QSociety

12 ways quantity surveyors save costs on projects

1. Competitive Bidding: Quantity surveyors help clients select competitive contractors and suppliers through the bidding process. This ensures that clients receive quality services and materials at the best possible prices.

2. Cost Estimation and Budgeting: Quantity surveyors provide accurate cost estimates and budgets at the project's outset. By having a clear understanding of costs upfront, clients can make informed decisions about project scope, materials, and design, potentially reducing unnecessary expenses.

3. Negotiating Contracts: Negotiating favorable contracts with contractors, subcontractors, and suppliers is a key skill of quantity surveyors. They can secure lower prices, favorable payment terms, and penalty clauses for delays or quality issues.

4. Value Engineering: They identify opportunities for cost savings through value engineering. This involves proposing alternative materials, construction methods, or designs that maintain or enhance project quality while reducing costs.

5. Cost Control: Throughout the project, quantity surveyors monitor costs and expenditures. By identifying cost overruns or variances early, they can implement corrective measures to keep the project within budget.

6. Risk Management: Quantity surveyors assess and manage project risks, which can include unforeseen delays, material price fluctuations, or design changes. By addressing these risks proactively, they minimize potential financial impacts on the client.

7. Change Order Management: They carefully evaluate change orders and variations to ensure they are justified and priced fairly. This prevents unnecessary cost increases due to undocumented changes.

8. Invoice Review: Quantity surveyors review contractor and supplier invoices to verify the accuracy of charges and ensure compliance with contract terms.

9. Quality Assurance: By monitoring construction quality and compliance with specifications, quantity surveyors help prevent rework and costly defects that can arise from subpar workmanship.

10. Life Cycle Cost Analysis: They consider the long-term costs of materials and systems, helping clients make informed decisions about investments that may have higher initial costs but lower operating and maintenance costs over the life of the building.

11. Claims Avoidance: Quantity surveyors work to prevent disputes and claims by ensuring that contract documents are clear and both parties understand their obligations. Avoiding disputes can save significant legal and administrative costs.

12. Post-Completion Audits: After project completion, quantity surveyors conduct audits to ensure that all project costs align with the agreed-upon terms and that any discrepancies are resolved.

MATERIAL RECONCILIATION

All construction projects require various material for incorporation and completion of work. These materials could be procured by the Employer or the contractor. In some cases the employer instructs that certain materials would be issued by him and the contractor should quote for the work accordingly. In other cases the employer may provide authority for procuring of materials to the contractor.
In both these cases, the material need to be accounted in the bills for payment. Non reconciliation will result in delay in clearance of bills as well as recoveries as per conditions of contract.
Here, Material Reconciliation will be discussed briefly, considering above both aspects.
Material Reconciliation - Simply, Material reconciliation will be done to analyze and compare the actual used amount of material with planned amount of material.
Importance of Material Reconciliation
To have an account of actual consumption of Materials.
Control of Wastage or Excess Material Consumption.
To know the measures to be taken to minimize wastage.
Important for cash smoothing.
To use as an evidence of usage of client supplied materials.
Using this report, maximum allowable quantity of material per each item, unauthorized use of material, work progress up to the date and profit and loss of each item can be identified.
The purpose of the Material Reconciliation Report - Material Reconciliation report is a summary document which exposed the balance of material at store and the usage of materials for completed work. Situations or types of projects where this report is commonly used - Normally, this report is prepared for materials which are supplied by the client & this will be used as an evidence of the usage of material. In addition, Material Reconciliation is used as a mechanism to monitor the cost of a project also. Generally, material reconciliation report will be submitted to the client at the end of every month along with the IPA.
Documents used to prepare Material Reconciliation Report – Store Keeper Records are used to identify the received quantity, issued quantity and balance quantity at yard or store. Daily Progress Report is used to measure the work done and the used materials in a particular month.

Material Reconciliation Formats can be varied according to the purpose as well as site to site.

LETTER OF CREDIT

When everything depends on buying and selling, letter of credit is an important financial tool. Specifically, a letter of credit is a letter from a bank guaranteeing a seller will receive payment from the buyer in the correct amount and on time. The reason a letter of credit is so important is that if the buyer is unable to pay, the bank must cover the full amount of the purchase.
Further, a letter of credit is a letter from a third party, usually a bank or financial institution, promising to pay the seller for goods purchased by its customer. Mainly used in long distance and international transactions, letters of credit are usually sent to the seller once verification is received that the goods have been shipped.
Following are the process of Letter of credit,
Step 1 - Issuance of LC - After the parties to the trade agree on the contract and the use of LC, the importer applies to the issuing bank to issue an LC in favor of the exporter. The LC is sent by the issuing bank to the advising bank.
Step 2 - Shipping of goods - After receipt of the LC, the exporter is expected to verify the same to their satisfaction and initiate the goods shipping process.
Step 3 - Providing Documents to the confirming bank - After the goods are shipped, the exporter presents the documents to the advising/confirming bank.
Step 4 - Settlement of payment from importer and possession of goods - The bank, in turn, sends them to the issuing bank and the amount is paid, accepted, or negotiated. The issuing bank verifies the documents and obtains payment from the importer.
In summary, we can see that LC can be used in procurement to provide security for buyers making payments to suppliers.

VARIATION

Variation can be identified as a change to the original scope of the work. Changes which are made to the original contract by the parties (due to Employer requirement, Technical requirement, Design requirement, Legal/regulatory requirement or User requirement) to the acceptance and instructions of the Engineer.
Initially, the Engineer may initiate as an instruction or request for the contractor to submit a proposal and as per Clause 13.3 variation procedure are to be followed by the parties. Contractor shall submit description of the proposed work, program for its ex*****on, modifications to project program, proposal for variation (technical and financial) and all the supportive documents. The impact on the variation can be in terms of cost as well as the time.
Variation may include,
a. Changes to the quantities of any item of work included in the contract – Quantity increase or decrease (do not necessarily constitute a variation)
b. Changes to the quality and other characteristics of any item of work – specification change
c. Changes to the levels, positions and dimensions of any part of the works
d. Omission of any work
e. Any additional work
f. Changes to the sequence of operation

As a Consultant QS, What is your responsibility in valuation of variations?
a. Identify whether the contractor’s proposal constitutes a variation in accordance with the contract
b. Check the validity of the variation - The Engineer’s instruction or Variation order
c. Check availability of technical information – drawings, sketches, specifications, etc - both original and new
d. Investigate the background and identify the holistic picture of the proposed variation. This leads to identify all direct and indirect work items, additions and omissions as well.
e. Examine contactors submittals and check whether he has addressed all the requirements
f. Check whether all supportive documents such as measurement sheets, rate break downs, quotations and necessary technical literature are available. If not needs to get down those
g. Obtain necessary technical support from the design team members (Architect, Resident Engineer, Structural Engineers, Services Engineers). This helps to again identify whether the proposal really constitutes a variation or not.
h. Review and analyse the quantities, rates and prices.
How do we derive appropriate rates?
I. Contract rates for the similar items
II. New rate derived from any relevant contract rates or prices
III. If relevant rates are not available, new rate or price to be worked out with reasonable profit – first principles or quotations

One important thing to remember – valuation of variations means something beyond checking contractor’s rate breakdowns!

i. There may be alternatives or options available. So, evaluation of all the options is needed to select most economical option.
j. Valuation of variation should be done in accordance with the relevance CoC
k. Cost impact – net increase or decrease to the contract sum to be worked out
l. Negotiate with the Contractor when finalizing the cost
m. Report the final cost impact to the Engineer with necessary substantiations
n. Assist the Engineer to issue Variation Order if necessary
o. Update the Employer regularly with the status of the variations

Once the variation order is issued, Contractor is responsible for ex*****on. Payments for the work done of variations should also be claimed with interim payment applications. Generally, variations are compiled as a separate chapter in interim payment applications with summary page, measurement sheets, etc. Completed work may be claimed on percentage basis for the lump sum type items. However, the basis of payment (lump sum or measure and pay) of each and every variation must be applied. Sometimes the ex*****on starts immediately at the site due to urgency before finalizing the rates and prices. In such situation, until finalization provisional certification on those work items are given.
Variation is a topic to discuss in much detail. According to my opinion, the success of a lump sum project lies on Variations.
Feel free to add any thoughts of yours.

Tender Bond Vs Performance Bond :

Bid/Tender Bond:

A bid/tender bond comes into play to prevent the contractor for backing out in Tender stage. If a contractor is awarded a project after a successful bid, a bid bond ensures that they abide by the bid they made.

The basic function of a bid/tender is to provide assurance to the project owner that the bidder is not only qualified, but will take their tender seriously and follow through on their bid.

If client realize that contractor didn’t bid enough and can’t afford the project, the client can then take legal action against the contractor

Performance Bond:

A Performance Bond guarantees that the contractor will perform its obligations to the client/employer according to the terms and conditions of the contract. This type of bond protects clients from unsatisfactory or incomplete work.

The basic function of a performance bond is to provide financial protection to the client/employer in the event of default on the part of the contractor.

If a contractor doesn’t do quality work or simply doesn’t finish the job, a performance bond allows the client/employer to take legal action against the contractor.

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FIDIC 1999 Red Book Clauses ~

Method of Measurement and Net Actual Quantity

Some standard contract forms in the absence of standard Method of Measurement, state that measurement shall be made as per net quantity of each item, without allowance added for bulking, shrinkage or waste.

Correct or not?

Isn't that a bit of a broad term?

What about openings in walls regarding finishing works for example, excavation and backfilling, soil compaction, shrinkage and waste of aggregates and so on?! To mention just a few. Add more ...

Often, Net Actual Quantity doesn't correspond with Net Actual Price!

EVM - EARN VALUE MANAGEMENT

සරලවම කිව්වොත් ව්‍යාපෘතියක් ප්ලෑන් කරපු අයුරින් ක්‍රියාත්මක වෙනවද කියලා බලන්න project management වලදි යොදාගන්න tool එකක් තමයි EVM කියන්නෙ. This is the industry standard method of tracking project progress. මේකෙදි ප්‍රදාන වශයෙන්ම දැනගත යුතු defined terms 03ක් තියෙනවා.

1. Plan Value (pv) - මෙන්න මේ කාලෙදි මෙන්න මේ වැඩේ ඉවර වෙද්දි මෙච්චරක් cost එක යාවි කියලා මේකෙන් කියන්නෙ.
2. Actual cost (ac) - වැඩේ කරන් යද්දි ඇත්තටම වියදම් වෙලා තියෙන ප්‍ර්‍රමාණය තමයි මේකෙන් කියන්නෙ.
3. Earned Value (ev) - ඇත්තටම වැඩ ඉවර ප්‍ර්‍රමාණය , project cost එකෙන් කොච්චර වටිනාකමක්ද කියන එකයි මේකෙන් කියන්නෙ.
= % complete x project cost

ව්‍යාපෘතියක විස්තර අපිට පුලුවන් පහත රූපයේ ආකාරයට ඇදගන්න සහ එතනින් project performance එක කියන්න.

මේකෙදි අපි index වර්ග දෙකක් බාවිතා කරනවා.
1. CPI - EV / AC
2. SPI - EV / PV
මේ දෙයාකරයදිම eanred value එක plan සහ actual cost එකත් එක්ක සසදලා performance එක කියන එකයි වෙන්නෙ.
මේ එන අගය 1ට වඩා වැඩි නම් project එක නියම පායෙ යනවා කියලා අපිට කියන්න පුලුවන්.

තව කෙනෙක්ටත් දැනගන්න පුලුවන් වෙන්න මේක share කරන්න හැමෝම.

ස්තූතියි!

Construction Contracts

1 – Lumpsum Contracts

In a lump sum contract, the engineer or/and contractor agrees to do the specified project for a fixed price. Also called “fixed fee contracts,” these are often used for engineering ventures.
A lump sum or fixed fee contract is appropriate if the scope and schedule of the project are sufficiently defined to allow the consulting engineer to estimate project costs.

2- Unitprice Contract

A unit price contract is a type of construction contract based on estimated quantities of items included in the project and their unit prices as initially estimated (rates may be hourly, the rate per unit work volume, etc.). In general, the contractor’s overhead and profit are included in the rate. The final cost of the work depends on the total quantity of items required to carry it out and complete it.

Unit price contracts are appropriate only for a project which involves well-known resources in quantities which are unknown at the time of the agreement, and will be defined when the design and engineering or construction work is finished.

A unit price agreement is one of the best choices for construction or supplier projects where the contract documents can correctly identify the various kinds of items, but not the numbers that are needed.

It is not uncommon to combine a unit price contract with a lump sum contract or other types of agreement for some parts of the project.

3 – CostPlus Contract

This is a contract agreement wherein the purchaser agrees to pay the cost of all labor and materials, plus an amount for contractor overhead and profit (usually stated as a percentage of the labor and material cost). In construction, a cost-plus contract may be specified as:

Cost-Plus + Fixed Percentage
Cost-Plus + Fixed Fee
Cost-Plus + Fixed Fee With Guaranteed Maximum Price
Cost-Plus + Fixed Fee + Bonus
Cost-Plus + Fixed Fee With Guaranteed Maximum Price and Bonus
Cost-Plus + Fixed Fee With Agreement for Sharing Any Cost Savings
Cost-plus contracts are preferred when the scope of the work is indeterminate or highly uncertain and the kinds of labor, material and equipment needed are also uncertain. Under this arrangement, complete records must be maintained of all time and materials that the contractor spends on the work.

4 – TimeMaterials Contracts

Contracts for time and materials (T&M) are a hybrid of fixed and cost-reimbursing contracts, and are used in cases where there can be no clear scope of work: for example, if the number of hours that the client needs is not clear. In this case, a set professional hourly rate is used (for instance, fees and costs). With this kind of contract, it’s always a good idea to set a ceiling or a price that cannot be exceeded, to prevent being overrun with heavy costs