Prepared by: Suhaida @ Suhana Kamarudin

At the end of this course students will be able to;

i. Apply the procedures in preparing contract documents

ii. Identify the requirement of site meetings and the

recording of minutes

iii.Prepare a simple interim payments

iv. Prepare a variation order and final account

LEARNING OUTCOMES

• ‘When the contractor has executed work including delivery

to… the works of any unfixed materials or goods intended

for use thereon.. and the total value thereof has reached the

sum referred to in the Appendix.. The S.O. at that time make

the first valuation of the work… Thereafter, once (or more

often at the discretion of the S.O.) during the course of each

succeeding month the S.O. shall make a fair valuation of the

works properly executed and of the materials delivered to..

the works…’

VALUATION

• The SO/Arch. has to make interim valuations in order

to arrive at the amount due in interim certificates.

• The evaluation is for the work executed and materials

delivered on site and to be carried out at least once a

month.

VALUATION (cont’d)

• The S.O. and the contractor have to agree on specific

dates or days of the month to carry out the valuation

work.

• Interim certificate can only issued when the total value

of works executed and materials on site exceeds the

required minimum value i.e. RM1,000.00 (No provision

for minimum value in PAM Form)

VALUATION (cont’d)

• The evaluation should be as accurate as is reasonable

possible and is subject to the possibility of arbitration.

• A new evaluation of the work done provides an

opportunity to adjust or modify previous evaluations of

earlier certificates.

• The value of work executed consists of Preliminaries

and permanent work done by contractor.

VALUATION (cont’d)

• This section consist of those item that do not form part

of the permanent works but are essential to be

provided for the successful completion of the job.

• The employer and the contractor should agree the

method of paying for the prelim. Items at the

beginning of the contract.

• Valuation is only made on the items that are priced

and carried out by the contractors.

PRELIMINARIES

• The price of each item may be broken down and categorized

as initial cost, progressive cost or completion cost to the

employer.

• Initial cost – a lump sum to be paid to the contractor in the

first interim payment.

• Progressive cost – a continuing cost to be spread

throughout the execution of the work and either related to

time or to the expenditure on the work.

• Completion cost – a lump sum to be paid to the contractor

upon completion of the work.

PRELIMINARIES (cont’d)

PreliminariesBQ Ref Description Total Initial Progressive Completion

D/11/A Temporary road 10,000.00 7,500.00 1,500.00 1,000.00

D/11/C Temporary Office 18,000.00 14,000.00 3,500.00 500.00

D/11/D Signboards 2,000.00 1,700.00 200.00 100.00

D/11/G Light & power 10,000.00 1,000.00 8,500.00 500.00

D/12/B Water for the works 15,000.00 3,000.00 11,500.00 500.00

D/12/D Contractor's equipment 300,000.00 50,000.00 240,000.00 10,000.00

D/12/E Site telephone 8,500.00 500.00 7,500.00 500.00

D/12/F Temporary hoardings 28,000.00 20,000.00 5,000.00 3,000.00

Total for the item

Claim when project start

Recurring

End of project

PRELIMINARIES (cont’d)

PRELIMINARIES (cont’d)

PRELIMINARIES (cont’d)

• Total amount of RM644,700.00 in column ‘Progressive’ to be paid

progressively during the execution of the works and can be done in

2 ways:

a) Pro-rata on contract period:

Preparation of Interim Certificate No 5.

Initial Cost = RM 291,700.00

Assumptions: Contract period = 24 months

Progressive payment = RM644,700 x 5/24 months

= RM 135,387.00

Amount of Preliminaries items to be paid:

Payment 1 = RM 291,700 + RM 135,387.00 = RM 427,087.00

PRELIMINARIES (cont’d)

b) Pro-rata on the value of work executed

Assumptions:

Contract sum = RM25,000,000

Provisional sums = RM1,500,000

Preliminaries = RM 969,500

Initial cost = RM 291,700.00

Net contract sum = RM25,000,000 –(RM1,500,000 + RM969,500)

= RM22,530,500

Amount of Preliminaries item to be paid:

If net value of work executed by contractor to date = RM 900,000.00

Progressive payment = (RM900,000.00/ RM22,530,500) X RM 644,700

= RM25,753.10

Payment 1 = RM 291,700 + RM 25,753.10

= RM 317,453.10

PRELIMINARIES (cont’d)

Preliminaries = Total Initial Cost + Work done x Recurring Cost]

Builder’s Work

PREVIOUS CURRENT CUMULATIVE

• Only the value of work properly executed by the contractor in

accordance with the contract must be included in the certificate.

a) Valuation based on Contractor’s work executed

• The valuation calculates the estimated value of work executed

by reference to:

The detailed quantities and rates for every item in the BQs

The cost of elements or work sections.

The contract sum

VALUE OF THE PERMANENT WORKS EXECUTED

• Valuation based on measured items

W.B.L.F.F.

Excavations

3/1/A To red. Lev. 990.00 100% 990.00

3/1/B For pile cap n.e. 1.0 m dp 10,900.00 100% 10,900.00

3/1/C Ditto 1.0 -2.0 m dp 5,250.00 100% 5,250.00

3/1/D Grd bm n.e. 0.50m dp 1,890.00 90% 1,701.00

3/1/E Hardcore 2,850.00 30% 855.00

Conc. Gr.15

3/1/F Lean conc. To pile cap 3,248.00 100% 3,248.00

3/1/G Ditto to grd bm 8,690.00 100% 8,690.00

Conc. Gr.30

3/1/H Pile cap 125,080.00 100% 125,080.00

3/1/J Col. Stump 7,695.00 100% 7,695.00

3/1/K Grd bm. 32,631.00 25% 8,157.75

3/1/L Bed 53,852.00 0% -

Total Carried Forward 172,566.75

Contract Sum Work done %Amount of

Work DoneDescription BQ Ref

VALUE OF THE PERMANENT WORKS EXECUTED(cont’d)

• Valuation based on elemental cost

A W.B.L.F.F. 25,400.00 100% 25,400.00

B FRAME 31,900.00 95% 30,305.00

C UPPER FLOOR 18,250.00 90% 16,425.00

D STAIRCASE 5,890.00 90% 5,301.00

E ROOF 20,850.00 30% 6,255.00

F EXTERNAL WALLS 9,500.00 35% 3,325.00

G INTERNAL WALLS 3,240.00 30% 972.00

H WINDOWS 8,500.00 0% -

J DOORS 5,400.00 0% -

K INT. WALL FINISHES 12,690.00 0% -

L INT. FLOOR FINISHES 22,200.00 0% -

M INT. CEILING FINISHES 13,850.00 0% -

N EXTERNAL FINISHES 15,800.00 0% -

P MECHANICAL AND ELECTRICAL WORKS 58,000.00 0% -

Total Carried Forward 87,983.00

BQ Ref Description Contract SumWork done

%

Amount of

Work Done

VALUE OF THE PERMANENT WORKS EXECUTED(cont’d)

The contract sum method:-

• This is only suitable for small job and to be done by

experienced staff only

• The amount of work done is calculated by multiplying

the estimated percentage completion with the contract

sum.

• Example:

Amount of work done = 25% X 100,000.00 = RM25,000

25% of overall work done and RM100k is the contract sum

VALUE OF THE PERMANENT WORKS EXECUTED(cont’d)

• This is an alternative method of valuing the work

executed by the contractor

• Interim payment to be made on the basis of

percentage completion of the various components of

the project.

• An example of breakdown of works for stage payment

for a residential building.

VALUATION BASED ON STAGE OF COMPLETION

• Schedule of breakdown contract sum

Item Stages of Works % of Contract sum

A Foundation and ground floor 15%

B

Reinforced concrete frame,

staircase and upper floor 20%

C

Walls including doors and

windows 15%

D

Roofing, electrical wiring and

plumbing 15%

E Finishes 15%

F

Roads, drains and sewerage

works 20%

Total 100%

VALUATION BASED ON STAGE OF COMPLETION(cont’d)

• The details of breakdown of works and the percentage of

payment to each stage of work will be decided by employer

and attached to the tender document or as agreed by both

the employer and the contractor before signing the contract.

• The amount to be paid to the contractor for the work

executed is equal to the value of the percentage of the

contract sum assigned to the work.

• In some arrangements, materials on site are not considered

for payments.

VALUATION BASED ON STAGE OF COMPLETION(cont’d)

• The SO/Arch. has to check the contract document for

arithmetical errors in the pricing by the contractor.

• Correction has to be made to avoid mistakes in the

computation of interim payments

• The original contract sum in the Tender Form must not

be changed.

PERCENTAGE ADJUSTMENT

• Source of errors:

a) Adjustment made to unreasonable and inconsistent rates by

the SO

b) Error made in ‘extension’ i.e. multiplication of rates and

quantities

c) Error made in adding up the total of each item on each page of

BQ

d) Error made in transferring the total on each page to Collection.

e) Error made in transferring the total from Collection to

Summary

f) Error made in transferring the total from Summary to Form of

Tender.

PERCENTAGE ADJUSTMENT (cont’d)

• This is the value of work which is not part of the original

scope of work but has been carried out by the contractor

as the result of the SO’s instruction.

• The value of variation works must also be included in

the valuation of permanent work executed by the

contractor.

• The value so consider for payment included the variation

work where variation certificate is not yet prepared.

VARIATIONS

NOMINATED SUB-CONTRACTORS WORKS

Payment to NSC/ NS

Payment to Main Contractor

Monthly claim by sub-contractor/ supplier

Monthly claim by contractor

Valuation and Certification by SO

Subcontractor submits claim to contractor

Contractor incorporates subcontractor’s claim in his claim to the employer

a) Generally

• The contractor entitle to payment for all unfixed

materials delivered to site but not yet

incorporate in the work

• Materials brought to site must not be removed out

of the site without the SO consent and the

contractor is responsible for their safety.

MATERIALS ON SITE (M.O.S)

b) Prerequisite for payment

Unfixed materials may be considered for payment if:

• Delivered to site or adjacent to site

• Intended for corporation in the permanent work i.e. in

accordance with the contract.

• Reasonably, properly and not prematurely brought to site

• Adequately protected against weather and other casualties,

• The cost of the materials have

• been paid by the contractor to the supplier

MATERIALS ON SITE (M.O.S) (cont’d)

c) Computation of valuation

• The materials are priced at invoice prices

• Valuation of M.O.S shall be paid 90% of value claimed by

contractor

• The total to arrive at the amount to be paid to the

contractor (PAM, sub-clause 30.3 allows the full value to

be paid)

MATERIALS ON SITE (M.O.S) (cont’d)

• The changes in cost of materials due to the market

conditions must be taken into account in the interim

payments.

• Price adjustment is made through the application of

indicates which are issued by the department of

statistic in a formula.

• The calculation of the fluctuation in price is to be made

monthly

FLUCTUATION OF PRICE

• Base index figure is the index figure for the

month the tender closes.

• Current index is the figure for the month

preceding the date of the month of valuation.

FLUCTUATION OF PRICE (cont’d)

FLUCTUATION OF PRICE (cont’d)

Amount of Addition / Omission

= Fluctuation factor x Effective value of work done

Fluctuation factor

= Recovery factor x (Current Index figure – Base Index figure)

Base Index figure

Recovery Factor

= 0.60 (i.e – estimated material cost is 60% of the total cost of the

works

Effective value of work done

= Builder’s work – Preliminaries items

Builder’s Work

= Contract Sum – (P.C Sums + Provisional Sums)

Keep calm

To be continued