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PROFESSIONAL PRACTICE

1.1 PROFESSION:

What is a profession? A profession includes:


A large body of specialized information and discipline
Mastery of this material and associated skills which is obtained through long standardized
period of education, training and apprenticeship
Regulation (education, quality, conduct etc.) by an association of experienced members
of the profession
Providing service to those who do not have this expertise

Besides these a profession is also required to:


Conduct research which improves the quality of their services and report findings not
only to their colleagues but also to the public
Maintain a caring relationship with the client or person/s served based on altruism, trust
and virtue

Based on the above criteria, determine whether architecture can be called a profession.

How is a profession different from a trade or an occupation, which also form associations
to monitor and regulate their work e.g. hairdressers, waiters, auto mechanics, shopkeepers
etc.? In most instances trades-people are not accountable for the quality of their product
whereas professionals do not sell products but services for which they are fully
accountable. Lately, consumer oriented laws are, however, forcing trades-people in
western countries to be more honest and accountable.

Professionals are different because:


they have obtained substantial and specialized education
they have to exercise discretion wisely. An auto mechanic may have one correct way of
fixing a problem, whereas, there could be very many good design solutions and the
architect has to make a wise decision from a large number of choices.
They have higher fiduciary (trust) responsibilities. This is characterized by good faith and
loyalty and exercise of skills and intelligence on behalf of the beneficiary at all times.
Unlike trades-people, professionals are not guided by profit considerations alone – you
don’t need to check the scales every time. The duty of the professional is to place the
client’s interest above one’s own and the public interest above both.
Trade includes manufacture, purchase, sale or resale of commodities whereas a
professional has nothing to sell except his knowledge and skills. He does not advertise his
skills or work unlike the trades-people who are heavily dependent on advertising of their
product to attract buyers,

The relationship of the professional with whom s/he works (colleagues and other
specialists) and people s/he serves (client or public) is consensual and fiduciary. The
professional:
Needs to provide client with good judgment and learning – act as the client’s expert
advisor. Oliver North’s attorney objected to questioning by US Senators as he felt that his
role was not to sit idly while his client was facing serious legal difficulties.
Needs to provide clients with information and options so the clients have the opportunity
to understand the situation and make the best choice of action. Must have no conflict of
interest with the client.
Needs to have diligent self-policing of incompetence as well as of intentional misconduct
and abuse. This is the true hallmark of professionalism. Earlier professionals were
expected to exercise good judgment and fair dealing. To ensure these were rigorously
maintained professional codes of conduct or ethical standards were established to
improve the standard of practice and policing of the profession. However, the codes have
often been used to determine if actions fit into the approved ethical guidelines rather than
whether the underlying concept of good judgment and fair dealing have been meted out
to the client, public or the profession.

1.2 PROFESSIONAL ETHICS

Ethics is a set of moral values which define what actions we take are “right” and what are
the principles for the “good”. The subject of ethics is best left to the philosophers as it is
very difficult to come to specific terms. It has often been argued that teaching ethics is
useless, as it is a trait acquired from childhood to maturation. What is not arguable is that
architecture students need to be made aware of the ethical standards expected of a
professional architect.

It is expected that an architect maintain high moral and ethical obligations to the public to
whom service is rendered. In a public opinion poll in the US in the mid 90’s architects
were rated higher in ethical behaviour to lawyers and some medical doctors and almost
all business people. The clergy was ranked the highest. Ironically, in Nepal the priests
would probably be rated one of the lowest and the architect probably in a favourable
position.

Professional ethics are established to codify those standards of ethical behaviour which
members of a professional organization must adhere to. The main problem in ethical
behaviour comes when self-interest, guided or not by practical ethics, differs from our
professional ethics. Pragmatic and self-interest concerns are always present in practice
but our main obligation should always be to our client, users of the buildings as well as
the general public. However, when an architect faces financial ruin and loss of firm,
practical ethics may cause him to deviate from strict adherence to the code. Nonetheless,
he may not disobey the law.

The code of ethics calls for the obligation of its members to obey the law. A violation of
the law is a violation of the code of ethics, however, some violations of the code may not
be unlawful. Actions against some laws have been deemed morally right in certain
circumstances e.g. civil rights movement, antiapartheid actions, democratic movement
during Panchayat and Rana era etc.
1.2.1 Brief Look at AIA and RIBA codes

Earlier the American Institute of Architects had two sections to the code: advisory and
mandatory – “Responsibilities of the Profession, Advisory” and “Standards of Behaviour
… Mandatory for Membership”. This was later changed in 1993 to goals that architects
should aspire (as opposed to responsibilities) and rules of conduct which are obligatory
(as opposed to mandatory). Some of the highlights of the earlier documents were:

Part One: Obligatory


Architect to maintain highest integrity
Architect’s honesty of purpose must be above suspicion
Moral responsibilities to associates and subordinates
Act with entire impartiality (between all parties in a project)

Part Two: Mandatory


Architect can only be compensated by his fees for work done on the project
No service without compensation (no free sketches except for established clients)
Architect shall not compete for a project on a fee basis
Architect shall not injure the professional reputation, prospect or business of a fellow
architect. He shall not attempt to supplant another architect or undertake a commission
for which another has been previously employed until he has determined that the original
employment has been terminated.
Architect cannot be employed for a project for which he has been an advisor
Architect shall avoid paid publicity
Architect shall not guarantee the cost of the project
Mandatory adherence to these standards.

In the 1993 AIA Document 330, these rules were changed to allow submitting
competitive bidding, providing discounts and providing free service because of action by
the Justice Department based on the concept that common good is “right”. Supplanting
rules were also changed. The five obligatory rules of 1993 documents included: General
Obligations, Obligations to the Public, Obligation to the Client, Obligation to the
Profession and Obligation to the Colleagues.

If an architect is found to have breached the code of conduct, the Council can investigate
the matter and either reprimand or suspend the architect. Suspension from the Council
leads to his cancellation of his right to practice.

The Royal Institute of British Architects also has codes of conduct very similar to the
AIA codes. It consists of three principles. The first principle deals mainly with agreeing
to the conditions of appointment and agreed fees, not sub-letting work without the
permission of the client and acting impartially in the interpretation of the building
contract. Principle two deals with informing client about any conflict of interest, not
advertising and giving credit to works of employees. Principle three deals with giving
correct information, not offering gifts or discounts to gain work and not supplanting
another architect unless his appointment has been terminated. A member proven to have
breached the code of conduct can be reprimanded, suspended or expelled from the
Institute, in which case he would be unable to practice architecture.

1.2.2 SCAEF Code of Conduct

The Society of Nepalese Architects (SONA) does not as yet have a code of ethics,
however, these are expected to be prepared in the near future.

The Society of Consulting Architectural and Engineering Firms (SCAEF), which has
been in existence since November 1990 has a code of ethics applicable to its members.
As of 2001, out of the 39 members 8 firms are mainly engaged in architectural works.
The SCAEF codes are a revised and improved version of the Code of Ethics for
Engineers first prepared by the Nepal Engineers’ Association (NEA) in 1969. The NEA
code of ethics laid out ethical conduct under 3 headings: 1) Relations with the Public 2)
Relations with the Employer and Client and 3) Relation with Engineers. This was later
expanded by SCAEF to 5 sections: 1) Responsibility towards the Nation 2)
Responsibility towards the Client 3) Responsibility towards the Profession 4)
Responsibility towards Fellow Professionals and 5) Client’s Responsibility towards the
Consulting Engineer.

The fundamental principles of professional engineering ethics are:


The Engineer will uphold and advance the honour and dignity of the engineering
profession in keeping with the high standards of ethical conduct:
Will be honest, fair and will serve with devotion his employer, his client and the public
Will dedicate himself to the advancement of the competence of the engineering
profession
Will use his knowledge and skills in the service of humanity

Responsibility towards the Nation


Moral Responsibility – towards community/ gain public’s confidence
Involvement in Community Development
Refrain from Work which is against National Interest – against national interest,
endanger human race or environment

Responsibility towards the Client


To gain and Maintain Client’s Confidence
To be Loyal to Client – use best technical knowledge and skills
To Protect Interest of the Client – with absolute professional integrity
To Safeguard Client’s Confidential Information
To disclose any Conflict of Interest

Responsibility towards the Profession


The Necessity of Formal Qualification
Refrain from Claiming Skill not in his Profession
The Need to Exercise Greater Skill in Specialized Jobs – exercise best judgment and
advise client accordingly
Need for High Quality of Skills
Eligibility for Agreed Remuneration only
Refrain from Holding Position Where There is Conflict of Interests
Need for Professional Development – exchange of professional experiences

Responsibility towards Fellow Professionals


Respect Fellow Professionals – not undermine professional credibility of others
Refrain from Unhealthy Professional Rivalry
Refrain from Associating with Undesirable Firms/ Individuals

Client’s Responsibility towards the Consulting Engineer


Selection of Consulting Engineers on Merit Basis
Payment of Agreed Fees as per Agreed Payment Schedule
Respect for Professional Relationship
Acceptance of Consequences Arising from Deviation of Advice
Relation with Third Party

Analyze clause by clause how closely members are adhering to the above codes.

Unlike the AIA, RIBA, IIA or even the Nepal Engineering Council acts, expulsion from
membership of SCAEF for a breach of code does not hinder the member from practicing.
Also SCAEF tends to be exclusive and somewhat elitist as its members consist only of
larger, more established firms.

Some of the drawbacks of the SCAEF code of ethics


How can an architect or Engineer be accountable for the actions of the client? The
clauses are more appropriate for inclusion in the Contract Agreement rather than as part
of the code of conduct of SCAEF members.
Concern shown only for fellow professionals. Silent about appropriate/adequate
compensation and working conditions for subordinate and employee professionals and
providing opportunity for their professional development, which is expressly stated in the
NEA codes.
No specific mention against discounts, commissions, gifts or other inducements
No mention about giving due recognition to the professional contribution of employees.

The Architects Professional Conduct Regulations 1989 India contains most of the clauses
of SCAEF except the clauses on the responsibility of the client. In addition, it includes
the clauses on giving proper recognition, remuneration and working environment etc. to
employees. It disallows discounts and commissions and advertising. It stipulates
members to follow specified competition guidelines and fee structures for services
rendered. The Architects’ Council of India can look into complaints of misconduct and if
found guilty, the architect can be reprimanded or removed from the register after which
the architect would be barred from practicing in India.
1.2.3 Nepal Engineering Council Act and Code of Conduct

The Nepal Engineering Council Act 2055 became effective since 11 March 1999. As per
the Act one has to be registered with the Council in order to be able to practice
engineering in Nepal. Since Nepal does not have a separate Architects’ Council,
architects have to register with the Nepal Engineering Council in order to practice in
Nepal. This is the only statute regarding engineering practice. SONA or SCAEF do not
have any statutory backing and serve only as professional associations that have no
authority to stop any member or non-member from practicing in Nepal.

The Council has the authority to prepare policies, plans and programs for engineering
services; award recognition to institutions providing engineering education; determine
minimum qualifications for practicing engineering and to strike out from its register the
names of those who violate the professional code of conduct. Since the Council is still in
its infancy, it has not as yet begun its regulatory functions. These are expected to be taken
up once the Council is more established and begins to function smoothly.

The Council has prepared a brief code of conduct for its members. The main elements of
the code are:
To practice engineering profession with discipline and honesty for the welfare and
honour of the profession
To maintain good relations with the client and to keep confidential all information related
to his work
Not to discriminate against the client because of his religion, race, gender, caste or any
other reason
Not to accept any financial benefits other than professional remuneration and related
facilities
To remain accountable for one’s professional services
To disclose the name, designation and registration number in all the drawings and
documents
Not to advertise in a way which would unnecessarily influence clients

If a complaint is received against a member for a breach of code of conduct and the
investigation committee of the Council finds him guilty, he will be suspended from
membership and his name will be removed from the register of the Council. He will then
be prevented from practicing until he is again reinstated by the Council.

1.3 DISCUSSIONS OF CASE STUDIES OF PROFESSIONAL CONDUCT

Example of misconduct – undercutting of fees, commission from contractor, collusion


with project manager, inflating the bill of quantities etc.
Example of high professional conduct –
Citicorp Centre in Midtown Manhattan. Building raised on 4 nine-storey high columns
placed at the centre of each elevation. Architect Hugh Stubbins Jr.; William J.
LeMessurier (pronounced Lemeasure), leading structural engineer, designed the 25,000
ton steel skeleton under the 59 storey tower’s sleek aluminium skin.
In 1978 a student calls to tell his professor thinks column placement wrong. Column
design result of compromise to rebuild the existing St. Peter’s Church. Buildings corners
cantilevered out 72’ out over church and plaza, dramatic effect. LeMessurier explains
structure best solution to cover quartering winds. New York City’s building codes
required adequate strength in perpendicular winds which had been determined safe. In the
spirit of intellectual play, he decided to check for winds at 45° and was surprised to
discover strain on bracing increased by 40%. When cross-checking he found that welding
at joints had been changed to bolted joints to reduce cost as well over designed strength.
He had doubts about bolted joints’ ability to withstand quartering winds. Consulted
leading Canadian engineer Alan Davenport who ran tests in wind tunnel, which
confirmed his fears. Calculations showed joint at 30th floor would fail in a 16 year storm
and with dampers in a 55 year storm but high chances of electricity to control dampers
failing during storm. Additional welding at joints required. To prevent disaster
LeMessurier decided to blow the whistle despite knowledge this could lead to possible
protracted legal action, bankruptcy and professional disgrace. Would definitely be a
shock to Citicorp management and shareholders. Contemplated keeping silent, even
suicide. Grilled by company lawyers. Leslie Robertson, structural consultant for the
World Trade Centre brought in review design. LeMessurier and Stubbins went to meet
the chairman of Citicorp who was very supportive. Department of Buildings informed.
But, efforts taken not to leak information to avoid panic. Evacuation plans prepared,
constant watch of weather and damper. Robertson, constantly monitoring the building
and progress. Citicorp released bland press release. Qualified welders hired to conduct
welding after office hours throughout the night. Strengthening carried out successfully.
Building can now withstand 500 year storm. LeMessurier sued by Citicorp for $4.3
million but settled for $2 million which was the limit of insurance coverage. Example of
no villians and all heroes.

Reference:
Legal and Contractual Procedures for Architects; Bob Greenstreet and David Chappell;
1996.
Nepal Engineering Council Regulations; Nepal Engineering Council, 2057.
Report on Consulting Architectural and Engineering Industry in Nepal; The Task Force
on Consulting A & E Industry in Nepal; 1990
Professional Practice: A Compendium of Business and Management Strategies in
Architecture; Andy Pressman; 1997

2. PROFESSIONAL RELATIONSHIP

2.1 ARCHITECT-CLIENT RELATIONSHIP

For the practicing architect, attracting and retaining fee-paying clients is a matter of
survival. In the US, out of over 13,000 architecture firms owned by AIA members, only
5% employed more than 10 architects while 62% were one-person firms and growing. In
India out of over 23406 registered architects in 1998, 10% were in the public sector, 30%
in the private sector while 60% were self-employed. In Nepal as employment
opportunities in the public and semi-public sectors become saturated, the trend towards
individual private practice will have to be expanded. Currently less than 5% of the
buildings in Nepal are designed by architects and the majority of the architects are
concentrated in Kathmandu Valley. If the percentage of buildings designed by architects
can be increased and architects begin practice in the rapidly urbanizing centers of the
country, the scope for private practice is quite significant.

The success of private practice hinges on successful client-architect relationship.


Professional organizations recognize this and include it in their code of ethics.
Breakdown in relationship is less from failure in design and more often due to breakdown
in the contractual relationship due to misunderstanding, miscommunication or general
lack of comprehension of the relative responsibilities of both parties. It is important,
therefore, for both parties to have a clear understanding not only of their own rights,
responsibilities and duties but also of the other party. This understanding can be brought
about through discussions, letters, recorded minutes of meetings etc., however, use of
contracts is one of the most convenient ways of establishing the ground rules. Although
one can produce one’s own contract, uses of standardized contracts ensure that important
issues are not left out. They have been continuously reviewed and revised and tend to be
fair to both parties.

For the meeting of minds to be successful, two conditions must be fulfilled:


The relationship needs to be detailed out as much as possible so that both parties
understand them fully
The understanding needs to be achieved BEFORE the contractual relationship has been
formalized

The AIA, RIBA have various types of standardized agreements. The Indian Institute of
Architect also recommends the use of a standard contract agreement. SONA has yet to
produce its own set of contract documents, whereas, SCAEF has a standard agreement
based on FIDIC and ADB documents. Many projects being implemented in Nepal
through donor funding have to use the contract agreements of the concerned agencies e.g.
the World Bank, ADB, UN, USAID etc.

The contract document also allows the architect to “educate” the would-be client on the
roles and responsibilities of each side and conversely what is NOT part of the basic
services. The standard agreements always specify the basic services to be provided. This
helps to protect the architect against unrealistic expectations of the client and also alerts
the client to his role during the period of the contract. Although this appears to be a
tedious task, not as interesting as discussing design and also has the possibility of
frightening off a few clients, it is better to lose an uncertain client before the work begins
rather than during the process. Architects are most vulnerable to working for a client on a
verbal or informal basis in the beginning of their careers because of the need to grab any
client at any cost. As a result they are overworked and underpaid. Example – client in
Baneshwore demanding daily site visits delayed payment, conflict.

When dealing with a client, a few things which need to be kept in mind:

Time to Sign Contract


It is quite common for architects to produce a few sketch designs at preliminary meetings
with the client before signing a contract. This is not necessarily a bad practice as it is akin
to “fishing” and helps secure the client. But such work should be limited and agreement
should be entered into within a reasonable period of time. In Nepal certain clients are
notorious for trying to milk architects for designs, simultaneously engaging two or more,
and finally getting the agreeable design developed cheaply through an overseer or
draftsman. It is often very difficult to deny clients when they request to take the sketches
to discuss with family and friends. They should be judged carefully before parting with
such sketches. When the client tends to prolong the signing of an agreement, the future of
the relationship needs to be carefully evaluated. Better to lose a potentially troublesome
client than to risk problems later on. Architects in heavy demand or with substantial
workload can charge for preliminary works, but this may not be possible for beginners.

Clarifying Client’s Requirements


Sometimes a client has difficulty clarifying his requirements and despite a lot of work the
architect cannot satisfy him. To safeguard against this, at the outset it must be made very
clear to the client that the architect is paid to review and clarify the client’s program. If
the client is vague about his requirements and needs substantial assistance from the
architect to gather and analyze necessary information (market studies, field studies, soil
investigations etc.), he should be informed that additional fees will be required.

When to Stop Designing


The architect is supposed to provide a design which fulfills the client’s expectations.
Sometimes some clients are very difficult to please and the architect has to produce a
continuous stream of drawings causing him to overrun his budget. It is possible to limit
the number of sketch design at the contract stage, especially if such a situation can be
foreseen. However, this requires the client’s agreement and he may be reluctant to setting
limits. Fees can also be set according to the amount of work done, but again the client
may not agree to this. Nonetheless, it pays to plan for such contingencies to prevent
problems later on.

Accuracy of Estimate
During the early phase of design, the client needs to be given only preliminary cost of the
project. However, care must be taken to keep the cost fairly accurate. Many consultants
in Nepal tend to deliberately provide underestimates to the clients in order not to scare
them off. This is not a good practice as it unnecessarily puts the client in a financial
difficulty later on which could be harmful to the future relationship. Detailed estimates
need to be prepared before bids are invited. Certain consultants have been known to
deliberately inflate and underestimate certain items and later delete them or include them
as additional items. This is done with bad intentions and made known to certain
contractors so they can outbid others by quoting unrealistically low or high prices for
these items.

Delays Beyond Architect’s Control


Delays can occur in getting necessary approvals/ agreements, financing etc. where
architect has no obligation to expedite the process. The client should be made fully aware
of any such delays. There should be no misleading of the client. If long delays are
foreseen in some projects (legal/financial etc.) it may be wise to include limits to project
extension periods.

Extent of Services
There is a tendency to think that the role of the architect as advisor and consultant more
or less covers everything about building design and construction. Both clients and
architects often fall into this trap. Architects could be providing too many services for too
little fees. It is advisable to prepare clear terms of reference (TOR) for the architect’s
services, clarify the TOR to the client and include it in the contract. This will avoid over-
expectation of services from the client.

Site Visits
Site visits should be made at appropriate intervals depending on the stage and nature of
the project (setting out, before cover-up, reinforcement, concreting etc.). The contract
agreement should be, however, be thoroughly studied while advising on site work or
conditions and process should be followed accordingly. Misunderstanding of instructions
can lead to conflict between client, contractor and architect.

Architect’s Fees
The amount and timing of the architect’s fees is very important for the smooth
functioning and proper financial management of the firm. In many instances architects
face difficulty in receiving timely payments, putting him into financial crises and
completely disrupting his plans. Often a certain percentage of the fees is never paid at all
and payment of fees is an issue that often brings about conflict in the client-architect
relationship. Thus mode of payment, payment amount or percentage etc. must be clearly
stated in the contract agreement and must be made clear to the client. Despite all the care,
certain clients are always reluctant to make timely payments. Therefore, it is good
practice to promptly submit bills, maintain excellent records of all transactions and keep
sending polite reminders. Although legal action is possible, it should be done only after
careful consideration because of the cost, time and potential public relations damage.

2.2 ARCHITECT- CONTRACTOR RELATIONSHIP

Although there is a contract agreement between the owner and architect and the owner
and the contractor, there is no contract between the architect and contractor to guide and
formalize their relationship. However, the contract agreement between the owner and
contractor (the standard HMG document is based on the World Bank’s small contracts
format while the documents used by SCAEF and ADB are based on the FIDIC format)
gives certain rights to the architect (designated as “Engineer” in many of the standard
documents) associated with his contractual duties to the owner. The documents also
specify responsibilities of the architect to both the owner and the contractor. It is while
trying to balance his duties to the two parties that he faces potential problems, especially
with regard to accuracy of drawings, specifications and contract documents; certification
of progress payments; review and approval of work, substantial completion certificate
and claims. To carry out the balancing act properly, the architect should strive to gain the
respect rather friendship of both the parties.
The contract document designates the Project Engineer/manager (who normally
represents the architect at the site) as the main line of communication between the client
and the contractor. Since the architect is vested with the authority to receive and give
instructions on behalf of the owner, the architect’s action or lack of it, makes the owner
liable to the contractor for the architect’s improper actions. The owner also expects to
recoup any losses incurred due to the architect’s action/inaction. The owner expects the
architect’s full loyalty in protecting the owner against poor workmanship and excess
costs. However, as per the contract, the architect, despite being hired by the owner, is
expected to act impartially between the two parties. A few areas of potential problems
are:

Errors in Drawings and Estimates


As per the contract documents, the contractor is responsible for the careful review of
drawings, specifications, estimates etc. and pointing out any errors, omissions or
inconsistencies. This does not cover review to ascertain whether the drawings are in
accordance with applicable laws or building codes. Genuine claims by contractors can
arise due to errors in the drawings and documents, whereas, the owner may be reluctant
to bear the additional costs. The architect has to objectively deal with such conflicts.

Construction Supervision
The architect has the authority to ascertain that works are being undertaken as per the
contract. He has the authority to reject defective materials and construction, make
variations, certify payments etc., however, he needs to carefully follow the procedure
spelled out in the contract. He can ask for testing of works which if found proper has to
be paid for by the owner. The owner expects the architect to favour him during such
decisions while the contractor may question the objectivity of the architect. The architect
is expected to act fairly towards both the parties; however, he may be put under great
pressure by the owner, especially if the owner happens to be the government or a large
institution.

Changes to the Construction Contract


Changes in the construction contract are quite common due to problems in the drawings,
specifications, site conditions, weather, acts of God etc. Sometimes the owner orders
extra work. Change orders can sometimes effect the profit or loss situation of the
contractor if loss making items are increased or profit items are deleted unreasonably.
The associated time extensions also affect the contractor if there are bonuses or liquidated
damages built into the contract. When there is mutual agreement between the owner,
architect and the contractor, the change orders can be executed without problems.
However, even if the contractor disagrees, he is obligated to perform the work whether
agreement is reached or not. Owners are also very sensitive to changes as they increase
cost. Some owners even insist on deleting items to reduce costs. Thus the architect needs
to be very careful while making change orders in the contract as he could come under
attack from both the parties.

In certain circumstances, the architect needs to be extra careful about requests for change,
especially if he suspects there is collusion between the owner and the contractor. This is
not unusual if the owner is the government and is represented by corrupt bureaucrats. In
case of legal action, the architect is liable to be made the scapegoat. Because of such
malfeasance the World Bank and ADB have now made it mandatory to include a clause
on corrupt and fraudulent practices which can terminate a contract and blacklist a
contractor. This clause becomes completely redundant when the owner himself colludes
with the contractor. In such severe situations the architect has to be vary careful and may
even have to consider terminating his agreement. Example of an architect who wanted to
cancel the tenders because of suspicion of collusion among contractors during bidding
and the owner insisting on continuing giving the excuse of excessive time loss in re-
bidding. Unfortunately, there are also innumerable examples of architect’s colluding with
contractors as well as with clients.

4. Disputes
The architect is given the power to resolve all claims and disputes between the client and
the contractor, including any claims arising out of the architect’s errors or omissions.
Unfortunately, many contractors tend to discount the architect’s ability to be fair in
determining disputes between the owner and the contractor and prefer to refer them to
arbitration. As arbitration involves extra time and cost, it is important that the architect
resolve claims and disputes fairly so that the contractor builds more faith on his
neutrality.

Payments
The architect has to process the contractor’s interim and final payment requests. Care has
to be taken against “front-end loading” or excessively high or low rates for certain items
in the contract. He should consider asking for additional guarantees if he feels such
imbalance could affect the smooth performance of the contract. Payment is a sensitive
issue as the owner does not want to pay for work not performed while the contractor does
not want to continue work unnecessarily at his own expense. The architect needs to
certify payments within the stipulated time period. Unless there are valid reasons e.g.
defective works, persistent delays, failure to pay subcontractors etc., the architect should
not unreasonably withhold payment certification as it can be very financially damaging
for the contractor. While processing of payment requests need to be as thorough as
possible, minor errors or omissions can easily be adjusted in the subsequent bills.

Project Completion
It is the architect’s responsibility to certify substantial completion and final completion of
the project. After substantial completion, a significant proportion of the retention money
is released, building use is permitted, liquidated damages period is terminated, defects
liability period is commenced and preparation of final bills initiated. Before certification,
a joint inspection is made and a list of minor items to be completed is prepared. Conflicts
can arise during the preparation of the list or determining whether the substantial
completion certificate can be issued as it involves large financial outcome.

2.3 ARCHITECT’S RELATIONSHIP WITH OTHER CONSULTANTS AND STAFF

Consultants
When a construction project requires certain services outside the normal services offered
by the architect, on the advice of the architect, the owner may employ specialists. This is
common for a one person practice. Separate contracts should be made with the specialists
so that the architect is not made liable for the specialists’ work. Some of these specialist
services are town planning, quantity surveying, structural engineering, mechanical
engineering, electrical engineering, interior design, landscape design etc. Often it is more
practical and profitable, especially for an architectural firm, to include these services
within its normal services in which case it must increase the fees to account for payments
to be made to the consultants. When the architect takes on the full responsibility of
providing the specialist services, he is liable for their performance so he must ensure their
work is undertaken with skill and care. He also needs to make the owner clear about such
an arrangement as he has to bear their costs. Where the specialists’ inputs form a part of
the architect’s services, it is advisable for the architect to sign an agreement with the
specialists prior to the commencement of the work, clearly outlining the scope of
services, responsibilities, terms of payment, duration of services etc. in order to avoid
misunderstanding and conflict later on.

When dealing with fellow architects, the architect should not try to compete with them
unfairly i.e. by reducing fees, offering discounts or other inducements in order to
undercut their fees. He also should not discredit or try to undermine the professional
credibility of other architects. Until and unless it has been determined that the contract of
an architect has been terminated in a fair and proper manner, no attempt should be made
to supplant that architect. Such actions not only create problems among architects, they
are in breach of the code of ethics of architects.

Staff
The architect should take every care to ensure the health, safety and general welfare of
his employees as far as he reasonably can. This includes providing a proper working
environment, training and social benefits. Although a contract is not generally necessary
for employees, a statement of the terms of employment should be provided. The terms of
employment should generally include:
Names of parties
Date of commencement of employment
Wage or salary rates
Payment intervals
Working hours
Benefits such as paid leave, sick leave, insurance, provident fund, pensions, gratuity etc.
Job title and job description
If the employment is for a fixed period, the date of expiry of employment
Restrictions on private work, if any
Position as to copyright

Certain obligations are implied on both the architect and his staff after employment. It is
the duty of the architect to provide work, wages, take reasonable care of the employee’s
safety and indemnify them against liability in the proper performance of their duties. He
should also recognize and respect the professional contribution of his employees,
associates and consultants. Similarly, it is the duty of the staff to work honestly and
faithfully and not to permit personal interests to conflict with their duties. They should
use reasonable skill and care in performing their jobs and to indemnify the architect
against liability incurred as a result of a breach of duty.

Reference:
Professional Practice; Dr. Roshan H. Namavati; 1997.
Professional Practice: A Compendium of Business and Management Strategies in
Architecture; Andy Pressman; 1997.
Legal and Contractual Procedures for Architects; Bob Greenstreet and David Chappell;
1996.

3. PROCEDURE OF HIRING A/E CONSULTANTS

3.1 DIFFERENT PROCEDURES

Basically there are three ways of engaging architectural and engineering firms: direct
engagement, selection by ability and selection through design competition. Direct
engagement of consultants is not permitted by the Financial Administration Rules (FAR)
of Nepal for public works, except for very minor works. However, this procedure is very
common among private clients who are not bound by any such legal provisions. This
process is normally followed for engaging consultants with high reputation, for
specialized works or
when the client has a good relationship or trust with a particular consultant. The biggest
advantage of this procedure is that least amount of time is spent in the selection process
and work is entrusted to a reputed or known and trusted consultant. The drawback of this
process is that the client has to depend upon the skill and knowledge of a single
consultant. He does not have a choice of design options as in a design competition.

The process of selection by ability is mandated by FAR Nepal and is most commonly
adopted by bilateral and multilateral agencies in Nepal. The consultant is selected after
evaluating the technical proposals submitted by all the participating firms. The advantage
is that the firm with the best technical capability is selected for the work. The
disadvantage is that it takes much longer to select the consultant. The choice is also
limited to a single proposal and there is no guarantee that the consultant with the best
evaluated ability will produce the best design.

Selection through design competition is usually resorted to when the project is prestigious
or significantly large and complex. The biggest advantage of this process is that it allows
the selection of the best design proposal among many alternatives. The client can actually
see and choose among finished design products before hiring the consultants, whereas, in
the other processes the client is unsure of what he will get at the time of engaging the
consultant. Design competitions also give less experienced or less well known
consultants who may be more talented than established but less creative designers an
opportunity to display their skills, although this chance is denied to them in limited
competitions. The disadvantage is that the process is quite time consuming and extra
costs are incurred for conducting the competition, for prizes, honoraria etc. In case of
start-up firms winning the competition, there is the danger that they may not be
financially and technically capable of executing the project. In such a case, the firms are
often asked to enter into joint venture with a more established and experienced firm.

3.2 FINANCIAL ADMINISTRATION REGULATIONS

The selection of consultants for all Government works is governed by the Financial
Administration Regulations (FAR). According to FAR:
Consultants can be selected through direct negotiations if the fees are less than one lakh
rupees;
For works which have consultancy fees ranging from rupees one to five lakhs, sealed
tenders will be invited from consultants comprising of separate technical and financial
proposals;
For works with consultancy fees exceeding rupees five lakhs, sealed technical and
financial proposals will be invited from consultants;
HMG can request for technical and financial proposals from any institution in which it
has more than 50% share and conduct direct negotiations with it based on the proposals.
(This provision appears to have been included to enable HMG to award work directly to
NEPECON and avoid the sometimes lengthy and tedious process of selecting consultants
through the two envelope system. Of late there has been some criticism that NEPECON
does not have the technical capability of undertaking some of the works and sublets them
to local consulting firms, thereby acting more as a commission agent rather than a
consulting agency);
For consultancy services of smaller and general nature, the fees should not exceed 3% of
the total cost of the project.

Invitation notice to consultants along with the TOR of the project works will have to be
published in a national newspaper and the firms will have to submit details of their office,
CVs of their professional employees and income tax certificates. For projects with fees
ranging from one to five lakh rupees, 15 days will be allowed for submitting the technical
and financial proposals while 15-35 days will be allowed for the projects with fees in
excess of five lakh rupees.

Where loan or grant agreements make specific provisions for joint venture between
foreign and local consultants, the consultancy services will be awarded only if local firms
are included as JV partners. In situations where local consulting firms compete with
foreign firms, the local firms will be awarded the contract even when their proposed fees
are higher by up to 10% than that of the foreign firm.

Before opening the technical and financial proposals appropriate criteria will be prepared
based on:
Experience, qualification and competence of the firm
Qualification and work experience of the proposed personnel
Work methodology, time schedule and manpower requirements
Possession of related technical equipment
Administrative and financial condition of the firm

All the technical proposals of the firms will be evaluated according to the approved
criteria and a list of all firms scoring higher than 60% will be prepared. In case there are
less than three firms scoring more than 60%, the firm scoring highest among those
scoring more than 50% will be included in the list. The financial proposals of only those
firms which are included in the final list will be opened for further evaluation. During the
second stage of evaluation, the financial proposals will be provided a weightage of 60%
while the financial proposals will be given a weightage of 40%. The firm with the highest
score will then be invited to sign the agreement. If the first ranking firm is not found
appropriate, the contract will be awarded to the next highest ranking firm. The fees for
the entire works from feasibility studies, research, design, drawings and specifications to
construction supervision should not exceed 10% of the cost of project. Special approval
will have to be obtained if this ceiling is exceeded.

3.3 SELECTION BY EVALUATION OF TECHNICAL ABILITY

In this method the architect/consulting firm is chosen by the client based on technical
competence, managerial ability, availability of resources in terms of finance and
professional manpower, fee structure etc. Emphasis is given to technical competence
rather than fee structure. Many firms tend to compensate for their lack technical
competence by proposing low fees. Therefore, negotiation of fees is carried out only after
the technical capability of the firm has been confirmed. One of the problems of this
process is that it favors the larger and more established firms as start-up or smaller firms
rarely have the requisite experience, manpower or finance to compete with the larger
firms. Smaller firms have often been heard to complain that this process helps larger
firms to form a cartel which prevents smaller firms from competing for large and
profitable projects.

The procedures for selecting a consultant are as follows:


Preparation of a terms of reference
Formation of an evaluation committee
Preparation of evaluation criteria for selecting consultants
Preparation of a long-list of consulting firms
Preparation of a short list of consulting firms
Invitation of proposals from short listed firms
Evaluation of technical proposals
Negotiating and signing of contract

Typical Terms of Reference


The terms of reference are prepared to define the objectives and scope of the proposed
services, advise the prospective consultants about the scope of work at the time of
invitation and define the services to be provided by the consultants. In case of bilateral or
multi-lateral funding, the TOR needs to be approved by the funding agency. Elements to
be included are:
Background – project formulation, owners, funding sources etc.
Objectives – general objective of the project and purpose it serves, principal outputs
desired
Scope of consulting services desired – geographic area to be covered, types of services to
be rendered, the way and method of access to information, data and how to work in
coordination with the client to achieve project goal; outline of each major type of work,
degree of accuracy required, work methodology and staff inputs.
Data, services and facilities to be provided by the client, including counterpart staff.
Time schedule and types and number of reports required – desk report, inception,
appraisal, field, draft and final reports, construction progress reports etc.

Formation of Evaluation Committee


The evaluation committee is formed by the client to evaluate the technical proposals
submitted by the interested firms. Members of the committee normally consist of one or
more concerned professionals, financial experts, an administrative/ legal expert etc., at
least one or more of them being a representative of the client. The recommendation of
SCAEF to also include representatives from the Engineering Society or funding agency is
generally not being followed in Nepal.

Preparation of Evaluation Criteria


The evaluation criteria for selecting consultants- both for short-listing as well as the
second stage- is prepared prior to the preparation of the long list of consultants. The
criteria depends on the nature of the project, funding sources, geographical area, work
volume etc. Since these are specified in the TOR, the criteria should be prepared only
after finalizing the TOR. The criteria are drawn up by the client with the help of experts
and ways of allotting scores are finalized. The scoring methodology is kept strictly
confidential; however, the consultants are informed of the general criteria on which they
will be judged. For projects which are funded by international agencies, it is normally
specified that the criteria has to be approved by them.

Preparing a Long-list of Consulting Firms


In Nepal the most common method of preparing the long-list of consulting firms is by
publishing a notice in a national newspaper and compiling the names of the firms that
respond. SCAEF’s proposal to consult Nepal Engineering Association or other related
organizations, embassies or business directories is rarely followed unless specified by the
funding agencies, especially for large projects where international firms may be eligible
to apply. In many cases where it is deemed that local firms do not have the requisite
technical capabilities, funding agencies like the World Bank, ADB, UN etc. publish
notices about the project in their regular gazettes and international consulting firms
registered with them submit letters of interest directly to the agencies. Local
implementing agencies are generally not involved in such selection procedures, but they
are informed of the ongoing progress. This is often justified by the fact that the entire cost
of consulting services (including all foreign currency costs) is financed by the funding
agencies, unlike in the construction works where the recipient country has to contribute
certain funds and consequently is primarily responsible for the bidding procedures.

The invitation notice to the consultants includes a brief description of the project,
information to be submitted by the firms (CV, company profile, list and cost of works
ongoing or completed, staffing, management system etc.), selection procedure and
weightage, personnel required, method of making proposal and final date of submission
etc.

Preparation of Short List of Consultants


The consultants included in the long list are allotted scores according to the criteria
prepared earlier. A reasonable number of firms scoring the highest marks (5-10) are then
short-listed for the second stage of the selection process. The criteria against which firms
should be evaluated could include eligibility, availability, experience in similar projects,
experience in similar geographic and climatic regions, work volume (in monetary value)
and man-power etc. While evaluating the firms, they must be checked whether they are
linked to any contractors or manufacturers.

The evaluation committee evaluates the firms included in the long list in an unbiased
manner and prepares the list of the short-listed firms which is then sent to the client and
the funding agency for approval.

Invitation of Proposal from Short Listed Firms


The most widely used system of inviting proposals from the short listed firms is the two
envelope system where separate technical and financial proposals are invited from the
firms. Each of the selected firms is provided a copy of the invitation documents prepared
by the client and previously approved by the funding agency. The invitation document
comprises the letter of invitation, background information, terms of reference and draft
contract agreement.

The letter of invitation should normally include:


Brief description of the project;
List of attachments e.g. background, TOR, forms to be completed etc.;
Contact office and person to be contacted for further information, whether country visit is
a must or not;
Anticipated man-months of consultancy services so the consultants can get a clear
understanding of the scale of the proposed assignment;
Provisions for association with other firms;
Source of funding and any requirements that need to be considered;
Time allowed for submission;
Reference to local laws which may apply especially with regard to taxes, duties,
exemption if any etc.;
Details regarding submission of proposals, viz., language, number of copies, address and
date for submitting proposals;
Tentative date for negotiation of contract and commencement of works
Period of validity of the consultants proposal
The background information provides information which will help the consultant prepare
his proposal in an informed and responsive manner. It should explain the history and
need for the project, the purpose and the intended benefits and beneficiaries. It refers to
other ongoing or completed projects which may have a bearing on the project as well as
reports and documents that need to be referred. In addition it may include information
which do not strictly form a part of the TOR such as temperature, rainfall, travel
conditions, availability of accommodation etc.

The terms of reference gives the consultants sufficient idea about the scope of works and
how the client perceives the likely deployment of the consultant’s resources. The TOR
forms a part of the final contract and provides the basis for assessing the performance of
the consultant. Therefore, it should be clear and detailed about the various activities of
the proposed assignment and how certain information should be provided e.g. bar chart of
activities, manning schedule of various staff, works completed by the firm, methodology
of completing the project, CV of proposed personnel etc.

The draft contract agreement provides the consultant with a clear idea of the type of
contract he will be expected to enter into.
As instructed by the invitation document, the short listed consulting firms submit
technical proposals and financial proposals sealed in separate envelopes. In case of
bilateral/multilateral funding, consultants are often requested to submit three copies of the
technical proposal as one copy remains with the client, one is sent to the funding agency
and the third copy is used by the evaluation committee for its evaluation purposes. A
single copy of the financial proposal is submitted in a sealed envelope which is not
opened until the evaluation of the technical proposals has been completed.

Evaluation of Technical Proposal


The evaluation criteria for the technical proposals are more detailed and systematic than
the criteria used for short-listing. This is also prepared and finalized before the technical
proposals are invited. This is to ensure that complete information required for the
evaluation of firms is provided by the prospective short-listed firms in the required
format.

The evaluation criteria are normally divided into:


Qualification and experience of the firm
Approach and methodology for carrying out the work
Proposed personnel

Qualification and experience of the firm: This is normally allotted 100 to 300 marks out
of a total of 1000 marks. The more important, complex or specialized the work, the
higher the marks allotted. However, most of the firms in Nepal are yet to establish
themselves properly and tend to hire short-term consultants for specific jobs. The
consultants are relieved as soon as the work is complete and without them, the firms are
incapable of undertaking similar works in the future. Thus, most of them appear strong in
experience only on paper. That is why every time there is an advertisement for a large
project, there is a mad rush to hire consultants and good consultants are deluged with
offers by many consulting firms. Unfortunately, the firms do not try and retain these
consultants after the works are completed and any experience the firms may have
gathered vanishes with the termination of the consultant’s services.

Approach and Methodology: This is generally allotted 200 to 400 marks and illustrates
how well the consultant has understood the TOR. It shows the consultant’s evaluation of
the task and how he allocates his resources. The consultant is evaluated on his
understanding of the project objective, work methodology, including any innovative ideas
proposed, work program, man-month requirements and counterpart facilities required.

Proposed Personnel: This is normally allotted the highest marks, ranging from 300 to
700. Since it is actually the personnel who will be responsible for the proper execution of
the work, they are given more weightage. This is also to safeguard against firms that are
strong in experience only on paper. The team leader is given the highest rating and other
key members are rated in decreasing order. The personnel are evaluated for their
experience in similar projects, qualification and other relevant training. Firms are
instructed to submit CVs of all the proposed personnel.

Negotiating and Signing of the Contract


After the ranking has been completed, the evaluation report has to be approved by the
client and by the funding agency, if any. The firm whose technical proposal has been
adjudged the best is then invited for negotiations within 2 weeks of approval of the
evaluation report.
The sealed financial proposal of the first ranked firm, which was submitted along with
the technical proposal, is then opened in the presence of the consultant. Detailed
negotiations on the proposal, beginning with the scope of works, are then carried out until
a satisfactory agreement is reached with the firm. When agreement has been reached, the
financial proposals of the other firms are returned unopened. However, if a satisfactory
agreement cannot be reached due to some serious disagreement, the negotiations are
terminated and negotiations are commenced with the second ranked firm, and so on. If
the project is funded by a multilateral agency, the agency must be informed about the
failure of negotiations with the first ranked firm and the reasons for disagreement and
approval must be sought to begin negotiations with the firm next in ranking.

One of the problems of the two envelope system is that consulting firms sometimes tend
to submit much higher than normal rates in their financial proposals, knowing very well
that once they obtain the highest ranking in the technical proposal, the client is under
great pressure to conclude an agreement with them. Funding agencies are also often
reluctant to terminate negotiations with the first ranked firm based primarily on financial
disagreements. Knowing this, the consulting firms try, as far as possible, to stick to their
unreasonably high proposals during negotiations and the client is often forced to conclude
negotiations at rates much higher than the normal fees.

Case study of negotiations between Pokhara Sub-metropolis and the consultant for the
Environment Improvement Education Program. Case study of disagreement between the
Project Management Unit and Department of Civil Aviation regarding concluded
negotiations with the consultants for the airport improvement projects.

Because of this persistent problem of overvaluing of financial proposals by the


consultants, the World Bank had initiated a single envelope system to replace the two-
envelope system. In this system the financial proposals are opened along with the
technical proposals and are also included in the evaluation of the firms. The financial
proposals are given a certain weightage, normally about 20%. The firm scoring the
highest in the evaluation of both the technical and financial proposals is then called in for
negotiations. This process has not as yet been adopted by ADB. For obvious reasons,
SCAEF is not in favour of this procedure; in spite of the many advantages it has for the
clients in compelling consulting firms to submit more realistic fees.

3.4 ARCHITECTURAL COMPETITIONS

Architectural competitions are generally held for large and complex buildings or for
buildings of national importance. Many landmark buildings of the 20th century have been
built through architectural competitions e.g. Sydney Opera House by Jorn Utzon,
Pompidou Centre by Renzo Piano and Richard Rogers, Boston City Hall by Kallmann
McKinnell and Knowles (their first major commission), New Opera House of Paris by
Carlos Ott etc.

It is a natural desire of clients to see and choose among many sketch designs prepared by
many architects. However, to do this becomes an expensive proposition, as he has to pay
all the architects for their work. Architectural competitions sanctioned by the respective
professional bodies allow architects to compete without fees and at the same give the
client an opportunity to choose among various differing alternatives. In open
competitions hidden talents among architects can be discovered and architects who would
never have been considered for big or important projects get an opportunity to display
their talent and ability. For a little extra cost and time, the client is able to draw upon the
talents of architects who decide to take up the architectural challenge and there is the
possibility that a truly outstanding design will emerge.

Competition guidelines are laid out to ensure that the conditions and limitations remain
the same for all competitors. Guidelines are usually set out by professional bodies. SONA
or SCAEF have not as yet prepared standard uniform guidelines although a few
competitions have been held in the past with SONA acting in an advisory capacity e.g.
design competition for KMC building in Juddha Sadak and ICIMOD headquarters. The
Indian Institute of Architects has specified certain guidelines based on Architectural
Competition Rules framed by the International Union of Architects on behalf of
UNESCO. In its recommendation to the government SCAEF appears to favour selection
of firms by evaluating their ability rather than through architectural competitions.
Architectural competitions have been recommended for very restricted types of projects
and for limited competitions among select group of consulting firms. This not only tends
to create exclusivity among SCAEF firms, it also tends to discriminate against smaller
non-member firms and talented newcomers.
To ensure that the client receives a design of high standard and the competition is fair to
all the competitors, it is essential that the designs are judged by architects who are
qualified and competent to interpret the competitors' drawings and judge whether they
best meet the client’s requirements. Thus one of the crucial elements in holding a
successful design competition is the appointment of prominent and respected architects as
assessors.

Design competitions can be open or limited and held in one or two stages. In an open
competition, invitation to participate is issued to all those interested through a public
notice and anyone desirous of competing can register and submit designs, however, these
are normally restricted to members of the professional organization or even students of
architecture (a third year student won the competition for the design of the Vietnam War
Veterans’ Memorial). In a limited competition only a select group of architects deemed to
have adequate experience in similar projects are invited to compete. New architects rarely
get invited to limited competitions. In open competitions it is common to award prize
monies and honoraria to a limited number of winners, whereas, in limited competitions,
apart from the prize monies, all the participating architects normally receive some sort of
compensation for their efforts.

In a single stage competition, the designs are judged and awarded in a single stage,
whereas, in a two stage competition, the designs submitted during the first stage are
reviewed and only a limited number of architects with the best designs are invited to
further develop their designs for the second stage. The winner is selected from among the
designs submitted for the second stage of competition.

Some of the important elements of a design competition are:


Appointment of prominent and competent architects/specialists as assessors. The
assessors or senior assessor usually assist in the preparation of the project brief, study and
understand the client’s requirements and site conditions, finalize the conditions and
prepare the final report of award.
Preparation of a project brief to be distributed to prospective competitors. The project
brief should clearly state the objective of the competition, the site conditions, the
conditions of local authorities that need to be met, the nature of the problem, the
requirements of the client as well as the competition conditions which need to be fulfilled
in order to be eligible to compete.
Finalization of competition conditions prior to announcement of competition. The
condition should clarify registration procedures if any, mandatory eligibility
requirements; number, nature, scale and dimensions of documents, plans, models etc.;
estimates if required, nature of prizes, names of assessors, timetable etc.
Non-disclosure of the names of competitors. Throughout the competition, the names of
the competitors should remain anonymous to the assessors so that judgment will be fair.
Drawings should be coded and the names should not be disclosed until the awards have
been finalized.
Award of the project to the winning design. In case no design is found worthy of the first
prize, the other prizes should be awarded and the client is under no compulsion to execute
any of the designs. If the award winning architect is found to be lacking in experience, he
can be asked to associate with an experienced architect or firm e.g. the winner of the
design competition for KMC building was asked to associate with an established firm and
she did.

Reference:
Professional Practice; Dr. Roshan H. Namavati; 1997.
Report on Consulting Architectural & Engineering Industry in Nepal; Task Force on
Consulting A & E Industry in Nepal; 1990.
Financial Administration Regulations 2056; His Majesty’s Government of Nepal.
Council of Architecture: Directory of Architects; Council of Architecture India; 1998.
Architects Handbook, Ready Reckoner; Charanjit S. Shah; 1996.
Handbook for Users of Consulting Services; Asian Development Bank; 1991.

4. CONTRACT AGREEMENT

4.1 General

Work can be started after a simple oral agreement or a brief letter from the client.
However, to avoid misunderstanding and conflict with the client later on, it is always
advisable to have a written contract agreement where all aspects of the architect’s as well
as the clients responsibilities and obligations are clearly spelled out; the staff, work
schedule as well as the fees are agreed upon and termination and method of dispute
resolution is specified. Some architects and clients also tend to prepare their own contract
documents with very specific conditions. Although this is useful in very unique and
special projects, for general as well as specific works, it is much safer to make use of
standard contract documents. Besides using documents which have been proven and
accepted through extensive use, adopting them ensures no important issues are omitted.
In most cases the standard agreement can form the basic document and alterations or
additional clauses can be added as required. The standard contract documents are usually
prepared by the respective professional bodies for use by their members e.g. AIA, RIBA,
IIA etc. Many multilateral organizations have also developed their own standard
contracts to be used in projects funded by them e.g. the World Bank, The Asian
Development Bank etc. SONA has yet to develop its standard format. On the other hand
SCAEF has prepared a model form of agreement for use among its members based on
formats prescribed by FIDIC and ADB. It is quite a comprehensive document and
suitable for use for all types of architectural works.

Normally a contract document should cover three principal areas, either in the contract
proper or in the appendices attached to it. These are service definition, staffing and
payment procedures. The service definition sets out the obligations of each party and
defines the steps to be followed in initiating, modifying and terminating the services.
More general obligations are included in the text while the specific responsibilities are
detailed out in the appendices. Since the consultants are normally selected according to
their proposed staffing, the actual list of professional staff is attached in the appendix.
The payment procedures outline the method of payment including definition of payment
items, method of calculating payment due, frequency of payments, recovery of advance
payment, retention etc. In addition there are other clauses related to performance
bonds/bank guarantees and retention which are generally applied to construction
contracts and not to consulting services contract, however, the FAR often require such
provisions. The contract documents also cover provisions for price adjustments, in case
contracts extend beyond one year, liability of the two parties and method of resolving
disputes. A closer look at some of the standardized contracts will highlight these
important areas.

4.2 SCAEF’S Model Agreement

SCAEF’s model form of agreement is adopted from FIDIC and ADB. It is recommended
for use by its members but also appears quite suitable for use by all architects. It consists
of three parts: a) Form of Agreement b) General Conditions of Contract and c)
Appendices. The General Conditions of Contract is divided into two parts. Part 1 deals
with standard conditions which are applicable to most projects while Part 2 includes
special conditions which are applicable to specific contracts. Part 1 remains unchanged
whereas any alterations to be made to Part 1 or any particular conditions, data,
information or general rules that apply to a particular project are included in Part 2. The
Appendices, which form part of the contract agreement, relate to Terms of Reference,
Undertaking by the Client, Undertaking by the Consultant and Remuneration Payment.

Form of Agreement
It is a brief memorandum of agreement which identifies the two parties entering into the
agreement, the date of agreement, a brief description of the nature and scope of services
and inclusion of various appendices as part of the contract. It is signed by the two parties
and their witnesses. Although SCAEF has not included the total cost of services in its
model form, it is quite common to include these in the form of agreement.

General Conditions of Contract


This is divided into Part 1: Standard Conditions and Part 2: Conditions of Particular
Applications. Part 1: Standard Conditions is further subdivided into:
General Conditions
Terms of reference – perform as per attached TOR (Appendix A)
Relationship between parties – not master/servant or principal/agent
Language and Law – English/ law of Nepal
Changes in legislation – adjustment of remuneration as per changes in legislation
Definitions – singular/plural, male/female
Headings – not part of agreement/ not to effect contract
Notices – to be given in writing

Commencement, Completion, Alteration and Termination of Contract


Agreement in force – after signing of agreement
Commencement of services – from the date stipulated in Part 2
Completion date – as stated in Part 2 or as mutually agreed upon
Alterations – TOR can be modified through mutual consent given in writing
Assignment – cannot assign obligations or benefits without client consent
Death of client – obligation passed on to successor
Partnership – addition or withdrawal of partners not to effect contract
Sub-contract – can be done only with the client’s written consent
Termination
client can terminate contract through written notice giving at least 30 days notice
force majeure
consultant can terminate contract if payment is not made within stipulated period or if
project is postponed by more than 6 months.
Consultant to be paid in full for work performed up to effective date of termination or
postponement
Inability of consultant to perform due to reasons beyond his control or circumstances
which he could not have reasonably foreseen
Default by consultant – failure to discharge his obligations as per the agreement as
notified in writing by the client. Can be referred to arbitration if there is disagreement
Termination not to effect the accrued rights and liabilities of either party

Undertaking of the Consulting Firm


Responsibilities of Consulting Engineer – carry out services with due diligence and
efficiency, protect interests of client and minimize expenses
Records – keep accurate and systematic records and allow client to inspect records and
accounts
Information – furnish all required information to client
Confidentiality – maintain confidentiality about project. Any disclosure only with
permission of the client
Prohibition or association – will not bid for project and will disqualify contractors,
engineers or others affiliated with it
Indemnification - will indemnify client and his agents against all actions, claims and
liabilities arising out of consultant’s actions including violation of copyright, patent.
Clients Equipment and Materials – client’s property if furnished or purchased with
client’s funds.
Proprietary rights of the client in reports and records – records and reports to be
confidential and remain the property of the client. Cannot be used for purposes unrelated
to the agreement without the client’s consent.
Insurance – consultant to insure against third party liability and damage to equipment
provided by client. Client not responsible for insurance of consultant’s personnel.
Notice of delay – promptly notify of any delay and may request for time extension

Liability of the Consulting Firm


Except for gross negligence or criminal action, liability of consultant not to exceed total
amount due to him as stated in Part 2
Liability to expire on date of completion as stated in Part 2
Liable for violation of patents or copyrights introduced in his documents
Not liable for work not undertaken by him
Not liable for actions of client, contractor or supplier not covered by TOR or his
instructions or written orders
Liable for payment of taxes, duties, fees as per law

Obligations of the Client


Client should provide all relevant information and give decisions timely so as not to
disrupt performance of consultant
Provide free access to land during performance of services. Not hold liable for any
resultant damage
Where applicable assist in obtaining necessary visas, licenses, permits and customs to
bring in equipment, permission to bring reasonable amounts of foreign currency for
services and personnel, authorization to take out earned foreign currency and repatriation
in event of emergencies. Client to compensate for any unrecovered cost of taxes, duties
etc. where exemptions apply.
Client to provide equipment as listed in Appendix C. When delay occurs in provision of
equipment, if notified, consultant will be entitled to appropriate time extension and
adjustment in remuneration. Agreement on new arrangement if not provided.
Client to provide counterpart staff as listed in Appendix C. Staff to work under direction
of consultant and to be replaced if found inadequate. Agreement on new arrangement if
not provided.
Consultant to cooperate with other firms engaged by client as listed in Appendix C. If
work held up by such firms, consultant entitled to time extension and proportional
remuneration. Agreement on new arrangement if anticipated services not forthcoming

Settlement of Disputes
Disputes to be settled under arbitration rules and procedures of Nepal. Decision of
arbitrator to be final

Personnel
Services to be carried out by personnel during period indicated in Appendix B
Reasonable time extension of 20% or 1 week whichever longer
Designate team leader responsible for liaison between client and consultant
If necessary replace staff with person of comparable experience with client approval
Client’s staff to be remunerated and removed by client

Remuneration to the Consulting Engineer


Client to pay consultant as set forth in Appendix D
Additional remuneration to be paid if supplementary services required. Cost computed on
a time basis as well as for all reimbursable costs incurred
If additional work required due to damage to work or equipment as a consequence of war,
political disturbance or causes beyond consultant’s control, appropriate remuneration to
be paid

Payment to the Consulting Engineer


Payment to the consultant to be made as set forth in Appendix D
Payment within 30 days of invoice otherwise interest to be paid
If dispute in certain item of invoice, payment for rest of item not to be held up. Payment
for disputed item to be made after settlement of dispute
If applicable foreign currency earnings to be available for repatriation unless specified to
the contrary in Appendix D
Exchange rate of foreign currency to be determined by selling rate published by an
official source on date of payment

General Rules of Agreement Part 2: Conditions of Particular Application


The following notes serve only as an aide-memoir and are not exhaustive. Specific
conditions can be included as necessary depending upon the nature of the assignment.

Notices
Client’s address and responsible official
Client’s alternative address
Consulting Engineer’s Address
Consulting Engineer’s alternative address

Languages and Law


Language(s) in which agreement is drawn
Ruling language
The law to which agreement is subject

Authorized Signatories: Signatures required to make agreement effective

Others
Commencement Date
Completion Date
Financial Liability of Consulting Engineer – limited to 100% of total remuneration
Expiry of Liability of Consulting Engineer – date
Settlement of Disputes – place
Client’s individual experts
Specification and designs – specifications and design in metric system and embody latest
design criteria. Specifications and designs prepared in an impartial manner so as to ensure
competitive bidding. Specified standards to be accepted and well known
Special clauses related to particular project

APPENDICES

Appendix A: Terms of Reference


Background of the Project and Objectives
Objectives of TOR
Scope of Works
Data Collection
Reconnaissance
Inception Report
Survey and Investigation
Study Reports
Design Reports
Construction Documents
Implementation Reports
Monitoring and Evaluation Reports
Operation and Maintenance Reports
Request for Proposal
Qualification and Experience Required
Man-power Inputs
Time Schedule
Evaluation Criteria and Marking System
Other Information Required

Undertaking by the Consulting Engineer


Scope of Service
Personnel Nomination
Assignment Period
Equipment to be Provided by the Consulting Engineer
Completion Targets

Undertaking by the Client


Client’s personnel
Services of Other Firms
Coordination among Different Parties
Equipment and Facilities to be Provided by the Client
Remuneration to be Paid
Remuneration and Payment
Remuneration
Salary
Social Benefits
Overhead
Fixed Fee/ Profit
Site Allowance
Out-of-pocket Expenses
Per diem
Site Accommodation
Travel
Transport
Office Accommodation
Consumables
Utilities
Report Reproduction
Documentation
Mode of Payment
- Upon Signing 15%
- On Submission of Inception Report 25%
- On Completion of Survey and Investigation 50%
- On Submission of Draft Reports 80%
- On Completion of Final Reports 100%
Exchange Rate of Currency (Selling Rate)
Price Escalation
- Annual Increment on Salaries 10%
- Annual Increment on Commodities 10% (as actual)
- Other Items 10% (as actual)
Provision of Taxes, Duties, Fee by Government Guarantees, Retention
Interest Rate 10% per Annum

4.2 ADB’s Sample Documents

ADB’s sample document is fairly representative of documents used by many multilateral


agencies. Unlike the SCAEF document it is a single document with appendices.
Nonetheless, almost all the clauses of the agreement are similar. It is a standard document
with certain clauses with blank spaces to be filled in according to specific projects. The
owners (recipient country) can make certain minor changes or additions to the document
as per its requirement, but the revised document has to be approved by the ADB before it
is signed. However, most of the clauses are standard and do not require modifications.

The cover page states the country, loan number, the name of the project, names of the
client and the consultant and the date of agreement.

The opening part of the document is a form of agreement where the date of agreement,
names of the client and the consultant, the name of the project and the guaranteeing
government is identified.

Article I covers Services where the services to be provided are identified in the TOR set
forth in Appendix A. The Commencement date is also fixed in number of days from the
day the client gives notice to proceed with the work.

Article II deals with personnel. The personnel are to be listed in Appendix B. Works are
to be carried out by them but if replacement is necessary, the person should be of equal or
better qualifications. The client can also request the consultant to replace any
incompetent staff. Remuneration rates of the replacement need to be approved by the
client but it should not exceed the remuneration of the previous person. The consultant
needs to appoint a Project Manager for the field work.

Article III deals with payment to the Consultant which shall be made in foreign currency
as set out in Appendix C and in local currency as set out in Appendix D. It stipulates the
ceiling for foreign and local payments as well as the currencies. It states remuneration
will be provided on time actually spent and defines what may be included in the
remuneration rate. Similarly, it defines what payments can be made out-of-pocket, the
type and number of international travels for consultant and family, other expenses such as
airport taxes, visas, communications, reports, tests etc. The article also states the mode of
billing and payment such as advance payment, submission of monthly statements of
payment, time within which payment will be made by client.

Article IV relates to the undertaking of the client. This article identifies the clients
responsibility of exempting the consultant from any taxes and duties, other privileges and
exemptions provided, access to land and the services, facilities and equipment to be
provided as listed in Appendix E.

Article V deals with the undertaking of the consultant. It states the general standard of
performance by the consultant, preparation of specifications and designs, maintaining
accurate records, assigning sub-contractors only with the approval of the client and
maintaining confidentiality. The article also prohibits the consultant from associating
with any contractor or manufacturer bidding for the project and providing indemnity to
the client against the shortcomings of the consultant’s works. The proprietary rights of
the client in equipment provided and reports and records is spelled out. The consultant
has to take out professional liability insurance and bear responsibility for welfare of his
personnel and give any notice of delay.

Article VI under general provisions deals with matters related to suspension, termination
of the contract by the client or consultant, the termination procedure, settlement of
dispute, force majeure and variation of contract.

Article VII identifies the effectiveness dates of contract, authorized representatives, the
addresses of the client and the consultant and their signatures.

The appendices include: Appendix A – terms of reference; Appendix B – personnel and


manning schedule; Appendix C – foreign currency cost estimates of remuneration (home
office and fiels), out-of-pocket expenses and summary; Appendix D – local currency cost
estimates; Appendix E – services, facilities and equipment to be provided by the client.

4.3 IIA’s Model Agreement

The contract agreement recommended for use by IIA is a concise document suitable
exclusively for architectural works, unlike the SCAEF or ADB documents which can be
used for all types of civil works. It is not as comprehensive as the other models but it has
been extensively used in India and has proven useful for architectural works. In place of
the form of agreement, it has a letter of appointment which states the project, the services
desired and the fees offered, signed by the client followed by a clause about agreement to
undertake the assignment and signed by the architect.

The second part is the Conditions of Agreement which consists of standard clauses. The
TOR which is included as an appendix in the SCAEF and ADB models is included in the
main text as article 1: Scope of Work and article 2: Schedule of Services. The scope of
work is a check-list of a broad category of all the works normally involved in a
comprehensive contract whereas in the actual contract only those works specific to the
project are expected to be included. The check-list includes site evaluation and analysis,
EIA, architectural work and site development, structural engineering work, sanitary,
plumbing, drainage, water supply and sewerage work, electrical work; heating,
ventilation and air-conditioning work, acoustical work, landscape work, interior
designing and graphic signage. The Schedule of Services describes the different stages of
design development from site evaluation and analysis and EIA report to concept design,
preliminary design, working drawings, specifications, bill of quantities, periodic site
visits. Certification of contractor’s bills and preparation of completion report does not
appear to be included.

The mode of payment and amount to be paid as well as the basis for determining
payments (on a percentage basis) is given in articles 3 and 4. Article 5 deals with
reimbursable expenses (comparable to out-of-pocket expenses). These are generally
appended to the general conditions in the other model agreements. Article 6 states the
client’s responsibilities with regard to providing the architect with detailed requirement
of the project, all necessary information and paying the architect on time. Article 7 deals
with the formation of a coordination committee which is optional. Article 8 denies the
architect any further work if he violates the agreement, ethics or fee structure
recommended by IIA. Article 9 covers the execution of the assignment and includes
responsibilities of the architect, termination clauses, general clauses about alterations in
designs, time extensions, site visits, client’s right not to execute the project etc. Unlike in
the other models the article states that the architect has proprietary rights over the
documents, not the client. Article 10 states all disputes to be referred to the Council of
Architecture.

References:
Report on Consulting Architectural and Engineering Industry in Nepal; The Task Force
on Consulting A & E Industry in Nepal; 1990.
Handbook for Users of Consulting Services; Asian Development Bank; 1991.
Council of Architecture, Directory of Architects; Council of Architecture; 1998.

5. FEE STRUCTURE FOR PROFESSIONAL SERVICES

5.1 TYPES OF FEE STRUCTURES

There are four basic types of fee structures used by consultants depending upon the types
of services rendered and the conditions under which services are to be performed. These
are man-month or time-based fees, lump-sum fees, percentage fees or cost plus fixed-fee.
Whatever fee structure is used by the consultant, the remuneration should cover all
salary, social benefits, overhead, profit and out-of-pocket expenses. The salary, social
benefits, overhead and profit are dependent on the efficiency and employment policy of
the individual firms. These are also determined by the past experiences of the firm in
similar projects, enabling the firm to propose fees which are competitive as well as
financially sustainable. Very often audited vouchers are produced to justify the fee
structure. The out-of-pocket expenses are actual expenses incurred during the
performance of the services other than salary payments and are reimbursed to the
consultant on actual expenditure basis after submission of actual vouchers e.g. payment
for air travel after submission of air tickets.

Man-month Contracts
This is also commonly referred to as time-based or “cost plus fee” contracts. This is the
most preferred contract by the multilateral agencies. Fees are paid as per agreed rates per
man-hour, man-week or man-month and are paid for the time the consultants actually
spend on the job. In addition there are other expenditures such as per diem, travel costs
and out-of-pocket or direct expenses for equipment, printing etc. The advantage of this
type of contract is that it most closely reflects the actual costs incurred by the consultants
during the performance of the services. This contract generally has a “ceiling” and is
accompanied by an explicit obligation of the consultant to complete the given task within
the stipulated amount and time. The disadvantage is that payment is done according to
consultant’s inputs rather than outputs so that there are chances the desired output is not
obtained within the given period and greater client monitoring is required.

Lump-sum Contract
In lump-sum contract a fixed amount is negotiated for a specified output. Its biggest
advantage is that it is simple to administer and payments are made at specific intervals
according to the work progress. The client also has the advantage of transferring the risk
of price rise and need for doing more than the anticipated amount of work to the
consultant. In this case the consultant has to take these into consideration while
estimating the contingencies in his quoted price. The fixed amount to be charged is
normally derived from man-month type of calculations or alternatively from percentage
type calculations.

Percentage Contract
This has been the traditional type of fee structure where the consultant is paid an agreed
percentage of the actual construction cost. The percentage to be charged for each type of
work is based on a scale drawn up by a national association of engineers or architects and
normally ranges from 2.5% to 10%. The percentage scales are supposed to be the
minimum fees and the consultant is free to charge higher fees if necessary. More accurate
concept of the actual fees to be charged can be developed as the consultant gains more
experience and knowledge over the years. It is simple to administer and the advantage to
the consultant is that fees automatically increase as the cost increases. The disadvantage
is that the consultant is not motivated to achieve the best design or reduce cost. However,
this type of fees is one of the least favoured by the multilateral funding agencies.

Cost Plus Fixed Fee Contract


In this type of contract the consultant is paid a fee based on time-based rates for the
design and management plus a fixed amount of fee, usually for his expertise and know-
how. It is quite similar to the man-month contract except that in a month contract the
consultant’s fees are built into the man-month rates whereas in this type of contract it is
calculated as a separate fixed amount of fee. This type of contract is generally used for
the design and construction of industrial plants or research and development works where
the degree of input cannot be estimated or the output specified with any confidence.
5.2 PREPARATION OF A COST PLUS FEE FINANCIAL PROPOSAL

The cost plus fee type of financial proposal is the most favoured by multilateral agencies.
The proposal clearly shows the breakdown of the different costs in a standardized format.
Not only does this make it easy for the consultants to prepare the financial proposal, it
also makes it easy to conduct item-wise negotiations. The following steps are taken in the
preparation of the financial proposal:

Preparation of the Activity Chart


The activity chart is normally a simple bar chart showing the proposed sequence and
duration of all the different activities of the project. One of the two axes of the matrix
shows the different activities and the other the time in months. The proposed activities
should cover all the different aspects of the TOR. The amount of time allotted for each
activity is usually an estimate based on the architect’s earlier experience in similar works.
Because of this, the time estimates tend to differ from firm to firm.

Staffing Schedule
Based on the activity chart a staffing schedule, also in a bar chart format, is prepared. The
input of each professional is checked against each activity of the activity schedule and the
sequence and duration of his input is then determined. This is done for all the different
staff required and the total man-month requirement of each staff is identified. It is
preferable to separate the staff inputs required during the design and the construction
phase.

Determination of Man-Month Rates


The man-month rate for each type of staff is then calculated. The man-month rate should
include i) base salary ii) social costs iii) overhead iv) fees and v) overseas and
inducement allowance if applicable. The base salary is the salary to be paid to the
individual but does not cover any other allowances. To justify the base salary the
consultant should be able to produce vouchers of salary being paid to the individual or
someone comparable to him.

Social costs are additional costs the consultant has to pay to his staff because of
legislation, work agreements of established practice. This includes sick leave, vacations,
medical and life insurance, providend fund, pension or gratuity etc. This can vary
according to the practices and regulations of the different countries as well as the
management practices of the consulting firms. Social costs typically range from 20% to
60% of the base salary. If required, the consultant should be able to justify the percentage
of the social costs proposed through vouchers of actual payments as social costs.
Overhead includes the consultant’s cost of doing business. This includes office rent,
office supplies and equipment, secretarial and clerical staff, travel expenses,
communication expenses, supporting technical staff etc. The overhead cost is also
expressed as a percentage of the base salary and typically ranges from 65% to 150% of
the base salary. The overhead cost is often an indication of the consultant’s efficiency and
the consultant has to justify the cost if necessary.
The fee represents the consultant’s gross profit before taxes and is usually expressed as a
percentage of the sum of the base salary, social costs and the overhead. This can vary
between 5% and 20% depending upon the policies and practices of the consulting firm.
The overseas or inducement allowance is paid to staff on overseas assignment and varies
according to the nationality of the firm and the country of assignment. This is not
applicable for in-country assignments.

The sum of the base salary, social costs, overhead, fees and, if applicable, overseas
allowance forms the man-month rate to be charged. This calculation is done for each
staff. If there are international staffs, it becomes necessary to calculate the man-month
rate in foreign currency.

Other Expenses
Apart from these, out-of-pocket expenses and contingencies also need to be worked out.
The out-of-pocket expenses are estimates of the per diem allowance, travel costs, project
office rentals, vehicle and equipment rentals, report printing and reproduction etc.
Contingencies are normally allocated to cover any unforeseen expenses or shortages, if
any, in any of the other categories and ranges from 5-10% of the sum of remuneration
and out-of-pocket expenses.

The total sum of all the remuneration, out-of-pocket expenses and contingencies is
normally the ceiling figure for the cost of consulting services.

5.3 SCHEDULE OF PAYMENT

The payment schedule depends upon the type of remuneration structure adopted. In the
man-month type of fee structure monthly bills are submitted indicating personnel time
inputs and reimbursable costs. The same method applies for the cost plus fixed fee
contracts.

In the case of percentage fee structure, payment is made according to the different phases
of the services rendered. Different percentages are agreed upon to be paid after each
phase is completed and paid after the work phase is completed. Different phases are
agreed upon for both the design and the construction phases. Since the percentage fee is
based on the final project cost, final adjustment has to be made once the construction is
complete since the interim fees are based on the estimated cost and later on the bid
amounts which are bound to change after the construction is complete.

For the lump sum fees, payment is made as per agreed percentage of total sum according
to completion of different stages of completion of the project e.g. at contract signing,
completion of 25% assignment, 50%, 75%, draft report and final report.

5.4 SCAEF’S RECOMMENDED BREAKDOWN OF SOCIAL COST, OVERHEAD


AND FEES
In its guidelines SCAEF has recommended social costs to be 42% of base salary,
overhead to range between 75-100% of base salary and the fees to vary from 15-20% of
the sum of base salary, social cost and overhead. The proposed breakdown of each cost is
as follows:

Social Cost Breakdown


Paid Leave 15-21 days/year 5.40 – 6.00%
Sick Leave 7 days/year 2.50%
Provident Fund 10.00%
Dasain Salary 1 month/year 8.33%
Medical Allowance 5.00%
Life Insurance 2.50%
Pension / Gratuity 8.00%
Total 41.73% or 42%

Overhead Breakdown
Head Office Rent 16%
Head Office Utilities 7%
Adm. Salaries 14%
Non-revenue Earning Professional Salaries 15%
Printing and Reproduction 3%
Computer Costs 8%
Transport 6%
Business Promotion 16%
Depreciation 6%
Postage 1%
Insurance 6%
Library Materials 1%
Financial (bank commissions/interest) 0.5%
Advertisement 0.5%
Fees for Lawyers, Auditors
Research and Development
Staff Training and Education
Professional Indemnity Insurance
Social Activities
Total 75-100%

Fees
Reserves and Profits, Business Risk 15-20%

5.4 IIA’S STANDARD SCALE OF SERVICES FOR COMPREHENSIVE


ARCHITECTURAL SERVICES

The IIA’s guidelines for charging professional fees are on percentage basis and could
serve as a useful tool for architects of Nepal to determine appropriate fees for their
services. An analysis of a few consulting firms’ fees based on cost plus fee was found to
range from 6-10% of the total project cost, whereas, the minimum fees recommended by
IIA for comprehensive services including site supervision and certification of contractor’s
bills is 6%. Thus there does not appear to be a major deviation in the total fees charged
according to the different systems.

The IIA recommends architects to be engaged, as far as possible, in comprehensive


architectural services and has designed a scale of fees for comprehensive services
including pre-design study, architectural, structural, electrical and plumbing design, air
conditioning, heating, acoustics and interiors and if required, detailed designs of external
services including roads, drainage, sewerage, water supply, street lighting, landscaping
and signage.

The fee structure is based on the tendered cost of the total project including repetition of
designs. The fees recommended are the minimum scale and architects are free to increase
the fees according to the type and complexity of the assignment. For works costing up to
Rs. 5 lakhs and community development works such as community housing, slum
upgradation etc. fees are negotiable between the architect and the client. For all other
works the minimum rates as given below are to be followed:

Urban Design 1%
Site development, housing (excluding high rises) 2.5%
All Other Building Projects (comprehensive) 5%
Additions/alterations 7.5%
Interiors 10%
Site Supervision and verification of Contractor’s Bills additional 1%
Site Visits, models, presentation Drawings actual cost

6. CONTRACT AGREEMENT

A contract document is a legally binding agreement between two or more parties for the
performance of certain services. Various types of contract documents are used for
construction works, namely, admeasurements (Bill of Quantities), turnkey or semi-
turnkey and lump-sum contracts. The most common type of contract for civil works is the
admeasurement type of contract where price for a given work is determined by
measurement and valuation in relation to agreed price formulas and rates. In the turnkey
contract, the entire works including survey, design, construction, installation and testing
of equipment are to be executed by the contractor. This type of contract is common for
industrial and other specialized works. In semi-turnkey contracts, certain portions of the
work are undertaken on a turn-key basis, whereas, in a lump-sum contract, a fixed agreed
amount is paid for a given work.

Just as in the case of a contract agreement between a client and a consultant, any type of
contract can be formed i.e. verbal, written etc., however, it is safer and more convenient
to use standard contract documents. SCAEF recommends the use of contract documents
prepared by FIDIC while HMG has prepared a standard contract document based on the
World Bank’s Standard Bidding Documents for Small Contracts (for contracts less then
$5 million but applicable to most construction works in Nepal). Since its introduction in
1999, it is compulsory for government agencies to use these documents for their larger
civil construction works. For smaller works, HMG does not requiring tendering. Direct
award can be made for works costing less than 1 lakh rupees and works worth less than
rupees 10 lakhs can be awarded based on evaluation of sealed quotations invited from at
least three contractors. A very concise and simple contract often in Nepali is generally
used for such small works.

6.1 HMG’S STANDARD BIDDING DOCUMENT

The document consists of various sections:

Invitation to Bidders – This includes background information such as source of funds,


eligible bidders, qualification of bidders, information to be submitted for qualification;
instruction on preparation of bids such as filling bid rates, currency of bid, bid validity,
bid security; instruction on submission of bids such as mode, deadline, modification and
withdrawal; instructions for bid opening and evaluation and award of contract including
clauses on performance security and corrupt and fraudulent practices. The clause on
corrupt and fraudulent practices was introduced as mandatory during the late 90’s when it
was discovered that corruption was very common in the construction phase. This clause
becomes effective only when the client is strict in safeguarding his investment. When the
client is an HMG bureaucrat with bad intentions and who is in collusion with the
contractor, the clause becomes redundant. Private parties and even INGOs and NGOs are
also not immune from this problem as the works are often entrusted to certain employees
who are not always honest.

Bidding Data – Many of the clauses of the invitation to bid are standardized, thus variable
clauses such as addresses, deadlines, bid security amount etc. are included in the Bidding
Data. Also, since it has been noted in the past that contractors rarely take the time to
study the contract documents carefully, the Bidding Data helps to draw their attention to
some of the main clauses the contractors need to be aware of but often overlook, leading
to their bids being rejected as non-responsive. This problem has arisen because of lack of
proper control and monitoring in the classification of contractors. Many class A
contractors have been found to be operating without proper office, staff and equipment
and quite a few of them don’t even know how to interpret the contract documents.

Form of Bid – This is a standard format where the contractor makes a firm commitment
to undertake the works for a given amount of contract price.

Qualification Information – This is a standard format where the contractor provides


information regarding his registration, volume of work undertaken during the last 5 years;
details of projects completed with dates and value of contract, list of equipment available
(owned or leased, make and condition), qualification of key personnel, financial reports,
access to finance, ongoing litigation, if any. The qualification information is used to
determine whether a contractor qualifies for the work before his bid is opened. Often the
client visits the contractors’ sites to verify the accuracy of the information provided. The
advantage of requesting qualification information along with the bids over the pre-
qualification method is that it discourages collusion among contractors. During pre-
qualification, the pre-qualified contractors are identified and their number is limited,
making it easier for them to collude in their bids. In the “post-qualification” method
collusion is difficult as it is not known at the time of submitting bids whether a contractor
will qualify for the bids or not. From past experience it has been noted that competitive
bids are often submitted during post-qualification, whereas, after pre-qualification, it is
normal to receive only three bids. The lowest bid is approximately 9 percent above the
estimated cost, since HMG regulations stipulate bids can be accepted up to 10% above
the estimated cost without much difficulty, whereas, higher bids require approval from
higher authorities and questions can also be raised during the annual audit. Although, of
course, in countries like Nepal the audit often is another source of corruption and
collusion.

Form of Agreement – This is a standard form of agreement between the client and the
contractor with their signatures and the commitment of the contractor to complete the
works as per the contract.

Conditions of Contract – This outlines the various conditions which apply to the contract.
It also defines the role the consultant has to play during the administration of the contract,
generally through his representative at the site, the Project Manager/ Engineer.
Otherwise, the consultant does not form any direct agreement with the contractor. All his
powers to act during the construction phase are derived from these conditions where his
role is to serve as the client’s representative and look after his interests. However, as per
the contract, he is expected to act as an impartial judge between the client and the
contractor. This can lead to difficult situations as the client being the consultant’s
paymaster expects favorable consideration from him whereas the contractor tends to
suspect that the consultant’s decisions will always favor the client. Almost all the clauses
are standard and apply to most contracts. The conditions are normally not altered. All
variable conditions are included in the Contract Data. However, in case it is felt necessary
to alter or delete any of the standard clauses or add new ones, this is done through an
insertion in the Contract Data specifying the alteration or deletion of the clause.

Some of the duties assigned to the consultant as per the contract are:
Will decide contractual matters between client and contractor fairly and impartially.
There is a provision that either party can refer the matter to an adjudicator if he feels the
decision of the consultant was taken wrongly;
May delegate duties and responsibilities to others after notifying client and the contractor;
Give permission to the contractor to sub-contract part of the works;
Give approval to contractor to replace key personnel or remove any member of the
contractor’s staff if the member’s presence is felt undesirable;
Approve insurance of the works, equipment, staff etc. as per the contract;
Approve work schedule and any subsequent revisions including any time extensions. This
becomes quite contentious if there are provisions for liquidated damages or bonus
payments;
Approve temporary works;
Instruct contractor what to do if any material of historical importance is discovered at the
site;
Check quality of contractor’s work and notify him of any defective work which needs to
be corrected. Can also ask contractor to carry out tests to determine if the works are as
per specifications. If contractor does not correct the defective work within a specified
time, he can have it corrected and deduct the cost from payments due to the contractor;
Approve changes in the rate if the quantity of a certain item exceeds the quantity in the
BOQ by more than 25% and the additional cost constitutes more than 1% of the Initial
Contract Price;
Approve any variations in the contract and cost of variation and adjust Contract Price and
time extension accordingly;
Certify contractor’s monthly bills and final bill;
Determine Compensation Event and adjust Contract Price accordingly e.g. hard rock
instead of normal soil;
Approve and certify Dayworks;
Issue Completion Certificate of the works (Substantial Completion);
Issue Defects Liability Certificate after determining all defects have been corrected and
certify final payments;
Determine if a fundamental breach of contract has occurred after either of the parties has
given written notice about such a breach of contract. If contract is terminated, determine
payments to be made to the contractor;
Certify if the contract has been frustrated due to events beyond the control of the
employer or contractor.

In certain cases the architect does not sign a comprehensive contract agreement with the
client in which case he is neither responsible nor authorized to carry out many of the
tasks identified above. His site visits could be very intermittent and he would report to the
client any inconsistencies in the design and execution or any deficiencies in the quality of
construction. The client would then be responsible for ensuring that the inconsistencies
are rectified.

Contract Data – All the variable conditions specific to each contract are included in this
section so as to avoid altering the standard conditions. The name of the contract, names
and addresses of the client, his representative, the Project Manager, the intended starting
date, the location of the site, the defects liability period, the percentage of liquidated
damages, bonuses, insurance, language, applicable law, currency of payment, adjudicator,
retention amount, performance security and any additional conditions are included in this
section.

Technical Documents – these include drawings, specifications, bill of quantities and form
part of the contract documents
6.2 SAMPLE BIDDING DOCUMENTS OF ADB (FIDIC)

The sample bidding documents of ADB is an admeasurement contract based on the


FIDIC document. Most of the general conditions of contract are similar to HMG’s
standard contract document except that they are more detailed out. The format is also
similar except that the Appendix to the Bid is inserted instead of the Bidding Data and the
Contract Data is replaced by Conditions of Particular Application where amendments to
the general conditions are included. Consequently, the Conditions of Particular
Application hold precedence over the General Conditions of Contract.

The FIDIC documents have been drawn up and are more suitable for situations where the
construction industry is highly developed and contractors are efficient and well equipped,
where minor delays inevitably lead to significant losses for both the client and the
contractor and where contractors tend not to make unreasonable or unjustified claims. As
a result provisions have been made in the contract to pay compensation to the contractor
for any kind of delays which are not a consequence of the contractor’s actions and
specific time periods have been stated for actions to be taken. In underdeveloped
countries like Nepal where the bureaucracy has a bad reputation for delaying decisions,
both the client and the contractor are prone to cause delays at every stage for reasons
often beyond their control or the existing legal provisions make it difficult to pay
compensation to the contractor for each and every lapse, the document needs to be used
with extra care otherwise contractors can make huge claims as has been the experience in
several big civil works in the past. The opportunities for corrupt and fraudulent practices
are also further increased.

Some of the clauses which could be difficult to accommodate or could pose problems in
the Nepali context due to conflict with the Financial Administration Regulations are:
Compensation to contractor for delays in supplying the relevant drawings (c 6)
Additional payment to contractor if highways or bridges have to be strengthened (30)
Compensation for any delay in providing site on time (42)
Work stoppage on all locally recognized rest days except on special situations such as
emergencies or expediting of work (46)
Reassessment of rates for variations or if sum increases or decreases by more than 10%
(52)
Payment of interest on amounts due to contractor if payment is not made on time (60)
Payment to contractor in times of special risks (wars, riots, calamities etc.) for removal of
equipment or expenditures incurred in expectation of completing the whole of the
contract (65 –8)
Arbitration to be settled in the International Chamber of Commerce (67)
Default of client if payment to contractor is delayed by more than 30 days after due date
and payment to contractor for any loss or damage arising from such termination (69).

6.3 CONTRACT ADMINISTRATION

Once the contract has been signed between the client and the contractor, efficient and
effective administration of the contract becomes very important to get the best results.
This becomes mandatory for the architect in case of a comprehensive contract agreement
with the client. Some of the responsibilities which are important and the architect needs
to be aware of in contract administration are:

The client/project director needs to inform the contractor about the authority given to the
architect and his project engineer to administer the contract. Similarly, the contractor
needs to inform the client and the project engineer about the authority delegated to his
representative, especially with regard to acknowledgement of directives.
The architect/project engineer should thoroughly study the plans, specifications,
estimates, contract documents etc. before commencement of the works. Any errors or
omissions discovered or reported by the contractor should be notified to the client and
rectified. The working drawings and specifications complement each other and must be
read in conjunction. All items may not be shown in both the plans and specifications but
they need to be present in at least one of them, otherwise they will be considered
additional items. In case of conflict, as stated in the general conditions of contract,
normally precedence is given to the specifications. Specifications are of two types,
method specification and performance specification. Method specification details out the
exact equipment and procedure to be used in performing a construction operation
whereas the performance specification indicates the result to be achieved and the
contractor has the freedom of choice of equipment and method e.g. in structural,
electrical, plumbing works etc.
The architect/project engineer should be fully acquainted with the contractor’s plan of
operations, safety provisions and schedule of progress. He should also keep track of all
revisions in the plan and its impact in the progress of the works. The time of completion
is normally mentioned in the contract. When a project is not completed on time, the
contractor has to pay for the damages suffered by the client due to such delay, not as a
punitive measure. This is covered in the clause on liquidated damages and specifies the
amount to be paid by the contractor for each day of delay. On the other hand, there are
provisions in the contract to allow time extensions to the contractor if certain events
occur which are beyond his control – owner directed changes, acts of God, strikes, war
etc. In case of delays due to acts of God, time extension needs to be provided but
compensation can be claimed from the insurers. In owner caused delays both time
extension and additional payments may be required. But in case of delays due to the
contractor no time extensions or payments are required.
The architect/project engineer needs to ensure construction is carried out as per the plans
and specifications according to the terms of the contract
The architect/project engineer needs to take measurements of quantities and determine
payments to the contractor. The progress payments need to be made on a monthly basis
or after reaching predetermined milestones. Payment is generally made for work
completed, material delivered to the work site and work prefabricated but not yet
incorporated in the project. It is customary to withhold a certain amount referred to as a
retention money from the progress payment as a guarantee against any defective work as
well as make proportional deductions for any advances paid in accordance to the terms
specified in the contract. The typical retention amount is 10% of the progress payment –
sometimes 5% for smaller contracts – of which half is released on the issuance of the
Substantial Completion Certificate and the remainder is paid after the expiry of the
Defects Liability Period (normally 6 months to 1 year but covering at least one full
monsoon season).
Maintain records of all project activities: correspondence, daily diaries of events (source
of information, outcomes etc. which can serve as evidence in case of later controversies),
personnel, supplies and equipment, project progress reports, final report, photographs etc.
If necessary, the architect/project engineer needs to issue contract modifications and
directives within the scope of the contract. The change orders are often necessitated due
to design modifications initiated by the owner or designer. Changes may also be required
due to differing site conditions, unforeseen work essential to complete the work,
variations in the estimated quantity of an item of work (if initiated by the contractor),
unforeseeable delays which increase the cost or time of construction, substitution by
alternate equipment, material or process. Modifications often require adjustments in the
contract price and construction time which needs to be carefully determined by the
project engineer and mutually agreed upon by the client and the contractor. Often prior
agreement cannot be made when the work has to be continued and agreement is made
later. If there is disagreement later on, this becomes a dispute.
The architect/project engineer should keep control of materials at the site. He needs to
approve different materials, samples and tests of materials carried out by the contractor.
He must also ensure that the materials are being stored and handled in a way so as not to
destroy their quality or strength. He must conduct regular inspections and keep records of
materials and equipment brought to the site or used in construction. This becomes
important in case of termination due to default of contractor.
After the contractor submits a letter stating that the works have been completed, the
project engineer, together with the contractor or his representative, should inspect the
works and make note of any defects or unfinished works. If these are considered to be
minor which can easily be completed during the defects liability period, the substantial
completion certificate is to be issued after which the building can be taken over by the
client and the defects liability period commences. Once the contractor corrects all
previously noted defects as well as any new defects by the time the defects liability
period is completed, the project engineer issues a defects liability certificate after which
final payment is made to the contractor and all retention is returned. Except for any
outstanding disputes, the contract between the client and the contractor is deemed to have
ended.
The architect/project engineer should properly evaluate and decide on any claims and
disputes, if any. A claim is a request by the contractor for additional payments or time
extension because of an occurrence of an event beyond his control. A dispute is a
disagreement between the client and the contractor on some contractual matters. The
project engineer needs to give his unbiased judgment on any dispute; however, if any of
the party is dissatisfied with his decision, he is entitled by the contract to refer the matter
to arbitration.

References:
Standard Bidding Document; His Majesty’s Government of Nepal; 1998.
Sample Bidding Documents, Procurement of Civil Works; Asian Development Bank;
1988.
Manual for the Administration and Supervision of Construction; Harihar Man Amatya;
1993.
Construction Methods and Management; S. W. Nunnally; 1998.

7. REGULATORY CONTROLS

Comprehensive development plans are prepared for the future growth of the cities based
on the goals and aspirations of the local communities. The success of the implementation
of plans, however, depends greatly upon the preparation and strict execution of
complementary regulatory controls, the most important of which are subdivision and
zoning regulations and the national building codes. While subdivision deals with the
breakup of land and design of streets and other infrastructure, zoning deals with the use
of the land, the building bulk and set-backs. The national building code is related to the
minimum standards to be followed in building design and construction in order to make
the building safe.

7.1 LAND SUBDIVISION

Land subdivision is the act of breaking up a piece of land into separate parcels. It is
normally done to permit the transfer of the subdivided parcels to someone other than the
owner of the original land. The primary purpose of the breakup is to allow development
to take place on the land e.g. for housing, industrial or commercial use etc. Although
subdivision is also done for dividing property among heirs or for continuing the use of
the land (farm sold to another farmer for agriculture purposes), the major intention of
subdivision is to develop the property. Subdivision is primarily a tool to regulate urban
development, unfortunately in Nepal, subdivision is conducted by the Land Registration
and Land Survey Departments which have no concern for the city plans.

Subdivision regulations govern the process by which individual lots are created out of
larger tracts of land and form an integral part of the larger master plan of the city. In
general, subdivision regulations govern the rules and standards for converting farm land
or vacant land into plots for urban development. These relate to the size and shape of the
lots and the width and length of the streets. They also include construction standards for
streets, curbs and gutters, water mains, sewers and sidewalks. On the other hand zoning
regulations divide the city into zones for different classes of land uses such as residential,
industrial, commercial etc. and specifies the spatial relationship between land and
building and the open spaces surrounding the building.

The subdivision has to consider certain provisions of the master plan e.g. proposal of
future roads, parks etc. The regulations also require that the existing utilities (local
streets, sewers, water mains etc.) tie in properly with the proposed utilities in the land to
be subdivided. Intentions to regulate the width of the street, length of the block, size of
lots, frontage etc. are also reflected in the subdivision regulations. Sometimes the cost of
public facilities is divided between the developers and the taxpayers, but often the
developers are required to dedicate land for streets and to install at their own expense the
necessary public facilities to serve the development. More recently, the developers have
been required to dedicate certain amount of land for parks, schools and even to contribute
towards the cost of constructing a sewage disposal plant. Unfortunately, Nepal does not
have any subdivision controls as a result of which subdivisions are occurring in an
unplanned and haphazard manner by individual land speculators. Individual plots of
irregular shapes and sizes without proper access and infrastructure are being created
without regard to any city development plans or planning rules and standards. The
following need to be considered when reviewing a subdivision proposal submitted for
approval:
Major streets are aligned with existing or proposed streets adjacent to the property
Utility lines are properly sized to fit the wider system
Drainage or natural hazard problems are not created for future residents or adjoining
properties
Improvements are adequate to serve proposed uses and quality of construction minimizes
future public maintenance costs
Natural amenities are preserved
Size and shape of plots serve their proposed use and met zoning and land use regulations
Subdivision can be served with necessary public services and facilities
Timing is right with regard to the community’s ability to provide services, for example,
the land cannot be an isolated lot far away from the built-up area where it will be too
expensive to extend services
Design is suitable and creates maximum safety for future occupants

Even in the developed countries the reviewing agencies are not always competent or
knowledgeable about the process and community goals are often not clear enough
resulting in poorly executed subdivision. Since subdivision is an integral part of the
planning process, it needs to be closely coordinated with other plans of the city and
cannot be implemented in isolation. Some of the plans which need to be considered are:
Water and sewer plans which establish the service area and the size, standard, location
and phasing of treatment facilities and lines to serve the area based on desired land use
pattern for future growth
Park and open space plan which identifies the location and standards for park and
recreation spaces to serve future growth and open space which needs to be preserved
Environmental plan identifying critical areas which need to be protected from
development such as flood plains, steep slopes, geologically sensitive areas, historical
areas, forest lands, agricultural land etc.
Street and transportation plan indicating location, capacity and nature of the system
Fiscal plan which determines the proportion of the cost of public facilities which needs to
be contributed by new subdivisions
Capital improvement plan which shows where and when physical improvements will be
made, their scale and how they will be financed

Ideally, subdivision proposals should be reviewed before final approval by the local
government as well as other concerned agencies such as water and sewer department,
roads and highway department, power and telephone companies, school authorities,
health department, fire department, parks and recreation department etc.
7.1.1 Subdivision in Nepal
There are no specific subdivision regulations per se in Nepal but a few related regulations
have been included in the bye-laws for Kathmandu and Lalitpur. Throughout the country
land is subdivided arbitrarily and approved by the Land registration Department. As a
result developments are often haphazard and follow no definite plans, access for
emergency vehicles is absent and buildings have been erected in areas that have no
infrastructure services. The subdivision regulations need to be closely coordinated with
other city plans such as transportation, infrastructure, parks and open spaces, capital
improvement plans etc. Either these plans do not exist or they are prepared independently
by different line agencies which make no attempt to coordinate their activities.
Consequently, sectoral activities are often implemented separately and timed improperly
to conflict with each other’s work e.g. road is dug up by the Department of Water Supply
soon after the Department of Roads finishes blacktopping the road.

The bye-laws for Kathmandu and Lalitpur include some subdivision regulations for
planned housing sub-zone. These include minimum road widths for different classes of
roads within the development area, minimum plot width of 6 m. and minimum area of 2.5
Annas, prescribing depth of plots according to area, minimum open spaces – from 2.5%
to 5% according to the size of the land to be subdivided. About 15-20% of land has been
prescribed for parking for buildings with high occupancy e.g. hotels, auditoriums,
commercial complexes, schools and colleges, office complexes etc. The municipalities
which are primarily responsible for issuing building permits tend to adhere only to
regulating building bulk and setbacks whereas the land registration office has neither the
knowledge nor the expertise to regulate urban development through subdivision controls.

7.2 ZONING ORDINANCES

Zoning is the division of the city into different zones in order to regulate the use of
private land. The zoning regulations specify the permitted uses, the bulk of the buildings,
set-backs and other requirements in each of the zones. In its simplest form, zoning was
developed to segregate residential areas from commercial and industrial development.
Zoning is an expression of police power to regulate activity by private people for the
health, safety and general welfare of the public. This kind of power rests only with the
state legislature and municipalities can exercise this power only after it has been
delegated to them by the state e.g. Town Development Act and the Local Self-
Governance Act.

Zoning needs to be consistent with the comprehensive plan of the municipality. Whereas
the plan indicates the future development aspirations of a city, zoning ordinances provide
the detailed means of achieving these plans. Zoning is also closely related subdivision
regulations. While subdivision involves the design and size of plots, the streets and other
infrastructure, zoning controls the use of the lot as well as the building bulk, set-backs