2. Owner wouldn’t like to be in a position where contractor is
entitle for progress payment(s) and owner can not fulfil his
contractual obligation. Failure of controlling the project cash
flow will result in partially completed project and no
money which may lead to considerable loses for both parties.
(William,1977)
The cash flow in any project is facing the challenge due toThe cash flow in any project is facing the challenge due to
improper cash in-flowimproper cash in-flow. Generally, the cash in-flow will be. Generally, the cash in-flow will be
calculated according to the number of days mentioned forcalculated according to the number of days mentioned for
payments in the governing conditions applicable to thepayments in the governing conditions applicable to the
contract.contract.
2
3. • Different conditions are used in Qatar to govern the
contracts. They are mainly:
- FIDIC 1987 (4th
Edition)
- FIDIC 1999 (1st
Edition)
- General Condition of Contract- 1999 (mostly for local
contracts)
• FIDIC 1987 – Clause no. 60.2 – Monthly PaymentsFIDIC 1987 – Clause no. 60.2 – Monthly Payments
“The Engineer shall, within 28 days of receiving such
statement, deliver to the employer an interim payment
certificate,...”
3
4. FIDIC 1987 – Clause no. 60.10 – Time for PaymentFIDIC 1987 – Clause no. 60.10 – Time for Payment
“The amount due to the Contractor under any Interim
Payment Certificate issued by the Engineer pursuant to this
clause, or to any other term of the contract, shall subject to
clause no. 47, be paid by the Employer to the Contractor
within 28 days after such Interim Payment Certificate has
been delivered to the Employer,...”
4
5. FIDIC 1999 – Clause no. 14.6 – Issue of Interim PaymentFIDIC 1999 – Clause no. 14.6 – Issue of Interim Payment
CertificateCertificate
“No amount will be certified or paid until the Engineer has
received and approved the performance security. Thereafter,
the Engineer shall within 28 days after receiving a statement
and supporting documents, issue to the Employer an Interim
Payment Certificate which shall state the amount which the
Engineer fairly determine to be due, which supporting
particulars.”
5
ENGINEER
CERTIFICATE
CONTRACTO
R SUBMIT
MONTHLY
EMPLOYER
RELEASE THE
PAYMENT
28 DAYS 28 DAYS
6. Consider a mega project of 5.0 billion worth contract value
which should be completed within 3 years. The expected
monthly payment will be approximately 138 million (this
may vary according to the program).
Can we realize how serious this problem is?
How long will it take to prepare or review such a
payment?
The answer is up to YOU!The answer is up to YOU!
(Imagine the workload and the time you need to check a million-
worth monthly payment. )
6
7. IT IS TIME TO SEEK ALTERNATIVE METHOD OF
PAYMENT INSTEAD OF CONVENTIONAL METHOD
7
9. 1. Payments based on milestones1. Payments based on milestones
Each and every payment could be issued upon mutual agreement of both
parties upon completion milestones. The contractor is entitled to claim
for the work done for completion such milestones and employer must
accept such payment request.
In this case, employer is benefited as he is paying for the deliverables, but
the contractor is not satisfied as there may be some portions of work
not completed as milestones but he has incurred some expenses .
2. Payment based on in-house payment methodologies2. Payment based on in-house payment methodologies
Some companies are using their in-house payment methodologies. To
apply these methodologies, both parties should agree for the method of
payment and to be included in the contract. Even it is agreement of the
two parties, certain government institutions (specially the Ministry of
Finance-Qatar) may not accept such conditions.
3. Payments base on progress measurement system3. Payments base on progress measurement system
This system is internationally accepted method of payment. A
modification to milestone payment methodology included with %
payment for uncompleted milestones. Specially in countries were there
are no quantity surveying practice available are using this methodology.
9
10. PROBLEMS IN PROGRESS MEASUREMENT METHODPROBLEMS IN PROGRESS MEASUREMENT METHOD
Owner wouldn’t like to be in a position were Contractor will be over paid for
the actual work performed, (unearned profit and cancel effects of retention)
In the other hand, Contractor wouldn’t like to be in a position were he will be
underpaid for the actual work performed.
If he’s paid only for the completed milestone, there will be a portion of
work he has spent money but uncompleted. As he’s entitled for the
payment for uncompleted milestones, still his cash inflow is affected.
To be fair with his cash flow, while paying 100% for the completed
milestone certain percentage for the uncompleted milestone also will
be paid in PMS. (but compensated due to acceleration)
This method is not 100% accurate compared with the BOQ method.
So this method could be considered as acceptable to both parties.
Program should be prepared based on the BOQ items
This method should be included in the Contract. (or ammended)
10
11. Milestones (0/100) Method Vs Bill of Quantity MethodMilestones (0/100) Method Vs Bill of Quantity Method
11
week
12. Progress Measurement SystemProgress Measurement System
This methodology is much more faster than the BOQThis methodology is much more faster than the BOQ
methodology.methodology.
After taking-off the measurements for the completed work done for
the BOQ items, and deriving amounts against them, we will calculate
completed percentage of progress against each and every BOQ item
and it will be the end result of the monthly evaluation.
This percentage evaluation will be the base document that will be
subjected to the discussion in monthly progress meetings
whether it is prepared by, either the quantity surveyor or the
planning engineer.
Vice-versa, if we can compute the percentage completed forVice-versa, if we can compute the percentage completed for
any activity, we can derived the amount against that activity.any activity, we can derived the amount against that activity.
12
13. Description Unit Qty.
Rate Progress Amount (QR)
QR. previous This Period To Date Previous This Period To Date
SECTION D
EXCAVATION & EARTHWORK
EXCAVATION
Excavation in isolated pits for foundations,
depth not exceeding 1500mm
m³
253.00 100.00
30.00% 35.00% 65.00%
7,590.00 8,855.00 16,445.00
Excavation in trenches for strip footings, depth
not exceeding 1500mm
m³
129.00 100.00
30.00% 35.00% 65.00%
3,870.00 4,515.00 8,385.00
Excavation for grade slab, depth not exceeding
1500mm
m³
106.00 75.00
30.00% 35.00% 65.00%
2,385.00 2,782.50 5,167.50
FILLING
Filling to excavations in layers with selected soil
arising from excavations
m³
280.00 65.00
20.00% 20.00% 40.00%
3,640.00 3,640.00 7,280.00
DISPOSAL
Remove surplus excavated material from site to
an approved legal tip stockpile for re-use as
instructed by Engineer
m³
208.00 50.00
10.00% 20.00% 30.00%
1,040.00 2,080.00 3,120.00
To Collection
18,525.00 21,872.50 40,397.50
14. Application of PMSApplication of PMS
• The reversed method of the BOQ measuring method is called as the
Progress Measurement System.
Instead of calculating the quantities first and deriving the
percentages based on the calculated quantities, method
should be reversed. Accordingly, determine the
percentages by some other method and compute the
“quantities.”
How to determine the cumulative completed quantity?How to determine the cumulative completed quantity?
Generally, the completed percentage could be derived from the cost
loaded program prepared based on the BOQ items. For this purpose,
let us consider the preparation of a program.
14
15. How to determine the cumulativeHow to determine the cumulative
completed quantity?completed quantity?
Calculating each and every bit and pieces of measurement by
checking the length, width and depth; by physical
measurement or drawings is the conventional method used in
quantity surveying practice for taking-off the measurements.
Instead of this long procedure, if we can use some other easy
method for calculating the quantities of completed work
activities it will definitely become easy methodology and
sophisticated tool for the quantity surveyors.
There are many methodologies to calculate either total
cumulative quantity completed or the quantity completed
during the month, based on the nature of the activity. The
methodology to be used should be agreed by both parties
prior to adaptation.
15
16. Requirements to be fulfilled while using thisRequirements to be fulfilled while using this
methodology:methodology:
1. Methodologies should be agreed by both parties.
2. It should be included in the contract as a method
of measurement (save BOQ method as well).
3. Quantity calculation should be substantiated.
4. This methodology should not be applied for
preliminaries and general items.
5. Instead of using the BOQ as the base document use a
cost loaded program prepared based on the BOQ
items.
6. Contractor must prepare all other preparatory
works.
16
17. ACTIVATING PMS IN A CONTRACTACTIVATING PMS IN A CONTRACT
A dispute may occur between owner and contractor about the appropriate
payment amount if there is no agreement on how such amount will be
determine. Therefore, progress payments shall be directly tied to the
physical progress of the work accomplished on the project. (Fleming and
Koppel[man, 2002) /9Fleming and Koppelman, 1995)
Before starting of work, contractor must present a measurable
performance plan against which their performance may be
measured to support payment. Contractor submits to owner a request
for payment every month where he will certify the money have been
expended and also include supporting documentation to demonstrate the
physical work has been achieved during the month. The proposed work plan
can be developed by using one of the following methods (Fleming and
Koppelman, 2002) (Fleming and Koppelman, 1995)
17
18. Schedule of ValuesSchedule of Values
We can agree for the payments based on one document agreed by both
parties. It can be BOQ, drawings, specification, scope schedule or can be
any other documented in the contract. If you’re not using the BOQ,
scope schedule could be selected as the base document for the payments.
For this purpose, approved cost loaded program could be utilized.
Schedule of values approach is the most common approach used in
construction. It is a cost loaded breakout of the contract cost which
prepared by contractor and verified by owner. Once agreement is
reached, the proposed schedule of values is used throughout the project
life to calculate physical performance. The schedule of values will be
changed only to incorporate the authorized changes by owner.
Schedule of values has its potential risk to owner and it can be front
loaded in favour of the contractor. Front loading is the over estimating
the values of the early work task and offset the values of the later task
which are correspondingly understated. Frontloading happens accidently
or intentionally. Such potential risk can be offset by 10% retention value.
However, there is no better than risk mitigation by assuring that the cost
are weighted properly before approving the schedule of values.
18
19. what are involve?
what are involve?
19
what are involve?
what are involve?
ACTIVITYACTIVITY
WORKWORK
PACKAGESPACKAGES
22. RESOURCES LOADED CPM NETWORKRESOURCES LOADED CPM NETWORK
This approach is a more recent development in the
construction industry. It requires contractor to develop a
performance plan that take a form of critical path method
(CPM) schedule and contains time-phased resources. This
approach provides the following benefits to owner
1.) It demonstrates during contractor selection process that
contractor is aware of project scope of work and he has a plan
to demonstrate this fact.
2.) It demonstrates that contractor is aware and has a plan for
all the required resources.
3.) Such plans can be used as a project baseline to monitor
contractor performance and in approving all payments to
contractor.
22
24. 24
DURATION UNIT QTY RATE AMNT %
FOUNDATIONS 24
Excavation(pits)including level+comp 11 m3 253 100.00 25,300.00 11.05
Blinding - (100mm thick) 10 m2 210 50.00 10,500.00 4.59
Form work - 10 m2 244 65.00 15,860.00 6.93
Reinforcement-(6mm-20mm dia) 10 kg 15600 5.00 78,000.00 34.07
Concrete - footings 8 m3 79 500.00 39,500.00 17.25
Curing compound -spray 7 0 0 0.00 0.00 0.00
Protective Coating 7 m2 410 16.00 6,560.00 2.87
Waterproofing membrane-4mm SBS 7 m2 410 60.00 24,600.00 10.75
Back filling 7 m2 280 65.00 18,200.00 7.95
Disposal 7 m3 208 50.00 10,400.00 4.54
TOTAL
228,920.00 100.00
SIMILARLY WEIGHTAGE FACTOR COULD BE COMPARED WITH THE TOTAL CONTRACT PRICE.
25. MEASURING WORK PROGRESSMEASURING WORK PROGRESS
Project is usually divided into several phases. Each phase contain
one or more deliverables. Number of activities and tasks need to
be done to provide the deliverables for the definition,
implementation and completion of each phase. The progress of
activities and tasks can be measured using different methods.
These methods are:
1. Unit Completed Method
2. Incremental Milestones Method
3. Start/ Finish Method
4. Opinion Method
5. Cost Ratio Method
6. Weighted or Equivalent Units Method
25
26. Unit Completed Method is applicable to activities and tasks
that are repeatable. The units of measurement that can be
used in this method include linear, square are, cubic etc.
The work to be measured may contain single or multiple
tasks. Examples of using this method for single task could
be pipe have been laid, the percent complete is founded
by dividing 4,000 linear meters by 40,000 linear meters to
show 10 percent complete. Examples for multiple tasks
work could be placing and finishing a reinforced
concrete. If 100 cubic meters of concrete to be poured
and 40 cubic meters of concrete have been poured, the
percent completed is founded by dividing 40 cubic meters
by 100 cubic meters to show 40 percent complete. (AACE,
2003) (AACE, 2002) (Hamilton, 2001)
26
UNIT COMPLETED METHODUNIT COMPLETED METHOD
27. Incremental Milestones Method is applicable to
activities and tasks that must be handles in
sequence.
Completing any subtask is considered to be the
achievement of a milestone and each incremental
milestone completed represents a certain percentage
of the total installation work. The percentage allocated
to each milestone in normally based on the number
of work hours estimated to do that subtask in
relation to the total work need to be done. (AACE,
2003) (AACE,2002) (Hamilton, 2001)
27
INCREMENTAL MILESTONE METHODINCREMENTAL MILESTONE METHOD
28. Start/Finish Method is applicable to activities and tasks that
are not readily definable into incremental milestones or
those for which the effort/time required is very difficult to
estimate. For such tasks, a percent complete is arbitrarily
assigned to the start of a task and 100 percent is
recorded when the task is completed.
28
START/ FINISH METHODSTART/ FINISH METHOD
OPINION METHODOPINION METHOD
In this method, an expert person usually assigns a percent
complete to the activity/task. This complete percentage is
subjective and depends on personal judgment.
29. Cost Ratio Method is applicable to tasks and activities that
take a long period of time or continue as long as the
project life. Examples for such tasks and activities are
project management, quality assurance and
quality control, contract administration and project
control. The percentage complete at any time is founded
by evaluating the actual cost or work hours expended to
that time divided by the forecast cost or work hours at
completion. For example if the percent complete for
project management need to be found at certain date
given that 5,000 work hours are spent to date and 10,000
work hours are the total work hours forecast, then
project management is 50 percent complete.
(AACE,2003) (AACE, 2002) (Hamilton, 2001)
29
COST RATIO METHODCOST RATIO METHOD
30. Weighted or Equivalent Units is applicable to activities and tasks
that take a long period of time and composed of two or more
overlapping subtasks. Each subtask measured with a different unit
of work measurement. Structure steel erection is an example for
which this method may be applied. The subtasks for structure
steel erection could be run foundation bolts (each), shim
(percent), shakeout (percent), columns (each), beams (each),
cross braces (each), girts and sag rods (bay), plumb and align
(percent), connection (each) and finally punch list (percent). Each
subtask for structure steel erection has a different unit of
measurement. To handle this, each subtask is weighted according
to the estimated level of effort (usually work hours) that will be
dedicated to that subtask. As quantities are completed for each
subtask, the quantities are converted into equivalent work
hours. (AACE, 2003) (AACE, 2002) (Hamilton, 2001)
30
WEIGTHED OR EQUIVALENT UNITSWEIGTHED OR EQUIVALENT UNITS
METHODMETHOD
31. The accuracy of progress measurement depends on two
factors:
1. Accuracy of the data collected for the work
accomplished.
2. Accuracy of the total scope of work.
The accuracy of the data collected can be achieved if the
physical quantities measured for progress are small enough
that judgment factors used do not grossly affect any large
quantities. Meeting this end takes time and effort in the
initial setup phase of the progress measurement system.
However, this is rewarded with easy updating of the
system. (Toth, 1983)
31
ACCURACY IN PROGRESS MEASUREMENTACCURACY IN PROGRESS MEASUREMENT
32. Under Lump Sum contract, contractor is given progress
payment based on presentation of percentage complete
together with the authorized budget for the completed
work. This is earned value at its finest. However, earned
value analysis cannot be completed with the aforesaid
information as the actual cost spent by contractor is missing.
Without the actual cost related to earned value achieved,
the cost performance index (CPI) can not be
determined. Contractor will not disclose to owner how
much profit he is making on a project. Also, such
information is not important to owner as his concern is to
complete the project on or under the contract price.
However, owner should be aware when contractor is
incurring a loss as the bigger the loss the more likelihood
the contractor may not complete the project. (Fleming and
Koppelman, 2002) 32
EARNED VALUE ANALYSIS AND LUMPEARNED VALUE ANALYSIS AND LUMP
SUM CONTRACTSUM CONTRACT
33. 33
Daily Activity Report
Weather Report
Date :
Project
:
Bright Day
Contract No.
: Sunny Day
Project Completion Date.
:
Rainy Day
Rainfall Chart
B.O.Q Labour Material Machine Remark
Item Unit Qty Privies Qty Current Qty Type Nos IN OUT Hrs Type Unit Used Type From To Hrs Remarks
Measurement or Location
Received Material Daily Progress NOTE
Type Unit Current Qty Privies Qty Cumulative Qty Supplier Name Current Rate Description Daily Cumulative
WORK TO BE DONE (as per Programme) - -
ACTUAL WORK DONE - -
DIFFERENCE - -
……………………………………. …………………………………….
Site Representative/ Engineer Project Engineer / Contractor
135791
1
1
3
1
5
1
7
1
9
2
1
2
3
1
3
5
7
9
11
13
15
17
19
21
23
34. Percentage IndicativesPercentage Indicatives
43
DURATION UNIT QTY RATE AMNT % Eng procu cons tes&com as-built Remarks
FOUNDATIONS 24 228,920.00 100.00 5% 30% 58% 6% 1%
Excavation(pits)including level+comp 11 m3 253 100.00 25,300.00 11.05
Blinding - (100mm thick) 10 m2 210 50.00 10,500.00 4.59
Form work - 10 m2 244 65.00 15,860.00 6.93
Reinforcement-(6mm-20mm dia) 10 kg 15600 5.00 78,000.00 34.07
Concrete - footings 8 m3 79 500.00 39,500.00 17.25
Curing compound -spray 7 0 0 0.00 0.00 0.00
Protective Coating 7 m2 410 16.00 6,560.00 2.87
Waterproofing membrane-4mm SBS 7 m2 410 60.00 24,600.00 10.75
Back filling 7 m2 280 65.00 18,200.00 7.95
Disposal 7 m3 208 50.00 10,400.00 4.54
TOTAL 228,920.00 100.00
SIMILARLY WEIGHTAGE FACTOR COULD BE COMPARED WITH THE TOTAL CONTRACT PRICE.
