Measurement and Payment

Construction Progress Payments Contractor gives a bill for progress to RPR Outlines what bill is for Give details as needed (quantities) RPR reviews Approves (sends to owner) or disapproves (calls contractor) Contractor gets paid

Approval of Payment Requests RPR responsible for checking quantities and costs Quantity take off Inventory of equipment and materials on site but not used Field measure work completed or claimed Construction Cost Estimate of all completed work Audit of Invoices and costs Review of claims for extra work and completed change orders Check of retention amount Check method used for profit and overhead, material costs for estra work or change orders

Basis for Payment Amounts Accuracy of field measurements determined by contract type Lump sum contracts do not need accurate field measurements Cost plus or Unit price contracts need very accurate field measurements Pg 432

Schedule of Values v. Cost loaded CPM Schedule Unit Price Contracts Do not call for Cost Loaded CPM Schedule Conflicts with line items on unit price sheet Do not call for schedule of Values A breakdown of all line items is submitted w/ contractor’s bid and is binding throughout job

Lump Sum Contracts with Cost Loaded CPM Do not ask for Schedule of Values – cost loaded CPM is equal Request Cost loaded CPM be submitted before first pay period ends Lump Sum Contracts w/o Cost loaded CPM Do not ask for a cost loaded CPM schedule Do not ask for a bid breakdown Request a schedule of values before starting work on project

Evaluation of Contractor’s Payment Requests Contractor submits request for payment at a prearranged date each month for previous month’s work Lump sum contract – payment based on a fair estimate of work completed plus overhead and profit Unit Price Contracts – contractor gets paid based on quantity used – RPR must have accurate field measurements +/- 25 % is okay more or less allows for renegotiations by either party

Equipment And Materials delivered but not used Contractor brings stuff on site early May try to bill owner since stuff is on site Contractor only paid when stuff is used Includes materials used but not completed – pipe not paid for until covered and tested Unit price contracts are usually for installed in place materials – on site is not in place Can make exceptions for long lead items which arrive on site early

Force Account Daywork or for any type of cost plus payment In US associated with extra work and change orders May be used to pay contractor when it is difficult to provide adequate measurements or estimate cost of certain items of work Should be last choice when setting up items for payment

Force Account Change order is a must Force account payments not authorized for supers. Allowances for supers is in contractors O&P. Foremen working full time on item would be covered by account PM has authority to direct every aspect of force account work

PM and Contractor must agree on Labor Classification and approximate N of workers, wage rates, travel allowance, subsistence, are foremen included Equipment Types to be used including size, rating, capacity, which indicate that item can do work required, owned or leased, cost per hour for use Materials Cost and freight charges, purchased for project or from contractor’s stock

PM prepares lists of equipment and labor classifications actually used and corresponding rates Equipment list includes complete nomenclature of the equipment to establish rental rate from a Rental Rate Book Labor list includes labor classification and composite hourly rate (basic wage + added costs listed in DOT standard specs)

Payments for Extra Work and Change Orders Usually laid out in Contract Common is cost plus with a reasonable allowance for O&P State agencies may allow 15, 20, 24,33 % on labor and then 15% on equipment, 15% on materials 5% on primary subs (not subs subs)

RPR must evaluate all change orders and requests for payment of extra work RPR should consult PM or owner to determine the exact terms of the agreement that cover extra work RPR keeps daily record of extra work performed and materials used

Make it a fixed cost that is on every bid Mobilization Costs Initial expenditures contractor makes before any work towards progress payment Permits, insurance, bonds Equipment Tools and supplies to do work Field Office Make it a fixed cost that is on every bid Contractor cannot inflate

Make sure that all items allowed in the mobilization cost are listed Can then either Prorate mobilization based on % complete Or Lump sum when all complete Other items to include RPR Field Office & Utilities & Communications Pg 448

Mobilization Lump Sum Projects Unit Price Projects Mobilization terms must be in a separate technical section Lump sum for mobilization Unit Price Projects Part of Measurement and Payment section with a separate line item and an A/E determined cost

Partial Payment to Contractor Waiver of Lien Procedure After each progress payment GC, subs, suppliers all sign waivers of liens for that payment Owner knows subs and suppliers are paid Limits the amount of the lien to only what has not been paid

Total Cost Pricing of Change Orders Compares total cost to do work with bid cost to do work, owner pays difference Allowed when Nature of claim makes it v. difficult to establish an accurate price Contractor’s bid was realistic Contractor’s costs were realistic Contractor’s actual costs were realistic Contractor was not responsible for any of the increased cost

Forward pricing of Change orders GC and Owner establish a mutually agreed lump sum payment for work Contractor cannot be forced to forward price work Contractor needs to make sure price is right – they are stuck with it

Retainage 5 – 10% of contract price Gives owner $ to satisfy lien claims if GC does not pay Also is the profit Can do either a lump sum or it can be computed based on each months progress payments

Retainage given to GC 35 days after completion of work if all lien releases turned in All employees paid Approval of the performance insurance CO. GC gets all but the amount representing the value of uncompleted or substandard work or materials.

Liquidated Damages during construction Can have liquidated damages for missed milestones Throws other contractors behind Deduct from next progress payment

Interpreting the Contractor’s Bid Bidding Errors Mathematical errors (unit price x quantity) Adding up bid items Ask for values in words and numbers Words rule GC may or may not get released from bid

Unbalanced Bids Contractor raises prices on some items and lowers prices on others w/o changing total project cost Should be rejected if found

Why do unbalanced bids To discourage certain types of construction and encourage others that the Contractor is good at Contractor thinks A/E estimate is low can make unit price high and make extra profit Increase unit prices on first items of work to be completed => receive excessive early payments then default on the job Leaves Surety with too little $ to do job

Can build up working capital – eliminates squeeze due to 10% retention Detecting an Unbalanced Bid Usually an unbalanced bid indicates and A/E error in estimate Use a spreadsheet to compare bids to find wide swings in bid prices All contractor’s should be in the same price range if normal bid

Resolving an Unbalanced Bid Easiest way is to reject all bids (owner’s perogative) Take bids to A/E point out area where possible error exists in estimate Get a new estimate Rebid job

Measurement for Payment Certain measurements do not represent true pay quantities Pipeline paid for by amount shown on drawing Drawing shows horizontal distance not length of pipeline on grade Does not include pipe overlap (bell & spigot joint) Contractor must take this into account when bidding job RPR must know how to measure bid item

Rock and Earth Quantities Compacted earth takes up less area than earth in natural state (shrinkage) shrinkage depends on material and compaction methods Fine Sand 6%, Sand and Gravel 8%, Ordinary Clay 10%, Loam 12%, Surface Soil 15% Rock takes up more space when removed (swell) from ground

Truckloads of loose material RPR and contractor should agree on a method of measuring material and use it throughout project Truckloads of loose material Water content can change weight of load 10% WC = 500lbs extra / 10 ton load Pay for materials in place as calculated from dimensions shown on the plans Must be careful on a unit price bid to make sure contractor is not over excavating to use more material.

Paving Quantities Small differences in depth can make a huge difference in price 0.5” over a 12’ lane 1 mile long = 2200# Also need to make sure that asphalt is at temperature when spread

Measurement Guidelines for Unit Price Quantities Pipelines – depend on contract can be horizontal distance (drawings), measures along top of joined pipe Do not measure along side of pipe Curbs – top edge facing the street Channels – use same location in channel for each measurement Sewer Lines – measure edge of manhole to edge of manhole – manholes separate item

Fencing – horizontal or along top rail of fence Pavements – area but watch for underruns on pavement thickness Retaining walls – each wall is measured as a prism, where walls meet do not double count

Final Payment to Contractor After CO contractor can apply for final payment Contractor must pay all bills or other indebtedness Must submit receipts, releases, and waivers of liens Consent of Surety must be obtained Less retainage

When computing contractor’s last payment consider for deduction in addition to retainage Any liquidated damages Twice the value of all outstanding punch list items The value of any lien claims already on file Final payment should not be approved until after formal acceptance of the work by owner (Notice of Substantial completion)