Clause 17.2 commences: (Clauses 17.2 to 17.5).
‘Any defects, shrinkages or other faults which shall appear within the
Defects Liability Period … .’
Under clause 35.16 of JCT 98, the architect must issue separate certificates
of practical completion for each nominated sub-contractor when, in his or
her opinion, the nominated sub-contract works have reached practical
completion.
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(b) Clause 2.13 requires the sub-contractor to notify the main contractor of the
date on which the sub-contractor considers the domestic sub-contract works
have reached practical completion.
(c) If the main contractor does not dissent from that date within 14 days of
receiving the sub-contractor’s notice, practical completion is deemed to have
occurred on the date notified by the sub-contractor.
(d) Clause 2.14 requires that if the main contractor does dissent, the date must
either be established by agreement or determined by an adjudicator. In the
absence of such agreement or determination, the date will be that stated by the
main contractor in his/her notification of dissent under clause 2.13 or if earlier
or no date is stated in the notification of dissent, on the date of Principal
Completion of the Works certified by the architect under clause 17.1 of the
main contract.
(a) The Intermediate Form closely follows that described above for JCT 98.
(c) Clause 2.11 provides for partial possession. The effect is similar to the
partial possession provisions of JCT 98 (see 4.1.6.5).
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PART 4, SECTION 1
‘When the Works have reached Practical Completion and the Contractor
has complied with clause 6A.5.1 or has complied sufficiently with clause
6A.5.2, whichever clause is applicable, the Employer shall give the
Contractor a written statement to that effect, which statement shall not be
unreasonably delayed or withheld, and Practical Completion of the
Works shall be deemed for all the purposes of this Contract to have taken
place on the day named in such statement.’
(a) The JCT Minor Works form provides a crisp, clear statement which has the
same effect as the provisions for the main JCT forms.
(c) It should be noted, however, that whereas the mechanism for certifying
practical completion is the same as JCT 98, the provisions for defects liability
differ.
(d) It has been held2 that the MW80 form (predecessor to MW98):
• does not require a written schedule of defects and, therefore, oral
notification is sufficient;
• in clause 2.5 the words ‘any defects, excessive shrinkages or other
faults which appear within three months of the date of practical
completion …’ extend to defects which appear before practical
completion;
• the words ‘defects, excessive shrinkages, or other faults’ are not
qualified by any reference to the ‘works’ and so would, therefore, extend
to an existing structure.
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The Prime Cost Contract uses the same wording as the Intermediate Form.
See 4.1.2.4.
(a) Under clause 2.14 of the WC/2, the management contractor is required to
issue separate certificates of practical completion for each works contract. The
management contractor is, however, obliged to obtain the architect’s consent
under clause 8.3.4 of the Management Contract, signifying that the relevant
works have, in the architect’s opinion, reached practical completion.
4.1.2.10A THE ACA STANDARD FORM OF CONTRACT FOR PROJECT PARTNERING PPC2000
(b) Clause 21.1 requires the constructor when it considers that the project has
achieved Project Completion to give the client representative not less than five
working days notice requesting the client representative to attend, inspect and
test as appropriate.
(c) Clause 21.2 requires that within two (working) days of completion of such
attendance, inspection and testing the client representative shall issue a notice
that either:
(i) confirmed that the project has achieved Project Completion;
(ii) indicates any aspect of the project which is not in accordance with the
Partnering Documents after which the constructor will again present
the Project in accordance with Clause 21.1.
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PART 4, SECTION 1
4.1.2.10B THE ACA STANDARD FORM OF SPECIALIST CONTRACT FOR PROJECT PARTNERING
SPC2000
(a) The provisions of the Standard Form of Specialist Contract SPC2000 are
similar to those on PPC2000, although the time frames are a little longer.
(b) Clause 21.1 requires the specialist to give the constructor seven working
days notice to attend, inspect and test as provided for in the Specialist
Working Brief.
(c) Clause 21.2 requires that within four working days of completion of the
attendance, inspection and testing the constructor and other appropriate
Partnering team members should issue a notice either:
(d) Clause 21.3 again provides for Part Specialist Completion of any part of
the specialist works using a procedure equivalent to clause 21.1 and 21.2.
(e) With regard to defect rectification clause 21.4 requires the specialist to
attend site whenever notified by the constructor of any defects, excessive
shrinkages or other faults. This defect rectification can include defects arising
either before Specialist Completion or during the defects liability period for
the specialist works.
(a) Though not as fully developed as the ACA form (see 4.1.2.10) it may well
be said that the ICE 7th edition provides a framework for completion which
reflects better than the JCT forms what actually happens in practice. In this
form, the contractor ‘offers up’ the works, and a process is provided for
dealing with outstanding works and defects.
(b) any Section in respect of which a separate time for completion is provided
in the Appendix to the Form of Tender has been substantially completed and
has satisfactorily passed any final test that may be prescribed by the Contract
he may give notice in writing to that effect to the Engineer or to the Engineer’s
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PART 4, SECTION 1
(2) The Engineer shall within 21 days of the date of delivery of such notice
either:
(b) give instructions in writing to the Contractor specifying all the work which
in the Engineer’s opinion requires to be done by the Contractor before the
issue of such certificate.
Note: It is the Engineer, not his representative, who is authorized to issue the
certificate.
(c) Clause 49(1) deals with outstanding work and defects as follows:
The undertaking to be given under clause 48(1) may after agreement between the
Engineer and the Contractor specify a time or times within which the outstanding
work shall be completed. If no such times are specified any outstanding work
shall be completed as soon as practicable during the Defects Correction Period.
The clause gives the engineer a discretion and, as in other forms, his or her
decision may be reviewed by an adjudicator or arbitrator.
It should also be noted that the ICE 7th edition form caters expressly for the
circumstances where the employer uses or occupies the works or part of the
works prior to a 48(2) certificate being issued.
‘If any substantial part of the Works has been occupied or used by the
Employer other than as provided in the Contract the Contractor may request in
writing and the Engineer shall issue a Certificate of Substantial Completion in
respect thereof. Such certificate shall take effect from the date of delivery of
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PART 4, SECTION 1
the Contractor’s request and upon the issue of such certificate the Contractor
shall be deemed to have undertaken to complete any outstanding work in that
part of the Works during the Defects Correction Period.’
Note: The ICE Design and Construct Clause 48(3) provisions in respect of
operation and maintenance instructions are not present in the 7th edition.
(a) The ICE Minor Works is unique amongst standard forms in that it defines
completion against the readiness of the works to be used by the employer.
(1) Practical completion of the whole of the Works shall occur when the
Works reach a state when notwithstanding any defect or outstanding items
therein they are fit to be taken into use or possession by the Employer.
(2) Similarly practical completion of part of the Works may also occur but
only if it is fit for such part to be taken into use or possession independently of
the remainder.
(3) The Engineer shall upon the Contractor’s request promptly certify in
writing the date upon which the Works or any part thereof has reached
practical completion or otherwise advise the Contractor in writing of the work
necessary to achieve such completion.
(c) Clause 4.7 deals with the completion of outstanding works or defects after
practical completion has occurred.
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PART 4, SECTION 1
Under this form, the sub-contractor must complete within the period for
completion specified in the Third Schedule (clause 6.1). The schedule could
provide that such a period is to end prior to substantial completion of the
main contract works. However, the sub-contract does not provide an
effective means to establish when completion of the sub-contract works has
been achieved. Therefore, unless the parties otherwise agree, it is probable
that completion of the sub-contract works may not be acknowledged until
substantial completion of the main contract works and only then by the
implication that the main works have completed. If the sub-contract works
are completed prior to main contract works completion, clause 13(1) of the
FCEC ‘blue form’ places the sub-contractor with an absolute obligation to
maintain the sub-contract works until substantial completion of the main
works.
(a) The NEC eschews the system set out in the ICE form which reflects current
practice, namely the contractor offering up the works and
completion/handover occurring together with clear provisions for dealing
with outstanding works and defects.
(b) Instead it may be thought that the NEC is in some respects closer to JCT:
completion takes place when the project manager decides so. As if completion
was not vexed enough already, the NEC gives the project manager three terms
to deal with: ‘Completion’, ‘taking over’ and ‘termination’.
(c) The NEC provisions are found in the core clauses as follows:
• Part 1 – General – Clause 11.2 (identified and defined terms) (13) states:
Completion is when the Contractor has
• done all the work which the Works Information states he is to do by the
Completion Date and
• corrected notified Defects which would have prevented the Employer
from using the works.
• Part 3 – Time – Clause 35 (Take over) states:
35.1 Possession of each part of the Site returns to the Employer when
he takes over the part of the works which occupies it. Possession
of the whole Site returns to the Employer when the Project
Manager certifies termination.
35.2 The Employer need not take over the Works before the
Completion Date if it is stated in the Contract Data that he is not
willing to do so. Otherwise the Employer takes over the Works
not more than two weeks after Completion.
35.3 The Employer may use any part of the Works before Completion
has been certified. If he does so, he takes over the part of the
Works when he begins to use it except if the use is:
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35.4 The Project Manager certifies the date upon which the Employer
takes over any part of the Works and its extent within one week of
the date.
(a) GC/Works/1 (1998) provides that the works are to be completed to the
satisfaction of the Project Manager, who is required to certify completion. In
addition, the Employer may choose to take partial possession of a part of the
works.
‘34(2) The Contractor shall, at all times, keep the Site tidy and free from
debris, litter and rubbish and shall, not later than the Completion of the
Works, remove from the Site all Things for incorporation in the Works or
any relevant Section which are unused, together with all things not for
incorporation. The Contractor shall, by the due date, clear and remove all
rubbish and deliver up the Site and the Works in all respects to the
satisfaction of the PM. The Contractor shall comply at his own cost with
any Instructions relating to the removal of any things and rubbish.’
‘The PM shall certify the date when the Works, or any Section, or any
completed part within the meaning of Condition 37 (Early Possession),
are completed in accordance with the Contract. Such completion shall
include sufficient compliance by the Contractor with Condition 11(7)
(Statutory notices and CDM Regulations). After the end of the last
Maintenance Period to expire, he shall issue a certificate when the
Contractor has complied with Condition 21 (Defects in Maintenance
Periods).’
(a) a Section; or
(b) any other part of the Works in respect of which the parties agree, or the
PM has given an instruction, that possession shall be given before the
completion of the Works or the relevant Section; and the completed part, on
and after the date on which the certificate is given, shall no longer form part
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(a) ‘Red Book’ for lump sum contracts. ‘Green Book’ for reimbursable
contracts.
(b) The IChemE forms recognize that on large process plant projects or
similar, the concepts of completion and taking over have distinctly separate
ramifications, from both contractual and safety points of view. These are
reflected in the contractual procedures provided in the IChemE forms. The
procedures, therefore, are closer to a true contractual definition of completion
than can be found in any other standard form. There are three aspects of
significance which are considered:
• Clause 33.1 (Red Book), clause 32.1 (Green Book) requires the
contractor to notify the project manager by means of a construction
completion report when he or she is of the opinion that the plant is
substantially complete.
When the plant has satisfactorily completed tests set out in the
specification and the contractor has adequately demonstrated
completion in accordance with the specification, the project manager
and contractor sign the construction completion report. There may, of
course, be a number of these reports related to different elements of the
plant.
If the project manager is not satisfied he or she may endorse the report
accordingly and the contractor must repeat the procedure described in
clause 33.1.
• Once all the construction completion reports have been signed by the
project manager, and where the contract schedule specifies a date for
completion of construction, the project manager issues a certificate of
completion of construction, under clause 33.4.
• The purchaser normally takes over responsibility for the plant just
before any raw materials are to be fed into the plant to undergo the
designed process change.
The IChemE forms, therefore, provide for the carrying out of take-over
procedures, including tests, as may be specified within the contract
schedules, to follow on from construction completion. As soon as all the
procedures have been successfully carried out, the project manager
issues a take-over certificate to be signed by the purchaser and delivered
to the contractor under clause 34.7. The purchaser is thereafter
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The various standard forms differ in their treatment of the transfer of rights
and obligations between the parties at completion.
(a) liability to pay damages for delay ceases (whether liquidated and
pre-ascertained, or unliquidated);
(b) possession of the site returns to the employer and the risk of security and
damage to the works and third party liability transfers back to the employer
(but not damage to the works caused by the contractor during the defects
liability period);
(d) payment to the contractor of one half of the retention fund; and
Dependent upon the form of contract, certain other factors are conditional
upon the certificate of completion. For example, under JCT 98:
(a) the employer may assign the right to bring proceedings in his or her name
(clause 19.1.2);
(b) the commencement of the period of the final adjustment of the contract
sum (clause 30.6);
(c) liability for frost damage is transferred from the contractor to the employer
(clauses 17.2, 17.3 and 17.5); and
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(d) the period for final review of extensions of time expires 12 weeks from this
date (clause 25.3.3).
There are a number of principal methods which might be used to reduce the
problems associated with practical completion. The following are seen as the
main options available:
The remedy available to the employer or contractor in the event they consider
the certificate has been wrongly issued or withheld is to adjudicate. This
option is used in the traditional JCT contract.
(d) It is possible that this could be dealt with as a ‘code of practice’ bound
within the contract document and expressly referred to in the conditions, in
similar fashion to the code of practice for opening up and testing under clause
8.4.4 of JCT 98.
(e) The IChemE forms come closest to this option, by prescribing tests and
standards to be achieved by the installed plant prior to completion. It is
suggested, however, that to define completion similarly for universal
application in building or civil engineering projects would be extremely
difficult. The primary area of difficulty lies in aspects of subjective evaluation
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(f) Appendix A offers a number of practical tests for judging the state of
completion.
(a) Here completion would not be granted until all outstanding works are
completed and defects rectified.
(b) This is not a favoured option in the UK, and the Courts have given
credence to the view that it is a difficult, if not impossible, yardstick to apply.
Nonetheless it is closer to the model applied in other European countries, and
an increase in the use of latent defects or ‘build’ insurance (such as the
mandatory decennial type liability in France) may bring a move towards ‘fault
free’ buildings at completion.
(a) Various models have been suggested for a two-stage process for the
certification of completion.
(b) Clearly, the intent is to divide into two the numerous benefits and obligations
which fall upon the contractor and employer at completion (see 4.1.3).
(c) The first stage may be denoted by the issue of a ‘provisional certificate’ and,
by example, may be due when beneficial occupation is achieved or achievable.
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(d) At this point, the employer would re-take possession and insurance risks
are transferred.
(e) The second stage would be perfect completion of the works. Only at this
point would the contractor be released from liability for liquidated and
ascertained damages. This would also mark the commencement of the defects
liability period. It is thought that the first release of retention would also not
occur until this point.
G 4.1.5 Definitions
One would normally say that a task was practically completed when it
was almost, but not entirely finished; but Practical Completion suggests
that is not the intended meaning and what is meant is the completion of
all the construction work that has to be done.4
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In the same case, the key element for defining a failure to achieve substantial
performance was emphasized to be:
the general ineffectiveness of (the work) for its primary purpose …11
Substantial performance has been held to have occurred even though the
works were in part defective. The defendants were held liable for the sum
claimed less a deduction based upon the cost of making good the defects:
The question here is whether in a contract for work and labour for a lump
sum payable on completion the defendant can repudiate liability under
the contract on the ground that the work though ‘finished’ or ‘done’ is in
some respects not in accordance with the contract … I think on the facts
of this case the work was finished in the ordinary sense, though in part
defective …12
It has recently been held by the Court of Appeal in Hong Kong that practical
completion should be interpreted in a similar manner to the doctrine of
substantial performance.
The judge reached his conclusion that practical completion had not been
achieved in circumstances where, by reason of the failure to modify the
sprinkler system, the work contracted for was, in the words of Somervell LJ in
Hoenig v. Isaacs, neither ‘finished’ nor ‘done’ in the ordinary sense.14
The direct connection between cases dealing with substantial performance and
the definition of practical completion is, however, to be treated cautiously.
This term (or equivalent words) used in clause 48(1) of the ICE 7th Edition
form ‘… substantially completed …’ now appears consistently throughout the
Conditions, inter alia, in clauses 43 and 47. The term is not defined, but the
expressed reference to ‘outstanding work’ to be completed within the Defects
Correction Period indicates a state plainly falling short of literal completion.
Neither is there any definition of ‘outstanding work’. There is no reason to
limit it to work that has not been carried out. It may include work which is
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(1) The Works can be practically complete notwithstanding that there are
latent defects;
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PART 4, SECTION 1
prevent completion (the more so, of course, if the contract provides for a
maintenance or defects liability period).19
In the last resort the degree of required completion needed to discharge the
contractor’s obligation to complete to time will be a matter of interpretation,
but can be expected to differ from other aspects of the contractor’s obligations
to complete. In English standard forms of contract employing liquidated
damages clauses for delay, this is often expressly described as ‘practical’ or
‘substantial’ completion, but there is no reason to suppose that these
expressions mean anything very different from the word ‘completion’
simpliciter when used or implied in the context of completion to time. It is
submitted that this will, in the absence of contrary indication, mean when the
work reaches a state of readiness for use or occupation by the owner, and free
from any known omissions or defects which are not merely trivial.20
(a) A specific question was raised in the Rees & Kirby case22 as to whether
financing charges incurred by a contractor upon primary elements of loss and
expense would cut off at the certificate of practical completion.
(b) The defendant argued that financing charges, which were to be considered
as a component part of the loss and expense claimed by the contractor as a
result of events occurring during the construction of the works, could not be
recoverable after practical completion, since the causative events complained
of must, by that stage, have come to an end.
As I read the clauses, given that (on the clauses in the form which they
take in the contract now before us) successive applications are made at
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But I can for my part see no good reason for holding that the contractor
should cease to be involved in loss or expense in the form of financing
charges simply because the date of practical completion has passed.
(b) This brings about the absurd situation of contractors’ claims for extension
of time after practical completion, or arguments that time is ‘at large’ in order
to defeat the imposition of earlier delay damages.
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(c) In one case,24 the Court did not accept the consultant’s defence that
because it had qualified its issued completion certificate by a list of ‘reserved
matters’, that this issued certificate should not have been taken to be the
completion certificate required by the terms of the contract. Even though the
employer was alleged to have instructed the consultant to issue an early
certificate, the consultant had not properly advised its client of the relevance
and importance of its issue including, amongst other things, the effect it would
have of depriving the employer of the benefit of the performance bond.
(d) In another case25 a consultant was held liable under a collateral warranty
to a future owner, for breach of a term to ‘exercise all proper professional
skill and care’, as it had purported in a letter to the architect that the
mechanical and electrical works were complete, when in fact they were not.
The architect subsequently certified practical completion, which induced the
purchase of the property. Although the representation to the architect was
made upon the employer’s request, the consultant should have declined the
request as it was in conflict with the future owner’s interests (i.e. the interests
of the beneficiary of the warranty that the consultant had agreed to) and the
consultant did not have the future owner’s express written agreement in this
regard.
(b) Certain standard forms of contract contain clauses that expressly state this
to be the case.
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If any substantial part of the works has been occupied or used by the
Employer other than as provided in the Contract, the Contractor may
request in writing and the Engineer shall issue a Certificate of Substantial
Completion in respect thereof …
(d) The New Engineering Contract (NEC) is also clear on this point, clause
35.3:
The Employer may use any part of the works before Completion has been
certified. If he does so, he takes over the part of the works when he begins
to use it …
(e) It has been argued that since some standard forms expressly deal with this
subject as above, then those forms of contract which do not include similar
express provisions should be interpreted to the effect that no assumption of
deemed practical completion may be made upon occupation or use of part or
all of the works. In other words, the express requirements of the contract
should be considered to be exhaustive of the circumstances whereby practical
completion can be established.
(f) The JCT forms of contract, including JCT 98, do not expressly provide for
‘automatic’ practical completion upon use or occupation by the employer of a
part or whole of the works. On the contrary, clause 23.3.2 of JCT 98 provides
for use or occupation in circumstances where practical completion or partial
possession will not occur (see 4.1.6.5(a)).
(g) A number of cases have looked at this question. In Big Island Contracting
v. Skink,26 although the owner’s occupation of the building was not argued as
key to the determination of the issues, the Court held that it could not
distinguish practical completion from ‘substantial performance’. On the facts
of this case, the Court held that practical completion had not been achieved,
despite the fact that the defendants had been in occupation of the building.
(h) A somewhat different view was held in Hoenig v. Isaacs,27 where Lord
Denning said:
There, by entering into possession and using the fitted furniture, the employer
was held to have waived a condition precedent of entire performance and
could no longer rely on it.
(i) In English Industrial Estates v. George Wimpey28, the Court held that
occupation did not amount to completion.
(j) In spite of the employer’s tenant installing and using machinery and storing
large quantities of paper in parts of the works, the court of first instance and
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PART 4, SECTION 1
the Court of Appeal found that partial possession had not occurred and held
the contractor and his insurers liable for damage caused by a fire occurring
during the employer’s occupation.
(k) In an Australian case29, the contract allowed the employer to have access
before practical completion for the purpose of fitting out the building. The
contractor argued that as the liquidated and ascertained damages provision
gave no credit for this benefit, it could not be a genuine pre-estimate of loss,
and would fail as being an unenforceable penalty.
(l) The Court summarily rejected this argument. The contract contemplated
staged completion, and any occupation of the premises prior to practical
completion for fitting-out was a contractual right and not a ‘benefit’ conferred
on the employer by delayed completion.
Under JCT 98 it may be seen that there are four levels of ‘occupation’ which
can be attained by the employer.
(a) The first level is use or occupation of the site or a part thereof generally for
storage or fit-out.
It can be seen that such a mechanism is consensual and that the insurers also
must confirm their consent to the occupation. Clause 23.3.3 provides that any
increase in the insurance premiums which results must be added to the
contract sum.
(b) The second level is partial possession. Again, this must be by the consent
of both parties, which the contractor must not unreasonably withhold.
If at any time or times before the date of issue by the Architect of the
certificate of Practical Completion the Employer wishes to take
possession of any part or parts of the Works and the consent of the
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PART 4, SECTION 1
The effect of partial possession under clause 18 is quite different from use or
occupation described under clause 23.3.2 above. With partial possession,
practical completion is deemed to have occurred in respect of that part with all
the consequences of a practical completion under clause 17 (see 4.1.4).
The architect’s written statement is used to compile the value of the part taken
into possession, such that retention (clause 30.4.1.2) and liquidated damages
(clause 24) will be reduced pro rata to the contract sum.
Reference is also made to insurance which must be dealt with in the event of
any partial possession (clause 18.1.3).
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PART 4, SECTION 1
Notes
1. Clause 18.1.1 refers to partial possession.
2. William Tomkinson & Sons Ltd v. The Parochial Church Council of St Michael and
Others (1990) 8-CLD-08-01.
3. Matthew Hall Ortech Ltd v. Tarmac Roadstone Ltd (1997) 87 BLR 96.
4. City of Westminster v.. J. Jarvis & Sons Ltd (1970) HL, 7 BLR 64.
5. Ibid, at page 75.
6. Ibid, CA [1969] 1 WLR 1448, at page 1458.
7. H W Neville (Sunblest) Ltd v. William Press & Sons Ltd (1982) 20 BLR 78.
8. Emson Eastern Ltd v. EME Developments Ltd (1991) QBD, 55 BLR 114.
9. Ibid, at page 122.
10. Bolton v. Madheva (1972) 1 WLR 1009, at page 1013.
11. Ibid, at page 1015.
12. Hoenig v. Issacs (1952) 2 All ER 176, at page 179.
13. Big Island Contracting (HK) Ltd v. Skink Ltd (1990) CA of Hong Kong,
52 BLR 110.
14. Ibid, at page 115.
15. Commentary by Editor of Building Law Reports, 52 BLR, at page 112.
16. Engineering Law and the ICE Conditions, 4th edition, Max W Abrahamson,
at page 160.
17. Keating’s Building Contracts, 6th edition, at page 590.
18. Hudson’s Building and Engineering Contracts, 11th edition, at page 1109.
19. Ibid, at page 1130.
20. Commentary by Editors of Building Law Reports, 52 BLR, at page 111.
21. Rees & Kirby Ltd. v. Swansea City Council (1985) CA 30 BLR.
22. Chartered Quantity Surveyor June 1990 (ref Q/89/136).
23. George Fischer Holding Ltd v. Multi Design Consultants Ltd and Davis Langdon
& Everest & others (1998) CILL 1362.
24. Environment Agency v. Hilson Moran [2000] CA (unreported to date).
25. Big Island Contracting (HK) Ltd v. Skink Ltd (1990) CA of Hong Kong,
52 BLR 110.
26. Hoenig v. Issacs (1952) 2 All ER 176.
27. English Industrial Estates Corporation v. George Wimpey & Co Ltd (1973) CA 7
BLR 122.
28. Multiplex Construction Pty Ltd v. Abgarus Pty Ltd (1992) APCLR.
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PART 4, SECTION 1, APPENDIX A
A2.3 Where appropriate (e.g. under design and build arrangements) the contractor
shall have satisfied all local authority requirements with regard to, for
example, refuse collection and postal address confirmation.
A3 THE SITE
A3.1 External works should be substantially complete so that the occupier has
unfettered access. Normally, all building impediments such as skips and site
huts should have been removed from the site, such that no potential safety
hazard remains present. (Note: Particular attention should be paid to this
when considering sectional completion for any part of the works.)
A4 ENTRANCES
A4.1 It is normally expected that the entrance to the premises and access way
would be clear and complete, sufficient for the client to operate for all intents
and purposes in a normal fashion.
A5 STRUCTURE
A5.1 Structural works should be complete and no part of the structure should be
unsafe.
A6 CLADDING
A6.1 The building should be wind and watertight and the cladding should be
properly secured. Under normal circumstances, roofs and claddings would
be tested by the elements. If, for some reason this has not taken place, then
the specification should include for water testing or, alternatively, an
instruction should be given to so test these elements.
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Appendix A (4/98)
PART 4, SECTION 1, APPENDIX A
A7 FINISHES
A7.1 This is the area of works where most reasons for delay in the issue of a
certificate of practical completion tend to arise.
A7.3 All the decoration works should be complete. For example, the reception
area and staircases should be finished, as should in general terms, the internal
areas. However, decorations incomplete to a store room in the depths of the
basement would not necessarily be considered as important.
A7.4 External works should be complete, including car-park lining, signage and
the like.
A8 PLANTING
A8.1 If, in the specification, external planting is included and it is acknowledged
that practical completion may take place during a period when undertaking
planting may be impractical, then the documentation should state this to
enable such works to be undertaken without detriment to the parties.
A10 MANUALS
A10.1 The requirement for the provision of operating and maintenance manuals and
as-installed drawings should be considered closely. Manufacturers’
warranties may well be nullified if mechanical plant is not maintained in
accordance with their instructions during the warranty period. Particular
attention will be required to be paid to the CDM regulations which call for
the ‘Safety File’ to be produced prior to practical completion.
Page 2 Part 4, Section 1 Effective from 1/6/98 The Surveyors’ Construction Handbook
Appendix A (4/98)
PART 4, S ECTION 1, A PPENDIX B
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Appendix B (revised 10/00)
PART 4, S ECTION 1, A PPENDIX C
Keatings Building Contracts, (6th Edition), Sir Anthony May, Sweet & Maxwell, 1995
The Surveyors’ Construction Handbook Part 4, Section 1 Effective from 1/12/00 Page 1
Appendix C (revised 10/00)
PART 4, SECTION 2
Introduction
The purpose of this Section is to provide practical advice to those who are
required to ascertain the amounts due in reimbursement of direct loss and/or
expense incurred in building projects.
Surveyors are particularly reminded that their role in these matters is set out in
their building contract and is normally limited to determining quantum; it does
not usually extend to determining liability.
Equally, it is not the quantity surveyor’s role (to whom the task of
ascertainment is usually given) to seek to get away with as little a payment as
he can. The contractor, for his part, may understandably press hard for a
significant figure and on occasions overstate his case either in words or money
or both. Too often the quantity surveyor is seen, or even sees himself, as being
at the opposite end of a tug-of-war rope to the contractor. This is incorrect.
Whilst the quantity surveyor is perfectly entitled to probe such submissions by
weighing all the contrary evidence, his ultimate task is to determine a proper
ascertainment in accordance with the conditions of contract and the
circumstances that have prevailed.
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PART 4, SECTION 2
G 4.2.1.2 However, the level of damages payable at common law has never intended to
act as a penalty or deterrent but simply to ensure that, in respect of the
aggrieved party, “he is, so far as money can do it, to be placed in the same
situation with regard to damages, as if the contract had been performed”.1
G 4.2.1.3 Nor are such damages intended to recompense the aggrieved party for all
losses whatever their nature. In the case of Hadley v. Baxendale2 it was
established that damages ought to be of a kind which “should be such as may
fairly and reasonably be considered either arising naturally, that is,
according to the usual course of things, from such a breach of contract itself,
or such as may reasonably be supposed to have been in the contemplation of
both parties, at the time they made the contract, as the probable result of the
breach of it”.
G 4.2.1.4 Where building contracts contain clauses dealing with the entitlement of the
contractor to recover direct loss and/or expense for any delay or disruption to
the regular progress of the Works caused by the client or his team or other
designated causes, such clauses have been developed against this general
background.
G 4.2.1.5 There are important distinctions to be drawn between the express provisions
in a form of contract on the recovery of direct loss and/or expense, and
recovery of damages at common law. In the case of the former the
requirements laid down in the contract must be rigidly adhered to; if they are,
then reimbursement is a contractual entitlement and does not require
judgement of the Court or an arbitrator.
G 4.2.1.6 The provisions of the loss and/or expense clauses are generally without
prejudice to any other rights and remedies which the contractor may possess,
and which he may wish to pursue through arbitration or the Courts. This
consideration is, however, outside the scope of this Section of the Handbook.
G 4.2.1.7 To determine the contractor’s entitlement one must calculate the difference
between the costs arising from the application of the following two questions:
(a) What is the reasonable cost of carrying out the particular element of work
in the delayed or disrupted circumstances that were created directly as a result
of the matter under consideration (for example late instructions)?
(b) If that delay or disruption had not been so caused what would those costs
have been?
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PART 4, SECTION 2
work that was carried out it does not follow necessarily that all such costs were
properly incurred.
G 4.2.1.9 Thus, even if the form of contract refers to ‘ascertaining’ the loss – as does the
JCT form (see G 4.2.1.13) – complete proof in the way of invoices or
verified cost records is unlikely to be available. Indeed, as outlined elsewhere
in this Section, the surveyor is not required to establish ‘complete proof’ but
is instead required to use professional judgement. This should not, however,
detract from the critical importance of ensuring that proper and reasonable
records are maintained by the contractor and contract administrator.
G 4.2.1.10 The primary purpose of this guidance is not to provide a legal treatise on the
matter of claims but to provide practical comment on how to go about
determining, as reliably as possible, the contractor’s monetary entitlement.
G 4.2.1.11 The correct ascertainment of the amount of any direct loss and/or expense to
be reimbursed to the contractor requires sound knowledge and experience of
building practice, careful study of the conditions of the relevant contract and
an understanding of their legal application, together with knowledge of the
relevant and up-to-date case law. In addition, the person undertaking the
evaluation requires access to the best records and other information that is
available on that particular contract.
G 4.2.1.12 The principles referred to are generally applicable to all cases where a
contractor is entitled, by the conditions of contract, to reimbursement of his
direct loss and/or expense. This entitlement is provided in most, but not all,
forms of building contract, even where the expression ‘direct loss and/or
expense’ may not be used.
G 4.2.1.13 This guidance is based predominantly upon the provisions of the 1998 edition
of the Standard Form of Building Contract, published by the Joint Contracts
Tribunal – referred to as JCT 98. The wording used in the form is either
identical, or very similar, to that adopted in many of the other forms published
by the JCT, for example the Works Contracts used in association with the JCT
Standard Form of Management Contract and the JCT Standard Form of
Building Contract with Contractor Design.
G 4.2.1.14 It should be noted that in this text extracts from printed forms are frequently
paraphrased. Readers therefore should in all cases check the precise wording
used in the particular form with which they are involved in practice,
particularly where the form is not one of those promulgated by the JCT. It may
even be that, although a JCT Standard Form has been used, particular clauses
have been amended.
G 4.2.1.15 Following the terminology used in the JCT forms, an event or failure which
gives the contractor grounds for seeking reimbursement of any resultant loss
and/or expense is referred to as a ‘matter’; whereas an event or failure which
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PART 4, SECTION 2
gives the contractor grounds for seeking an extension of time for the
completion of the works is referred to in this Section as an ‘event’ (also
see G 4.2.3.2).
4.2.2 Definitions
G 4.2.2.1 LOSS AND/OR EXPENSE
Any monies which a contractor has a proper expectation of receiving but has
not received and/or monies properly expended or to be expended by him.
G 4.2.2.2 DIRECT
“The direct consequence of the act giving rise to the claim”,1 or “that which
flows naturally from the breach, without other intervening cause”.2 Clearly
this word ‘direct’, when used in conjunction with the words ‘loss and/or
expense’, is a very restricting one and disqualifies all costs and/or expenses
that do not arise as a direct result of the matter under complaint. Thus, any
costs due, for example, to mismanagement, to other causes not recognized as
matters by the wording of the contract or to other concurrent delays should be
excluded from those reimbursable to the contractor as they are not the direct
result of the matter under consideration.
G 4.2.2.3 ASCERTAINMENT
The definition of this word should be seen in the context of the subject of the
ascertainment. Given that judgement is almost always called for (see G
4.2.1.5 and G 4.2.1.6) it follows that ‘to ascertain’ can rarely mean to prove
comprehensively with invoices and records but rather to establish by the use
of such facts as are available and by the use of expert judgement.
4.2.3 Entitlement
G 4.2.3.1 LIMITATIONS
(a) The loss and/or expense must arise directly as a result of one of the matters
referred to under the terms of the contract. Such matters do not usually extend
to the contractor underpricing the rates to be used in valuing variations. Thus,
losses arising from any such underpricing are not usually reimbursable.
1 A & B Taxis Ltd v. The Secretary of State for Air (1922) 2KB 328
2 Saint Line Ltd v. Richardson Westgarth & Co (1940) 25 BLR 140 refers to the case only in passing
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PART 4, SECTION 2
(b) Indirect costs – i.e. costs not arising directly as a result of the matter under
consideration – should be excluded. In this respect the link between cause and
effect is a vital factor.
(c) Costs incurred in respect of which the contractor has not compelled with
the conditions laid down in the contract in relation thereto cannot be dealt with
under the terms of the contract (but see G 4.2.1.6). For example, JCT 98
requires the contractor to make an application in writing to the contract
administrator as soon as it is reasonably apparent that disruption will occur as
a result of a matter referred to in clause 26 of that contract (or under clause 34
in the case of loss and/or expense arising from the discovery of antiquities).
For the contractor to be able to obtain reimbursement in accordance with the
contract he must first have complied with that provision (see G 4.2.3.3 for
more detailed advice on the validity of written applications).
(f) On the other hand, a contractor who through good management is destined
to increase the profit he anticipated making at tender stage cannot be denied
this prospect by the incidence of a matter giving rise to a loss and/or expense
claim. For example, at tender stage the contractor might have anticipated
removing some element of plant by, say, the twentieth week. In the event he
may be beating this target and be destined to be able to remove it by, say, the
fifteenth week. If a delay caused by a matter recognized by the contract occurs
which requires that plant to be retained for a further four weeks, i.e. until the
nineteenth week, he is entitled to additional reimbursement for those four
weeks.
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PART 4, SECTION 2
Under JCT 98 and other forms of contract in the same series, the expression
‘extension of time’ is replaced by the words ‘fixing a new completion date’
but the more traditional ‘extension of time’ is used in this Section. Extension
of time does not necessarily mean that the contractor has an entitlement to
reimbursement of loss and/or expense. On the other hand, the contractor may
have an entitlement to such reimbursement even when there is no extension of
time. Each matter needs to be treated on its merits whether or not an extension
of time is due or granted. Nevertheless, under JCT 98 there is a requirement
that the contract administrator declares the amount of any extension of time
granted for any event which also constitutes a matter under clause 26 where
such a declaration is necessary for the ascertainment of loss and/or expense.
Thus, in ascertaining the contractor’s entitlement to reimbursement of loss
and/or expense, the existence and amount of any attendant extension of time
must be revealed where this is relevant to that ascertainment.
(c) Reference to loss and/or expense in site meetings or the like, or references
to ‘delays’ which do not mention loss and/or expense, do not constitute valid
written applications to recover loss and/or expense.
JCT 98 requires that the contractor provides the contract administrator (or if
so instructed, the quantity surveyor) with all the documents necessary for
1 John Laing Construction Ltd v. County and District Properties Ltd (1982) 23 BLR 1
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PART 4, SECTION 2
G 4.2.3.5 In practice, what is going to be adequate data will depend upon the nature of
the disruption or delay. Thus, the request for the contractor to keep such
details should not only be timely but should also be as specific as possible as
to the data required.
In general the same principles apply to ascertaining the loss and/or expense to
be reimbursed to a nominated sub-contractor as apply to the main contractor.
It must be recognized, however, that a nominated sub-contractor may have an
entitlement under the terms of the sub-contract to reimbursement by the main
contractor (due, for example, to the latter’s mismanagement) which should be
passed on to the employer.
4.2.4 Ascertainment
G 4.2.4.1 RESPONSIBILITY FOR ASCERTAINMENT
Under JCT 98 the responsibility for ascertaining the amount due is the
contract administrator’s, unless he instructs the quantity surveyor to undertake
this task. Where the contract administrator so instructs the quantity surveyor
this instruction should be in writing, to be copied to the contractor, and be
specific as to the matters which are covered in such an instruction. However,
the contract administrator cannot delegate to the quantity surveyor, or anyone
else, the task of forming an opinion on whether or not there is a case in
principle for loss and/or expense to be ascertained. A checklist of steps
required under JCT 98 is included at Appendix E.
G 4.2.4.2 The quantity surveyor should be careful to ensure that the contract administrator
undertakes this task of forming an opinion before embarking upon any
ascertainment. The quantity surveyor should also ask the contract administrator
for all the data he has upon which he formed that opinion; for the quantity
surveyor’s task is always one of determining quantum in respect of the items
which in the opinion of the contract administrator are admissible in principle. It
is not for the quantity surveyor to usurp the role of the contract administrator in
matters which the contract conditions specifically reserve for him.1
1 John Laing Construction Ltd v. County and District Properties Ltd (1982) 23 BLR 1
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G 4.2.4.3 However, once the quantity surveyor has been properly instructed to ascertain
the amount due he should proceed with this task without delay. It is for the
contract administrator or quantity surveyor, as the case may be, to ascertain
the amount and not to await a detailed submission from the contractor.
G 4.2.4.4 In general the surveyor should ensure that the basis, calculations and
evidential records used in the ascertainment are recorded in writing. This may
be a mandatory requirement on public sector contracts.
G 4.2.4.6 Clause 26.1 of JCT 98 requires that ascertainment is made from time to time.
This means that ascertainment should be an ongoing process where the facts
are sufficiently established to make a proper and finite calculation. Moreover,
clause 30.2.2.2 of JCT 98 states that any amount ascertained under clause 26
should be included in interim certificates.
In recent years there has been much discussion on whether claims should
properly be considered on a global basis or whether each item should be
considered in isolation. In this respect the quantity surveyor need only be
concerned with the points in G 4.2.4.10 below.
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PART 4, SECTION 2
G 4.2.4.10 It is important that a contractor makes proper applications on each and every
occasion that an entitlement to make a claim arises.
(a) It is necessary that each application conforms fully with the rules written
into the contract about them (for example timing, in writing, sent to the
contract administrator).
(b) The contractor must keep such records as are necessary for the
ascertainment of the amount due.
(c) Only where the effect of a series of matters (for example the late issue of a
number of instructions or the instructing of a number of variations) is such as
to create extra costs which by their nature are indistinguishable from one
another can an application on a global basis be entertained. Simply because
there is, for example, a series of variation instructions which create
overlapping or contiguous disturbance, it does not follow that all other matters
on that project can be added in to make a global claim. A global approach to
ascertainment should be restricted solely to events which create
indistinguishable effects. Thus, no contractor should be penalised by being
denied reimbursement simply because extra costs were incurred which could
not by their nature be particularised. On the other hand, the facility of global
ascertainment should not be used to mask facts and figures that could properly
have been particularised and presented.
More often than not the dominant items will be the first two from the above
list.
G 4.2.5.2 PRELIMINARIES
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G 4.2.5.3 When ascertaining the extra cost of ‘preliminary’ items (but see G 4.2.4.8)
it is important to break each item down into the following components:
(b) Removal costs are admissible in the same way as setting-up costs.
(c) Extra hire charges would be reimbursable if the particular item is required
to be kept on site longer than otherwise would have been the case due to the
relevant matter. The comparison is between the period that the item would
have been on site had the matter not occurred and the period that it was
reasonable to have been on site given that the matter did occur
(see G 4.2.1.7). Where the plant in question is owned by the contractor the
measure of his loss is the amount (if any) that he could have earned by using
the plant elsewhere had it not been tied up on the site for longer than would
have been the case if the matter in question had not occurred.
(d) Extra running charges would be reimbursable if, due to a relevant matter,
the particular item is required for a longer period than otherwise would have
been the case. Again the comparison is between the period that the item would
have been in use had the matter not occurred and the period that it was
reasonable to have been in use given that the matter did occur
(see G 4.2.1.7).
(b) Wherever possible request that contemporary records be kept, noting the
output achieved in practice by the particular workmen who are disrupted.
Clerk of works’ records and diaries can be invaluable evidence of this.
(c) Have regard to whether any delay comprises a series of small recurrent
delays or one large one. In the former case the proportional loss of output can
be very high, whereas in the latter case the loss can be mitigated by
redeploying resources elsewhere.
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(d) Recognize that there is a learning curve in all activities. The advantage of
this can be lost if a new gang of men is brought in to undertake work which
has become familiar to others; the resultant extra cost will be reimbursable.
Moreover, if additional labour has to be recruited at short notice it may be
necessary to pay premium rates which would in principle be reimbursable.
(e) Whatever the level of variation orders, late instructions and so on, much of
the work of labour will not actually be significantly affected. For example,
bricklaying or fixing pipework once under way may suffer little or no delay.
The delay may be associated with becoming familiar with an unexpected or
unplanned task. The ‘coal face’ operation may not be affected at all.
(f) Recognize that great economies can flow from a repetitive task, for
example fixing partitions in a series of identical dwellings, the interruption of
which can result in far-reaching losses.
G 4.2.5.7 INFLATION
If work is executed later than otherwise would have been possible as a result
of a relevant matter and if inflation has caused the cost to rise then, provided
that such costs are not reimbursable under the fluctuations clause, they will
form part of the ascertainment. Even where the contract contains a
fluctuations clause, if it contains a non-adjustable element, a delay in the
execution of work might well increase the non-recoverable element, which
would be reimbursable.
Loss in the recovery of head office overheads is an admissible item but the
amount of such loss may be difficult to substantiate. Overall percentages, not
related to the particular circumstances, cannot be used.1
G 4.2.5.9 Wherever possible, proof should be sought of such items as extra site visits by
head office staff or the greater involvement of head office staff in managing
1Tate & Lyle Food and Distribution Co. Ltd & Another v. Greater London Council & Another (1982)
1WLR 149
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the project as a result of the matters giving rise to a claim. Appendix C gives
further guidance on the components and methods of such an ascertainment.
G 4.2.5.10 Account should be taken of the extent to which extra costs are already being
reimbursed through the pricing of the variation account.
G 4.2.5.11 Where there has been a delay as a result of a relevant matter but no consequent
increase in value (thereby excluding some contribution to extra head office
costs) some extra recovery is an entitlement provided that this does not extend
to include costs that should have been mitigated. It should also be shown that,
but for this delay and the consequent tying-up of head office resources for a
longer period than would otherwise have been the case, those resources could
have been productively used elsewhere. The Courts have increasingly
recognized that, providing all the pre-conditions are met, a formula approach
to calculating this element maybe permissible.1
G 4.2.5.12 As with the recovery of loss of profit, however, it is important that overriding
consideration be given to the level of recovery that would have been possible
on alternative work had the contractor been free to do so (see G 4.2.5.13).
1 St Modwen Developments Ltd v. Bowmer & Kirkland Ltd (1996) 1996 CILL 1203
2 Peak Construction (Liverpool) Ltd v. McKinney Foundations Ltd (1970) 1 BLR 114
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borrowed (or interest that could not be earned on capital) in order to finance
the prime cost of the loss and/or expense. Such finance charges are
reimbursable.1
G 4.2.5.15 Finance charges are recoverable from the date that the primary loss and/or
expense was incurred up to the time that the certificate, which included the
payment of that loss and/or expense, was issued, provided, as always, that the
conditions in the contract in that respect have been met (see G 4.2.3.3 (c)).
G 4.2.5.16 The rates and manner of interest payable should be those actually incurred (or
being earned on capital).
It is not possible to list all the items which are inadmissible. However, it might
be helpful to comment upon certain items which are occasionally claimed as
being reimbursable when they are not. Among these the most usual are:
(b) The cost of preparing a submission for the reimbursement of loss and/or
expense.
In common with most lump sum contracts JCT 98 does not contain provisions
for instructions to be given to accelerate the works. If acceleration is required
it should be achieved by means of a separate agreement.
G 4.2.6.5 Where, however, he provides the data which might be required by the quantity
surveyor under clause 26.1.3 the cost of so doing may be reimbursable.
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PART 4, SECTION 2, APPENDIX A
A2 TEMPORARY ACCOMMODATION
Consider:
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Appendix A (4/99)
PART 4, SECTION 2, APPENDIX A
A3 PLANT
This covers plant owned by the contractor or hired from a subsidiary or
specialist company. It is advised that the conditions of hire are examined.
There is often a guaranteed minimum period of hire which would have been
paid for in any case. When long delays have occurred, loss must be mitigated
by use elsewhere or the termination of the hire contract.
Consider:
• tower cranes;
• mobile cranes;
• banksmen and slingers;
• weighbridge;
• wheel washing facilities;
• compressors;
• mixers;
• pumps;
• hoists;
• site surveying equipment;
• site/crane radio system;
• concrete testing;
• general site equipment;
• small plant and tools; and
• rubbish removal (skips).
A4 TEMPORARY WORKS/ACCESS
Consider:
• temporary roads – maintenance; and
• clean access and site roads.
A6 DISTRIBUTION
Consider:
• service gang –cleaning, attendance and distribution;
• forklifts and drivers;
• dumpers and drivers;
• telescopic hoists, including driver;
• internal site transport; and
• hoist drivers.
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Appendix A (4/99)
PART 4, SECTION 2, APPENDIX A
A7 SCAFFOLDING
Consider:
• extra hire;
• adaptations; and
• additional work – for example safety rails where scaffolding removed.
A8 TEMPORARY ELECTRICS
Consider:
• equipment – generators, transformers etc.;
• fuel consumption;
• consumables; and
• maintenance.
A9 TEMPORARY WATER
Consider:
• water and sewerage – rates/metered consumption; and
• maintenance.
A10 INSURANCE
Consider:
• contractor’s all risk;
• public liability;
• professional indemnity; and
• performance bond.
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Appendix A (4/99)
PART 4, SECTION 2, APPENDIX B
Appendix B: Disruption
B1 THE EFFECTS OF DISRUPTION
B1.1 Labour
Factors to be taken into account include:
• loss of productivity (labour resources must have been available and able
to have been used profitably elsewhere had the loss of productivity not
occurred);
• standing time;
• overtime; and
• changes in labour strength on the site and in gangs;
B1.2 Plant
Refer to invoices to indicate additional costs due to:
B1.3 Materials
Extra costs can be incurred due to the:
B2.2 This information can assist in the ascertainment of the effects of instructions
upon progress.
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Appendix B (4/99)
PART 4, SECTION 2, APPENDIX B
B3.2 There may be further items not covered above which the contractor could
bring to the notice of the quantity surveyor. In making an assessment of
disruption, the quantity surveyor may require the tender progress intentions
of the contractor, and to examine data on which projections of progress were
based in order to indicate the effect that changes have had upon the planning.
The information may include critical path analyses and similar information.
B3.3 The quantity surveyor should give careful consideration to all this
information and judge its relevance to the particular matters being examined
(but see G 4.2.4.2).
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Appendix B (4/99
Appendix C: Ascertaining the Cost of Head Office Overheads
C1 HEAD OFFICE OVERHEADS
A contractor seeking direct loss and/or expense in relation to head office
overheads will probably include some or all of the following:
• percentage;
• lump sum(s) (specify how compiled); and
• spread in rates of all items.
• time records or diaries which may indicate additional time spent with
consequential financial disbursements (this should be time arising from
relevant events over and above that which would have been spent on
ordinary administration of the contract);
• proof of payment made on all admissible items; and
• details showing build-up of general head office costs at the relevant time
or throughout any relevant period.
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Appendix C (10/02)
C4 FURTHER CONSIDERATIONS FOR THE QUANTITY SURVEYOR
C4.1 At what stage in the contract did delays occur and what was the impact
on head office costs? (The costs are unlikely to have been incurred
until the end of original contract period.) While it is correct that the
actual sum allowed in the contract price for head office overheads will
not necessarily be expanded by the contractor until after the end of the
original contract period, the contractor will actually incur the
additional costs at the time of the delay and since it is likely that
overhead recovery will be delayed as a result of the later execution of
original contract work then the additional overheads could be payable
before the end of the original contract period.
C4.2 What were the relevant events giving rise to delays under the
conditions of contract? Were head office costs applicable to those
events?
C4.3 To what extent was the head office involved in, for example, site visits,
meetings etc.?
C4.4 Was there a need to employ additional head office staff whether or not
a delay had occurred?
C4.5 How effectively did the firm employ staff on this contract as against
other contracts that they were undertaking?
C4.6 What was the size of the contract in relation to the size of the firm and,
therefore, the impact of the delay to progress on the business of the
firm?
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Appendix C (10/02)
PART 4, SECTION 2, APPENDIX D
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Appendix D (revised 07/01)
PART 4, SECTION 2, APPENDIX E
The Surveyors’ Construction Handbook Part 4, Section 2 Effective from 1/9/01 Page 1
Appendix E (revised 07/01)
PART 4, SECTION 2, APPENDIX F
BOOKS
Chappell, David. Powell-Smith and Sims’ Building Contract Claims, 3rd Edition,
Blackwell Science Ltd, 1998
Keating, Donald and May, Anthony Sir. Keating on Building Contracts, 7th Edition,
Sweet & Maxwell, 2001
Parris, John. The Standard Form of Building Contract JCT 80, 2nd Edition, Collins,
1985
The Surveyors’ Construction Handbook Part 4, Section 2 Effective from 1/9/01 Page 1
Appendix F (revised 07/01)
PART 4, SECTION 3
Introduction
Risk is present in all projects and surveyors are routinely involved in making
decisions which have a major impact on risk. Risk management is concerned
with establishing a set of procedures by which risk is managed, rather than
being dealt with by default. Major clients, such as Network Rail and BAA,
already have formal procedures in place for managing risk. Other clients are
likely to seek guidance from their professional advisers, which includes
surveyors, on how best to deal with risk.
The effective management of risk can only be achieved by the actions of the
whole project team, including the client. The role of a risk manager is to
facilitate input into the project management process such that risk is
effectively dealt with. With further training, surveyors are well placed to
undertake the role of risk manager. The role can be either full- or part-time,
combined with other responsibilities on the project.
The risk management process outlined in this section can be applied to any
procurement route and to new build or refurbishment-based projects,
regardless of cost or technical complexity.
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PART 4, SECTION 3
I 4.3.1 Definitions
4.3.1.1 Risk: An uncertain event which, should it occur, will have an effect on the
achievement of the project’s objectives. A risk can be measured in terms of
likelihood (probability) and consequence (impact).
4.3.1.2 Risk management: A structured and auditable process for the benefit of all
members of the project team which is dedicated to the sole purpose of
controlling and mitigating uncertainty in a project.
4.3.1.4 Risk analysis: An adequate and effective assessment of the individual and
combined effect of identified risks on the successful delivery of the objective.
4.3.1.5 Risk response: An action to reduce either the probability of risk arising or the
significance of its detrimental impact if it should arise.
4.3.1.6 Risk management plan: An auditable document which describes the risk
management approach (identification, analysis and response) to be adopted
for a specific project or objective delivery and which states who should
undertake it and when.
4.3.1.7 Risk register: A document listing all the risks identified for the project,
explaining the nature of each risk and recording information relevant to its
assessment and management.
4.3.2.1 Surveyors will invariably be called upon to advise clients as to whether they
should undertake risk management on their project. While the benefits of risk
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PART 4, SECTION 3
4.3.2.2 The demands of delivering a construction project are extremely onerous. The
desire to deliver projects cheaper and faster, while moving closer to the
boundaries of innovative design, all increase the risk profile of a project. In
this respect risk is good, without it there would be no opportunity. It is the very
presence of risk that represents the opportunity for a building project to go
ahead in the first place.
Furthermore, the actual impact of risk is unique to a project even though its
presence may be commonplace. The risk management process may not be at
fault just because risks were realised. Indeed, if no risks were realised, the
effectiveness of risk assessment would be questioned because without risk
there would be no opportunity.
4.3.2.3 Risk management is not a panacea and there are likely to be times when it may
not be effective to practise all its facets. However, the delivery of any
objective can be made more effective if the risks are fully appreciated. There
is a need for appreciation of risk not just its analysis. The extent of analysis
necessary is related to the extent to which the cumulative effects of risks can
be appreciated.
4.3.2.4 Risk management, together with other services provided, should be flexible,
adapting to the circumstances of the client’s needs and the project. Some
clients require a snapshot of the risks at the outset of the project, with an initial
risk assessment, the provision of a one-off risk register and a quick estimate of
the combined effect. Other projects may require a full risk management
service with risk being continually addressed throughout the project.
4.3.2.5 A concern often voiced by clients is how to quantify the benefits of risk
management. Since risk management has a major emphasis on reducing
potentially detrimental effects, it is not usually politic to demonstrate its
effective application as having minimised the impact of cost overrun to,
say, 15%.
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4.3.3.1 A risk cannot be managed effectively unless it is identified. The earlier a risk is
identified, the more time is available for analysis and the development of a
suitable response. Although the process is linear it does allow for iteration and
is designed to be proactive. Unfortunately, most risk is still dealt with in a
reactive manner where a response has to be devised and implemented as soon as
the risk arises. This reactive response does not allow any time for identification
and analysis and the right response may not always be implemented.
4.3.3.2 The risk management process also needs to be integrated into the project
management process. Since any risk management workshop or assessment is
a snapshot in time, the process has to be undertaken on a repetitive basis.
Essentially, the risk management process should be commenced as early as
possible in a project life cycle and each of the three stages repeated as
necessary to effectively manage the risks associated with that project. At the
start of the process a risk management plan should be developed. The risk
management plan is similar in nature to the project execution plan and may
form part of that document.
(a) Methodology
(i) Structured identification of all sources of risk to the project
The risk management process is based on the concept of providing a
structured approach to dealing with risk. It may seem obvious that ground
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PART 4, SECTION 3
conditions are one source of risk, but how would this impact on other risks that
might be identified on the project? It is this inter-relationship between risks
that can only be drawn out through the use of a structured workshop and
identification methods where the whole project team have the ability to
contribute.
(iii) The true risk needs to be identified. Risks are caused by background
conditions which are essentially ‘givens’ e.g. location of site. If the risk does
occur it will affect the project. This is shown diagrammatically below.
(b) Techniques
(i) Research
While exactly the same project will not have been executed before, something
similar will have been. Investigation into projects on neighbouring sites or
projects previously undertaken by the client should be instigated.
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The probability and impact of the risk can also be shown; the importance of
these factors is discussed in 4.3.3.4(a). Finally the response to the risk can be
shown.
The risk register is a very useful format for showing a wide range of
information in the risk management process. If the register is placed on a
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PART 4, SECTION 3
Figure 1: Typical Risk Register
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It is also possible to place identified risks into categories, for example, ‘client
control’. In figure 1 six categories are shown, but these can be altered to suit
the circumstances of each project. The use of categories allow risk to be
bundled together and can help responses to be tailored to deal with a category,
rather than an individual risk.
(a) Methodology
(i) Analysis of risks to assess the severity of impact and the probability of
occurrence
Risks have two dimensions:
• probability – this is the likelihood of the risk occurring and is generally
expressed as a percentage; and
• impact – if the risk did occur what impact would it have on meeting the
project’s objectives.
For each of the risks identified, its probability and impact should be assessed,
normally in a workshop environment with key stakeholders present.
Before the risks can be entered onto the risk register, a scale should be set for
the probability and impact dimensions. Setting a common scale will ensure a
consistent approach to placing newly-identified risks on the matrix at a later
stage in the project life cycle. An indicative layout for defining scales is shown
in figure 2.
While the probability scale shown in figure 2 may be utilised for any project,
the impact scale should be set for each project. In figure 2 the cost and time
impacts are shown as a percentage of the original cost and time. Hence a very
high impact would mean the cost of the project would increase by more than
50% of the original budget.
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PART 4, SECTION 3
PROBABILITY IMPACT
Cost Time
Although time and cost impacts have been shown separately it is possible to
combine them, or to use other criteria such as performance. Again, the scale
should be set according to the needs of a project. Once set the scales should
not be changed during the life of a project. This allows risks to be compared
on a common scale throughout a project and for the risk profile of a project to
be accurately monitored.
The method of having the probability scale linear and the impact scale
non-linear emphasises the significance of low probability/high impact risks.
The matrix allows each risk to be ranked and compared on an even basis.
Where resources are scarce it also allows attention to be focused on those risks
which sit in the high-risk category of the matrix.
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used in managing risk. The risk ID numbers from the risk register in figure 1
have been plotted in figure 4 to demonstrate the principle more thoroughly.
(ii) Synthesis of all risks to predict the most likely project outcome
Risk tends to have a ‘knock-on’ effect and so it is important to consider not
only the effect of individual risks but their cumulative effect as well.
The probability/impact matrix is the easiest technique to use and allows all
project team members to participate in the process via a risk workshop. More
sophisticated tools and techniques may be applied to provide a better
understanding of the identified risks. There are a wide range of such tools and
techniques available, many of which are supported by computer software
packages:
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PART 4, SECTION 3
The analysis stage provides the team with a better understanding of the risks.
The next stage is to develop a response to those risks.
(a) Methodology
• avoid;
• transfer;
• mitigate; and
• control.
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The tools available are not usually related purely to risk management. For
instance, most surveyors would recommend to their clients that the contractor
has third party insurance for the project. This is a risk management response
designed to reduce clients’ exposure to claims for damages if a particular
incident were to occur. This is a risk management tool, although most
surveyors would consider it to be common project procedure. Typical tools
available are:
• insurances/bonds/warranties;
• contingency plans;
• forms of contracts;
• contingency drawdown models;
• special cost schedule allowance;
• earned value analysis;
• resource levelling; and
• training.
All responses to risks that are put in place should be managed. This should
form part of the project management system. Unless responses are effectively
managed, the whole risk process fails. Until a response is actioned, the risk
may still occur, regardless of how well it has been identified and analysed.
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I 4.3.4 Summary
In conclusion, the key components of a risk management strategy are:
• identify staff and resources assigned to the risk management process;
• define lines of reporting and responsibility for the risk management
process;
• link the risk management plan to other project tools such as safety
(including CDM), quality and environmental management, and
planning and reporting systems;
• consolidate all risks identified into an appropriate and digestible
response strategy in order that cumulative effects can be perceived;
• state risk audit intervals and key milestones;
• include risk milestones in project plan;
• identify possible response strategies and programmes for each risk
category including contingency plans and how to handle new or
unresolved risks;
• assess cost involved; and
• monitor success of responses strategies and produce feedback for
reporting into future projects.
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PART 4, SECTION 3, APPENDIX A
BSI, Project Management. Guide to the Management of Business Related Project Risk
(BS 6079–3:2000), British Standards Institute, London, 2000 (ISBN 0 580 33122 9)
Chapman, C. and Ward, S., Project Risk Management: Processes, Techniques and
Insights, John Wiley and Sons, Chichester, 1997 (ISBN 0 47195 804 2)
Godfrey, P. S., Control of Risk: a Guide to the Systematic Management of Risk from
Construction (SP125), CIRIA, London, 1996 (ISBN 0 86017 441 7)
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Appendix A (5/03)
PART 4, S ECTION 4
Introduction
Many construction projects require interim payments to be paid to a
contractor. This is in order to relieve the contractor of the burden of financing
the whole of the works until completion; works which may take many months
or years to complete.
Within each contract there will be clauses which set out the criteria under
which interim payments will be made, the timing of these payments and the
administrative rules under which quantity surveyors, architects, employers
and contractors must operate. In many contracts, whilst the completion and
calculation of the value is important, the method and procedure of the interim
payment which the contractor receives is equally as important.
I 4.4.1 Valuations
An interim valuation involves a revaluation of the whole work, not the work
done since the last certificate was issued. The valuations should be treated
almost as ‘mini final accounts’ as they generally reflect all the matters and
items which appear in a final account. Interim valuations may now be
subjected to the same scrutiny as final accounts as they may be the subject of
adjudication provisions in contracts and per se are required to be compiled
with care.
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The quantity surveyor carrying out the valuation must be aware of the overall
position of any valuation within a project; to assess what remains of the
anticipated final contract value after each valuation and ensure that within the
terms of the contract this will be adequate to complete the works. This action
is particularly valid towards the end of the contract.
I 4.4.2 Assumptions
It has been assumed throughout this section of the handbook that the interim
valuation by the quantity surveyor is provided for the benefit of an architect:
the person who certifies the amount of the valuation to the employer. Under
JCT contracts that person is normally the architect but could be referred to as
the contract administrator.
This section has been prepared from the standpoint of a quantity surveyor
acting for an employer, assuming normal terms of appointment.
Most quantity surveyors carry out interim valuations under a JCT Form of
Contract. Therefore, this section is based on the JCT Standard Form of
Building Contract With Quantities 1998 (JCT 1998 With Quantities). This
contract is only intended for use where the client has engaged a professional
consultant to advise on and to administer its terms.
This section of the handbook assumes that the quantity surveyor has normal
terms of appointment and the relative roles of the quantity surveyor carrying
out a valuation for an employer under a normal JCT contract.
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4.4.2.3 DEFINITIONS
4.4.2.4 LEGISLATION
Parties to the contract are free to agree the amounts of the payments and the
intervals at which, or circumstances in which, they become due.
Section 110 of the Act states that every construction contract shall provide an
adequate mechanism for determining what payments become due under the
contract and provide for a final date for payment in relation to any sum which
becomes due.
Section 111 states that a party to a construction contract may not withhold
payment after the final date for payment of a sum due under the contract
unless an effective notice of intention to withhold payment has been given.
JCT 1998 With Quantities contains the right of the contractor to interim
payments at clause 30 (Certificates and Payments). Clause 30.1.1.1 states
that, ‘The Architect shall from time to time ... issue Interim Certificates
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PART 4, S ECTION 4
stating the amount due to the Contractor from the Employer specifying to
what the amount relates and the basis on which that amount was calculated.’
Clause 30.1 also sets out a timescale for payment and the right of the
contractor to interest if the timescale is not adhered to by the employer.
The employer has to advise the contractor of the amount which he or she is
due to be paid and the amount of, and reason for, any deduction to that
payment.
Under clause 30.1.3 the dates for the first and subsequent interim certificates
are set out in the Abstract of the conditions.
Clause 30.2 states how the amounts due in an interim certificate are to be
ascertained. It follows that any interim valuation prepared by the quantity
surveyor should follow the same method as that for an interim certificate.
In clause 35.13 it is stated that the architect shall direct the contractor as to
interim payments to nominated sub-contractors. The ascertainment of
amounts due to nominated sub-contractors are calculated in accordance with
clause 4.17 of the JCT 1998 Nominated Sub-Contract Conditions (NSC/C).
Clause 4.17 contains step-down provisions similar to clause 30.2 of JCT 1998
With Quantities and the works of nominated sub-contractors are assessed in
the same manner as that of the main contractor.
(i) Check that the architect requires regular valuations for interim
certificates and refer to the contract for the frequency;
(ii) Note whether there are any ad hoc amendments made to the standard
form of contract that have a bearing on interim certificates; and
(iii) Prepare a job progress chart and cash flow forecast ready for checking
against the value of work completed at successive valuations.
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(i) Check that the programme of valuations and certificates matches the
employer’s programme of payments;
(ii) Note any adjustments to the contract price made in the summary of the
bills of quantities or elsewhere;
(iv) Where there are to be fluctuations, refer to 4.4.9.3 of this section; and
(v) Calculations made in the course of the interim valuation should be set
out in a clear form and retained for future reference. Any details which
are applicable to the final account should be collected together as a
running record.
G 4.4.5 Communications
4.4.5.1 PRELIMINARY DISCUSSIONS WITH THE CONTRACTOR
(i) Agree with the contractor the programme of valuations decided with
the employer, in line with the employer’s arrangements for payment;
(iii) Agree the basis on which preliminaries and sums in adjustments to the
tender (and/or in the correction of errors) will be incorporated into
valuations.
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(ii) Arrange with the architect a detailed procedure for recording the
contractor’s resources on site. Obtain the architect’s agreement that you
set up this procedure, including briefing and controlling the clerk of
works in this respect. Remind the architect that he or she (or authorised
deputy) has responsibility for verifying daywork.
(i) Impress on the clerk of works (or site engineer or any person to whom
the responsibility has been given to record contractor’s resources, time,
materials, plant, etc.) that diligence and accuracy in checking on
resources used is crucial and that, therefore, he or she must keep a
reliable daily record. Inform him or her that you will be visiting the site
to make spot checks unannounced;
(ii) Acquaint the clerk of works with the valuation dates programmed.
Request that you are notified of all items of work likely to become
hidden so that you can ensure that records are made, ready for
measurement; and
(iii) Arrange with the clerk of works to receive his or her labour record
(which is required for checking wages fluctuations).
G 4.4.6 Approach
4.4.6.1 METHOD
(ii) The format for the valuations will be suited to the particular project,
and for measured works, the format of the bills of quantities (for
example, separate buildings, elements, trades) may well determine the
order of sections that best suits the contract basis (for example,
grouping as that required for fluctuations);
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(iii) In approaching each valuation, the quantity surveyor should note first
in general terms the position of the particular valuation in relation to
the overall project and the progress that has been made relative to the
forecast of payments; and
(iv) The quantity surveyor should ensure that backup information and
documentation which he or she requires from the contractor is available
in time for each valuation.
(i) The JCT 1998 With Quantities allows the contractor to submit an
application for payment to the quantity surveyor;
(ii) The format in which the contractor presents his or her valuation should
be agreed in the same manner as detailed earlier in 4.4.5.1 and 4.4.6.1
of this section.
(iii) The contractor has the opportunity when submitting his or her
valuation to include with it all the relevant documentation. Agreement
should be made with the contractor at the outset of the contract that he
or she must submit this documentation at the same time as his or her
valuation.
(i) It is important (and necessary) to visit the site of the works. First, to
assess the overall progress of the works and, secondly, to assess the
various aspects of the valuation in detail.
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(iv) If the contractor has made a submission under clause 30.1.2.1 of the
contract, the quantity surveyor must respond to the contractor’s
submission in the same detail as was supplied by the contractor.
Work Executed
Measured Work
Approximate Quantities
Preliminaries
Sub-Contracts – Nominated
Sub-Contracts – Domestic
Suppliers
Variations
Dayworks
Materials – On Site
Materials – Off Site
Fluctuations
Loss and Expense
Special Payments
Deductions
Work under this category relates to work included in the tender documents
and, subsequently, the contract as measured either in bills of quantity format
or schedules, or descriptions of work items.
Include an assessment of the work properly executed using rates within the
bills of quantities. Consider whether an adjustment shall be made to the rates
where the item is partially executed, allowing for the location of the work and
for inflation if it is a fixed price contract.
This assessment will normally be carried out using rates within the bills of
quantities. However, where the item is only partially executed, adjustment to
the rates will be necessary having due regard to the location and
circumstances of the work.
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(c) Preliminaries
From the detail of preliminaries items (see 4.4.4.3 (i)) include one-off
payment items as circumstances dictate.
Assess items which are related to value, including those items which appear
in the summary of the bills of quantities.
Preliminary items should be further divided into set-up, running and removal
costs where appropriate.
The quantity surveyor must ensure that the detail and information provided
from this source is in the terms of the main contract and not the values which
occur in the contract between the contractor and domestic sub-contractor as
these values may be different.
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(f) Suppliers
4.4.7.3 VARIATIONS
It is not possible to cover all the required information on variations within this
section. However, the following simple rules should be followed:
(i) Only variations properly instructed under the terms of the contract
should be included in a valuation. The valuation of variations is
described in clause 13 of the Conditions of Contract.
(ii) For simplicity, variations have been categorised in accordance with the
following:
• Pre agreed – where the variation has been agreed both in terms of
content price and time before being instructed.
• Agreed in terms of price but not in terms of effect on the contract.
• Instructed to be carried out and to be evaluated in terms of the
contract.
• Items identified by the contractor as variations but not instructed
by the architect at the time of valuation.
Items agreed in terms of price but not in terms of effect on the contract
– the price for work in this category, having been agreed, can be dealt
with as for pre-agreed items. The quantity surveyor has to seek further
information from the architect and contractor regarding effect on
contract. There may be no easy answer in respect of this item.
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PART 4, S ECTION 4
A price statement may include loss and expense or the price may be
accepted without an assessment of the effect on the contract. The
quantity surveyor should be aware of the content of any price statement
before including it in an interim valuation.
4.4.7.4 DAYWORKS
Include dayworks only if they are prepared in accordance with clause 13.5.4
of the contract and verified by the architect.
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PART 4, S ECTION 4
The value of materials or goods intended for the works but stored off site are
not included in interim valuations except those which were noted as ‘the listed
items’ prior to the contract.
Clause 30.3.1 of the contract states that the property in uniquely identified
listed items must be demonstrated by the contractor to the architect to be
vested in the contractor.
Where the items listed are not uniquely identified the contractor must provide
evidence of vesting.
A bond (details of which are set out in Annex 1 to the appendix to the
contract) is provided by the contractor if required by the contract.
Clause 30.3.4 sets out the conditions under which the materials are to be
stored before payment is included in a valuation.
The quantity surveyor may be asked by the architect to view and assess the
materials off site. If so, the quantity surveyor should ensure that all the
relevant conditions have been met before including the value of the materials
or goods in the interim valuation.
4.4.7.7 FLUCTUATIONS
Loss and expense may be included within an interim valuation. The basis of
the loss and expense in a contract must be established before any monies are
included in an interim payment.
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Within the terms of the contract there may be other costs which are required
to be added into the valuation.
4.4.7.10 DEDUCATIONS
(a) Retention
Retention should be deducted from the gross valuation at the rate stated
in the contract. The gross valuation is calculated in the total derived in the
categories referred to above (Work Executed to Special Payments).
Retention is applied in terms of the contract. Clause 30.4 sets out the
rules for ascertainment of retention and clause 30.2.1 clarifies the items.
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PART 4, S ECTION 4
The quantity surveyor should compile a list of the work and values
deducted and include the list with the notes passed to the contractor.
The previous two paragraphs assume that, in deducting for work which
is not in accordance with the contract, the work will require to be
redone or amended in accordance with the contract. However, under
clause 8.4.2 the work not in accordance with the contract may be
accepted by the architect and a reduction in value allowed for it. This
reduction will be shown as a deduction to the valuation.
(e) Fluctuations
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Under clause 7 of the contract, if errors have been made in setting out,
these errors may not be amended (at the sole cost to the contractor). A
deduction may be made to the contract in lieu.
G 4.4.8 Administration
4.4.8.1 GENERAL
The quantity surveyor should ascertain the way in which the architect requires
the valuation and whether any additional explanation and information is to be
provided at the time of valuation.
The use of a standard form, such as that issued by the Royal Institution of
Chartered Surveyors (RICS) for interim valuations is recommended.
Whilst the same wording is not used in the contract in the context of the
quantity surveyor issuing a valuation to the architect, it is prudent for the
quantity surveyor to provide additional detail of the valuation to the architect
than is required by the contract terms. The architect may well require this
additional detail when explaining the content of the certificate to the
employer.
One way for the quantity surveyor to achieve this additional detail is for the
quantity surveyor to use in his or her advice, a similar format that is used in
the example in Appendix C of this guidance.
When making his or her recommendation for payment, the quantity surveyor
should state the basis of his or her calculations in a covering letter to the
architect, if not detailed separately (as described in 4.4.6.1 above) or on the
valuation form. This covering letter would need to include a statement on the
authority for part release of retention and details of defective works not
included in the valuation.
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PART 4, S ECTION 4
In a letter advise the architect whether all the work executed is included in the
valuation (the quantity surveyor may have been instructed to exclude specific
items). It is prudent to remind the architect that he or she is to adjust the
recommended figure if there are further works or unfixed materials that are
not acceptable to him or her. The wording of the RICS standard form at note
(iii)(a) refers to this point, but it is advisable to mention the matter in the
letter.
4.4.9.3 FLUCTUATIONS
The contract will state the basis of adjustment: whether there is to be detailed
cost recovery (clause 38 or 39) or the use of price adjustment formulae (clause
40). Where detailed cost recovery is to be the basis, check that basic prices of
materials goods, electricity and fuels have been agreed. Note any imported
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Prime cost sums are expended on the written orders of the architect in respect
of nominated sub-contractors or nominated suppliers.
Provisional sums are expended on the written orders of the architect. The
valuation of work instructed under this method may be dealt with by reference
to the other sections.
JCT 1998 With Quantities allows for performance specified work which shall
not be carried out by nominated sub-contractors or nominated suppliers.
In clause 30.2 the contract allows the parties to agree to stage payments. If
stage payments were included in the contract for all or part of the works, the
values for these parts or sub-portions have been pre-agreed. The stage
payment will be included in valuations when the scope of work to which the
stage payment relates has been completed and so indicated by the architect.
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PART 4, S ECTION 4
Annex 2 of the contract allows for an agreement between the parties in respect
of the exchange of communications by electronic means. Therefore, interim
valuations can be communicated by such means.
The simplest form of electronic communication is by fax machine and the use
of this is now widespread. Information is simply reproduced by a fax and the
recipient receives a copy. This is useful where invoices and the like require to
be transferred.
The Code of Practice for Electronic Data Interchange states that parties
proposing to contract on terms which expressly give administrative or other
responsibilities to third parties should not adopt EDI in connection with that
contract without the agreement of those third parties.
It would appear to be prudent that when EDI is being set up at the outset of
the contract the ‘rules’ for interim valuations should also be set out clearly.
The guidance provided in this section will apply equally to the JCT Without
Quantities edition, the Local Authority editions, and these forms used with the
sectional completion supplement and with the contractors designed portion
supplement.
In general terms other JCT contracts will have the principles set out here
applied although the detail may be different.
Contracts issued by other bodies will, in general terms, have the principles set
out here applied although the detail may be different.
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PART 4, S ECTION 4, A PPENDIX A
The Aqua Group. Contract Administration for the Building Team, Blackwell
Science, London, 1996
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Appendix A (05/00)
PART 4, S ECTION 4, A PPENDIX B
3. Where the listed items are purchased from a supplier by the Contractor, the
Contractor should give the Architect a copy of the written contract of sale
applicable to the listed items; and a written statement from the supplier that
any conditions in that sale contract that must be fulfilled before the property
passes to the Contractor have been fulfilled. The statement of the supplier
should also say that the supplier's property in the listed items is not subject to
any charge or encumbrance which would prevent the passing of the property
unconditionally to the Contractor after fulfilment of all the relevant terms of
the sale contract with the Contractor.
4. Where the listed items have been purchased from a supplier by a sub-contractor
the Contractor should give the Architect a copy of the written sub-contract with
the sub-contractor which should expressly state the conditions that have to be
fulfilled before the property in these listed items passes from the sub-contractor
to the Contractor; and a written statement from the sub-contractor that any
conditions in that sub-contract that must be fulfilled before the property passes
to the Contractor have been fulfilled.
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Appendix B (05/00)
PART 4, S ECTION 4, A PPENDIX C
£ 2,190,000.00
___________
Note that the above excludes the prime cost sums and profit thereon,
provisional sums and provisional quantities.
The Surveyors’ Construction Handbook Part 4, Section 4 Effective from 1/7/00 Page 1
Appendix C (05/00)
PART 4, S ECTION 4, A PPENDIX C
Preliminaries breakdown
£ 170,000.00
___________
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Appendix C(05/00)
PART 4, S ECTION 4, A PPENDIX C
£ 297,000.00
___________
The Surveyors’ Construction Handbook Part 4, Section 4 Effective from 1/7/00 Page 3
Appendix C (05/00)
PART 4, S ECTION 4, A PPENDIX C
___________
£ 222,000.00
___________
Page 4 Part 4, Section 4 Effective from 1/7/00 The Surveyors’ Construction Handbook
Appendix C(05/00)
PART 4, SECTION 5
Introduction
There are probably more disputes about extension of time and consequential
cost issues than any other disputes under construction contracts. It is therefore
imperative that extension of time issues are dealt with in a proper manner by
the contract administrator.
• the provisions for the timing and content of delay notices by the
contractor;
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PART 4, SECTION 5
This section of the handbook provides guidance to surveyors who are required
to carry out assessments of extension of time entitlement under a construction
contract by virtue of appointment under the contract as contract administrator.
It is also for surveyors who are asked to advise either party to a construction
contract on extension of time issues.
G 4.5.2 Assumptions
This section has been prepared from the standpoint of the surveyor who has to
assess extension of time entitlement under a construction contract by virtue of
appointment under the contract as contract administrator.
It is recognized that there are other forms of contract being used. However, the
principles set out here will remain valid. Extension of time procedures for
different contract terms are briefly noted later (see 4.5.11 and 4.5.12).
4.5.2.2 DEFINITIONS
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JCT 1998 With Quantities contains the provision for the contract
administrator to award an extension of time at clause 25.
The contract administrator, by virtue of clause 25.3.3, also has the power to
carry out a final review of the completion date not later than 12 weeks after the
date of practical completion. This can result in the fixing of an earlier or later
completion date than previously set under clause 25.3.1. (It should be noted
that the contract administrator cannot set a completion date earlier than that
stated in the appendix.) This final review is not subject to receipt of a notice or
particulars and estimate from the contractor.
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It is implicit that the contractor should provide information that the contract
administrator reasonably requires in order to assist the contract administrator
in his or her duty in relation to extensions of time.
Whilst the contractor is required to give notice forthwith, the courts have held
that such notice (in relation to the JCT 1963 form) was not a condition
precedent to the performance of the contract administrator’s duties in respect
of giving an extension of time2. Whilst this was in relation to an earlier form
of contract, case law further indicates that for something to be a condition
precedent a time for compliance must be given and the consequence of
non-compliance stated3.
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G 4.5.5 The Award of an Extension of Time during the Contract Period and
Before the Completion Date
‘Sufficient’ particulars and estimates are thought to be those that comply with
clauses 25.2.2.1 and 25.2.2.2. Therefore it follows that, provided a contractor
gives the best particulars and estimates it can in the circumstances that exist at
the time of the notice, the contract administrator will not be able to delay
granting an extension of time beyond the 12 weeks (or such shorter period if
notice is given within 12 weeks of the completion date), on grounds that he or
she cannot yet judge the effect that the cause of delay will have on the
progress.
When assessing an extension of time during the contract period and before
practical completion, the contract administrator, by virtue of clause 25.3.1.2,
can only take into account relevant events that occur before the original or
previously fixed (in the event of further extension of time assessments)
completion date. Relevant events that occur after the completion date are dealt
with when the contract administrator reconsiders extensions of time after
either the completion date or practical completion under clause 25.3.3.
• the exact terms and application of the facts of the relevant event in
question;
• the extent to which the contractor has used its best endeavours to prevent
delay in accordance with clause 25.3.4.
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PART 4, SECTION 5
In assessing delay the contract administrator could consider the effect of the
causes of delay as a whole by carrying out a retrospective delay analysis. This
will involve assessing the effect of each individual delaying event in
conjunction with other delaying events. This will inevitably involve the
preparation of an ‘as built’ record or programme to identify the delayed
activities and a subsequent analysis of the causes of the delayed activities and
assessment of whether the causes of delay are relevant events. A comment on
the approach in dealing with the effect of concurrent delays and consequential
entitlement is made later in this section (see 4.5.8 and 4.5.9).
There will be times where the records either do not exist or are inadequate to
construct an ‘as built’ record. Further, an assessment of an extension of time
entitlement may have to be considered before the effects of delays are known,
thereby preventing a retrospective delay analysis. In these instances the
contract administrator should undertake an objective analysis of the likely or
probable impact on the critical path activities based on logical analysis and not
an impressionistic assessment.
Prior to 1993 it has been argued, in relation to the JCT 1963 form of contract,
that if a variation was issued after the completion date, that is, after the date of
any previous extension of time awards, the employer would be prevented from
deducting liquidated damages for the period up to the date of the issue of the
instruction to undertake the variation. However, it has been held that this
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PART 4, SECTION 5
principle does not apply to the JCT 1980 form and, by virtue of the same
wording being adopted, its successor the JCT 1998 form. The correct position
now is that if instructions for additional work are issued at a time when the
contractor is in culpable delay, that is, the Works being incomplete after the
latest extended completion date, the contractor is only entitled to a fair and
reasonable ‘net’ addition (sometimes referred to as the ‘dot on’ principle) to
the previously fixed completion date and not by fixing as the completion date
the calendar date upon which the work would reasonably be expected to be
completed having regard to the calendar date upon which the variations were
instructed5.
The relevant events have been categorized as ‘employer risk’ (4.5.7.1) and
‘neutral’ (4.5.7.2) events.
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PART 4, SECTION 5
does not cover the issue of information that is required, then the contract
administrator is required to provide any other drawings and details to explain
and amplify the contract drawings when they are reasonably necessary.
It has also been held (by analogy to a House of Lords decision in relation to a
similar clause in JCT 1963) that whilst the withdrawal of a nominated
sub-contractor may not come within this clause, delay by the employer in
making a timeous re-nomination was covered8.
The execution of work not forming part of this Contract by the Employer
himself or by persons employed or otherwise engaged by the Employer as
referred to in Clause 29 or the failure to execute such work [or] the supply
by the Employer of materials and goods which the Employer as referred
to in clause 29 or the failure so to supply.
This clause is also known as the ‘artists and tradesmen’ clause. Its scope
includes work by a local authority or statutory undertaker under a contract
with the employer.
Clause 25.4.12:
Failure of the Employer to give in due time ingress to and egress from the
site of the Works or any part thereof through or over any land, buildings,
way or passage adjoining or connected with the site and in the possession
and control of the Employer, in accordance with the Contract Bills and/or
Contract Drawings, after receipt by the [contract administrator] of such
notice, if any, as the Contractor may be required to give, or failure of the
Employer to give such ingress or egress as otherwise agreed between the
[contract administrator] and the Contractor.
This clause is not concerned with possession of the site itself, but with access
to it over other land in the possession and control of the employer as stated in
the contract documents.
Clause 25.4.14:
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Clause 25.4.17:
Clause 6A.1 relates to the employer ensuring that the planning supervisor (and
the principle contractor, where the contractor is not the principle contractor)
carries out his or her duties under the CDM regulations.
Clause 25.4.18:
Clause 30.1.4 relates to the contractor’s rights to suspend the Works as a result
of failure by the employer to pay the contractor in accordance with the
contract payment terms and procedure in compliance with the Housing
Grants, Construction and Regeneration Act 1996. Therefore, if the contractor
is entitled to suspend the Works under clause 30.1.4 it will be entitled to an
extension of time in the event that the Works are delayed as a result. It is
interesting to note that the corresponding matter clause (26.2.10) is more
restrictive in that it only entitles the contractor to recover any direct loss and
expense if the suspension was not ‘frivolous or vexatious’.
Clause 25.4.1:
‘force majeure’
Clause 25.4.2:
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PART 4, SECTION 5
Clause 25.4.3:
• fire;
• lightning;
• explosion;
• storm;
• tempest;
• flood;
• apparatus or pipes;
• earthquake;
The scope of the specified perils is very wide and could stem from acts of
negligence by the contractor.
Clause 25.4.4:
The terms strike and lock-out should be given their ordinary meaning. The
courts have given guidance on the meaning of civil commotion in relation to
insurance contracts to include a stage between ‘riot and civil war’10.
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PART 4, SECTION 5
Clause 25.4.5.1:
Clause 25.4.6:
The effect of this clause is that if such a delay causes an extension of time,
even if the delay is due to the default of the nominated sub-contractor, the
employer is deprived of the right to deduct liquidated damages. However, it
should be noted that if a nominated sub-contractor has completed its work and
has to return to site to remedy defective workmanship which in turn causes a
delay to the Works, then this clause does not apply11. In this scenario an
extension of time would not be granted. Whilst the employer is not liable to
the contractor for losses caused by nominated sub-contractors and nominated
suppliers, the contractor may be able to recover its losses directly through its
nominated sub-contract or supplier contract.
Clause 25.4.9:
The exercise after the Base Date by the United Kingdom Government of
any statutory power which directly affects the execution of the Works by
restricting the availability or use of labour which is essential to the proper
carrying out of the Works or preventing the Contractor from, or delaying
the Contractor in, securing such goods or materials or such fuel or energy
as are essential to the proper carrying out of the Works.
The effect of this sub-clause is to reduce the scope of the force majeure
sub-clause (clause 25.4.1) to those events not contained within this wording.
The contractor’s inability for reasons beyond his control and which he
could not reasonably have foreseen at the Base Date to secure such labour
[goods or materials] as is [are] essential to the proper carrying out of the
Works.
These words limit the effect of the sub-clause in respect of shortage of labour,
materials or goods that the contractor could have foreseen by reasonable
enquiry were likely to continue or arise at all.
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PART 4, SECTION 5
Clause 25.4.11:
Clause 25.4.13:
Clause 23.1.2 enables the employer to defer possession of the site by six
weeks without being in breach of contract. This clause enables the completion
date to be extended accordingly without the employer losing his or her right to
deduct liquidated damages for any delay for which the contractor is culpable.
Clause 25.4.15:
Delay which the Contractor has taken all practicable steps to avoid or
reduce consequent upon a change in the Statutory Requirements after the
Base Date which necessitates some alteration or modification to any
Performance Specified Work.
Clause 25.4.16
The effect of this sub-clause is to reduce the scope of the force majeure
sub-clause (clause 25.4.1) to those events not contained within this wording.
2) In relation to clause 26 which deals with loss and expense: that is, some
relevant events are paying and some are non-paying.
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The contract administrator may be faced with a scenario where there are
concurrent causes of delay, each of which could have an equal delaying effect,
or alternatively could have significantly unequal effect. The law is unclear on
the correct approach. However, the generally accepted approach is that it is the
dominant delaying event that should govern the award of an extension of time.
Therefore, if a contractor seeks to rely on late instructions as entitlement for
an extension of time and at the same relevant time the contractor is also
delayed by events for which it is culpable, the contract administrator will need
to satisfy him or herself that the delay caused by the late instructions was the
dominant delay in order to award an extension of time. Which cause is
dominant is a question of fact. This is not solved by the mere point of order of
time but is to be decided by applying common sense standards12.
The court had to consider the question of concurrent delays in 1999 and held
that a contract administrator is entitled to consider the contractor responsible
for concurrent delays when establishing whether or not a relevant event has in
fact caused a delay13. Therefore, the question for consideration by the contract
administrator when there are competing causes of delay, one of which is a
relevant event and one which is not, is which cause was the dominant cause of
delay. The courts also commented that where those competing causes were of
equal causes, then if the contract administrator considers it fair and reasonable
to do so, he or she is required to grant an extension of time14.
G 4.5.10 Administration
A notification granting an extension of time must be taken with great care. Use
of the RIBA and/or RICS Notification of Extension of Time form is
recommended. The notification should include:
• a list of the relevant events for which an extension of time has been
given;
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PART 4, SECTION 5
• the extent to which the omission of work has been taken into
consideration;
• the date of the contractor’s written notice of delay (if any); and
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PART 4, SECTION 5
Notes
1. Fairweather v. Wandsworth (1987) 39 BLR 106
11. Jarvis J. & Sons v. Westminster Corporation [1970] 1 WLR 637 (HL)
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PART 4, SECTION 5, APPENDIX A
Duncan Wallace, I.N. (1994) Hudson’s Building and Engineering Contracts, 11th
edition, London: Sweet & Maxwell
Ramsey, V. & Furst, S. (2000) Keating on Building Contracts, 7th edition, London:
Sweet & Maxwell
The Surveyors’ Construction Handbook Part 4, Section 5 Effective from 1/2/02 Page 1
Appendix A (12/01)
Surveying safely
Your guide to personal safety at work
Surveying safely Your guide to personal safety at work
Why is
health and
safety
important?
Serious accidents at work destroy and disrupt family and personal lives. The loss of a parent,
breadwinner, partner, friend is devastating and trying to rebuild a life after an accident can be
equally traumatic, especially if it could have been avoided.
You have a critical role, whatever part you play in the industry. Decisions taken in the
boardroom can have as much influence on health and safety as working practices in the
office, travelling on business or being at a property or on site. Adequate planning,
innovation and best practice, good design, sufficient resources and effective training will
provide a better product more safely and more economically.
This guide has been produced by the new RICS Health and Safety Forum to help you to put
health and safety first when carrying out your duties and responsibilities. It will also
remind you of the many aspects of our industry that can be hazardous.
2
Contents
General statement of employers’ and employees’ duties 4
Safety of employees 4
Your workplace 5
Case studies 14
3
Surveying safely Your guide to personal safety at work
Equally, employees need to take reasonable care of their own safety and that of others who
may be affected by their acts or oversights.
In addition, both employers and employees have a duty of care in tort (particularly
negligence) towards those who may be affected by their actions or instructions.
Safety of employees
Make sure you comply with the provisions of the Health and Safety at Work etc Act 1974.
Other regulations that are important to know and adopt include:
Employers must:
• Provide information on health and safety
• Have emergency procedures
• Carry out risk assessments
• Eliminate and control risks
• Have insurance
• Carry out health surveillance
• Provide Personal Protective Equipment (PPE)
• Provide for those with special needs
• Control working hours
• Provide regular health and safety training.
Employers with five or more employees must:
• Have written health and safety documents. The HSE document ‘Successful Health and
Safety Management (HS(G) 65)’ provides guidance on how to satisfy the legal
requirements of the regulations
• Have a policy statement by the chief executive/managing director/senior partner
outlining the organisation’s commitment to health and safety, and that it will be
reviewed on a regular basis
• Detail the organisation’s health and safety structure, with roles and responsibilities for
managing health and safety
• Make sure arrangements are in place that show the organisation’s approach to health
and safety, and how the management system is planned and implemented (including
hazard identification, risk assessments and control measures)
• Measure, audit and review the organisation’s health and safety performance on a
regular basis.
4
Employer’s actions
You have a special responsibility for people in your charge, particularly those in training or
who are inexperienced.
• Make sure employees in your charge take the right equipment with them on visits.
Check they know how to use it
• Make sure scrupulous records are kept of employees’ movements
• Keep available, records of hazards on particular sites. Make sure all relevant
people are notified
• Make sure a supply of the right equipment is available. Helmets, steel capped shoes, ear
defenders, face masks, overalls, torches and batteries – these should be in your office as
appropriate and in good condition
• Make sure your offices are safe:
Are there fire precautions and means of escape?
Washing facilities?
Is electrical equipment up to date and safe?
Do you prepare and store food and drink safely?
Have you carried out Display Screen Equipment Assessments?
Are you aware of the stress that some employees may be suffering?
• Assess the risks of manual handling in the office or look at the materials being used or
stored and whether COSHH assessments are needed
• Provide guidance on driving on your organisations business or the use of hand held
devices while driving.
Finally, the best way to make sure safe practice by people in your charge is to set a
good example.
Your workplace
The Workplace Health Safety and Welfare Regulations 1992 provide information on what
assessments you should be making and the facilities you should provide, depending on the
size and nature of your organisation:
Welfare
Smokers
Rest room
First aid
Pregnant mothers
Fire – The Fire Regulations Act 1991 and Fire Regulations 1997 need you to maintain
adequate fire safety equipment. Your employees need to have training on how to use it.
Occupiers of premises must also carry out fire risk assessments.
First aid – accident books – you should have the correct form of accident book, which
allows personal details to be extracted from the book and placed in a secure location to
comply with the Data Protection Act 1998.
5
Surveying safely Your guide to personal safety at work
Signage – in addition to helpful Health & Safety signs on first aid, fire or manual handling,
you should have safety signs displayed for any other significant risks, whether it be very
hot water or fragile roofs.
Portable Appliance Testing (PAT) – around 25% of reportable electrical accidents involve
portable appliances. Make sure you have them tested regularly (recommended annually)
by an approved tester.
Contractors – to protect yourselves, you should have procedures to make sure no one
comes into your building to work without you knowing they are competent, a risk
assessment has been carried out and a safe system of work has been established.
Asbestos – everyone in control of premises must proactively locate and manage any
asbestos that exists.
Disability Discrimination Act 1995 (DDA) – the DDA and the Disability Rights Commission
Act 1999 requires anyone providing a service from their building and receiving visitors, to
suitably provide for people with disabilities.
Legionnaires disease – depending on the use of the building with which you may be
involved, you should make sure you are not at risk, by employing a WTC (Water Treatment
Company) to carry out an assessment. And get advice on how to reduce any risks and how
to carry out your own checks.
In the words of the Health and Safety Executive (HSE), risk assessment is ‘nothing more
than a careful examination of what, in your work, could cause harm to people so that you
can weigh up whether you have taken enough precautions or should do more to prevent
harm.’ Risk assessment involves two key concepts, being those of hazard and risk.
Risk is the likelihood (whether high or low) of the harm being caused.
Importantly, risk increases as both the severity or likelihood of the harm increases.
However, it is important to write down a summary of the risk assessment process so there
is a record of it and so that other people can refer to it. A range of HSE and other guidance
is available that will allow you to develop a system suitable for you and your business.
6
Managing risk
Having identified a hazard and assessed the risk involved, consider how the risk might be
reduced to a level as low as reasonably practicable by looking at:
Either option will involve a consideration of the method of working and if necessary
documenting a ‘Safe system of work’ or ‘Method statement’ for the activity.
You must make as full an assessment as reasonably possible, consulting with others as
necessary. The sorts of factors you need to take into account include:
Condition of site
• If a construction site, what stage has been reached? hat are the site rules?
• Are the premises known to be derelict or in poor condition, and if so what is the extent
and nature of the damage?
• Are areas to be defined as unsafe for access?
• Are security measures in force and how is access to be gained?
• Is protective clothing or special equipment needed (see later)?
Occupation
• Is the property occupied? If so, does the occupant know you are coming and have they
made any special access arrangements?
• Who are you likely to encounter on the building or site, eg children, squatters,
vagrants, animals?
• Are the occupants or neighbours likely to be aggressive or disaffected?
7
Surveying safely Your guide to personal safety at work
Activity
• If a building/site is occupied, what is the nature of that occupation, i.e. residential,
manufacturing, warehousing, etc, and what might you encounter, e.g. noise, fumes,
vehicle movements, electronic equipment etc?
High structures
• If a scaffold exists, it is safe to use? When it was last inspected by a competent person?
• Are any towers, masts or tall chimneys involved?
• Are they to be inspected, and if so how will they be accessed?
• Is a ‘cherry picker’ or other special access equipment needed and who is to
provide/manage it?
Dangerous substances
• Is the inspection likely to bring you into contact with hazardous substances such as
chemicals, radiation, asbestos, gas or other noxious atmosphere, explosives etc?
• Are records such as a Register of Asbestos Containing Materials or environmental
reports available? What do they reveal and what special precautions need to be taken?
Diseases
• Is the nature of the site such that it could be contaminated with any form of
clinical waste?
• Are you likely to encounter used syringes/needles, condoms, razor blades etc?
• Could the site be a source of anthrax which, for example, could be present in
haired plaster?
• Could legionella be present in disused water storage systems?
• What hazards might arise from vermin (eg Weil’s disease)?
Special access
• Will special access arrangements be required (eg underground) and who will provide
it and manage it?
• Is special training needed?
Special risks
• Is the nature of the building or site such that it presents special hazards, eg railway
premises, security establishments, confined spaces, plant rooms, etc?
Special equipment
In certain circumstances any of the following equipment may be necessary:
• Gloves
• Respirator or face mask
• Safety helmet
8
• Ear defenders
• Eye protection
• Boots
• Temporary lighting
Having considered the ‘physical hazards’ that might exist, you need to consider these in the
light of personal and environmental issues:
Environmental
• Will weather conditions and/or light levels increase risk?
(eg windy conditions and high structures)
• Will temperature extremes present a hazard?
Personal
• Does gender or level of fitness have any bearing on the hazards which have been
identified? Pregnant or nursing mothers need special consideration. Would lack of
fitness present a hazard in itself?
• Are special skills needed and do you have those skills?
• Do you have any phobias or suffer from vertigo or claustrophobia that would impair
judgement with regard to personal safety?
The above lists are by no means exhaustive and the extent to which any of the items
might be relevant in a particular circumstance will vary.
Review the risk assessment as necessary and be alert during the inspection to other
hazards such as.
Structures
• The chance of partial or total collapse of:
• Chimney stacks, gable walls or parapets
• Leaning, bulged and unrestrained walls (including boundary walls)
• Rotten or corroded beams and columns
• Roofs and floors.
Timbers and glass
• Rotten and broken floors and staircases. Flimsy cellar flaps and broken pavement lights
• Floorboards, joists and buried timbers weakened by age, decay or attack
• Projecting nails and screws, broken glass
• Glazing in windows and partitions may be loose, hinges and sashcords weak or broken.
Glass panels in doors and winglights may be painted over.
9
Surveying safely Your guide to personal safety at work
Roofs
• Fragile asbestos cement and plastic coverings
• Fragile rooflights (often obscured by dirt or temporary coverings)
• Low parapets or unguarded roof edges, loose copings
• Rusted, rotten or moss covered fire escapes, access ladders and guard rails
• Rotten roof decking and joists
• Slippery roof coverings (slates, moss or algae covered slopes)
• Broken access hatches
• Mineral wool dust, mortar droppings and birds’ nesting material and excrement in
roof voids. Cornered birds and vermin
• Insects, including bee and wasp colonies
• Water cooling plant may harbour legionella
• Unguarded flat roofs
• Broken, loose, rotten and slippery crawling boards and escape ladders
• Weak flat roofs and dust covered rooflights
• Slippery roof surfaces
• High winds during roof inspection
• Ill-secured or flimsy, collapsible, sectional or fixed loft ladders
• Concealed ceiling joists and low purlins
• Ill-lit roof voids.
Unsafe atmospheres
• Confined spaces with insufficient oxygen including manholes, roof voids, cellars, vaults,
ducts and sealed rooms
• Rotting vegetation which may consume oxygen and give off poisonous fumes
• Accumulation of poisonous of flammable gases in buildings on contaminated land
• Stores containing flammable materials such as paint, adhesives, fuel and cleaning fluids
• Hazardous substances, including toxic insecticides and fungicides
• Gas build-up in subfloor voids.
Danger from live and unsecured services
• Electricity, gas, water and steam supplies
• Awkward entrances into sub-stations and fuel stores
• Temporary lighting installations: mains connections and generators
• Buried cables and pipes
• Overhead electrical cables.
Hidden traps, ducts and openings
• Lift and services shafts, stairwells and other unguarded openings
• Manholes, including those obscured by flimsy coverings. Cesspools, wells and
septic tanks.
10
Contamination
• Asbestos, lead and other substances hazardous to health
• Chemicals in storage or leaked
• Contaminated water supplies
• Contaminated air conditioning systems (legionella)
Rural Environments
• Hazardous operations such as tree felling or tractor work
• Shafts, holes, pits, ditches, etc
• Farm animals
• Chemicals in storage or in use.
It is equally a criminal offence for you to intentionally or recklessly interfere with or misuse
any thing provided in the interests of health, safety or welfare. If you are a manager within
an organisation you are also personally liable if you do not carry out the health and safety
responsibilities associated with your duties.
Safety of yourself
• Make sure you are familiar with your organisation’s health and safety policy and
arrangements for implementing safe working procedures
• Comply with the office safety policy and ensure that any equipment you may use is in
good and safe condition
• Comply with your organisation’s safe systems of work, or ensure one is put in place prior
to carrying out work, particularly where a risk assessment shows that a hazard exists
• Refuse to condone unsafe working practices by yourself or others and distribute
information on hazards
• Make sure your advice to clients will minimise the risk to the health and safety of others
11
Surveying safely Your guide to personal safety at work
• Make sure you are aware of any hazards which may exist, together with any safe
working instructions, which have been issued by clients prior to carrying work at
their premises
• If you are working alone, make sure you follow your organisation’s lone working procedures.
Safety of others
You are responsible for anyone under your supervision, particularly those in training or who
are inexperienced, and also towards anyone who may be affected by your or their work.
• Make sure anyone in your charge takes the right equipment with them on visits. Check
that they know how to use it and that it is safe to use
• Make sure a suitable and sufficient risk assessment has been carried out of the tasks to
be performed, and a safe working method is in place that has been communicated to
and understood before any field work taking place
• Make sure everyone has suitable and sufficient information, training and instruction on
health and safety matters for the task in hand
• Check available records of hazards on particular sites and make sure that all relevant
people are notified
• Make sure, wherever necessary that precautions are put in place to safeguard anyone
who may be in the vicinity of works and unaware of the possible hazards
• Make sure the right equipment is used. Helmets, safety shoes, ear defenders, face masks,
overalls, torches and batteries. Do not use any equipment that is defective – report it to
your employer.
Finally, the best way to ensure safe practice by people in your charge is to set a good example.
The regulations need you to have a health and safety policy and to have effective
management systems in place for the planning, organisation, control and review of safe
working practices (identified through the risk assessment). You will find the key elements
of such systems in HSE publication HS(G) 65 – Successful Health and Safety Management.
Not taking the necessary actions to protect people from avoidable dangers in the
workplace is in itself a criminal offence and charges may be brought against both the
organisation, the directors/partners and individual managers for non compliance with any
health and safety regulations. An accident does not have to happen before action is taken
against you for non-compliance. If action is taken, it is for you to prove everything
reasonably practicable was done to comply with the relevant legislation.
12
Employers may develop generic sets of safe working practices for each activity carried out.
However, individual managers/team leaders also have a further responsibility for making
sure any generic safe working practices are either sufficient or expanded as necessary for
any particular activity taking place within their area of responsibility (Armour v Skeen, see
case studies).
Equally employees must be given sufficient training in hazard identification and reduction/
control techniques to ensure that any non-foreseeable hazards arising during the course of
their work do not give rise to otherwise avoidable accidents occurring.
Civil liability
Employers and employees owe a duty of care to anyone who may be affected by their
actions, where effects of their actions are reasonably foreseeable.
The duty to provide safe systems of work is illustrated by the judgement in General
Cleaning Contractors v Christmas which stated: ‘It is the duty of the employer to consider the
situation, to devise a suitable system, to instruct his/her men what they must do, and supply
any implements which may be required.’
Key regulations
This publication sets down the background to health and safety legislation as it affects the
work of surveyors. Bearing in mind the wide ranging nature of the profession it is not
intended to specify every piece of health and safety legislation, code of practice or
guidance notes published by the HSE.
The employer or employee must seek out the relevant information themselves. Where in
doubt get specialist advice.
13
Surveying safely Your guide to personal safety at work
Case studies
Criminal offence caused by neglect of director, manager or secretary of an organisation
Armour v Skeen Strathclyde Regional Council and its director of highways were both
prosecuted following the death of one of its employees due to lack of a safe system of
work and failure to make notification of certain works taking place. While it was held that
it was SRC (as the body corporate ) that had committed the offence, its director of roads
(being a manager or similar officer within the meaning of the Health and Safety at Work
etc Act 1974) was found to have been negligent in not having a sound safety policy,
developed from the authority’s overall policy, in place for his department, failing to provide
information to his subordinates, and failing to provide training and instructions in safe
working practices.
14
For more information
www.rics.org
www.hse.gov.uk
www.hse.books.com
www.shponline.co.uk
www.iosh.co.uk
www.rospa.com
www.britishsafetycouncil.co.uk
http://agency.osha.eu.int/
www.aps.org.uk
15
www.rics.org
In response to this, guidance has been prepared which is based on the personal
experience of the working party members. The list is not exhaustive and has
been prepared impartially without inference or preference or ranking and no
doubt there are many other equally suitable sources of information not
included.
Other eminent organizations, not the least of which is the Library Service of
the Institution, produce reading lists which contain much more comprehensive
information, if this is required.
This schedule attempts to meet the widest needs, ranging from introductory
background for the beginner to more detailed coverage on specific topics for
the more experienced reader. A variety of available media has been included
such as videos and audio tapes, as well as the written word. Where possible,
data has been collated on a functional basis under the heading of the various
representatives of the project team for whom it is felt that the information is
most useful.
The Surveyors’ Construction Handbook Part 5, Section 2 (10/02) Effective from 1/12/02 Page 1
PART 5, SECTION 2
Regulations
The Construction (Design and Management) Regulations 1994, HMSO, 1994
[0110438450]
The Construction (Health, Safety and Welfare) Regulations 1996, HMSO, 1996
[0110359046]
Accident Awareness/Statistics
‘Blackspot Construction’ – Study of fatal accidents in the building and civil engineering
industries 1981–1988 (out of print), HSE, 1988 [0118839926]
Risk Assessment
Clients
Engaging an Architect: Guidance for Clients on Health and Safety, RIBA, 1995
[1859460062]
Clients and The CDM Regulations: What You Need to Do, APS, 2002
Clerk of Works
The CDM Regulations: Their Implications for Practice. A Guidance Note for Clerk of
Works, ICW GB
Page 2 Effective from 1/12/02 Part 5, Section 2 (10/02) The Surveyors’ Construction Handbook
PART 5, SECTION 2
Designers
Designing for Health and Safety in Construction (The Green Book), CONIAC, 1995
[0717608077]
CDM Regulations Case Study Guidance for Designers: An Interim Report, CIRIA,
1995 [0860174212]
A Safer Bet: An Introduction to the Principles of the CDM Regulations 1994, CERCI,
1995 [Video 1898671044] Out of Print
Construction Safety Sheet No. 41. Construction (Design and Management) Regulations
1994: The Role of the Designer, HSE, 1995 [CIS 41]
Site Safety Handbook, CIRIA, 2001 3rd edition [08 601 78005]
Building Design: Easibrief. CDM Primer by Henry Haverstock, Building Design, 1997
Out of Print
Planning Supervisor
Construction Sheet No. 40. Construction (Design and Management) Regulations 1994:
The Role of the Planning Supervisor, HSE, 2000 [CIS 40]
CDM Documents
(See also ‘Comprehensive Guidance’)
Construction Sheet No. 42: CDM – The Pre-Tender Stage Health and Safety Plan, HSE,
1995 [CIS 42]
Construction Sheet No. 43: The Health and Safety Plan During the Construction Phase,
HSE, 1995 [CIS 43]
The Surveyors’ Construction Handbook Part 5, Section 2 (10/02) Effective from 1/12/02 Page 3
PART 5, SECTION 2
Construction Sheet No. 44: The Health and Safety File, HSE, 1995 [CIS 44]
The Building Centre Maintenance Manual & Health and Safety File, Building Centre
Trust, 1997 [0901919136]
Comprehensive Guidance
CDM Regulations: How Do Regulations Affect You? HSE, 1995 [PML 54] Out of Print
A Guide to Managing Health and Safety in Construction (The Brown Book), HSC, 1995
[0717607550]
CDM Regulations Explained by Raymond Joyce, Thomas Telford 2nd edition 2001
[0727730363]
Construction Health and Safety Manual (includes 2 updates/year), CIP, 1997 [1852630
027]
Specific Hazards
Safety in Excavations, HSE, 1997 [CIS 8 rev]
Dust and Noise in the Construction Process, Contract Research Report, HSE, 1995
[CRR73] [0717607682]
Contractors
(See also ‘Comprehensive Guidance’)
Page 4 Effective from 1/12/02 Part 5, Section 2 (10/02) The Surveyors’ Construction Handbook
PART 5, SECTION 2
Construction Site Safety: Safety Notes Loose-leaf, CITB, 2000 [GE 700] CD-Rom
Audio Tapes
CONDAM – CDM Regulations. RICS and College of Estate Management, Owlion
1995 [ASP 10100]
Construction Radio: Talking Point on the CDM Regulations, CITB, 1995 [AT 1]
Health and Safety in Property. RICS and College of Estate Management, Owlion, 1995
[ASP 17230]
The Surveyors’ Construction Handbook Part 5, Section 2 (10/02) Effective from 1/12/02 Page 5
PART 5, SECTION 2
ICW GB (Institute of Clerks 1st & 2nd Floors 01733 564 033
of Works of GB) The Old House
The Lawns
33 Thorpe Road
Peterborough PE3 6AD
Page 6 Effective from 1/12/02 Part 5, Section 2 (10/02) The Surveyors’ Construction Handbook
PART 5, SECTION 3
Introduction
The articles and guidance published in the Construction Handbook are largely
the responsibility of three faculties and their associated forums.
The Building Surveying Faculty aims to increase the public perception and
appreciation of the core values offered by a building surveyor and in particular
the building surveying specialisms. The faculty wants to be identified as the
principal source of knowledge and innovative thought on building surveying
matters. It also seeks a clearer understanding for the public, employers, media
and other construction professionals of the skills building surveyors hold and
an awareness of what can be added through their appointment.
CONSTRUCTION
PROJECT MANAGEMENT
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PART 5, SECTION 3
BUILDING CONSERVATION
I 5.3.1 Faculty working groups and committees of selected members have the
following roles in respect of defined spheres of surveying services:
Groups and committees fulfil these roles primarily by providing these types of
outputs:
Page 2 Part 5, Section 3 (09/03) Effective from 1/11/03 The Surveyors’ Construction Handbook
PART 5, SECTION 3
I 5.3.2 Faculty working groups and committees are responsible for producing
material for this handbook.
I 5.3.3 Working groups and committees are not permanent and are subject to
continuous review.
The following working groups are currently in existence and are listed by
faculty:
CONSTRUCTION FACULTY
The Surveyors’ Construction Handbook Part 5, Section 3 (09/03) Effective from 1/11/03 Page 3
PART 5, SECTION 3
FACULTY CONTACTS
GENERAL ENQUIRIES
For general enquiries, please get in touch with the RICS Contact Centre on
+44 (0)870 333 1600, by Email at contactrics@rics.org.uk or by post to:
RICS Contact Centre
Surveyor Court
Westwood Way
Coventry
CV4 8JE
United Kingdom
If you already know who you need to speak to, please call our main
switchboard on +44 (0)20 7222 7000. The postal addresses of our
headquarters (Parliament Square) and two other central offices are:
Page 4 Part 5, Section 3 (09/03) Effective from 1/11/03 The Surveyors’ Construction Handbook
PART 5, SECTION 4
I 5.4.3.1 ANALYSES
Elemental analyses have been at the heart of BCIS since the first printed
service was launched. Using analyses allows the cost of a new building to be
forecast using examples of buildings priced in the market place. BCIS Online
has a search capability which allows you to quickly and easily find the most
appropriate examples to match your current project from the database of over
14,500 projects.
I 5.4.3.2 INDICES
BCIS compiles a full range of building cost, tender and output indices; a range
of derived regional tender price indices and trade price indices; together with
indices for certain sub-markets in the construction industry. A wide range of
background statistics is available, including consumer prices, construction
output and new order statistics.
The Surveyors’ Construction Handbook Part 5, Section 4 (revised 10/02) Effective from 1/12/02 Page 1
PART 5, SECTION 4
I 5.4.3.4 BRIEFING
BCIS Online Briefing carries the latest news in areas of key importance to the
construction economy, together with the BCIS commentary and background to
the forecasts. This section also includes the annual BCIS Five Year Forecast.
I 5.4.3.5 STUDIES
Tender price studies report on the effect on tender prices of location; regional
trends; selection of contractor; building function; building height; type of
work; site conditions and contract sum.
I 5.4.3.6 DAYWORKS
BCIS interprets the definitions of prime cost of daywork for all the main types
of operative in the industry. Current and historic base rates are provided,
together with the build-up for the latest rates. Details of construction wage
agreements, national insurance and CITB levy supplement this part of the
service.
• Indices
BCIS Cost and Tender Price Indices are available together with Retail Price
Indices.
• Average Prices
• £/m2 study
• functional unit prices
Briefing
BCIS Review Online Briefing carries the latest news in areas of key
importance to the construction economy. Together with the BCIS
commentary and background to the forecasts. This section also includes the
annual BCIS Five Year Forecast.
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PART 5, SECTION 4
Studies
Tender price studies report on the effect on tender prices of location; regional
trends; selection of contractor; building function; building height; type of
work; site conditions and contract sum.
(e) Digests
Digests give the source of publication and a brief summary of articles on
construction economics.
The Surveyors’ Construction Handbook Part 5, Section 4 (revised 10/02) Effective from 1/12/02 Page 3
PART 5, SECTION 4
This new guide provides cost per unit area tables for:
Additional cost advice is given to help to adjust the base figures for a range of
specific circumstances.
The Regional Supplement contains separate tables of costs for each of the
Standard Regions. It helps surveyors and valuers take account of differences
in various parts of the country.
This index assists in the updating of the figures in the guides between the
annual issues. A monthly figure is circulated to all subscribers.
Page 4 Effective from 1/12/02 Part 5, Section 4 (revised 10/02) The Surveyors’ Construction Handbook
PART 5, SECTION 5
The publications listed below are included in the full BMI subscription service
but are also available separately.
• redecoration;
• fabric maintenance;
• services maintenance;
The Surveyors’ Construction Handbook Part 5, Section 5 (revised 10/02) Effective from 1/12/02 Page 1
PART 5, SECTION 5
• rehabilitation.
Detailed occupancy cost plans for typical buildings show maintenance and
occupancy costs projected over a 20 year period. Two plans a year are
published and recent examples include retail centres and sports centres.
I 5.5.6 Annual subscription rates, further details, a full list of BMI special reports,
up-to-date prices and special rates for chartered surveyors are available by
contacting:
BMI
12 Great George Street
Parliament Square
London
SW1P 3AD
Tel: 020 7695 1500
Fax: 020 7695 1501
Email: bmi@bcis.co.uk
Page 2 Effective from 1/12/02 Part 5, Section 5 (revised 10/02) The Surveyors’ Construction Handbook
PART 5, SECTION 6
G Introduction
The production and storage of documents and other information on computer
systems has become increasingly common and it is, therefore, inevitable that
these stored documents will be used in their electronic form as a basis for
business transactions, and will be produced, transmitted and stored in
significant numbers.
There is a need to store and retain records for professional and legal purposes.
However, paper storage is a significant problem for many practices. The
quantity of paper produced is increasing year on year and would do so even
without expansion of the business. Two factors have led to the increase in the
amount of documentation being produced by businesses. First, there is far more
regulation being introduced into everyday life, and this is linked directly to a
more litigious population. The need is now to be able to prove what actions
occurred and when. Secondly, the growth in management systems generally, as
previously promulgated in BS EN ISO 9001:1994 and now in BS EN ISO
9001:2000, has led to an increase in documentation. In fact, the processes
involved in compliance with ISO 9001 are designed to provide the documentary
evidence which will satisfy the regulations which are relevant to the particular
business and, it is hoped, provide acceptable evidence in the event of litigation.
The requirement for storage also has implications – not least of which is the
cost of dedicated storage areas. Storage conditions must be right to ensure that
storage is effective. Using a local lock-up garage will probably not be
adequate to prevent deterioration of paper copies over a period of time.
The Surveyors’ Construction Handbook Part 5, Section 6 (12/03) Effective from 12/03 Page 1
PART 5, SECTION 6
There has been considerable discussion about the value of documents stored
on a document management system (DMS) when documents are required to
be kept as evidence for a considerable time. It has been accepted by most
commentators that a common discipline needs to be agreed so that the value
of these documents as evidence can be maximised.
It has not been possible to develop a set of requirements and may not be for
some time. The difficulty is the range of issues which have to be considered,
the rate of change of technology and the need to consult our European partners
on all legal aspects. The Civil Evidence Act 1995 would have to be updated
annually just to keep pace and this clearly cannot happen. Instead, a Code of
Practice (DISC PD 0008) has been developed, which is evolving as
technology and electronic commercial practices mature. It defines best
practice in document management and provides guidance that will help
maximise the value and integrity of information in a court of law. First
prepared and published in 1996, the Code came about as a result of the
merging of the research carried out by two organisations, namely the Legal
Images Initiative (formed by the Information and Document Management
Association) and the Document Management Forum (a group of the
Computing Suppliers Federation). In the absence of a formal set of
requirements approved by the courts through case law or by Parliament
through the Civil Evidence Act, leading institutions took the view that a Code
was required which recognised new technologies and would give a framework
which reflected the existing legal precedents but applied to the new
technologies. A document entitled Principles of Good Practice for
Information Management, written by two of the authors of the Code of
Practice, contains a detailed explanation of the background to each of the
sections of the Code.
It should be emphasised that the Code does not guarantee legal admissibility.
It seeks to define the current interpretation of best practice.
In this guidance note, where it is stated that an action ‘should’ be carried out
in relation to the Code, the word ‘should’ indicates that such action is
necessary in order to claim compliance with the Code.
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PART 5, SECTION 6
There are different considerations for civil and criminal law. In a criminal
case, the prosecution faces a much higher burden of proof ‘beyond reasonable
doubt’ than in civil proceedings ‘on the balance of probability’.
G 5.6.3 Authenticity
It is important to be able to demonstrate that the computer has been
functioning properly (i.e. according to agreed procedures) in order to
authenticate documents stored on the system. Documents may be rejected if
this cannot be shown. There are three methods for doing this:
(2) By having a control set of documents which have been used, scanned and
reproduced from the scanned version to set a benchmark for the quality of
copy.
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PART 5, SECTION 6
In most cases, arguments are over what a document says rather than the
authenticity of the document. However, the adversarial legal process means
that the other party may try to discredit evidence on the basis of authenticity,
to avoid dealing with the content. Arguments over authenticity of evidence
can lead to an investigation into the system that produced the paper and the
method of storage; operation and access control; and even the computer
programs and source code.
The Code recommends that all interested third parties should be consulted,
and it would be prudent to include professional indemnity insurers. It could be
disastrous for a business to find that it was uninsured because it had
introduced a scan and destroy procedure.
The procedures by which documents are stored and accessed are vital in
satisfying a court of law about the authenticity of a ‘copy’ of a document and
the inability to tamper with it. All copies of documents (photocopy, microfilm
or image processing) will be treated as secondary evidence by a court of law,
Page 4 Part 5, Section 6 (12/03) Effective from 12/03 The Surveyors’ Construction Handbook
PART 5, SECTION 6
There may be some confusion about ‘originals’ and ‘copies’. Many items to
be scanned are actually themselves photocopies. The original document may
reside in a file elsewhere. It may be necessary, if this is not readily apparent,
for the image processing system to indicate whether an image taken was from
the original or from a copy of it.
Due to the duration of storage of many documents, the person who ‘certified’
a system, or a document stored on it, may not be able to give evidence in
person. It is essential that a proper system for auditing and certifying is
implemented to demonstrate that the integrity of the system has been
maintained from the time the document was stored.
As well as the specific details included in the Code, users should also comply
with the relevant sections of BS 7799-1:2000 – Information Technology – A
Code of Practice for Information Security Management.
Of major importance to this Code is the Civil Evidence Act 1995. The Act
introduces a flexible system whereby all documents and copy documents,
including computer records, can be admitted as evidence in civil proceedings.
However, the court judge or arbitrator still has to be persuaded to treat the
evidence as reliable and so organisations have to put in place procedures to
prove the authenticity and reliability of the record.
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(2) It is immaterial for this purpose how many removes there are
between a copy and the original.
The Code of Practice contains an introduction and six sections, each of which
includes details of processes and procedures that need to be put into place to
ensure conformity with the Code. In addition, there are ten annexes, including
one which identifies the changes since the previous edition.
5.6.7.1 GENERAL
Scope
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The Code covers any type of data file controlled by the DMS. Data files may
be created by the DMS, or may be imported into it. The Code covers all such
data files, either created or imported, directly or through a network system,
from the time at which the system assumes complete control of the data file.
Such networks may be local or wide area.
While the Code covers aspects of document management that impinge upon
the issue of legal admissibility of digitised images, it also covers aspects that
may affect the use of images in a legal context, even where admissibility per
se is not at issue. Such aspects include the legibility and completeness of the
document images, and the transfer of the images to other systems.
The Code covers the capture of digitised images both from the original
documents and from microform versions of the original documents. In the
latter case, users should be aware of the implications of the processes used in
the microfilming of the original documents.
• end users who wish to ensure that the information created by, entered
into and/or stored within the information management systems can be
used with confidence as evidence in a court of law.
Where users wish to claim adherence to the Code, the paragraphs identified by
text in bold type in the Code are considered essential in so far as they apply to
the specific application concerned. Other paragraphs contain recommendations
in italics that should be followed where practical.
DISC PD 0008 was first published by the BSI in 1996, covering legal
admissibility of information stored on electronic management systems. It has
since been revised and reissued in 1999, and re-titled ‘A Code of Practice for
Legal Admissibility and Evidential Weight of Information Stored
Electronically’. Prior to this, BS 7799:1995 was published in 1995 setting out
best practice for information security management. The Code is heavily
reliant on this document, which has now been revised as Information
Technology – Code of Practice for Information Security Management.
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The Code advises that a policy document should be produced, dealing with the
policy on:
• storage media;
• responsibilities; and
• legal advice sought and acted upon, including any special regulations. In
addition, such bodies as professional indemnity insurers may wish to be
consulted.
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The policy should list all types which are to be stored in compliance with the
Code such as:
In any event, there should be business continuity planning to ensure that all
data can be recovered successfully following major failures of equipment,
environment or personnel.
The organisation should develop its own manual for the DMS. This can be
incorporated in the quality management system, where the organisation
already has one. Such a procedures manual, in addition to any
vendor-supplied manuals for the system, should include the following topics:
• document capture;
• data capture;
• indexing;
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• file transmission;
• information destruction;
• system maintenance
• workflow;
• self-modifying files;
• maintenance of documentation.
All procedures must be reviewed at least annually and the results of reviews
must be documented.
Document capture
There must be procedures dealing with the situations either where data files
are created by the system or where they are imported into the system.
If the information management system is used for storing images, then these
procedures should be documented and users should comply with the
recommendations set out in Annex C of the Code.
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Factors which may affect the scanning process should be considered and
there must be a procedure to deal with scanning difficulties. There should
also be a method for identifying such things as ‘post-it’ notes attached to the
original document or physical amendments which might not be visible after
scanning.
Document batching
Photocopying
Scanning processes
The Code requires that the procedures manual should include details of the
operational procedures used in the scanning process and that records be kept
of all audit trails. In particular, it requires each document to have a unique
identity that cannot be changed or removed except on deletion and then only
under tightly controlled circumstances.
In practice, the scanning software will take care of many of the requirements
and a paper record will fill the gaps. (Appendix A shows a specimen form for
recording scanning information.)
The procedures should also describe how it is ensured that all documents in a
batch are scanned.
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Quality control
This set of prints and originals is retained and periodically rescanned and
checked.
The Code gives a number of criteria which may be appropriate to the user,
including print size and grey scale, which can be used to establish the quality
of the scanned image.
The results of all quality control checks (including audits) should be recorded,
as should any problems or difficulties which are experienced. In addition the
equipment should be properly maintained at all times.
Rescanning
Image processing
If image processing is used to improve the quality of the image, this could
conceivably lead to image manipulation. The procedures manual should
define how this is managed.
Data capture
This is mainly used where the original data is provided by such methods as
Optical Mark Reading (OMR) or manual entry from an existing document.
There should also be a procedure to deal with data migration from one system
to another.
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Indexing
The procedures manual must describe the indexing technique to be used and
should include a method for checking the accuracy of the records. This is often
built into scanning software and electronic document management systems.
Any changes to the index should be fully explained and audit trails dealing
with the amendment should be available. The Code also advises that in all
cases the index files should be retained for at least as long as the information
to which they relate.
For the prints to be legally admissible, there should be a formal process for
recovery whereby the operator certifies that all equipment is operating
normally and identifying the storage index data and document information
which confirms that the reproduction is a true and complete record. Appendix
B shows a specimen retrieval record for a scanned document/file, which
allows the operator to effectively certify that the document/file has been
correctly retrieved.
The Code also places great stress on the authentication process and for
controls where the output is not an exact reproduction, for example,
monochrome rather than coloured. If some aspect of the layout such as font or
pagination is not maintained, then retrieval characteristics must be agreed and
documented.
File transmission
When a data file is transmitted to another party, the original should be stored
on the system. Equally, a data file received from an external source must be
saved on the system and the time and date of any data file should be stored as
part of the audit trail.
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In some cases the original document will need to be retained, for example,
where the original is of poor quality or holds annotations which cannot be
scanned, or where fraud is suspected. In each case, the procedures should deal
with this.
Backup facilities on the system should allow for automatic backup and
verification of all data files and associated information, including audit trails
at regular intervals. Procedures used in these systems should be documented
in the procedures manual, including the requirement for secure off-site storage
of the backups. There should also be a record kept in the system audit trail of
all backup activity, which should include details of any problems incurred
during the procedure.
It is important to ensure that the files can be read even when the original
hardware is no longer available.
Where backup data is used to recover from a system failure, there should be
documented procedures to ensure that data file integrity has not been
compromised. It is therefore important that the backup media be tested
regularly.
System maintenance
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• all media must be kept secure, with at least one backup off site;
• user facilities may be in open areas, but the central system should be in
a secure area;
Details of the procedures used and the transfer of documents and/or media
from the client to the service provider and from the service provider to the
client should be documented in the procedures manual.
The Code recommends that the contract between the supplier and the client
should set out details of the extent to which compliance is claimed.
In addition, where the supplier also performs an indexing service, the client
should check that the required accuracy is being achieved.
The Code also describes the procedure where a copy is stored with a trusted
third party as a secure means of detecting tampering with data files.
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PART 5, SECTION 6
Workflow
Self-modifying files
In some cases, document files contain automatic functions such as date entries
which change to the current date when the file is opened. This means that the
file cannot be ‘frozen’ in the sense required by the Code. Either the automatic
functions need to be disabled before storing or there need to be procedures
which define how the files are to be stored and retrieved to ensure that
authenticated copies of the original can be produced.
Of key importance is an accurate record of the date and time and, to this end,
it is essential that the system is maintained with the correct information.
Regular checking of system clocks and changes to reflect seasonal changes,
i.e. ‘summer time’ must be incorporated into the procedures. Only authorised
personnel should be able to change the system clocks.
The procedures should define how voice, audio and video data are to be dealt
with. Where the recording is not under the control of the information
management system, the recording system must be up to the same standard as
that required by the Code for the information management system. There also
needs to be a procedure dealing with authentication of the source data.
Version control
If changes are allowed to stored data files, then this must be in accordance
with a documented procedure which includes any requirement to keep
previous versions.
The Code then makes the point that all changes to procedures and processes
should be implemented in accordance with an approved change control
procedure.
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Maintenance of documentation
Procedures and records should be maintained and stored in the same way as
information generally.
General
For a new system, the user should ensure that the system has been designed in
accordance with the requirements of the Code. For systems already in
operation, documents stored on the system prior to the introduction of the
Code cannot be considered as conforming to it unless controls which meet the
requirements of the Code were in place from the time of storing the
documents.
This section of the Code describes technologies and how they should be
utilised and controlled. The following elements need to be addressed to
achieve compliance with the Code.
Access levels
The systems description manual must define the levels of access available, as
follows:
• system manager;
• system administrator;
• system maintenance;
• authors or originators;
• information retrieval.
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Only authorised members of staff may have access and such authority may
only be given after suitable training.
The system should ensure that the integrity of data files is maintained
throughout the system, including during the transfer of this data to and from
the storage media.
An additional element in the Code deals with digital and electronic signatures
and the ability to verify the true identity of a person prior to their being
enrolled as document signatory.
Compound documents
Image processing
• deskew;
• despeckle;
• forms removal.
These should only be used with extreme care and should be fully documented.
It is safer not to allow image processing, as any interference could invalidate
not only that document but any other which may possibly have been adjusted.
Compression techniques
(2) lossless.
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Lossy should not be used on primarily text files, as the compressed image will
lose certain details which may be replaced by artificially generated data when
it is reproduced.
In general, it is safest not to use lossy compression at all, but the Code sets out
the requirements should this method be used.
Where the system software removes a fixed overlay from the digitized image,
leaving only the variable data, a record should be automatically generated to
record the removal and a copy of the template should also be stored on the
same medium.
Environmental considerations
The hardware manufacturer may well have its own recommendations for the
operational environment. These should be acknowledged and addressed in the
system manual. Handling and storage procedures should also be described, as
well as the procedure for checking the storage media regularly.
Audit trails
This information will be the subject of the audit trails and the records kept
should be sufficient to provide a full historical record of all significant events
associated with the stored information, and the information management
system.
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It is important that the audit trail be agreed with all stakeholders who might
need to refer to the information, including the user, audit and legal functions.
The Code recommends that, as far as possible, audit trail data should be
generated automatically and that where this does not occur, there should be
adequate procedures in place and that, in either case, the date and time should
be recorded contemporaneously.
Audit trail data should also be stored as a separate entity on the system. It
should be kept for at least as long as the information to which it refers and
should be accessible. In particular, it may be necessary to make it easily
accessible to third parties who have little or no experience in the use of the
system.
The audit trail information should be treated as having the same level of
security as the information to which it pertains with secure backup copies
being kept. If paper copies are kept then the procedures should define how
frequently they should be removed and stored.
The procedures for data migration should be defined and the audit trail should
include this information.
Part of the audit trail should include the records of information capture, batch
information, indexing, change control, destruction information and workflow.
G 5.6.8 Conclusion
The Code of Practice provides a sound basis for the use of electronic
document and information management systems which, if followed, should
mean that the information can be used as evidence in the civil courts.
With the enactment of the Human Rights Act 1998 and the Data Protection
Act 1998, it is expected that the pressure will continue to increase for a formal
documented statement on legal admissibility. In time, this is likely to feature
in the Civil Evidence Act, either by reference to the Code or to some European
wide standard.
The danger, however, is that technology will continue to outpace any attempt
at legislation.
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PART 5, SECTION 6, APPENDIX A
Confirmation of scanning
Date
Indexing information
Confirmation of acceptance
The above scanned files have been checked, the images are true and complete
representations of the documents scanned.
The batch contains ............... (No) images and consists of ................ (No) documents.
Signed …..............……........... DIP Operator/Archivist Disk refererence…....………...
Optical disk backup confirmed by IT Date
........................................................ …………………...................
Confirmation of destruction
The above original documents may now be destroyed
Signed ……………………………........................................................................ Managing Partner
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Appendix A (12/03)
PART 5, SECTION 6, APPENDIX B
……………………………………...........................................
Files/Documents/Drawings retrieved
Date
Indexing information
Certificate of authenticity
Signed ………………………………………..
Date ………………………………….............
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Appendix B (12/03)
PART 5, SECTION 6, APPENDIX C
Appendix C: References
Further and more detailed information can be obtained from the British Standards
Institution (BSI). Publications include:
The following publications are available from The Stationery Office, 123 Kingsway,
London WC1. Tel: 0870 600 5522 Fax: 0870 600 5533 Web: www.tso.co.uk
The Surveyors’ Construction Handbook Part 5, Section 6 Effective from 12/03 Page 1
Appendix C (12/03)
PART 5, SECTION 6, APPENDIX C
Data Protection Registrar, Data Protection Guidance for Users of Document Image
Processing Systems, 1995
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Appendix C (12/03)
INDEX
Note: references are to paragraphs. Figures and tables are not included
U W
ultimate cost 3.1.2.2
wage rates 5.4.4.2
uncertainty 4.3.2.6
wall to floor ratio Part 2 Section 1: Appendix C
see also risk
warranty 3.1.2.10(c); 3.2.4.3
underpricing 4.2.3.1(a)
warranty contracts 3.1.1.16(b)
uniqueness 3.1; 3.1.1.2; 3.1.1.3
waste 4.2.5.6
unit quantities see element unit quantities
water testing Part 4 Section 1: Appendix A6
unit rates Part 2 Section 1: Appendix A2.1; A2.2
whole-life costs 3.1.4.15
updating 3.1.4.12(e)
With Contractor’s Design Form 4.1.2.3(e); 4.1.2.5
user functions 1.2.7.5; 1.2.7.6; Part 1 Section 2: Appendix A
user requirements 3.1.4.13 work executed 4.4.7.1; 4.4.7.2
work not properly executed 4.4.7.10(b); 4.4.7.10(g)
V worked examples
valuation and investment tables (Parry’s) 2.2.5.7 life cycle costing 2.2.5
valuations for interim certificates tax allowances 2.2.3.7
administration 4.4.8 works
checklist 4.4.2.1–4.4.2.4 outstanding 4.1.1; 4.1.2.10(b); 4.1.2.11(c); 4.1.2.13;
communications 4.4.5 4.1.2.14(c); 4.1.4.1(c); 4.1.4.2(a); 4.1.5
content 4.4.7 packages 2.4.5.2; 3.1.2.5
covering letter 4.4.8.2 workshops
further reading Part 4 Section 4: Appendix A risk management 4.3.2.8; 4.3.3.3(a)(i)(b)(iv); 4.3.3.4(b)
other Forms of Contract 4.4.11 value engineering 1.2(Intro); 1.2.3.1; 1.2.4.4; 1.2.5; 1.2.6;
other relevant Contract Terms 4.4.10 1.2.9–11
preparation method 4.4.6 World Commission on the Environment and Development
purpose of 4.4(Intro); 4.4.1 2.6 (Intro)
special situations 4.4.9 ‘writing down’ allowance Part 2 Section 2: Appendix D7
start of contract 4.4.4 written application for reimbursement 4.2.3.3; 4.2.6.1;
under JCT Contract 4.4.3 4.2.6.4
value added tax see VAT (Value Added Tax) written down value Part 2 Section 2: Appendix A6