1. SCHOOL OF ARCHITECTURE, BUILDING AND DESIGN
BACHELOR OF QUANTITY SURVEYING
(HONS)
PROFESSIONAL PRACTICE II
LEE PEI GIE (0315653)
NA YEOW SING (0320385)
YONG SEEN YEE (0315883)
KEVIN LEE HEE XIAN (0315192)
THUN SHAO SHUN (0315919)
CALVIN CHIN WEI LONG (0326086)
GAN JET FOONG (0315998)
3. INTRODUCTION
In this coursework, we are given a situation whereby we 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 2,800,000.00
Bill No. 2 – Building Works RM 34,700,000.00
Bill No. 3 – Local Infrastructure Works RM 5,830,000.00
Bill No. 4 – P.C. and Provisional Sums RM 6,670,000.00
Contract Sum RM 50,000,000.00
This report briefly explains the adjustments of the essential elements in the preparation of the
project’s final account. It also outlines the significance and implications of the omission if
some works are entirely left out in the Bills of Quantities and included in Provisional Sum or
P.C. Sum. In the first given situation, Works like entrance arch with guardhouse in which are
shown on the drawings but not sufficiently designed for measurement of quantities are not
included in Provisional Sum in our tender document. Thus necessary adjustments are to be
made.
In addition, we are also to assess the application and prepare the Final Account for the
apartment project based on the provided valuations and adjustments made to the Contract
Sum. The report concluded with the method of how variations are evaluated in accordance
with PAM Form of Contract 2006 (With Quantities).
4. Q1
The Employer has instructed you to allow a Provisional Sum for the apartment
entrance arch with guardhouse. However you have forgot about this item and
did not include it in your tender document. The tender was awarded without it.
The director would also like to know the significance and implications of this
omission by their office.
In addition, you are required to prepare a report to your director, explaining
briefly the adjustments of the essential elements in your preparation of this
project’s final account.
5. To: Mr. Director
From: ABC Consult Sdn Bhd
Re: Report on the adjustment of essential elements in Final Account
Date: 22th May 2017
The purpose of the final account is to establish the final construction cost of
the project and the final sum is payable by the employer to the contractor or owing
from the contractor. According to PAM Contract 2006 Clause 30.10, final account
showing the necessary adjustment of the contract sum and the final account shall be
completed by the quantity surveyor within 6 months after receipt of all necessary
documents, drawings and site data from contractor.
In a final account, the adjustment made to the contract sum is a crucial and
indispensable process. A completed final account should include the following
essential elements:
Variation work (Clause 11.6)
Remeasurement of provisional quantities (Clause 11.6(f))
Omission of Prime Cost and Provisional sum (Clause 30.11(c))
Adding-back of NSC’s and NS’s final accounts (Clause 30.11(c))
Adjustment of profit and attendance (Clause 30.11(c))
Adjustment of Provisional sum based on actual expended and
omitted of not expended (Clause 30.11(d))
Additional expenses claims (Clause 11.7)
Loss and expense claims (Clause 24.4)
Variations often arise during the construction stage. It is the alteration or modification
of the design, quality or quantity of the Works according to Clause 11.1. In terms of
final account, the only contractually change to the contract sum will be for variations,
which has been formally instructed through the issuance of Architect’s Instruction in
writing, and in specifically prepared form with ‘Architect’s Instruction’ title and serial
numbering in accordance to Clause 2.2. The valuation of variation works executed by
6. the Contractor for which a provisional quantity is included in the contract and the
expenditure of provisional sum shall be based on Clause 11.6(a) to 11.6(f).
Next, Clause 11.6(f) indicates that remeasurement of provisional quantities is also an
important element to be included in Final Account. The actual work quantities are
barely known in the beginning, for instance excavation or piling works. Thus the
amount to be paid to the contractor in respect of such Works upon completion of the
contract shall be ascertained by remeasurement of the work as it is actually executed.
Prime Cost sum and Provisional sum are as well essential elements in Final Account.
Prime Cost sums are the sum of the specialist works carried out by the nominated sub-
contractor which often inclusive of profits and attendance; whereas Provisional Sums
are the allowance for specific element of works that is not yet defined in enough detail
thus cannot be itemized in Bills of Quantities (BQ). There sees a need to allow
provisional sum in BQ although adjustment is to be made in final stage. Taking this
case as example:
(a) Contractually an entrance arch with guardhouse is to be built with limited
details of drawings. Thus, provisional sums need to be added into BQ to
aware client of project budget and financial commitment as it allows
approximate amount for cost control purposes.
(b) On the other hand, contractor needs to include the provisional sum works
to plan his work programme so that works can be finished within the
stipulated completion date. If provisional sum is not included in the
contract document, it will cause dispute and contractor may have rights to
Extension of Time (EOT). As execution and completion of work in
specific order is altered, Architect’s Instruction has to be issued for the
variation works as per Clause 11.1(d).
In such, Prime Cost sums and Provisional Sums with related profits shall be omitted
from the final account as stated in Clause 30.11(c). This is due to the fact that they
are mere estimated allowance by Quantity Surveyor and are subjected to change.
Consequently, the awarded nominated sub-contractor and nominated suppliers’ final
account shall be added back in accordance to Clause 30.11(c). They need to submit
the Final Account along with pro-rata amount for profit. The final adjustment is made
after completion of works and final cost is ascertained.
7. During the tender stage, the contractors are required to allow some percentage for the
profit and attendance in the prime cost sum which normally from 5 per cent to 15 per
cent. It will vary depends on the workload, risk and economic climate. However,
clause 30.11(c) stated that the profit have to be adjusted in the final account based on
pro-rata of the amount payable to the Nominated Sub-Contractors and Nominated
Suppliers instead of using the profit stated in the contract documents. Attendance is
provided to ensure that the contractor will provide the specific services required by
the sub-contractors or suppliers and it is usually in fixed amount or lump sum basis.
Therefore, the attendance in final account shall be same as the contract document.
Provisional sum is usually estimated by the quantity surveyor in the tender documents
for the specific element of works that the details are not enough for the tenderers to
price. When the quantity surveyor prepared the final account, the provisional sum
estimated in the contract documents have to be adjusted based on actual expended
which is stated in Clause 30.11(d). If the provisional sum in contract document is
more than the actual expended, the omission shall be made. Conversely, if the actual
expended is more than the provisional sum in the contract documents, the addition
shall be made accordingly.
As mentioned earlier, variations frequently take plave during the construction stage
and the valuation of variations has to follow the rules stated in Clause 11.6(a) to
11.6(f). If the contractor incurs the additional expenses in the variations, Clause 11.7
allows the contractor to make a claim for the additional expenses and include in the
final account. The contractor shall give written notice to the Architect for his intention
to claim for the additional expenses together with the initial estimate of his claim.
After the contractors have completed the variation works and he shall send the full
particulars with necessary information of his claims for the additional expenses to the
Architect within 28 days (This two-step procedure stated in Clause 11.7(a) and
11.7(b)).
Clause 24.1 empowers the contractor to claim the loss and expense when the
contractor incurs the loss and expense due to the regular progress of work has been or
is likely to be materially affected by the matter stated in Clause 24.3. The contractor
may make a claim for the loss and expense when the loss and expense could not be
reimbursed by payment under any provision in the contract. Moreover, the amount of
8. loss and expense ascertained by the quantity surveyor or architect has to be added to
the contract sum and included in the final account accordingly based on Clause 24.4.
Significance and implication of Omission
According to Clause 11, as the items were forgotten in the provisional sum the
arch and guardhouse will be considered as a variation. Clause 11.1(a) explains the
term “variation” as the addition, omission or substitution of any work. Therefore, it is
applicable to this situation as it is an addition of work to the contract sum.
Furthermore, clause 11.4 states that the architect shall issue an Architect’s Instruction
(AI) in regard to the expenditure of provisional sums included in the contract bills.
Clause 11.2 shall arise as the architect will have to issue an AI ordering or sanctioning
the variation to enable the contractor to carry out the variations with due diligence and
expedition. However, there is a disadvantage to this solution as it will be very time-
consuming and the overall cost will increase due to the lengthy tender process and
sudden involvement of works.
Furthermore, Clause 11.6(f) states that in respect of provisional quantity, the
quantities stated in the contract documents shall be remeasured by the Quantity
Surveyor based on the actual quantities executed. The arch and guardhouse for this
case are the provisional quantities. Although the quantities are subjected to changes
but the rates priced in the contract documents will remain the same.
Presumably the total cost of the arch and guardhouse is RM10,000 and in Bill
no.4 of PC and provisional sums consist of 10% in contingencies. The amount in
contingencies will be able to cover the estimated cost of the arch and guardhouse.
However, if there are no contingencies allowed in bill no.4. Then the addition of cost
will be treated as a variation order and the contract sum will be increased. Therefore,
there will be a final contract sum of a total of RM50,010,000.00.
Other than that, the other suggestion for this case is that the arch and
guardhouse shall enter into a separate contract which consists of only these 2 items. In
regards to this solution, AI for variation may give the contractor a chance to claim for
9. EOT which is in accordance to Clause 23.8(g). This would cause a disadvantage to
the employer as he would have less imposed liquidated damages.
In conclusion, the error made by the Quantity Surveyor would cause
consequences to both parties which are the employer and contractor. Besides that, the
director will lose the faith and professionalism towards the employer and contractor.
10. Q2
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:
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 25,000.00 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 selection ofcarpet.
In his second application for extension of time, the Contractor submitted an loss and
expense claim for RM800,000.00 in his Final Accounts to you. The Architect had
rejected the Contractor’s second application.
b. There are four variation orders carried out by the Contractor:
c. The following
are the
nominated sub-
contractor’s
accounts:
11. Q3
Explain the basis on how the following variations may be finalised and priced
during the Final Account stage:
a. The Contractor had priced RM 130,000.00 for the Contractor All Risk
Insurance policy in the Preliminaries Bills. However, when the Contractor failed
to purchase this insurance, the Employer bought the said insurance for RM
180,000.00 on behalf of the Contractor.
b. Contractor is required to provide a photocopier machine on site in the
Preliminaries section but the item was left unpriced, i.e. BQ item was left blank
in the rate/amount column in the contract document. The Architect instructed
the Contractor to provide a laptop computer and printer costing RM8,000.00 in
lieu of the photocopier machine.
c. A wash trough as required and priced in the Preliminaries section was not
constructed due to site constraints imposed later by the Employer. However, the
vehicles leaving the site during construction were always kept clean including the
public roads using water jet washing and full-timed workers.
d. Mistake was made in rate for 50mm thick concrete blinding is RM 10 per m3.
Item was not rationalised during contract documentation. However, original
quantity in BQ is 100m3 but re-measured quantity is 2,000 m3. The Contractor
submitted a loss and expense claim for RM50,000.00 and also claimed for revised
rates.
12. Question 3(a)
PAM Contract 2006 (With Quantities) under Clause 19.0, stated that insurance
against injury to people and loss and/or damage of property required Contractor to
arrange for insurance to support the indemnity given in Clause 18.0 (injury to person
and loss and/or damage of property to Employer). The purpose of insurance is to :-
a) Clause 19.1(a) – insurance cover to Employer, Contractor, and other parties.
b) Clause 19.1(b) – third parties for any personal injury or property loss.
c) To cover losses and minimizing disputes between Employer and
Contractors.
d) Potential costs, fees, rights and damages for the Employer and the
Contractors.
Contractor had priced the said insurance policy in Preliminaries as stated under
Clause 19.3. Contractor and Sub-Contractors are to take insurance to cover local
workmen which not subject registration under SOCSO and is bound to get registered
before Commencement of Work. The duration of cover of the Contractor All Risk
Insurance policy shall be valid up to the Completion Date and 3 months after the
Defects Liability Period (DLP).
In this case, the contractor is in breach under Clause 4.4 as he has failed to purchase
this insurance. Clause 30.4, the Employer shall be entitled to set-off all cost incurred
for loss and expense where the contractor is in breach. Therefore, it gives default
powers to the employer as stated under Clause 19.5, and Employer can buy the said
insurance on behalf of the Contractor, which shall be recovered through a set-off later
as stated in Clause 30.4.
Employer is allowed to increase the insurance from RM130,000.00 to RM180,000.00
which is enforced by Clause 19.5. Thus, the final price for the said insurance will be
RM180,000.00.
13. Question 3(b)
Contractor is required to provide a photocopier machine on site in the Preliminaries
section but the item was left unpriced, i.e. BQ item was left blank in the rate/amount
column in the contract document. The Architect instructed the Contractor to provide a
laptop computer and printer costing RM8,000.00 in lieu of the photocopier machine.
When the photocopier machine in the Preliminaries is left unpriced, it shall be deemed
that the Contractor has already included the rates and prices elsewhere in Bills of
Quantities. There is no specific rule or standard way for Contractor to price the
Preliminaries, so neither defaults nor breach is from Contractor. In regards with this,
Quantity Surveyor is expected to identify the cost of photocopier machine to allow
omission of its cost as stated in Architect’s Instruction (AI).
Under clause 11.6 in PAM Contract 2006 states that the valuation of Variations and
work executed by the Contractor for which Provisional Quantity is included in the
Contract and the expenditure of Provisional Sums (other than for work for which a
tender had been accepted under Clause 27.14) shall be made in accordance with the
following rules :
Clause 11.6(a) which indicates where work if of similar character to, is executed
under similar conditions as, and does not significantly change the quantity of work as
set out in the Contract Documents the rates and prices in the Contract Documents
shall determine the valuation. It means that, contractor have to omit the cost of
photocopier machine based on current fair market price or the cost from precious
contract documents of similar projects.
14. Question 3(c)
The valuation of variations for the water jet washing and full-timed workers who
responsible to clean up the vehicles on site is in accordance with the Clause 11.6(d)
which is by using the daywork rates or actual cost plus 15%. Meanwhile, this method
is only applied if it meets certain pre-condition which is the work cannot be properly
measured and valued. For example, the quantity of water used on the water jet
washing to clean the vehicle on site is not quantifiable. And this mechanism is a form
of reimbursement to compensate the Contractor for the actual costs incurred including
profits. Where there is day work rate in the contract, then it is used and inclusive of
labour, plant, materials, profits, etc. Daywork recorded shall be verified by the Site
Staff and progressively sent to the Architect and Consultants.
15. Question 3(d)
According to the situation, it shows the consultant team had made mistake on the
measurement quantity for 50mm thick concrete blinding. Instead of 2000m3 during re-
measurement, 100m3 was recorded in Bills of Quantity. Therefore, the Contractor is entitled
to loss and expense claim to compensate the outstanding work.
In regards with this matter, the variation for this situation is recommended to be valued based
on Clause 11.6(b), which is by using the contract rates and price but with fair adjustment to
rates for the differences. However, it has several pre-conditions require to match up before
apply this method. The work must be of similar character and it is not executed under similar
conditions; or the work of similar character but it is significant change in the quantity of work.
In Clause 24.1(a), the Contractor must give his evidence along with the calculation as to
clearly justify his sum of claim for RM50,000.00 to the Architect. This has to been done
within 28 days from the date of Architect’s Instruction or the date of occurrence of matters in
respect to Clause 24.3, whichever earlier.
In this case, the Contractor will face a lost due to the irrationalized rates priced during the
contract documentation. This is because the final account rates will follow the rates priced in
contract document. As for the remeasurement quantity, Contractor has the rights to claim for
a fair adjusted rate of the elements due to the mistakes done by consultant team.
Thus, the recommended revised amount of the claim for Contractor is RM19,000.00 instead
of RM50,000.00 based on the calculation below.
Calculation:
a) 1m3 = RM10
Therefore, 100m3
100m3 x RM10 = RM1000 (Original quantity & price) [CLAIMED]
b) 2000m3
2000m3 x RM10 = RM20,000 (Re-measurement quantity & price)
Revised amount is RM20,000 - RM1000 (Claimed) = RM19,000
