Measurement and Payment Construction Progress Payments Contractor gives

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)

– 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

• 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 – 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