Assignmenr for pp2 final account

SCHOOL OF ARCHITECTURE, BUILDINGS AND
DESIGN
BACHELOR OF QUANTITY SURVEYING (HONOURS)
QSB 60904 PROFESSIONAL PRACTICE II
AUGUST 2018 SEMESTER
COURSEWORK NO. 2
Group Members :
NO. NAME STUDENT ID.
1 ADAM WONG 0322520
2 CHLOE SIM 0322932
3 TEOH ZI WEI 0323372
4 SEW YUE LING 0327032
5 LOO SIAH MONG 0321995
6 GOH SONG KIT 0322013
7 LEE JIA KIAM 0320029
8 YONG ZKANG 0324195
LECTURER : MR. EDDIE LIM SEK CHEON
SUBMISSION DATE : 29th OCTOBER 2018

Coursework No. 2 – Preparation of Final Account
You are appointed as the consulting Quantity Surveyor for a apartment project based on PAM
Form of Contract 2006 (With Quantities). The summary of the Contract Sum is as follows:
Bill No. 1 - Preliminaries RM 4,250,000.00
Bill No. 2 - Building Works RM 62,850,000.00
Bill No. 3 - Local Infrastructure Works RM 4,500,000.00
Bill No. 4 - P.C. and Provisional Sums RM 9,600,000.00
Contract Sums RM 81,200,000.00
Question 1
The Letter of Award for the above works was issued for RM 81,200,000.00 based on the tender
sum submitted by the Contractor. As you were preparing the contract documents for binding and
signature, you found some errors in the rates for aluminum windows works submitted by the
Contractor, which were very low. Kindly advise the actions that you will take.
(10 marks)
Answer for Question 1
First of all, when the letter of award is issued, it means that’s the contract is formed.
Since the contract documents are not bind and signed yet, it means that the contract document is
not finalized yet.
In the situation above the contractor may purposely price lower on the aluminum
windows as from his opinion the actual quantities of execution of work is relatively lower than
quantities listed in BoQ. As a quantity surveyor I shall check back on the initial cost plan and
estimation of the quantities of aluminum window, making sure mine estimation is not faulty and
tally with the Architect design. Upon confirmation of mine estimating and make sure I am not
over estimating on the quantities , i shall amend and rationalize on the rates of aluminum
window to a fair market price as well as lower down the some of the other higher rated element
in the contract document. According to Clause 13.1 in PAM Contract with Quantities (2006),

any arithmetical errors in the prices and rates shall be corrected and/or rationalized without any
changes to the contract sum before signing of the contract , this clause empower me on the right
and authority of amending the contractor tender price before the contract have been signed.
Hence, I will rationalize rates of the aluminum window higher to similar to a fair market
price as well as lower down the some of the other higher rated element in the contract document.
Rationalized is a process to adjust the wrongfully rated element to meet a fair market rate. Hence,
by rationalize the rate will not affect the contract sum.
Question 2.
In accordance with clause 30.10 of the contract, the contractor duly submitted his Final Accounts
within 6 months after the issuance of the Certificate of Practical Completion. You are then
required to assess this application and prepare the Final Account for the apartment project based
of the following valuations and adjustments made to the Contract Sum:
(30 marks)
Information provided are as follows:
a. The Architect had granted the Contractor’s first application for extension of time and approved
additional insurance premium amounting to RM 30,000.00 in accordance with clause 24 of the
contract due to the delay in the completion of the works caused by the Employer’s late decision
on the toilet design.
In his second application for extension of time, the Contractor submitted an an application for
extension of time due to exceptionally inclement weather and a loss and expense claim for
RM120,000.00 in his Final Accounts to you. The Architect approved the extension of time as per
Clause 23.8.

b. The following are the nominated sub-contractors’ accounts:
Original P.C & NSC’s
Provisional Sum Final Account
i. Lift Services: RM 1,300,000.00 RM 1,600,000.00
Profit @ 2% RM 26,000.00
Attendance as item RM 20,000.00
1. Air Conditioning Services: RM 2,300,000.00 RM 2,200,000.00
Profit @ 2% RM 46,000.00
1. Electrical Services: RM 2,700,000.00 RM 2,600,000.00
Profit @ 2% RM 54,000.00
1. Provisional Sums: Guard House RM 1,000,000.00 RM 1,250,000.00
1. Contingency Sum RM RM 2,064,000.00
RM 9,600,000.00
Answer for question 2(a)
The first scenario stated that the Contractor had granted for his first application for
extension of time due to the late decision on the toilet design by the Employer with additional
insurance premium amounting to RM30, 000.00. According to Clause 23.8 (e) stated that the late
issuance of AI causes the Contractor have not receive the necessary AI in due time including
those for or in regard to the expenditure of P.C. Sums and Provisional Sums, further drawings,
details, levels and any other information. Since the delay on toilet design, the Architect may

issue an AI regarding to the postponement of work under clause 21.4. Thus, the insurance
policies need to be extended and extra premium is paid by the Employer as the cause of delay is
the Employer’s fault which the contractor can claim for loss and expenses under clause 24.3.
In the second scenario stated that the Contractor applied for extension of time due to
exceptionally inclement weather and a loss and expense claim for RM120,000.00. The
application for extension of time is approved by the Architect because it is falls under relevant
event which is Clause 23.8 (b). In this scenario, the Contractor is entitled to claim for extension
of time but no provision for loss and expenses as the delay is caused by neutral events and there
is no relevant clause for this event. It was not the default of Employer so the burden of delay
should be share among the Contractor and Employer.
Answer for question 2(b)
We as the consulting Quantity Surveyor shall include a Contingency Sum for the
unknown risks of a project, unidentified or unsettled phases of a design. Other than that, we
would have an estimated allowance known as Provisional Sum. This is and estimated allowance
for the works that has insufficient details for the tenderers to price accurately into to the tender
document. The purpose of Provisional Sum is included in the tender document is to prevent
variation orders and also to be included into the master programme. Moreover, Prime Cost Sum
is an allowance in the tender documents for the supply of materials or works to be provided by
nominated contractor or supplier by client. Both Provisional Sum and Prime Cost Sum are
estimated fairly to avoid any disputes between parties.
The total amount in the Contract Documents to be omitted is RM 9,600,000.00 as shown
in the Final Account in accordance to Clause 30.11 (c) and (d). The initial P.C. and Provisional
Sums in this project including all related profit and attendance amounting RM 7,536,000.00 are
omitted because all the Sums are priced precisely at the completion of the project. Consequently,
the Contingency Sum that is originally allowed for unforeseen risks for the project amounting
RM 2,064,000.00 is also omitted. The total amount in the Contract Documents to be omitted RM
9,600,000.00 as shown in the Final Account according to Clause 30.11 (c) and (d). According to

Clause 30.11 (c), all P.C. Sums and Provisional Sums including all the related profit and
attendance in the Contract Documents shall be omitted on the final account. Then, substitution of
the amounts payable by the Employer to the Nominated Sub-Contractors’ and Nominated
Suppliers’ final accounts with the adjusted of related profit and attendance. Other than that,
Clause 30.11 (d) stated that final account shall also include the adjustment of Provisional Sum
based on actual expended and the omission of Provisional Sum if not expended.
In conclusion, Quantity Surveyor will proceed by adding back of Nominated Sub-
Contractor’s final account, after the adjustment of variation works. After the project is completed,
accurate amount of the lift services, air conditioning services and electrical services that is
allowed under the Prime Cost Sums can be provided by the Contractor. Then, Prime Cost Sums
amounting RM 6,400,000.00 is then to be added back as the profit of the 2% of the Prime Cost
Sums and lump sum of attendance amounting RM 126,000.00 and RM 110,000.00. Guard
house’s final amount of RM 1,250,000.00 would be added back to the final account after the
complete remeasurement of the Works by us Quantity Surveyors. Hence, totaling RM
7,886,000.00 is added back to the final account in accordance to Clause 30.11 (c) and (d) in
PAM Form of Contracts 2006 (With Quantities).

STATEMENT OF FINAL ACCOUNT
Project : Contruction and Completion of Taylors Residence, Sunway
Employer : Taylors Sdn Bhd
Contractor : Five Stars Builder Construction Sdn Bhd
RM RM
1.0 Original Contract Sum 81,200,000.00
2.0 9,600,000.00
Total Builder's works 71,600,000.00
3.0 Add : Variation works
Total Additions 33,000.00
Total Omissions (50,500.00)
Net (17,500.00) (17,500.00)
71,582,500.00
4.0 Add back : NSCs' final account
4.1 Lift Services 1,600,000.00
4.2 Air Conditioning Services 2,200,000.00
4.3 Electrical Services 2,600,000.00
4.4 Provisional Sum: Guard House 1,250,000.00
7,650,000.00 7,650,000.00
4.6 Profit and attendance
153,000.00
b. Attendance @ lump sum 135,000.00
288,000.00 288,000.00
5.0 Contractual Claim :
5.1 Additional Expenses 30,000.00
5.2 Loss and Expense 0.00
30,000.00 30,000.00
FINAL CONTRACT VALUE 79,520,500.00
a. Profit@2% of RM7,650,000.00
Less : PC & Provisional Sums
STATEMENT OF FINAL ACCOUNT

SUMMARY OF VARIATION WORKS
VO/1 Changes of black and white photocopied machine to 8,000.00 8,000.00
Colour photocopied machine
VO/2 Changes of floor finishes from Marble tiles to granite tiles . (50,000.00) 20,000.00 (30,000.00)
VO/3 Quantity of rock excavation change from 10m3 to 100m3 (500.00) 5,000.00 4,500.00
and the rate from rm50/m3 to Rm 550/m3.
VO/4 Employer set-off Contractor on additional cost incurred
due to failure of Contractor in purchasing Contractor All
Risk Insurance
- - -
SUMMARY OF VARIATION WORKS
TOTAL CARRIED TO STATEMENT OF FINAL ACCOUNT (50,500.00) 33,000.00 (17,500.00)
NET OMSSION/
ADDITION (RM)
ADDITION
(RM)
VARIATION
ITEM
OMISSION
(RM)
DESCRIPTION

SUMMARY OF NSC FINAL ACCOUNT
NSC/1 Lift Services 1,300,000.00 1,600,000.00 306,000.00
Profit @ 2% 26,000.00 32,000.00
Attendance as item 20,000.00 20,000.00
NSC/2 Air-Conditioning Services 2,300,000.00 2,200,000.00 (102,000.00)
Profit @ 2% 46,000.00 44,000.00
NSC/3 Electrical Services 2,700,000.00 2,600,000.00 (102,000.00)
Profit @ 2% 54,000.00 52,000.00
NSC/4 Provisional Sum :Guard House 1,000,000.00 1,250,000.00 260,000.00
Profit @ 2% 20,000.00 25,000.00
Attendance @ 2% 20,000.00 25,000.00
Total NSC Final Account 7,300,000.00 7,650,000.00 362,000.00
Total Profit 146,000.00 153,000.00 0.00
Total Attendance 130,000.00 135,000.00 0.00
SUMMARY OF NSC FINAL ACCOUNT
TOTAL CARRIED TO STATEMENT OF FINAL ACCOUNT 7,576,000.00 7,938,000.00 362,000.00
OMISSION
(RM)
NET OMSSION/
ADDITION (RM)
ADDITION
(RM)
DESCRIPTION
VARIATION
ITEM

SUMMARY OF ORIGINAL CONTRACT SUM
1 Preliminaries 4,250,000.00 4,250,000.00
2 Building Works 62,850,000.00 62,850,000.00
3 Local Infrastructure Works 4,500,000.00 4,500,000.00
4 P.C and Provisional Sums 9,600,000.00 9,600,000.00
SUMMARY OF ORIGINAL CONTRACT SUM
TOTAL CARRIED TO STATEMENT OF FINAL ACCOUNT 81,200,000.00 0.00 81,200,000.00
OMISSION
(RM)
NET OMSSION/
ADDITION (RM)
ADDITION
(RM)
DESCRIPTIONITEM

SUMMARY OF LOSS AND EXPENSES
Variation Item Description Clause Reference Omission (RM) Addtion (RM)
Nett Addition /
Omission (RM)
1 Additional expenses on Insurance premium due
to Employer late decision on the toilet design
24.3 (a) - 30,000.00 30,000.00
2 Adverse weather condition Not fall under
Relevant Events
- - -
30,000.00
SUMMARY OF LOSS AND EXPENSES
TOTAL CARRIED TO STATEMENT OF FINAL ACCOUNT

SUMMARY OF EXTENSION OF TIME
Project : Construction and Completion of Taylors Residence, Sunway
Contractor : Hello Construction Sdn Bhd
SUMMARY OF EXTENSION OF TIME
Item Cause of Delay Clause Reference Days Claimed Days Granted Remarks
1 Employer's late decision on toilet design C23.8 (e) The contractor is entitled for
extension of time as the cause of
delay is by the Employer which
falls under Relevant Events.
2 Exceptionally inclement weather C23.8 (b) The contractor is entitled for
extension of timeas the cause of
delay is not the Contractor's fault
which is caused by neutral
events.
TOTAL
Employer : Taylor Homes Sdn Bhd

Question 2 (c)(i)
c. You have to evaluate the following variations for final account:
i. The Contractor had priced RM 130,000.00 for the Contractor All Risk Insurance policy in the
Preliminaries Bills. The Contractor failed to purchase this insurance when the works commence.
The Employer, then, bought and paid for the said insurance for RM 180,000.00 on behalf of the
Contractor, for which the Contractor agreed. The Employer wants to recover this cost.
(15 marks)
Answer for question 2(c)(i)
As mentioned clearly in PAM clause 20.A.1 Contractor has his obligation to obtain the
Contractor all risk (C.A.R) insurance for a value not less than the contract sum , plus the sum to
cover professional fees for reinstatement and removal of debris that stated in appendix .The
validity of the insurance must up to completion date and the period of the insurance must cover
for the defects liability period plus a further 3 months .Clause 20.A.3 further urged that if the
contractor fail to obtain the insurance , the employer shall insure on behalf of contractor and the
amount incurred in the insurance shall be set-off by the employer.
In the situation above ,the employer has purchased the insurance on behalf of the
contractor as the contractor has failed to purchase the insurance even when the work has
commenced , stated clearly in the clause of 30.4 , employer stand the right to set off all the
amount incurred to obtain the insurance with the following condition:
1. The Architect or Quantity Surveyor (on behalf of the employer) has submitted to the
contractor a complete details of their assessment of such set-off
2. The employer or Architect on behalf on him has given the contractor a written notice
specifying his intention of such set off , the written notice shall be given not later than 28
days before any set off
3. The set off is deducted from any payment by the employer (Usually through interim
payment certificate )

The amount of set off is recoverable either from contractor as a debt , deducting through
interim certificate or from the performance bond. If the contractor is not satisfied with the set off,
he shall send out a written notice to the employer stating the reasons and particulars for such
disagreement within 21 Days.
In the situation above, the Employer bought the insurance for RM 180,000.00 on behalf
of the Contractor, for which the Contractor agreed on, even the insurance is RM50, 000.00
higher than the tender amount of RM130, 000.00, and the client is entitled to set-off for full
amount of premiums which is at RM180, 000.00. This is because of the failure of contractor to
obtain its insurance and the employer is now entitled to incur an additional losses. This is
supported by Clause 20.A.3 which stated that employer is entitled to set-off the amount of
premiums and any other cost incurred that paid by the employer to obtain the insurance.
Noting that the set-off by the employer shall not affect any payment progress for the item
stated in contract, and shall not include in the Final Account, this is further supported by Clause
30.11(f) mentioning that set-off by the employer are matter to be resolved separately between the
employer and contractor and shall not be included in the final account.
Question 2 (c)(ii)
ii. Under the Preliminaries, the Contractor is required to provide a black and white photocopier
machine on site for the Resident Engineer’s use but this item was left un-priced, i.e. BQ item was
left blank in the rate/amount column in the contract document. During the progress, the Architect
instructed the Contractor to provide a colour photocopier machine costing RM8,000.00 instead
of the black and white one as specified. Contractor submitted a variation claim for RM8,000.00.
(15 marks)

Answer for question 2(c) ii)
According to the PAM Contract 2006, Clause 11.1 stated that the term “Variation” means
the alteration or modification of the design, quality or quantity of the Works. In the situation
above, it is considered a variation under Clause 11.1 (a) which is the addition, omission or
substitution of any work as the Architect instructed the Contractor to provide a color photocopier
machine instead of the black and white one as specified in the Preliminaries.
According to Clause 11.6(e), it is stated that the rates and prices in the Contract
Documents shall determine the valuation of items omitted. If omissions substantially vary the
conditions under which any remaining items or works are carried out, the price of such
remaining items shall be valued under Clause 11.6(a), (b) or (c). In the situation where the black
and white photocopier machine was left unpriced in the contractor document, the Quantity
Surveyor shall omit the black and white photocopier machine based on either Clause 11.6(a), (b)
or (c).
Since the black and white photocopier machine was not priced in the Contract Document,
the Quantity Surveyor shall base on Clause 11.6(c) for addition of the colored photocopier
machine as requested by the Architect. Clause 11.6(c) stated that where work is not of a similar
character to work as set out in the Contract Documents, the valuation shall be at fair market rates
and prices determined by the Quantity Surveyor. The Quantity Surveyor shall determine the
price of the black and white photocopier machine based on the current market rate and prices
since it was not included in the preliminaries in the first place and add the amount of colored
photocopier machine which is RM 8,000.00. The price difference between the fair market price
of the black and white photocopier machine and the color photocopier machine shall be the
variation.
In conclusion, the omission and addition of items shall later be included in the Final
Account. In accordance with Clause 30.11 (a), any adjustment made to the Contract Sum shall be
shown in the Final Account of the Works.

Question 2 (c)(iii)
iii. The Contractor had delivered to site all marble floor tiles needed for the lift lobbies as
specified in the contract and construction drawings. However the Architect decided to use granite
floor instead and instructed the Contractor to remove all the marble tiles from site. The
Contractor paid RM 50,000.00 for the marble tiles. The Contractor returned the marble tiles to
the supplier but only managed a refund of RM 30,000.00. The Contractor submitted a claim for
the loss of RM 20,000.00 that he suffered.
(15 marks)
Answer for question 2(c)(iii)
Based on the situation above, the contractor is struggling for loss and expenses due to
architect default. The architect has made a variation order to instruct the contractor to change the
marble floor to granite floor, even when the contractor has already bought in the necessary
material as per specification of contract document for marble flooring work at the price of RM50,
000.00. The contractor has made all step to mitigate the losses by sending the granite floor back
to the supplier and only able to refund a total of RM30, 000.00 in return.
The above valuation of claims falls under Clause 11.6 (c) under PAM Contract 2006.
Clause 11.6 (c) urged clearly that where work is not of similar character to work as set out in the
Contract Documents, the valuation shall be at fair market rates and prices determined by the
Architect. The contractor is entitled for the claim of loss and expenses of RM20, 000.00 caused
by variations which stated under Clause 11.7 with the condition as below:
1. The Contractor shall give written notice to the Architect of his intention to claim for such
additional expenses together with an initial estimate of his claim duly supported with all
necessary calculations.
2. Such notice must be given within 28 Days from the date of AI or CAI giving rise to his
claim. The giving of such written notice shall be a condition precedent to any entitlement
to additional expenses that the Contractor may have under the Contract. The Contractor
shall send the complete particulars of his claim for additional expenses together with all

necessary calculations to substantiate his claims to the Architect within 28 Days of
completing such Variations. If the Contractor fails to submit the required particulars
within the stated time, it shall be deemed that the Contractor has waived his right to any
such additional expenses.
The above situation is further support by the court case of Crittall Windows v T.J Evers
(1996) 54 Con LR 66. It has been held in Crittall Windows v T.J Evers (1996) 54 Con LR 66 to
mean that the Contractor shall be entitled to a fair valuation which will not give the Contractor
more than his actual cost, reasonably and necessarily incurred, plus similar allowance for
overheads and profit.
In conclusion, the amount of additional expenses caused by Variations shall be added to
the Contract Sum which stated under Clause 11.9. Clause 30.11 (a) stated that the Final Account
of the Works shall show the adjustment made to the Contract Sum.
Question 2 (c)(iv)
iv. Mistake was made in the price for excavation through rocks at RM 50 per m3. Item was not
rationalised during contract documentation. However, original quantity in BQ is 10 m3 but re-
measured as-built quantity was 100 m3. The Contractor submitted a claim for RM 55,000 based
on a revised rates of RM 550 per m3 for the total quantity of 100 m3.
(15 marks)
Answer for question 2(c)(iv)
Stated clearly in Clause 11.6 of the PAM Contract 2006, the valuation of variation works
which are executed by the contractor for which a provisional quantity is included in the contract
shall measure based on the rules accordance with 11.6(a),(b) & (c) ,(d) ,(e) & (f).
In the above situation, we shall assume the excavation work is not a provisional work but
work being stated in the contract documents. Hence the variation is no longer subject to 11.6(d)
and 11.6(e) which is valuation method for provisional item or work that cannot be measured and

valued. Therefore, the situation above should be referred to Clause 11.6(b) of the PAM Contract
2006. According to Clause 11.6(b), the valuation of variations is carried out where the work is of
similar character set out in the Contract Documents but is not executed under similar conditions
or there is a significant change in the quantity of work carried out. The rates and prices in the
Schedule of Rates should be the basis for determining the valuation which includes fair
adjustments in the rates if needed. In this situation, the quantity for excavation through rocks was
revised from 10m3 to 100m3. There is a significant change in the quantity of work carried out
which is relatable to Clause 11.6(b). In addition, there is also a revised rate for the excavation of
rocks from RM50 per m3 to RM550 per m3.
However, according to the case law of Henry Boot Construction Ltd v Alstom Combined
Cycles (No.1) (200), the English Court of Appeal stated that contractors would have to follow
the rates and prices stated in the contract even though there is mistake during the tender stage.
The court further urged that the contract rate is ‘sacrosanct, immutable, and not subject to
correction’ on the basis of one party’s dissatisfaction with them. In some situation, the contractor
could deliberately lower down the rate of a certain item to obtain a more desirable contract sum
which would help the contractor to secure projects. In such cases, the contractor shall take full
responsibility and risk for the submitted tender rates. The contractor should not be able to request
for a change in rates if there are significant changes in the quantity.
In conclusion of the above study, the contractor is only entitled to claim for RM5, 000.00
(RM50x 100m3) for the rock excavation work even if there are changes in the quantities.
.

Assignmenr for pp2 final account

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