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

2. 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
Financing of Building Order

3. 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
Financing of Building Order

4. 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)
Financing of Building Order

5. 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)
Financing of Building Order

6. 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
Financing of Building Order

7. 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 CZK without VAT, building works min CZK without VAT not reaching the financial limit
Less then CZK without VAT in the case of supplies and services, less then 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
Financing of Building Order

8. 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
Financing of Building Order

9. 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)
Financing of Building Order

10. 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
Financing of Building Order

11. 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
Financing of Building Order

12. 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
Financing of Building Order

13. 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
Financing of Building Order

14. 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
Financing of Building Order

15. 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
Financing of Building Order

16. 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
Financing of Building Order

17. Financing of Building Order
Financing of Building Order

18. 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
Financing of Building Order