Lecture was elaborated with the help of grant project of Ministry of Education, Youth and Sports, FRVŠ n. 2005 „Innovation of Subject Financing of Building Order“ Building Order

Subject of a Building Activity Activity of a building company is based on a realization of building orders Building order Supply of outputs, works and services for purpose of creating of new building object or adapting of an existing object A result of a building order realization can be: New building: newly created building object having a character of long-term tangible property and creating a compact or at least technically separate part of a building Reconstruction of an object: construction work including interference with building constructions Modernization of an object: construction work substituting existing parts of an object by more modern parts and increasing availability and usability of an building object Extension of an object: additional building 22.2.2019 Financing of Building Order

Kinds of Building Production Building production it is possible to divide into following kinds: Basic structural production Includes supplies of building works realized own workers or sub suppliers These supplies it is possible next to divide into following kinds of production: Main building production Includes supplies of building works realizes mainly on fabric (foundations, horizontal and vertical constructions etc.) Associated building production Includes professions and handcrafts Subsidiary production Includes preparation of resources and facilities needed for basic structural production, e.g. production of intermediate products and production of building materials 22.2.2019 Financing of Building Order

Kinds of Building Orders According to the Investor From the aspect of a investor character (or sources of financing) it is possible to distinguish following kinds of works: Public order (state or institutions of public and self administration (towns, regions) or other organizational parts of the state) Private order Individual orders (investors are usually in a form physical persons that don’t realize the order in the frame of own business activity) Orders in the frame of a business sphere (investor is in the form of private person that realize the order in the frame of own business activity) 22.2.2019 Financing of Building Order

Law n. 137/2006 Coll., about public orders • Public order is realized based on agreement between submitter (public institution) and one or more contractors. Subject of public order is the delivery of supplies, services or realization of building works. Public order is based on the written agreement (§7). The submitter can be public, endowed or sector Public submitter – the state, municipal authorities or allowance organizations financed by state Endowed submitter – physical person or corporation, which submits the public order financed from more then 50 % by public sources Sector submitter – person, which realizes one of relevant activities (e.g. gas industry, power supply, supply of heat or water) 22.2.2019 Financing of Building Order

Classification of Public Orders according to the Subject According to the subject are divided into: PO for supplies §8 PO for services §10 PO for building works §9 Public order for supplies: Its subject is the purchase of goods Public order for building works Its subject is the realization of building works including relevant project works and engineering activity Public order for services - PO, which is not PO for supplies or PO for building works 22.2.2019 Financing of Building Order

Classification of Public Orders According to the Supposed Value According to the supposed value are public order classified in following way: PO exceeding the limit PO not exceeding the limit PO of low extension Financial limit in the case of public orders is defined by implementing regulations, which define the financial limit according to the particular categories of submitters and according to the kind of public order. Supplies and services min. 2 000 000 CZK without VAT, building works min. 6 000 000 CZK without VAT not reaching the financial limit Less then 2 000 000 CZK without VAT in the case of supplies and services, less then 6 000 000 CZK without VAT in the case of building works No duty to award this kind of order according to the law The public order must not be divided into small parts with smaller extension 22.2.2019 Financing of Building Order

Procurement of Public Orders Law about Public Orders defines these kinds awarding procedures: Open proceedings § 27 Close proceedings § 28 Parley proceedings with declaration§ 29 Parley proceedings without declaration§ 34 Competition dialog § 35 Simplified proceedings § 38 22.2.2019 Financing of Building Order

Kinds of Awarding Procedures Kinds of procurement proceedings Open proceedings Submitter calls on unlimited amount of applicants for the submitting of an offer Close proceedings Submitter calls on unlimited amount of applicants for the submitting of an application and for the presentation of a qualification, applicants fulfilling defined conditions are called for submitting of offers Parley proceedings with declaration Submitter announces to unlimited amount of applicants the idea to submit the public order in this kind of proceedings Parley proceedings without declaration Submitter announces to limited amount of applicants the idea to submit the public order in this king of proceedings Competition dialog Submitting of difficult orders, where the submitter is not able directly to define technical conditions or legal or financial requirements Simplified proceedings Submitting of public orders not exceeding the financial limit (in the case of building works deliveries not exceeding 20 mil. CZK) 22.2.2019 Financing of Building Order

Financing of Building Order Qualifying Criteria Qualifying criteria are: Basic qualification criteria No arrears of taxes Clean conduct-book No arrears of health and social insurance Not to be in the bankruptcy Professional qualification criteria Extract from Company Register Business license Economic and financial qualification criteria Balance sheet from past periods Amount of returns Insurance agreement (insurance of responsibility for lost caused to another person) Technical qualification criteria Reference buildings 22.2.2019 Financing of Building Order

Criteria for Submitting of Public Order Basic criterions for valuation of particular offers: Economic merit of the offer The lowest offering price The decision making according to the economic merit of the offer: The offer is valuated according to the particular criterions solved by submitter The submitter must define for each criterion scales usually expressed in % One of the criterion must be every time the offering price, next criterions are mostly: Operating costs Requirements for the maintenance Technical, quality, ecological and functional characteristics of the subject of the order 22.2.2019 Financing of Building Order

Submitting of Private Orders Tender, which features (the process, criteria, etc.) are chosen by investor (submitter) on his own For trouble free process of the (building) order must be concluded the contract for work created according to the Civil or Business Code 22.2.2019 Financing of Building Order

Financing of Building Order Contract for Work Price is agreed in the agreement about price mentioned in the contract for work Parties to contract are investor (buyer) and supplier Contract is agreed in the sense of the business code (law n. 513/1991 Coll.) Terms of contract for work: I. Parties to contract – investor, supplier II. Subject of delivery – building object, building work III. Time of delivery – time of finishing of the delivery IV. Price of delivery V. Payment conditions – the way of paying for deliveries VI. Qualitative and technical conditions VII. Realization of work VIII. Handover and takeover of building object – way of handover IX. Responsibility for defects, guarantee, warranty claims X. Avoidance of contract XI. Sanctions XII. Next agreements 22.2.2019 Financing of Building Order

Financial Difficulty of the Building Order, Budget Costs for building part are calculated as a sum of costs: for particular building works materials not included in the building work (valuated as a specification) shift with materials For calculation is prepared the item budget 22.2.2019 Financing of Building Order

Overview of Groups of Building Sections Number Title of group of building sections General construction and works 1 Earthworks 2 Foundations, special foundations 3 Vertical and complete constructions 4 Horizontal constructions 5 Communications 6 Construction of surfaces, floors 7 Associated building production (handcrafts, installations) 8 Pipage, conduction 9 Finishing works, demolitions 22.2.2019 Financing of Building Order

Item of Budget of Building Part Numeral code of item (Classification of Building Constructions and Works) Description of item Measure unit Amount of item in measure unit Unit price in e.g. CZK per measure unit Totally per item Unit weight in tons Weight in tons totally per one item 22.2.2019 Financing of Building Order

Financing of Building Order 22.2.2019 Financing of Building Order

Costing Model (Formula) Unit price of building work Direct costs (DC): Direct material (M) Direct wages (W) Other direct costs (ODC) Machines and machinery (S) Indirect costs (IC): Overhead product costs (OPC) Overhead administrative costs (OAC) Profit (P) Price totally 22.2.2019 Financing of Building Order