UNDERSTANDING VARIOUS PROCEDURES IN PRE-CONTRACT STAGES OF BUILDING CONSTRUCTION

11th MARCH 2009

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TABLE OF CONTENTS

1. ABSTRACT...Page 3 2. INTRODUCTION..Page 4 3. ABOUT MY TECHNICAL PAPER.Page 5 4. PRE-CONTRACT STAGE....Page 6 4.1 Appointing a Consultant....Page 6 4.2 Basic Services of a Consultant...Page 7 4.3 Fee Structure..Page 7 5. PRE-CONTRACT PROCEDURAL STAGES..Page 8 5.1 Concept Design and Reports..Page 8 5.2 Scheme Design and Reports...Page 9 5.3 Detailed Design, Product Information, Bills of Quantities....Page 9 5.3.1 Detailed Design...Page 9 5.3.2 Product Information..................................................................Page 10 5.3.3 Bills of Quantity....Page 10 5.4 Tender Action...Page 16 6. CONCLUSION....Page 18 7. REFERENCES.Page 20

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1. ABSTRACT In Construction, developing a concept into a finished facility involves large scale multitasking , which are managed by various professionals at various level. The Construction process is divided into two steps namely Pre-contract and Post-contract stage. This paper deals with the various procedures involved in the Pre-contract stage from developing the concept till contract award in the UAE construction industry. The Pre-contract stage involves the appointment of a consultant to develop the concept expressed by the owner into a finished product. The Consultants scope of works in the Pre-contract stage consists of development of concept design & submission of report which includes cost estimate, development of scheme design, outline specifications & submission of report , development of detailed design, specifications, drawings, preparation of bills of quantities and tender action. The preparation of bills of quantities is an important function in the Pre-contract stage and is explained in detail. The significance of methods of measurement for preparing bills of quantities and commonly used methods are in UAE are also explained. A format for the preparation of bills of quantities in a typical high rise building including items in each bills are also detailed here. The selection process of a contractor through tender invitation are also briefed in detail. If a project completes with in the time agreed and within the budget, then it is called a successful completion. For achieving such a result, so many factors are involved. A systematic and professional approach in developing the concept through various levels in the Pre-contract stage is definitely an important factor. A clear understanding and a good approach can save both time and money in construction projects. 2. INTRODUCTION

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Construction blooms your dreams into a solid reality. In fact it is the translation of all the papers or computer based designs into finished product. It consists of buildings or assembling of infrastructure. Construction involves a large scale of multi-tasking. These tasks are managed by the Project manager and aided by Construction manager, Contracts manager, Design engineer, Quantity surveyor, Construction engineer or Project engineer at various levels in varying degrees of their expertise.

Construction is the step in which the plans, specifications, materials and permanent equipments are transformed into a finished facility. All the parties involved in a construction project owner/client, designer, supplier, contractor and end user strive for the same goal : a facility meeting the expectations of the client and end user. The concepts expressed by the client are turned into design drawings, specifications and purchase orders by the designer or the Consultant. The entire construction process can be divided into two stages, the Pre-contract stage and the Post-Contract Stage. The pre-contract stage includes developing the concept expressed by the owner followed by approved scheme design, outline specification, detailed design specification, product information, preparation of bills of quantity, tender action etc. until contract award. Whereas the postcontract stage includes the execution of all the contracted documents into the finished reality as agreed per the contract by the contracting parties viz. client and contractor. The procedures related to the pre-contract and post- contract stages are to an extend similar in all jurisdictions.

3. ABOUT MY TECHNICAL PAPER

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As known to all, the construction process is very extensive and unique in each project. My Technical paper is an endeavor to explain the various procedures involved in the precontract stage in construction with reference to private building projects. Presently I am working in the Project Development department of a company in UAE as a Senior Quantity Surveyor, frequently dealing with the pre-contract stages and which alone is the rationale for selecting this topic towards my technical paper. I trust this paper would provide an effective briefing on the pre-contract stage.

The contents of the entire paper are broken into titles and sub-titles and a brief description is given on each. The assignment commences with an introduction on pre-contract stage, then the main stages of the pre-contract phase is explained. The role, importance and the format of Bill of Quantity is also dealt elaborately. Under the subtitle of Tender Action, I have attempted to explain the procedures and documentation involved in it and how it would eventually lead into the contract award. I hope this paper would enlighten the reader on the basic information required on Precontract phase of construction, and would serve as a hand-guide to those readers who have graduated in the construction field and aspiring to gain practical experience in that field.

4. PRE-CONTRACT STAGE Page 5 of 19

Any construction activities can be subdivided into two stages, the pre-contract stage and the post-contract stage. What constitutes the pre-contract stage? The pre-contract stage can be simply described as that phase where the concepts of the client are developed into design drawings, specifications and purchase orders by the design engineer or consultant. The successful completion of a pre-contract phase depends on the appointment of an experienced consultant for the design and preparation of product information, bills of quantity and tender action. Therefore it is essential to know about a consultant before sinking into the core of the pre contract stage. 4.1 Appointing a Consultant The consultants are the team who visualizes in paper or computer designs the concept of the owner and strive towards the fulfillment of the same with other bunch of experts. The first step in a pre-contract stage of any building project is appointing a consultant .It is always recommended to approach an experienced consultants services. The expertise of the consultant has a heavy impact on the cost of the work and the time factor, for these to be under control, the quality of a consultant team is a matter of concern. The consultant should have enough experience and expertise to develop the concepts expressed by the client to the utmost satisfaction of the owner/client. Before appointing a consultant, the client may gather a panel of consultants available and invite the fee proposal and programme and qualifications from various respective consultants and have a comparative approach of the fee structure and may select the best one which suit to his needs. Once the client selects the consultant, he enters into a service agreement with the respective consultant.

4.2 Basic Services of a Consultant Page 6 of 19

The consultant usually provide professional consultancy services in the disciplines of Architecture, Structural , Mechanical, Electrical, Plumbing & Drainage engineering and Quantity surveying inclusive of Local Authority submission / approvals and byelaws. In addition to this, the owner can request for other services in the field of Interior design, Landscape design, Traffic impact study etc. depending upon the nature and necessity of the project. The basic services also includes supervision, approvals of material samples and working drawings involved in the post-contract stages.

4.3 Fee Structure Generally the fees for the basic services are based on a percentage of pre and post contract fees of an agreed percentage of the total construction cost .If the client opts to go ahead with a project on a figure higher than the budget, the fees shall be adjusted accordingly. The general practice is to fix around 70% for pre-contract stage and 30% for postcontract stage. The pre-contract fees are invoiced upon completion of each levels of

designs in the pre-contract stage. Post-contract fees are usually invoiced monthly as per the progress of work. For smaller scale of works undertaken like renovation works, the fees would be generally a lump sum amount.

5. PRE-CONTRACT PROCEDURAL STAGES

Now let us examine the various procedures followed in the pre contract stages. The main levels in Pre- Contract are as follows: Concept design and reports on all design disciplines

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Scheme design and reports Detailed design , Product information , Bills of quantity Tender action

5.1 Concept design and reports This is the preliminary stage where the client reveals to the consultant all his ideas, plans about his project, such as the concept of the project, time scale about the completion and about the budget to be expended. The consultant set out to obtain the information regarding the plot/site, boundary fences, encroachments, underground services, rights of way and other relevant matters. It is based on these information and the plans of the client expressed to him, does the consultant with his sub-consultants analyze the clients requirements, and prepare outline proposal(s), a report of the project and also an approximate construction cost. The said report depicts, the site location, site access, the overall design approach adopted, the specified areas, plans, Architectural, Structural, Mechanical, Electrical, Plumbing and Drainage engineering requirements. The outline proposal, report and the approximate construction cost is submitted to the client for his preliminary approval.

5.2 Scheme design and reports After obtaining the approval from the client for the concept report and estimate, the next stage is to prepare a scheme design from the outline proposals taking into account

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amendments suggested by the client and then to prepare a cost estimate. At this stage the consultant will be able to indicate the possible start and completion dates for the building contract. The scheme design will illustrate the size and character of the project in sufficient detail to enable the client to agree the spatial arrangement, materials and appearance. Also the consultant can advise the client of the implications of any subsequent changes on the cost of the project and on the overall programme. Finally, the consultants submit the scheme design detailing the structure, engineering and part architectural materials and appearances together with cost estimate for clients approval.

5.3 Detailed design , Product information , Bills of quantity 5.3.1 Detailed Design This is the crucial stage in the pre-Contract phase.The consultant with all his subconsultants develop the scheme design after incorporating all the suggestion by the client to his satisfaction. Though a client can make any changes during the post -contract phase, it is always advisable to minimise variations during the post-contract period and make whatever changes to be made at the detailed design stage itself ,so as to save the cost and time. At this stage the clients approval for type of construction, quality of materials and standard of workmanship are taken. Hereafter the consultant will liase with the authorities and statutory undertakings like the water, electricity, telephone, drainage etc. for

statutory approvals and no objection certificate. It is during this level the consultants applies for building permit from the appropriate statutory authority,co-ordinate with any design work done by sub-consultants, contractors and suppliers for specialist work and obtain quotations and other information in connection with the same for the production of

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a complete detailed design. Finally, submits the detailed design together with cost estimate for the clients approval. 5.3.2 Product Information The consultant along with sub-consultants prepare the production information including drawings, schedules and specification of materials and workmanship, provide information for the preparation of bill of quantities etc. All the information to be complete in sufficient detail to enable a Quantity surveyor to prepare the bill of quantities and the tenderer to submit a competitive price. 5.3.3 Bills of Quantity ( BoQ ) The preparation of Bill of Quantities is another important function in a Pre-Contract stage. The Bill of quantities means a list of items providing brief identifying description and estimated quantities of the scope of work comprised in the tender documents. Normally this is prepared by the consultant with the help of in house Quantity surveyors or any other professional Quantity survey organization. The bill of quantity should be very detailed and precise so that it will enable all parties concerned to understand all the items and requirements of the project. This will help all the tenderers to participate in a competitive manner in the tendering process. The bill of quantities are generally prepared in accordance with the methods of

measurement2,3 followed by various institutions. The object of the method of measurement is to set forth the procedure according to which the Bills of Quantities shall be prepared and priced and the quantities of work expressed and measured.

Objects of the Bills of Quantity The objects of the Bills of Quantities are Page 10 of 19

To provide information of the quantities of work so as to enable tenders to be prepared efficiently and accurately

To provide for use of the priced Bill of Quantities in the valuation of work executed, after entered into the Contract

To attain the objects, works should be itemized in the Bill of Quantities for it to be possible to distinguish between the different classes of work, and between work of the same nature carried out in different locations or in any other circumstances which may give rise to different considerations of cost. All work which is expressly required should be covered in the Bill of Quantities. Principally, the above objects can be attained by the use of Work Classification as mentioned in the Standard method of measurement book. After understanding the objects of the bills of quantity, a small briefing of the preparation of bills of quantities are also essential , and are described below.

Different Sections of Bills of Quantity The Bill of Quantities consists of different sections such as Preamble, Work items, Daywork Schedule and Grand summary. A small briefing of these sections are given below. Preambles This is a preliminary statement which explains the measurement rules used other than the method of measurement, if any, adopted in the preparation of the Bills of quantities and are to be used for the measurement of any part of the works. The Preamble also should

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indicates the inclusiveness of the unit prices quoted in the bills of quantities under various sections. Work Items The items in the Bills of Quantities should be grouped into different bills to distinguish between those parts of works that by nature, location, access, timing, or any other special characteristics may arise to different methods of construction, phasing of works, or considerations of cost. General items common to all parts of the work may be grouped as a separate bill in the bills of quantities and this general items are recorded as Bill No.1 under the work items. The various bills recorded under the work items in the bills of quantity for a Building project are listed below. A brief statement of the works undertaken under each section is also provided for a better understanding of the same. Bill No. 1 General Items or Preliminaries - includes items like Site administration, Supervision, Security, Safety, Contractors & Employers facilities like site office, toilets, water, electricity, telephone, fax, office furnitures, Transportation, Construction plant, Sign board, Bonds & Insurances, Temporary works. Cleaning etc Bill No. 2 Site works - includes Site preparation, Shoring, Excavation, backfill, Disposal, Dewatering, Anti-termite treatment etc. Bill No. 3 Concrete works - includes Sub- structure & Super-structure concrete works, Shuttering works, Reinforcement works, Sub-structure waterproofing works etc. Bill No. 4 Masonry works - include internal and external block works

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Bill No. 5 Non-structural metal works - includes Glass window, Glass doors, Aluminum doors, louvers, Handrails, Access platform etc.

Bill No. 6 Wood works - includes Wooden cladding, Wooden ceiling, Timber Handrail, Vanity counters, Wardrobes, Cupboards etc.

Bill No. 7 Thermal and Moisture Protection - includes Waterproofing to wet areas, balcony, roof etc.

Bill No. 8 Doors and Windows - includes all types of doors, windows etc. Bill No. 9 Finishes - includes all internal finishes and external finishes to floor, wall, ceilings etc.

Bill No. 10 Specialties - includes Signage, Bathroom accessories etc. Bill No. 11 Equipment - includes Garbage chute, Window cleaning, Swimming pool equipment etc.

Bill No. 12 Conveying System - includes Lift, Escalators etc. Bill No. 13 MEP works - includes Mechanical , Electrical, Fire Protection, Fire Fighting, Plumbing & Drainage works etc.

Bill No. 14 External works - includes External services, Kerb, Paving works etc. Bill No. 15 Provisional Sums - Provisional sums4 means sum included in the contract and so designated in the bill of quantities for the execution of any part of the work, or for the supply of goods, materials, plants or services, or for contingencies, which sum may be used, in whole or part, or not at all, on the instruction of client or his representative in construction stage.

The usual format followed in recording the items in a bills of quantities includes a Description of items column, followed by Units of measurement, Quantities, Unit Rates

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and Amount.(The unit rates and amounts are filled by the tenderer(s) while returning the priced tender). Each page of the BOQ will carry the page total which will carry forward to the summary of each sections and in-turn merge into the grand summary.

Daywork Schedule Another section which finds space in the bill of quantities is Daywork schedule. Daywork means the method of valuing work on the basis of time spent by the workmen or labour, the materials used and the plant employed. The daywork schedule shall comprise a) a list of the various classes of labour, materials and contractors equipment for which basic daywork rates or prices are to be inserted by the tenderer, together with a statement of the conditions under which the contractor will be paid for work executed on a daywork basis ; and b) a percentage to be entered by the tenderer against each basic daywork subtotal amount for labour, materials, and plant representing the Contractors profit, overheads, supervision, and other charges Grand Summary

The grand summary shall contain a tabulation of the parts of the bill of quantities with provision for insertion of the total of the amounts brought forward from the part summaries such as General items, Work items, Provisional Sum items and Dayworks. The value against each part are inserted here and will form the Grand Total.

Generally in UAE, any one of the following three methods of measurements are used for the preparation of bills of quantity. Page 14 of 19

i)

POM(I) - Principles of measurement ( International ) for works of construction dated June 1979 issued by the Royal Institution of Chartered Surveyors, London, UK.

ii)

SMM7 - Standard method of measurement for building works dated January 1998 issued by Royal Institute of Chartered Surveyors, London, UK.

iii)

CESMM3 - Civil engineering standard method of measurement, 3rd edition, 1991, issued by Institution of Civil Engineers, London, UK

All the above are amended to suit local practices and intended to be used in conjunction with the Conditions of Contract4. The decision to proceed with which type of measurement rule to be used lies with the client and the consultant depending upon the type of the project and should be spelled out precisely in the Preamble to the Bill of quantities. Following the preparation of BOQ, the consultant will price the BOQ and submits this for clients review as Pre-tender estimate.

5.4 Tender Action Tender action is the next stage in the Pre-contract phase. Here the complete tender documents are prepared and send to all the approved contractor for tender invitation. The tender documents include : the letter of Invitation which informs the tenderer of when and where tenders should be submitted and any other information Page 15 of 19

the Instruction to tenderers which consists of important guidance and information for completing the tender including type of contract, submission of bonds / guarantees etc. Generally in our projects we follow three types of contracts namely Fixed price Lumpsum contract, Item rate contract or Re-measurable contract and Cost plus percentage contract. Based on the type of project, the consultant / owner will take a decision on the type of contract to be implemented and included in the Instructions to Tenderers.

the form of tender in which the tenderer mention about the Price for the execution and completion of the works and remedying of any defects therein in accordance with the provisions of the contract, and acknowledging by listing the tender documents he has received in the appropriate part of the form of tender and confirming that he has understood all the interpretations correctly and pledges towards fulfillment of his contractual obligation.

the Conditions of contract for works although there are lot of conditions of contract available , mostly we follow FIDIC Conditions of contract ( Fourth Edition 1987 ) reprinted in 1992 .

the drawings ( such as Structural drawings, Architectural drawings, Mechanical drawings, Electrical drawings, Plumbing and Drainage drawings, External drawings, Interior design drawings etc. )

the specifications ( such as Structural, Architectural, Mechanical, Electrical, Plumbing & Drainage, Interior design specifications etc. )

the Bills of quantities where the prices should be entered by the tenderer so as to form the Final contract Price.

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Usually the tender form contains the standard clause stating that the client is not bound to accept the lowest or any tender he may receive. In the form of tender, the tenderer and a witness has to sign and stamp as acknowledgement / confirmation. Also there is an Appendix to the form of tender which clearly gives information as well as tendereres obligation in terms of bonds, insurances, Notice to commence the work, time for completion of works, penalty for delays, payment terms etc

All the above documents are sent to the respective contractors for pricing mentioning the tender return date and submission of Tender bond along with the return of the tender documents by the contractors..Tender bond is an unconditional bank guarantee from a bank approved by the Client. Normally the contractors has to tender a bond amount which shall be in the sum not less than 5% of the Contract Price as surety against the withdrawal of the tender before the expiry of the period of validity of tender.

After obtaining the completed sealed tender from the tenderers along with the tender bond, all the tender will be opened on specified date and time. All the tenders are evaluated against the pre-determined criteria which are specific in the the tender document. The evaluation will balance the proposal of the tenderer in delivering the contract against the quality of outputs required by the specification and balanced against the price. After the thorough evaluation, the client or his representative will issue the Letter of Acceptance4 to the successful tenderer. Subsequently both the client and the successful tenderer or known as contractor will enter in to an agreement for the execution

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of the project in the same format of Form of Agreement which forms the part of tender documentation whereby contract award is done with.

6. CONCLUSION The Successful completion of a project depends on factors which help to complete the project in time and within the budget. Every delay in completion will have an impact on cost also, which will adversely affect both owner and end user. There are various reasons for a project to get delayed. This includes the activities in both Pre-contract and Postcontract stages. Since this paper deals with Pre-contract stage, the delays caused due to the changes in drawings and specifications are to be avoided. The recommendations are a) The consultant and his sub-consultants should co-ordinate well while developing the drawings of different disciplines b) The consultant who have enough knowledge about the regulations and requirement of the statutory bodies are to be appointed c) The consultant and the owner should liaise with each other to understand / convey the ideas effectively in developing concepts, spatial arrangements, selecting

materials etc. which in-turn will expedite the approval process in post-contract stage d) The complete scope of works are to be determined well in advance.

If all the above recommendations are implemented systematically in a professional manner, then most of the delays in Pre-contract stages can be avoided and save both money and time. So a clear understanding of the procedures in Pre-contract stage is very essential for the successful completion of the project. Page 18 of 19

7. REFERENCES 1) Standard Agreement for the Appointment of a Consultant - by RIBA ( Royal Institute of British Architects ) , January 2008 2) CESMM3 - Civil Engineering Standard Method of Measurement, 3rd Edition, 1991 issued by Institution of Civil Engineers, London, UK 3) SMM7 - Standard method of measurement for Building Works dated January 1998 issued by Royal Institute of Chartered Surveyors, London, UK 4) FIDIC Conditions of Contract, 4th Edition, 1987 reprinted in 1992 - by Federation Internationale des Ingenieurs-Conseils

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