3 Apr 2020: Created.
- Quantity Surveyors provide cost management and contract advice services during the post contract stage until the settlement of the Final Account.
Post contract scope of services of consultant QS firms
- Attending meetings.
- Vetting insurances, bonds and warranties.
- Advising on estimated costs of potential changes to the Contract Sum.
- Preparing Financial Reports at regular intervals.
- Preparing cash flow tables.
- Advising on contract interpretations.
- Valuing payments.
- Preparing Final Accounts and negotiating with the contractors to agree the Final Accounts.
Additional scope of scope of services
- Additional services caused by termination of construction contracts or determination of contractors’ employment.
- Preparing for and attending mediation, arbitration or court proceedings.
- Project co-ordination meetings (usually monthly):
- attended by Employer and Consultants without Contractor
- QS usually attends
- for discussing outstanding design, statutory submission status, selection of Nominated Sub-Contractors and Suppliers.
- Design co-ordination meetings (as required):
- attended by Consultants
- QS usually does not attend
- for more detailed co-ordination of drawings prepared by different Consultants.
- Site meetings (usually monthly, more frequently initially):
- attended by Consultants, Contractor and Sub-Contractors
- QS usually attends the relevant part
- for discussing site programme, progress, document issuance and submission status, problems, etc.
- Sub-Contractors’ co-ordination meetings (usually weekly):
- attended by Contractor and Sub-Contractors
- QS does not attend
- for detailed co-ordination of shop drawings, installation drawings, programme, progress, problems, etc.
- Final Account meetings (as required):
- attended by QS and Contractor / Sub-Contractors
- for discussing and agreeing Final Account
- during the course of construction and not necessarily deferred until after completion of the Works.
Vetting insurances, bonds and warranties
- QS vets draft insurances and bonds submitted by the Contractors and Nominated Sub-Contractors and Suppliers to ensure that the terms and conditions are in compliance with the contract requirements.
- Usual types:
- Contractors' all risks and third party liability insurances – required to be submitted before any work on site
- Employees’ Compensation Insurance – required to be submitted before any work on site
- Surety bond – usually required before the first payment otherwise cash security of equal amount will be retained
- Materials and workmanship warranty (roofing, kitchen and bathroom waterproofing layers, windows, curtain wall) – usually towards Substantial / Practical Completion.
- Form of Warranty related to Nominated Sub-Contractors and Suppliers should have been dealt with not later than the award of the contracts.
- Usual problems encountered:
- Drafts not exactly following the pro-forma given in the Tender Documents (pro-forma usually given for bonds and warranties)
- Drafts not complying with contract requirements
- Incorrect date of the letter of acceptance or letter of intent inserted (used when Contract Documents may not have been signed at that time)
- Incorrect names and addresses of Project, Employer and Contractor inserted
- Incorrect descriptions of parties to be included as the joint-insured
- Incorrect descriptions to cover all tiers of sub-contractors
- Amounts of excesses too high
- Period of insurance (construction and defects liability / maintenance) not sufficient
- Fixed expiry date in the form of calendar date instead of a floating expiry date pegged to the Substantial Completion Date or Date of Defects Rectification Certificate / Certificate of Completion of Making Good Defects.
- Late submission of drafts with protracted rounds of comments and re-submissions
- Late submission of formally executed documents.
Advising on estimated costs of potential changes to the Contract Sum
- Design changes may be proposed during the course of construction.
- The Employer may like to know the estimated costs before approving to make the design changes.
- QS estimates the costs based on the Architect’s or Engineer’s design.
- The design may not be complete for estimating at the earliest time for quick decision making.
- Whether the design is complete or not, approximate estimating using approximate quantities and composite rates should be adopted to shorten the time to do the estimate.
- It is possible that the design may eventually not be adopted or may be further modified.
- It will be a waste of time if the estimate is prepared in great details like valuing a variation formally but is not really so accurate that at the end of day the estimate cannot be used as the formal valuation.
- Buffer for agreement with the Contractor should be allowed.
- AI pre-approval forms may need to be signed before an Architect’s instruction is authorized to be issued for the proposed changes.
- The Contractor may also raise claims, which require QS to report to the Employer the probable costs of those claims.
Preparing Financial Reports at regular intervals
- QS needs to prepare Financial Reports at regular intervals (usually monthly) to report on the latest situation of all the possible adjustments to the Contract Sum.
- The reports serve as a register of instructions issued, potential variations, claims received, etc.
- The reports should have columns to show the latest of each of the following:
- amounts estimated by QS – with buffer for budgetary purposes; not known to the Contractor; can be viewed as the maximum payable
- changes since the last report
- amounts claimed by the Contractor
- amounts assessed by QS – formal amount notified to the Contractor; can be viewed as the minimum payable
- difference from amounts claimed
- The reports should also show the status of the items, such as:
- tentative based on claim
- estimated (some measurement)
- no cost effects
- assessed (detailed)
Preparing cash flow tables
- QS may be required to prepare cash flow tables regularly or ad-hoc to indicate the likely amounts of payments required to be made by the Employer so that he may prepare for funding.
- Care should be made to adjust for the difference between the time of progress and the time of actual payment.
- A comparison between the cash flow graph prepared based on the baseline master programme and the latest actual flow graph can be a good visual indication of whether the progress is ahead or behind the programme (measured by the value of the Works).
Advising on contract interpretations
- As QS is the party responsible for preparing the contractual and financial parts of the Tender Documents, QS is very often requested by the Employer and other Consultants to advise on the contractual validity of claims raised by the Contractor.
- The next and probably the most important question is on the cost implications.
- While the Special Conditions of Contract and Preliminaries may be prepared using the QS’s company standard with some modifications with little thoughts on the interpretations, post contract advice would demand a good understanding of the meaning of the clauses in the Form of Contract, Special Conditions of Contract and Preliminaries.
- On top of a thorough understanding of the standard forms of contract, the common law rights and remedies are also very important matters to be understood.
- A QS may be handling different types of contracts at the same time, therefore, his/her knowledge should be broad enough to cover all types encountered.
- In the worst case where determination of the employment of the Contractor or termination of contract is to be considered, proper procedures must be implemented to ensure that a proper determination or termination would not end up into a breach of contract. QS advice on the detailed procedures would be important.
- In case dispute resolution procedures like mediation, arbitration or court proceedings are involved, the case will then usually be passed to the lawyers to handle with QS to assist on the technical and financial aspects only.