1. Measurement and Payment

2. 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

3. 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

4. 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
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5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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)

13. 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)

14. 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

15. 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

16. 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
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17. 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

18. 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

19. 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

20. 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

21. 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

22. 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.

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

24. 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

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

26. 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

27. 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

28. 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

29. 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

30. 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

31. 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.

32. 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

33. 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

34. 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

35. 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

36. 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)