Slqs pm spart2-blog

22ndnd Session Session

TACTICAL OUTLINE OFTACTICAL OUTLINE OF PROJECT PROGRESS PROJECT PROGRESS

MEASUREMENT SYSTEMMEASUREMENT SYSTEM

PMSPMS1

Owner wouldn’t like to be in a position where contractor is entitle for progress payment(s) and owner can not fulfil his contractual obligation. Failure of controlling the project cash flow will result in partially completed project and no money which may lead to considerable loses for both parties. (William,1977)

The cash flow in any project is facing the challenge due to The cash flow in any project is facing the challenge due to improper cash in-flowimproper cash in-flow. Generally, the cash in-flow will be . Generally, the cash in-flow will be calculated according to the number of days mentioned for calculated according to the number of days mentioned for payments in the governing conditions applicable to the payments in the governing conditions applicable to the contract.contract.

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• Different conditions are used in Qatar to govern the contracts. They are mainly:

- FIDIC 1987 (4th Edition)

- FIDIC 1999 (1st Edition)

- General Condition of Contract- 1999 (mostly for local contracts)

• FIDIC 1987 – Clause no. 60.2 – Monthly PaymentsFIDIC 1987 – Clause no. 60.2 – Monthly Payments

“The Engineer shall, within 28 days of receiving such statement, deliver to the employer an interim payment certificate,...”

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FIDIC 1987 – Clause no. 60.10 – Time for PaymentFIDIC 1987 – Clause no. 60.10 – Time for Payment“The amount due to the Contractor under any Interim Payment Certificate issued by the Engineer pursuant to this clause, or to any other term of the contract, shall subject to clause no. 47, be paid by the Employer to the Contractor within 28 days after such Interim Payment Certificate has been delivered to the Employer,...”

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FIDIC 1999 – Clause no. 14.6 – Issue of Interim Payment FIDIC 1999 – Clause no. 14.6 – Issue of Interim Payment CertificateCertificate

“No amount will be certified or paid until the Engineer has received and approved the performance security. Thereafter, the Engineer shall within 28 days after receiving a statement and supporting documents, issue to the Employer an Interim Payment Certificate which shall state the amount which the Engineer fairly determine to be due, which supporting particulars.”

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ENGINEER CERTIFICATE

CONTRACTOR SUBMIT MONTHLY

EMPLOYER RELEASE THE

PAYMENT

28 DAYS 28 DAYS

Consider a mega project of 5.0 billion worth contract value which should be completed within 3 years. The expected monthly payment will be approximately 138 million (this may vary according to the program).

Can we realize how serious this problem is?

How long will it take to prepare or review such a payment?

The answer is up to YOU!The answer is up to YOU!

(Imagine the workload and the time you need to check a million-worth monthly payment. )

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IT IS TIME TO SEEK ALTERNATIVE METHOD OF PAYMENT INSTEAD OF CONVENTIONAL METHOD

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ALTERNATIVE METHODS ALTERNATIVE METHODS OF PAYMENTOF PAYMENT

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1. Payments based on milestones1. Payments based on milestonesEach and every payment could be issued upon mutual agreement of both parties upon completion milestones. The contractor is entitled to claim for the work done for completion such milestones and employer must accept such payment request.In this case, employer is benefited as he is paying for the deliverables, but the contractor is not satisfied as there may be some portions of work not completed as milestones but he has incurred some expenses .

2. Payment based on in-house payment methodologies2. Payment based on in-house payment methodologiesSome companies are using their in-house payment methodologies. To apply these methodologies, both parties should agree for the method of payment and to be included in the contract. Even it is agreement of the two parties, certain government institutions (specially the Ministry of Finance-Qatar) may not accept such conditions.

3. Payments base on progress measurement system3. Payments base on progress measurement systemThis system is internationally accepted method of payment. A modification to milestone payment methodology included with % payment for uncompleted milestones. Specially in countries were there are no quantity surveying practice available are using this methodology.

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PROBLEMS IN PROGRESS MEASUREMENT METHODPROBLEMS IN PROGRESS MEASUREMENT METHOD Owner wouldn’t like to be in a position were Contractor will be over paid for

the actual work performed, (unearned profit and cancel effects of retention)

In the other hand, Contractor wouldn’t like to be in a position were he will be underpaid for the actual work performed.

If he’s paid only for the completed milestone, there will be a portion of work he has spent money but uncompleted. As he’s entitled for the payment for uncompleted milestones, still his cash inflow is affected. To be fair with his cash flow, while paying 100% for the completed milestone certain percentage for the uncompleted milestone also will be paid in PMS. (but compensated due to acceleration)

This method is not 100% accurate compared with the BOQ method. So this method could be considered as acceptable to both parties. Program should be prepared based on the BOQ items This method should be included in the Contract. (or ammended)

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Milestones (0/100) Method Vs Bill of Quantity MethodMilestones (0/100) Method Vs Bill of Quantity Method

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week

Progress Measurement SystemProgress Measurement System This methodology is much more faster than the BOQ This methodology is much more faster than the BOQ

methodology. methodology.

After taking-off the measurements for the completed work done for the BOQ items, and deriving amounts against them, we will calculate completed percentage of progress against each and every BOQ item and it will be the end result of the monthly evaluation.

This percentage evaluation will be the base document that will be subjected to the discussion in monthly progress meetings whether it is prepared by, either the quantity surveyor or the planning engineer.

Vice-versa, if we can compute the percentage completed for Vice-versa, if we can compute the percentage completed for any activity, we can derived the amount against that activity. any activity, we can derived the amount against that activity.

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Description Unit Qty. Rate Progress Amount (QR)

QR. previous This Period To Date Previous This Period To Date SECTION D                  

                 EXCAVATION & EARTHWORK                  

                 EXCAVATION                  

                 Excavation in isolated pits for foundations, depth not exceeding 1500mm m³

253.00 100.00

30.00% 35.00% 65.00% 7,590.00

8,855.00

16,445.00

                 Excavation in trenches for strip footings, depth not exceeding 1500mm m³

129.00

100.00

30.00% 35.00% 65.00%

3,870.00

4,515.00

8,385.00                  

Excavation for grade slab, depth not exceeding 1500mm m³

106.00

75.00

30.00% 35.00% 65.00%

2,385.00

2,782.50

5,167.50                  

FILLING                                   

Filling to excavations in layers with selected soil arising from excavations m³

280.00

65.00

20.00% 20.00% 40.00%

3,640.00

3,640.00

7,280.00                  

DISPOSAL                                   

Remove surplus excavated material from site to an approved legal tip stockpile for re-use as instructed by Engineer

m³

208.00

50.00 10.00% 20.00% 30.00%

1,040.00

2,080.00

3,120.00

To Collection      

18,525.00

21,872.50

40,397.50                    

Application of PMSApplication of PMS

• The reversed method of the BOQ measuring method is called as the Progress Measurement System.

Instead of calculating the quantities first and deriving the percentages based on the calculated quantities, method should be reversed. Accordingly, determine the percentages by some other method and compute the “quantities.”

How to determine the cumulative completed quantity?How to determine the cumulative completed quantity?

Generally, the completed percentage could be derived from the cost loaded program prepared based on the BOQ items. For this purpose, let us consider the preparation of a program.

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How to determine the cumulative How to determine the cumulative completed quantity?completed quantity?

Calculating each and every bit and pieces of measurement by checking the length, width and depth; by physical measurement or drawings is the conventional method used in quantity surveying practice for taking-off the measurements.

Instead of this long procedure, if we can use some other easy method for calculating the quantities of completed work activities it will definitely become easy methodology and sophisticated tool for the quantity surveyors.

There are many methodologies to calculate either total cumulative quantity completed or the quantity completed during the month, based on the nature of the activity. The methodology to be used should be agreed by both parties prior to adaptation.

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Requirements to be fulfilled while using this Requirements to be fulfilled while using this methodology:methodology:

1. Methodologies should be agreed by both parties.2. It should be included in the contract as a method

of measurement (save BOQ method as well).3. Quantity calculation should be substantiated.4. This methodology should not be applied for

preliminaries and general items. 5. Instead of using the BOQ as the base document use a

cost loaded program prepared based on the BOQ items.

6. Contractor must prepare all other preparatory works.

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ACTIVATING PMS IN A CONTRACTACTIVATING PMS IN A CONTRACT

A dispute may occur between owner and contractor about the appropriate payment amount if there is no agreement on how such amount will be determine. Therefore, progress payments shall be directly tied to the physical progress of the work accomplished on the project. (Fleming and Koppel[man, 2002) /9Fleming and Koppelman, 1995)

Before starting of work, contractor must present a measurable performance plan against which their performance may be measured to support payment. Contractor submits to owner a request for payment every month where he will certify the money have been expended and also include supporting documentation to demonstrate the physical work has been achieved during the month. The proposed work plan can be developed by using one of the following methods (Fleming and Koppelman, 2002) (Fleming and Koppelman, 1995)

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Schedule of ValuesSchedule of Values We can agree for the payments based on one document agreed by both

parties. It can be BOQ, drawings, specification, scope schedule or can be any other documented in the contract. If you’re not using the BOQ, scope schedule could be selected as the base document for the payments. For this purpose, approved cost loaded program could be utilized.

Schedule of values approach is the most common approach used in construction. It is a cost loaded breakout of the contract cost which prepared by contractor and verified by owner. Once agreement is reached, the proposed schedule of values is used throughout the project life to calculate physical performance. The schedule of values will be changed only to incorporate the authorized changes by owner.

Schedule of values has its potential risk to owner and it can be front loaded in favour of the contractor. Front loading is the over estimating the values of the early work task and offset the values of the later task which are correspondingly understated. Frontloading happens accidently or intentionally. Such potential risk can be offset by 10% retention value. However, there is no better than risk mitigation by assuring that the cost are weighted properly before approving the schedule of values.

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what are involve?

what are involve?

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what are involve?

what are involve?

ACTIVITYACTIVITY

WORK WORK PACKAGESPACKAGES

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RESOURCES LOADED CPM NETWORKRESOURCES LOADED CPM NETWORK This approach is a more recent development in the

construction industry. It requires contractor to develop a performance plan that take a form of critical path method (CPM) schedule and contains time-phased resources. This approach provides the following benefits to owner

1.) It demonstrates during contractor selection process that contractor is aware of project scope of work and he has a plan to demonstrate this fact.2.) It demonstrates that contractor is aware and has a plan for all the required resources.3.) Such plans can be used as a project baseline to monitor contractor performance and in approving all payments to contractor.

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DURATION UNIT QTY RATE AMNT %

FOUNDATIONS 24          

Excavation(pits)including level+comp 11 m3 253 100.00 25,300.00 11.05

Blinding - (100mm thick) 10 m2 210 50.00 10,500.00 4.59

Form work - 10 m2 244 65.00 15,860.00 6.93

Reinforcement-(6mm-20mm dia) 10 kg 15600 5.00 78,000.00 34.07

Concrete - footings 8 m3 79 500.00 39,500.00 17.25

Curing compound -spray 7 0 0 0.00 0.00 0.00

Protective Coating 7 m2 410 16.00 6,560.00 2.87

Waterproofing membrane-4mm SBS 7 m2 410 60.00 24,600.00 10.75

Back filling 7 m2 280 65.00 18,200.00 7.95

Disposal 7 m3 208 50.00 10,400.00 4.54

TOTAL     

  228,920.00 100.00

SIMILARLY WEIGHTAGE FACTOR COULD BE COMPARED WITH THE TOTAL CONTRACT PRICE.

MEASURING WORK PROGRESSMEASURING WORK PROGRESS Project is usually divided into several phases. Each phase contain

one or more deliverables. Number of activities and tasks need to be done to provide the deliverables for the definition, implementation and completion of each phase. The progress of activities and tasks can be measured using different methods. These methods are:

1. Unit Completed Method2. Incremental Milestones Method 3. Start/ Finish Method4. Opinion Method5. Cost Ratio Method6. Weighted or Equivalent Units Method

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Unit Completed Method is applicable to activities and tasks that are repeatable. The units of measurement that can be used in this method include linear, square are, cubic etc. The work to be measured may contain single or multiple tasks. Examples of using this method for single task could be pipe have been laid, the percent complete is founded by dividing 4,000 linear meters by 40,000 linear meters to show 10 percent complete. Examples for multiple tasks work could be placing and finishing a reinforced concrete. If 100 cubic meters of concrete to be poured and 40 cubic meters of concrete have been poured, the percent completed is founded by dividing 40 cubic meters by 100 cubic meters to show 40 percent complete. (AACE, 2003) (AACE, 2002) (Hamilton, 2001)

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UNIT COMPLETED METHODUNIT COMPLETED METHOD

Incremental Milestones Method is applicable to activities and tasks that must be handles in sequence.

Completing any subtask is considered to be the achievement of a milestone and each incremental milestone completed represents a certain percentage of the total installation work. The percentage allocated to each milestone in normally based on the number of work hours estimated to do that subtask in relation to the total work need to be done. (AACE, 2003) (AACE,2002) (Hamilton, 2001)

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INCREMENTAL MILESTONE METHODINCREMENTAL MILESTONE METHOD

Start/Finish Method is applicable to activities and tasks that are not readily definable into incremental milestones or those for which the effort/time required is very difficult to estimate. For such tasks, a percent complete is arbitrarily assigned to the start of a task and 100 percent is recorded when the task is completed.

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START/ FINISH METHODSTART/ FINISH METHOD

OPINION METHODOPINION METHOD In this method, an expert person usually assigns a percent

complete to the activity/task. This complete percentage is subjective and depends on personal judgment.

Cost Ratio Method is applicable to tasks and activities that take a long period of time or continue as long as the project life. Examples for such tasks and activities are project management, quality assurance and quality control, contract administration and project control. The percentage complete at any time is founded by evaluating the actual cost or work hours expended to that time divided by the forecast cost or work hours at completion. For example if the percent complete for project management need to be found at certain date given that 5,000 work hours are spent to date and 10,000 work hours are the total work hours forecast, then project management is 50 percent complete. (AACE,2003) (AACE, 2002) (Hamilton, 2001)

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COST RATIO METHODCOST RATIO METHOD

Weighted or Equivalent Units is applicable to activities and tasks that take a long period of time and composed of two or more overlapping subtasks. Each subtask measured with a different unit of work measurement. Structure steel erection is an example for which this method may be applied. The subtasks for structure steel erection could be run foundation bolts (each), shim (percent), shakeout (percent), columns (each), beams (each), cross braces (each), girts and sag rods (bay), plumb and align (percent), connection (each) and finally punch list (percent). Each subtask for structure steel erection has a different unit of measurement. To handle this, each subtask is weighted according to the estimated level of effort (usually work hours) that will be dedicated to that subtask. As quantities are completed for each subtask, the quantities are converted into equivalent work hours. (AACE, 2003) (AACE, 2002) (Hamilton, 2001)

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WEIGTHED OR EQUIVALENT UNITS WEIGTHED OR EQUIVALENT UNITS METHODMETHOD

The accuracy of progress measurement depends on two factors:1. Accuracy of the data collected for the work accomplished.

2. Accuracy of the total scope of work.The accuracy of the data collected can be achieved if the

physical quantities measured for progress are small enough that judgment factors used do not grossly affect any large quantities. Meeting this end takes time and effort in the initial setup phase of the progress measurement system. However, this is rewarded with easy updating of the system. (Toth, 1983)

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ACCURACY IN PROGRESS MEASUREMENTACCURACY IN PROGRESS MEASUREMENT

Under Lump Sum contract, contractor is given progress payment based on presentation of percentage complete together with the authorized budget for the completed work. This is earned value at its finest. However, earned value analysis cannot be completed with the aforesaid information as the actual cost spent by contractor is missing. Without the actual cost related to earned value achieved, the cost performance index (CPI) can not be determined. Contractor will not disclose to owner how much profit he is making on a project. Also, such information is not important to owner as his concern is to complete the project on or under the contract price. However, owner should be aware when contractor is incurring a loss as the bigger the loss the more likelihood the contractor may not complete the project. (Fleming and Koppelman, 2002) 32

EARNED VALUE ANALYSIS AND LUMP EARNED VALUE ANALYSIS AND LUMP SUM CONTRACTSUM CONTRACT

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Daily Activity Report

                                          Weather ReportDate :  

Project          :                            

Bright Day 

Contract No.:   Sunny Day  

Project Completion Date.   

:                       

   Rainy Day    

            Rainfall Chart

B.O.Q Labour Material Machine Remark

Item Unit Qty Privies Qty Current Qty Type Nos IN OUT Hrs Type Unit Used Type From To Hrs RemarksMeasurement or Location

Received Material Daily Progress NOTE

Type Unit Current Qty Privies Qty Cumulative Qty Supplier Name Current Rate Description Daily Cumulative     

             WORK TO BE DONE (as per Programme) - -    

             ACTUAL WORK DONE - -

             DIFFERENCE - -

  ……………………………………. …………………………………….

  Site Representative/ Engineer                                 Project Engineer / Contractor

1357911131517192123

13

5

7

9

1113

15

17

19

21

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Percentage IndicativesPercentage Indicatives

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DURATION UNIT QTY RATE AMNT % Eng procu cons tes&com as-built Remarks

FOUNDATIONS 24       228,920.00 100.00 5% 30% 58% 6% 1%  

Excavation(pits)including level+comp 11 m3 253 100.00 25,300.00 11.05            

Blinding - (100mm thick) 10 m2 210 50.00 10,500.00 4.59            

Form work - 10 m2 244 65.00 15,860.00 6.93            

Reinforcement-(6mm-20mm dia) 10 kg 15600 5.00 78,000.00 34.07            

Concrete - footings 8 m3 79 500.00 39,500.00 17.25            

 Curing compound -spray 7 0 0 0.00 0.00 0.00  

Protective Coating 7 m2 410 16.00 6,560.00 2.87            

Waterproofing membrane-4mm SBS 7 m2 410 60.00 24,600.00 10.75            

Back filling 7 m2 280 65.00 18,200.00 7.95            

Disposal 7 m3 208 50.00 10,400.00 4.54            

TOTAL         228,920.00 100.00

SIMILARLY WEIGHTAGE FACTOR COULD BE COMPARED WITH THE TOTAL CONTRACT PRICE.

THE ENDTHE END