BEQ2183 Contract Administration II Notes - Sem 2 2023/2024 PDF

BEQ2183 Contract Administration II Sem 2, 2023/2024 Lecturer : Dayang Afiqah Abang Mohamad Shibli Fakulti Alam Bina UNIMAS COURSE LEARNING OUTCOME 01. Interpret clauses related to payment, variation, project completion...

BEQ2183 Contract Administration II Sem 2, 2023/2024 Lecturer : Dayang Afiqah Abang Mohamad Shibli Fakulti Alam Bina UNIMAS COURSE LEARNING OUTCOME 01. Interpret clauses related to payment, variation, project completion extension of time according to the and standard forms of contract. 02. Apply contractual provisions related to payment, variation, project completion and extension of time in the management of construction projects. 03. Propose possible solutions for contractual issues based on contract provisions. ASSESSMENT FOR BEQ2183 Assignment 1 – 20% (Due Week 9) Assignment 2 – 20% (Due Week 13) Test – 10% (Week 10) Final Exam – 50%  TOPICS COVERED LU1: Payment Introduction Procedure of Certification Contractor’s Application Valuation Certifications Payment to Contractor Comparison between PWD Form 203A (Rev.1/2010), PAM Contract 2018 and JKR Sarawak PWD 75 (Ver.2021)  TOPICS COVERED LU2 : Variation Introduction Procedure of Variations Instructions for Variations Measurement of Variations Valuation of Variations Adjustment to Contract Sum Comparison between PWD Form 203A (Rev.1/2010), PAM Contract 2018 and JKR Sarawak PWD 75 (Ver.2021) PAYMENT AND CERTIFICATES Related Clauses : PWD 203A 2010, Clause 28, PAM 2018, Clause 30  Introduction The employer’s obligation is to pay the contractor. The payment certificates state the amount that the employer should pay the contractor. The general procedure is for the contractor to apply for payments, the Contract Administrator (CA) to certify and employer to pay. Payments can be classified as : i. Advance Payment, usually made upon signing of the contract and before work starts. ii. Interim Payments made at agreed intervals or stages which occur throughout the contract construction period. iii. Final Payment, upon issuance of the Final Certificate.  What is a Certificate? A certificate is the formal expression of the CA’s opinion that the work complies with the contract. E.g. At stipulated times he will issue Interim Certificates showing the amount of work properly carried out and the sums due to the contractor. At other times, he will issue a Certificate of Practical Completion when he considers the works are complete, while a Final Certificate approves the completed works and states the sums due to the contractor for his services. A certificate is of importance, i.e. A payment certificate is a pre-condition to contractor’s right to receive payment from the employer.  Advance Payment Some forms make provision for the employer to make an advance payment to the contractor. This is a sum paid early to assist the contractor with its start-up costs e.g. Mobilization costs and down payments to vendors. The contractor must repay the employer the amount in installments spread over an agreed period and this is usually through percentage deduction in the payment certificates. The employer will require the contractor to give a bond from an approved bond provider before making payment. The purpose of the bond is to protect the employer’s interests if the contractor fails to repay an Advance Payment. Refer PWD 203A 2010, Clause 69.  Interim Payments Payment is in installments as the works progress. The main purpose is to assist the contractor’s cash flow. The contractor is paid the value of the works carried out to date i.e. The quantity of work done based on rates in the BQ or proportion of lump sums for contracts without BQ. The interim certificate states the amount due to the contractor from the employer. It sets out details of what has been included for payment. The CA is responsible for issuing the Interim Certificates according to the times set out in the contract. Usually, the CA’s payment certificate is issued to the employer and a copy sent to the contractor.  Interim Payments : Frequency of Payments By stages, for example : i. Work up to foundations ; or ii. Work from ground level to framework ; or iii. Phases of work. At regular intervals : i. As the work proceeds, usually will be monthly basis. ii. Commonly, the QS and contractor will agree on the dates which they will meet and value the works carried out as of that date.  Final Payment As the name implies, final payment is the last payment to be made by the employer upon the issuance of the Final Certificate by the CA. The Final Certificate would state the final balance payable to the contractor or to the employer, as the case may be. The final payment is made at some time after the construction activity on site has ceased, and the contract had ended.  Employer’s Duty to Pay The employer’s duty to pay the contractor does not arise until the CA has issued an interim certificate. The employer is to pay the contractor the amount stated in an interim certificate, subject only to his right of set-off (counter-claim) within a fixed period (period of honouring certificates). If the employer fails in his duty, the contractor can claim interest on late payment (PAM 2018) or suspend the works or terminate the contract provided that he follows the appropriate procedures. Refer PWD 203A 2010, Clause 55. Refer PAM 2018, Clause 26.1, 30.7.  Can the Employer Refuse to Pay the Certified Amount? Lubenham Fidelities v South Pembrokeshire (1995), Pembinaan Leow Tuck Choy v Dr. Leela Medical Centre (1995). i. An architect’s certificate is a ‘condition precedent’ to the contractor’s entitlement to be paid that sum. ii. If either party is dissatisfied with the sum certified and if discussion does not result in a correction to the certificate by the architect, then the remedy is to refer to arbitration. iii. Even if an architect has certified an incorrect sum, the employer must pay the net amount stated as due, subject only to misconduct by the architect and subject to arbitration. THE PROCEDURE  The Procedure 01. Contractor applies for payment certificate together with particulars. The forms may require him to first comply with requirements of the contract such as to deposit the 03. The payments are determined by valuation of the work carried out insurance policies, performance during the period. The forms may security or supporting progress stipulate that the value of the reports. valuation must exceed a certain amount before before the issuance 02. The CA or QS will visit the site to of any payment certificate. A carry out a valuation (visual minimum amount of these estimate) of the partially completed certificates is specified in the works but responsibility for the appendix. correctness of the sum on the certificate remains with the CA. 04. Interim payment certificates are to be issued at agreed intervals or stage. It states the amount due to the contractor from the employer.  The Procedure (Cont’d) 05. CA to issue certificates as a 07. condition precedent to payments. Failure to honour certificates within the due time is a ground for suspension or termination by the 06. contractor and employer to pay Employer has a specified period in interest on late payments (PAM which to pay from the date of the 2018). certificate (period of honouring certificates). 08. Where, the employer is entitled to recover monies from the contractor, he may do so by deducting monies from the interim certificate.  The Procedure (Cont’d) 09. Amounts due in interim certificates generally include for : i. Value of the work properly executed; ii. Materials and goods delivered 10. The amount to be paid by the employer is the amount shown on to the site for use in the works, if the certificate minus any not premature; deductions for Liquidated Damages and his other rights of set-off. iii. Certain materials off-site (if the contract allows); iv. Claims, fluctuations (if any); and v. Deduction for sums retained and amounts previously certified. CONTRACT ADMINISTRATOR AS CERTIFIER Duty of the Certifier The CA is to issue interim certificates as a condition precedent to payments. He must issue interim certificates at the period stated in the contract or, when the work has reached certain stages previously agreed.  Liability for Certification Before certifying the amount of the valuations, the CA should deduct the value of any work improperly carried out or of any materials prematurely brought on the site or are not adequately protected. If he fails to do so, he may incur liability for negligence as in Sutcliffe v Thackarah (1974). He must also remain independent in the issue of certificates so as to act in an impartial manner as in Hickman v Roberts (1913).  Liability for Certification (cont’d) In Sutcliffe v Thackarah (1974), when an architect issues an interim certificate he owes a duty of care to the client to check the progress and quality of work and to exclude from the certificate any amount claimed for the work which is defective. In Townsend v Stone Toms & Partner (1985), it is a clear breach of contractual duty for the architect to certify work which he knows has not been done properly. In Hickman v Roberts (1913), in certifying the architect must act impartially and independently between the parties. A certificate may be set aside where there is evidence that the employer was interfering with the certification process and the agent is influenced by the conduct of the client. Interference with or obstruction by the employer in the issue of a certificate is a ground for termination by the contractor.  Liability for Certification (cont’d) It should be noted that the QS values the work. The QS is not qualified or responsible for approving the quality of the work, this is the responsibility of the CA. The CA tells the QS to exclude the defective work from a valuation or the CA deducts from the valuation prior to certifying the amount due as in Sutcliffe v Chippendale (1971), Dhamija v Sunningdale (2010). APPLICATION FOR PAYMENT BY THE CONTRACTOR  The contractor is to submit a prior application for payment showing the amount he thinks as due together with all relevant documents necessary to substantiate his application. If he fails to submit the full particulars, PWD 203A 2010, the S.O. will still have to evaluate the works based on the documents Clause 28.1, 28.3, available to him. 28.6  The contractor is to submit a payment application for interim payment showing the amount he thinks due including details and particulars. If he fails to submit, he is deemed to have waived his right for that interim certificate. PAM 2018, However, the Architect has the discretion to issue or not issue an Clause 30.1 interim certificate under the circumstances. VALUATION  Valuation by the CA or QS An interim valuation is generally required for each interim certificate. In PAM, the valuation and certification duties are clearly separated. The QS is responsible for the preparation of interim valuation and the amount to be recommended to the Architect prior to issue of the interim certificates. The Architect is not bound to follow the QS’s valuation and the Architect remains responsible for certifying sums for payments as in RB Burden Ltd v Swansea Corporation (1957), Sutcliffe v Chippendale (1971).  Valuation by the CA or QS (cont’d) Apart from submitting for payment certificate, the contractor is not required to assist in the preparation of interim valuations or certificates. In practice, however, site valuation is done together with the contractor’s representative. This gives the parties the opportunity to resolve problems early on. However, this does not relieve the CA or QS of his responsibility as the person named in the contract to carry out the task.  Thank You CREDITS: This presentation template was created by Slidesgo, including icons by Flaticon, and infographics & images by Freepik.