Lesson 3: Bills - Introduction.

Objectives.

1. Understand what Bills are.

2. Understand the constituents of Bills.
3. Understand the process of preparing Bills.

Introduction to Bills of Quantities.

Bill of Quantities is a compiled list of items of work to be performed by the

contractor; They describe the works giving quantities and extent of work involved;
These are referred to as items of work; Items of work are generally arranged in the
BoQ in the order of their execution; BoQ items are separated to reflect the different
trades that may be involved in the project. Example: for a building project, item
may include:

• Clear the site;

• Excavations;
• Cast of foundations;
• Construct the super structure;
• Erection of roof;
• Electrical wiring;
• Fix windows and doors;
• Finishes
• External works and clear the site.

Functions of Bills of Quantities.

The Bills of Quantities may serve a number of functions as:

 • A breakdown of the tendered price, with no contractual status, but providing
information for the selection from tenderers;
• An estimate measure of the work for the tendered price, to be used to arrive
at a revised contract price once the actual quantities of work carried out are
measured. This is the re-measure form of contract.
• A schedule of rates as the contract basis for valuing variations in the work.
• A basis for measure of the value of work completed for interim payments.
• Contractors are asked to insert their prices against the work items;
• When summed up, together with other direct cost of supply of materials and
machinery (PC Sums) and contingencies, they form the tender sum;
• The preparation of BoQ for building works is normally prepared by Quantity
surveyors while that of civil engineering works is normally prepared by civil
engineers;
• In a lot of cases, they work together.
• In some special cases, other branches of engineering are incorporated such
as mechanical engineers, electrical engineers, service engineers, etc.

There are two types of bill of quantities:-

i. Firm BoQ - A firm bill of quantities is used to obtain a lump-sum price for a
fully-designed project. The work required is measured and described
precisely, meaning that it can be priced accurately. As a result, tender prices
should be reliable and good financial control should be possible. Where
changes are necessary to the works described in the tender documents, the bill
of quantities provides a good basis for assessing the costs of those changes.
ii. Approximate BoQ - An approximate bill of quantities (sometimes referred
to as a notional bill of quantities or provisional bill of quantities) is subject to
 re-measurement, and is used if there is insufficient information to prepare a
firm bill of quantities at the tender stage, or if it is decided that a firm bill of
quantities is not necessary.
The description of the works required is complete, but the quantities are
approximate. As a result, quantified schedule of rates are provided by tenders
rather than a lump-sum price, and the quantities are subject to re-measurement
on completion.
This may appear an attractive option, as less cost and time is required to
prepare the bill of quantities, however, typically, there will be more variations,
and as re-measurement is required, overall administrative costs may be higher.
In addition, there is greater cost uncertainty.

Methods of preparing BoQs.

i. Traditional method

Work from one drawing to the next taking of dimensions of items and recording
them on continuous basis. Say from one floor of a building to the next. Using these
sheets, information is assembled for similar items on another sheet of paper. Say all
items related to Class F Concrete are assembled in another set of papers. The actual
quantities are then computed by squaring.

For example:

Concrete slab grade 2.7/3.5/0.25 means concrete slab of size 2.7m by 3.5 m by 0.25
m thickness. Squaring is therefore 2.7 x 3.5 x 0.25 = 2.3625m3

ii. Cut and shuffle method

This is a faster method than the traditional method. The civil engineer or quantity
surveyor takes-off quantities into specially designed sheets in duplicate where the
original sheet is perforated into strips which can be separated from the book and
collected together to form group of items. Squaring is done immediately on the same
sheets. The strips for similar items are put together and handed over for billing.

iii. Intelligent CAD system

Normally, CAD system is only used as a platform for preparing and presenting a
model which has only geometrical and textural information of the design. The
information contained in the model does not support all the activities involved in the
engineering design, analyses and construction processes. An intelligent CAD is an
integrated system which can not only represent the basic geometrical and textural
information of an engineering object, but also other engineering properties useful to
engineering design and analyses. The system should also be able to generate cost
estimations, virtual walkthrough, and other analyses so that the whole project
delivery procedure can be better supported. The advantages of an intelligent CAD
system are:-

• Generation of photo-realistic image of designs before the

commencement of construction
• Automatic measurement of quantities and costs
• Conduct "what-if" analysis in order to reduce unnecessary design
changes from clients
 QUESTIONS.

1. Define bills of quantities and discuss the functions of Bills of Quantities.

2. State and define the types of BoQs.
3. State and discuss the methods of preparing BoQs.
Lesson 4: Bills – further concepts.

Objectives.

Understand deeper concepts of BoQs.

Further concepts in generation of BoQs.

i. Arrangement of BoQ Generally.

BoQs are arranged in a similar format as the CESMM or SMM;

For small projects the BoQ, and indeed all the tender documents can be contained in
a single volume. In case the project has several large portions that can be treated
separately, separate BoQ Volumes can be prepared for the different sections;

For example;

BoQ 1: CoET Block A;

BoQ 2: CoEET Block B; etc

BoQ N: External Works

ii. Arrangement/Sections of BoQs for Building Works.

The arrangement of BoQ for building works generally involve the following items:

a. Preliminaries – these are used to cater for site and office procedures e.g.
administrative work, mobilization, demobilization, construction of site
office, etc.
b. Substructure;
c. External walls;
d. External doors;
e. Windows;
 f. Roofing;
g. Internal walls and partitioning;
h. Internal doors;
i. Finishing;
j. Decorations;
k. Fittings and fixtures;
l. Plumbing and engineering installations;
m. Electrical power;
n. External works;
o. Provisional sums
p. Prime cost items;
q. Day works

Specific Ingredients of BoQs.

i. Prime Cost Sums.

A prime cost sum (PC or PC sum) is an allowance, usually calculated by the cost
consultant, for the supply of work or materials to be provided by a contractor or
supplier that will be nominated by the client (that is, a supplier that is selected by the
client to carry out an element of the works and imposed on the main contractor after
the main contractor has been appointed). The allowance is exclusive of any profit
mark up or attendance (such as material handling, scaffolding and rubbish clearance,
etc.) by the main contractor.

Payments are made based on the quotations/invoices of the supplied items by the
contractor plus addition of reasonable/agreed percentages for overhead costs and
profits. If the contractor's actual cost is higher than the bill of quantities allowance,
then the contract sum will be increased to balance it up and if the cost to the
contractor is lower, then the contract sum will be reduced by the balance. The
contractor should make reasonable provisions within their price for prime cost
sums, however, these can prove inadequate, and so prime cost sums can be a source
of increased costs and disputes.

ii. Provision Sum.

A provisional sum is an allowance included in a fixed price construction

contract for an item of work that cannot be priced by the contractor at the time
of entering the contract. Whereas all other elements of the price in a fixed price
contract are set, provisional sums are adjusted to reflect the final cost of performing
the provisional sum work, once their final cost is known.

In other words, where a lump sum contract price includes a provisional sum, the final
amount payable by the principal will be adjusted to reflect the actual cost of the
provisional sum work.

Provisional sums are used where the principal wishes to enter into a contract to
enable the project to commence, even though the design for parts of the project is
not yet finalised. (Early Contractor Involvement or 'ECI' is another form of
contracting that allows principals to commence without a fully completed design.
You can read more about ECI contracts here.)

iii. Contingency sum

A contingency sum is an amount of money, usually expressed as a percentage,

included in the project budget to allow for the unknown or unresolved aspects of a
design. It is usual for the initial allowance to be as much as 25% to 30%.

iv. Role of a quantity surveyor.

 Known in the industry as a Construction Cost Consultant or Commercial Manager,
their role is to keep a close eye on project finances and contractual relationships.
They make sure that the financial position of construction projects is accurately
reported and controlled effectively. They manage the contractual relationships
between the various parties involved in any particular building project. What a
quantity surveyor does:-

• Advising on the potential of a site and working out what a client can afford to build,
often termed ‘feasibility’.
• Presenting detailed information on the cost of particular elements of work on a
periodic basis to enable payment for those works carried out to date. This process
is known as ‘valuations’.
• Organising the division of a project into its component work packages, then
awarding these work packages to smaller, more specialised construction companies
(known as subcontractors) and, in that process, finding out who offers the best deal.
• Dealing with contractual and legal matters.
• Managing costs to make sure that the initial budget isn’t exceeded.
• Arranging staff payments and, at the end of a job, settling the final accounts.
• Acting as financial advisors and monitoring progress for the client.

v. Nominated sub-contractors.

A nominated subcontractor is the one that is selected by the client to carry out an
element of works. Subcontractors are appointed by main contractors to carry out part
of the work on their behalf.

vi. Nominated suppliers.

Company that supplies goods or specialist services selected by the client and
identified as the supplier within the contract documents. The supplier is listed within
the tender documents and bill of quantities. Within government contracts it is
essential that the process allows for fair competition.

vii. Work re-measurements.

Calculation of the actual quantities of work ordered on the contractors in order to

certify the payment due to a contractor. Re-measurement is also known as measure-
and-value’. Re-measurement contracts, measurement contracts or measure and
value contracts may be necessary on projects where the type of works required can
be described in reasonable detail when they are tendered, but the amount cannot. For
example, excavation works where the quantity of excavation required is difficult to
assess until after the works have begun.

Instead of giving a firm price, rates are provided in the contractor’s tender, either as
part of the priced approximate bill of quantities, or within a schedule of rates. Then
the actual quantities of work carried out are measured and the tendered rates applied
to those quantities. The contractor is paid for the actual work they have done. As a
result, the quantities paid for may vary from the original estimates.

viii. Types of building and civil engineering contracts.

There are many types of contracts used in construction. Each type has its
advantages and disadvantages concerning the owner and the contractor. They
are categorized into two major groups as per the method of payment to the
contractor. The following are the types of construction contracts generally used
in construction projects:
a) Lump-sum contract - In this type, the contractor bids a single fixed price for
overall activities in the project scope. The contractor is responsible for
estimating project costs from drawings then adds overhead and his profit to
determine the value of the project. All risks are assigned to the contractor, and
there isn’t any risk carried by the owner. The contractor has an incentive in
this contract as he is rewarded for an early finish, and there is a penalty for a
late finish. This contract is ideal when the project scope is well defined at the
design stage because there is limited flexibility for modifying the design
during the construction period.
b) Unit price contract - The total price of the project in the unit price contract is
based on the price of each item’s unit. The contractor is paid as per the rates
of items specified in the bill of quantity. The risk is shared with the contractor
and the owner. This type of contract has more flexibility for design changes
than the lump sum contract. The construction of the project can be started
before finishing the designs, so the total cost of the project will be uncertain
at the early stages of the project.
c) Cost-plus contract - The contractor is paid based on the actual cost of the
project, including direct and indirect costs, plus a specific fee. This fee could
be a fixed fee or percentage of costs. All risks are assigned to the owner, and
he gets involved with the contractor in the management of the project. The
contractor has no risk in case of increasing the cost of the project; also, there
isn’t any incentive for an early finish. This type of contract is ideal when the
project scope is uncertain in the early stages of the project. The contractor can
start the execution of the project before finishing the design. It is impossible
to estimate the cost of the project before the construction has been completed.
d) Target cost contract- Target cost contract has common features of the lump
sum and cost-plus contracts. The contractor is paid based on the actual costs
 plus a certain fee either fixed or percentage of total cost in case of the cost of
the project doesn’t exceed certain target cost specified by the owner. There is
a risk carried by the contractor in case of an increase in the cost of construction
projects. The contractor is also rewarded a percentage of any savings between
target and actual cost.

ix. Contract documents.

The different types of documents in a construction contract are as follows-

a) General conditions - They are standard terms that suit the majority of
projects; they include:
• Definition of the project
• Contract components
• Rights and responsibilities for the owner and the contractor
• Project schedule
• Payment method
• Warranty and delay penalty

b) Special conditions - They are the modifications required to suit the

uniqueness of the project, make the contract flexible for the nature of the
project, and achieve project objectives.
c) Drawings and specifications – these are the definitions of the construction
to be done in terms of design drawings and definitions in size, quality, etc.
d) B.O.Q (bill of quantity) – As earlier defined.
e) Letter of acceptance – Once the bid of the contractor has been accepted,
they receive a letter informing them that their bid has been successful. In
turn, the successful contractor is supposed to write back accepting the
 award of the contract. This letter by the contractor is called the letter of
acceptance.
f) Contractor bid – Once the contractor want to undertake a certain
construction for the client, they give their proposal of how much they want
to undertake the project for, the duration, state the method of execution and
other aspects. This proposal is the contractor bid.

x. Payment certificate - Payment certificates are mainly used in the construction

projects as the documents verified by the construction project owners,
architects or engineers to keep an account of the work completed and is
approved by the contractor. Periodically, the contractor gives an account of
the work done and requests payment for this work done. The request is called
a payment request. The quantity surveyor then values that work and gives an
estimate. This valuation is used to prepare an account of the payment to be
made. The document requesting payment to the contractor based on the QS’
estimate is the payment certificate.
xi. Final Accounts - A Final Account in construction contracts is the agreed
statement of the amount of money to be paid at the end of a building contract
by the employer to the contractor. ... The bulk of the final account will
generally consist of measured work priced at the original billed rates.
xii. Variations and valuation of variations - A variation (sometimes referred to as
a variation instruction, variation order (VO) or change order), is an alteration
to the scope of works in a construction contract in the form of an addition,
substitution or omission from the original scope of works. Variations are
valued/measured jointly by the quantity surveyor and the contract and
countersigned by both to show acceptance of the final figures.
QUESTIONS.

1. Discuss the arrangement of sections in a BoQ.

2. State and discuss five specific ingredients of a BoQ.
3. State and define six contract documents.