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PROFESSIONAL PRACTICE IPROFESSIONAL PRACTICE IPROFESSIONAL PRACTICE IPROFESSIONAL PRACTICE I
[QSD 289][QSD 289][QSD 289][QSD 289]
1MohammadMohammadMohammadMohammad NasharudineNasharudineNasharudineNasharudine ShuibShuibShuibShuib
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SECTION DESCRIPTIONS LINKS
1 INTRODUCTION2 GENERAL MATTERS
3 STANDARD FORM OF CONTRACT
4 METHOD OF PRICE DETERMINANTION
2
5 CONTRACTOR SELECTION & APPOINTMENT
6 PROCUREMENT OPTIONS
7 CONTRACT STRATEGY
8 CLIENT PROCUREMENT NEEDS
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Client organizations are divided between those inprivate and public sectors although this distinctionis becoming more difficult to define since the
privatization of many national bodies. The private sector includes industrial, commercial,
social, charitable and professional organizations,and individuals.
e pu c sec or s a en o mean governmendepartments, nationalized industries, statutoryauthorities, local authorities and developmentagencies.
The experience which a client has of building
procurement ranges from extensive, in the case of aclient with a project management team, to none,where a private individual may want a developmentonly once in a lifetime.
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The traditional method of organizing
construction work starts with appointing aconsultant designer, usually an architect or
engineer, or both. Other specialists may be
,
appointed to provide cost information,
prepare bills of quantity, compare bids and
maintain financial management during
construction.
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BASE ON CONTRACTPRICE
CONTRACTUALARRANGEMENT
BASE ONCONTRACTORSOBLIGATIONS
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Fixed Price
Cost
Reimbursement
Conventional
Design and Build
ManagementContracting
Others
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MEASUREMENTCONTRACT
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@CONTRACT PRICE
QUANTITIES
RATES
DRAWINGS &SPECIFICATIONS
BILLS OFAPPROXIMATEQUANTITIES
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LUMP SUM(contract sum
pre-determined)
FIXED PRICE
RE-MEASUREMENT(contract sum to be
ascertained on completion)
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Bills of Quantities(BQ)
Drawing andSpecifications
Schedule of Rates(adhoc/std)
Approximate Billsof Quantities
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FIXED PRICE
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LUMP SUM(contract sum
pre-determined)
FIXED PRICE
RE-MEASUREMENT(contract sum to be
ascertained on completion)
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Bills of Quantities(BQ)
Drawing andSpecifications
Schedule of Rates(adhoc/std)
Approximate Billsof Quantities
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The contractor contract to do the work at a
price he estimated in advance.He takes the risks of calculating approximately
how much work is involved & its cost.
Contract sum is predetermined & stated in thecontract.
Traditional contracts are usually fixed price
contract.
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LUMP SUM(contract sum pre-determined)
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Bills of Quantities (BQ) Drawings and Specifications
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The contract price is agreed at time of the
formation of the contract. The contractor is responsible for carrying out
all the works shown in BQ or Drawings and
spec ca ons. Example: PAM, PWD, CIDB etc.
Advantages: client is able to define the
works & prepare documentation.
Drawbacks: Documentation must be
complete before tender.
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Prepared by QS
Subject to adjustment for variations. For civil engineering works, the BQ are based on
estimated quantities (Provisional Quantities),
the whole work subject to re-measurement. All the contractor tender on the same
measurement data.
Drawback: provide the best basis forestimating, tender comparison & financialadministrations.
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The contractor is responsible for carrying out all
the works as shown on drawings &specifications.
The contractor must calculate his TENDER SUM
ase upon e
SPECIFICATIONS.
The contractor will calculate his own quantities.
The contractor must submit & priced the
schedule of rates in order to value variations.
drawback: does not provide for easycomparison of tender sums.
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RE-MEASUREMENT
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RE-MEASUREMENT(contract sum to be ascertained
on completion)
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Schedule of Rates(adhoc/standard)
Approximate Bills ofQuantities
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The parties do not pre-agree any price for
the works as a whole. But they do pre-agree the rates of payment
to which the contractor shall be entitled.
Sometimes described as dayworks contract orcontract with approximate quantities.
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The cost of the works is calculated by applying anagreed schedule of rates to the work actuallydone.
The schedule is similar to a BQ but without thequantities.
Contractor is re uired to insert his rice a ainst
the items in the schedule. Alternatively, a priced schedule is prepared & the
contractor is asked to quote a percentageadjustment (plus @ minus) to the rates.
The contractor is paid for the actual workdoneaccording to the schedule of rates.
The total cost the project is unknown until the
works is completed. 33
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All the works would be re-measured upon
completion.
Approximate quantities are prepared & thecontract price is based upon the actual quantities
of works executed which are re-measured durin
the course of construction. Example: Civil Engineering Works
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COST
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COSTCOSTCOSTCOST
COSTCOSTCOSTCOST ++++ %%%%
COSTCOSTCOSTCOST ++++ FIXEDFIXEDFIXEDFIXED
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REIMBURSEMENTREIMBURSEMENTREIMBURSEMENTREIMBURSEMENT FEEFEEFEEFEE
COSTCOSTCOSTCOST ++++FLUCTUATINGFLUCTUATINGFLUCTUATINGFLUCTUATING
FEEFEEFEEFEE
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Also known as PRIME COST / COST PLUS because
the method of payment is by reimbursement tothe contractor of his prime cost plusmanagement fee.
r me cos means: e o a cos o e
contractors, of using & hiring plant & employing
labours to carry out construction works.
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Advantages
The time required for preparation of tender
document & for obtaining tender is minimized.
Early start on site to be made.Work on site may proceed before the detailed
desi n is com lete.
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Disadvantages
The parties have least indication of theircommitments.
Cost of construction to the client is greater. The computation & verification of the total
prime cost is a long & tedious process.
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Most uneconomical type of contract & should
only to be used in certain circumstances.
For example: where cost is less important factorthan time.
3 types:-
a. Cost Plus Percentage Feeb. Cost Plus Fixed Fee
c. Cost Plus Fluctuating Fee
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COST PLUSPERCENTAGE
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REIMBURSEMENTCONTRACT
COST PLUSVARIABLE FEE
COST PLUS FIXEDFEE
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Contractor is paid actual cost of the work
incurred plus a percentage of the actual cost, tocover his overhead & profit.
May provide schedules to determine the prime
cos .
No incentive to contractor to make good
progress or to save money because his fee rise
with the total cost of the job.
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The contractor is paid a fee equal to an agreed
% of the prime costs.
The fee paid to the contractor is a fixed sumwhich normally vary with the total prime cost.
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Due to uneconomic organization of the contract,
inefficiency & excessive waste, the total prime
cost was RM55,000.00.
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The contractors overhead still RM7,500 but theprofit would be RM3,500 [RM11,000 RM7,500]
More inefficient contractors operations, thegreater waste of resources, the higher fee paid
to the contractor.
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The fee is a fixed lump sum.
The fee remains constant even when cost vary.The contractor does not profit by increased
expenditure unless the nature of the work is
su s an a y a ere .
The contractor has more incentive to finish
quickly & minimize his profit as percentage
turnovers.
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The fee paid to the contractor is a fixed sum
which normally does not vary with the total
prime cost.
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Due uneconomic organization of the contract,
inefficiency & excessive waste, the total Prime
Cost RM60,000 (excess RM10,000), then thetotal cost would be:-
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Similar to fixed fee. An estimate is made of the
total cost. The amount of the fee received by the
contractor varies inversely to the costs actually
ac eve a s ng sca e.
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