Standard Forms of Building Contract

Furthermore, procedures for selecting main contractor and sub-contractor was reviewed and comparison was prepared to show differences between two procedures. A flow-chart diagram was attached in the Appendix to show the procedures. 2 Introduction 2. 1 Background of the Projects The project we are going to bid is a private development, which to construct a 24- storey residential apartment. The form of contract that the client decided to use in the captioned project is Hong Kong Standard Form of Building Contract 2005-With
Quantities, which is published by HKIS, HKIA & HKICM. The client preferred a single stage selective tendering approach and we are now going to enter the bid. 2. 2 Objectives (i) Understand the procurement strategy adopted (it) Understand the form of contract adopted (iii) Understand how the Client will appoint our company (iv)Understand how our company will appoint a subcontractor (v) Identify differences in tendering procedures 2. 4 Procurement Strategy Figure 1 Organizational structure ofa traditional strategy (RICS, 2013) Based on the above scenario, we assumed the project adopting the traditional rocurement.
Traditional procurement is most commonly used approach in the construction industry. It’s standard practice in the industry since 19th century. (RICS, 2013) Therefore, roles and responsibilities of contractors and different project consultants are well understood. In traditional procurement, design process is kept separate from the construction process. (RICS, 2013) The design have to be completed first and full documentation including drawings, specifications are needed before tendering process. In view of the client, he can remain his control over the design and ensuring quality.

A contract dministrator will also appointed to monitor the projects, usually the architect or the engineer. In view of cost and contracts, all returned tenders are based on same intormation, the tender prices can be easily analyzed, and no need tor the Contractor to build in a risk premium in the tender sum. If the designed is fully completed, construction costs can be determined with reasonable certainty given that there are no changes in the construction stage. OCT, 2008) However, this procurement method may take longer time because the scheme has to be more or less fully designed before seeking tenderers.
Also, fragmented design nd construction process can leads to disputes between the Contractors and the designers, rather than single responsibility in “design-and-build” method. (RICS, 2013) 2. 5 Contract Choice Since the client has adopted traditional approach, “Hong Kong Standard Form of Building Contract Private Edition-With Quantities 2005 Edition” (HKSFBC05) has been chosen by the client to use in this tender. This contract is commonly used in private developments in Hong Kong. (KPK, 2010) It is a lump sum contract in which payment will be made at monthly interval.
It’s suitable for adopt in medium-large size building orks designed by the Employer, or someone on behalf of the Employer. Drawings and bills of quantities have to provide by the Employer to define the quantity and quality of the work for Contract to price for it. OCT, 2008) The HKSFBC05 contains detailed conditions which regulates the rights and obligations of the Employer and Contractor. Moreover, under Article 3&4 of the HKSFBC05, an Architect and a Quantity Surveyor have to be named to administer the contract conditions, their power and duties are also described in the Contract.
The Architect will be the contract administrator whereas the quantity surveyor will assist im to prepare valuations for interim payments and variations, calculating liquidated damages (LD) and prepare final account, etc. Generally, the price is bases on lump sums and payment to be made in monthly interval. OCT, 2008) 3 Tendering Procedures 3. 1 Definition Tendering is the process by which bids are invited from interested contractors to carry out specific packages of construction work. The process aims to ensure achieving of true competition.
Procurement strategy and forms of contract should have decided and confirmed in precedence to execute the tendering process. 3. 2 Main-contract The whole tendering procedures for main contract can be divided at 3 sections as follows:- 3. 2. 1 Establishment of Tender List At the very beginning of the process, the client should have compile a tenderer list, in order to ensure every contractor chosen to tender will be able to meet specified eligibility, if they are appointed. To form the tenderer list, pre-qualification mechanism may adopted.
Interested contractors should prove that they meet minimum standards in certain criteria like financial conditions, project experience, protessional competence, etc during pre-qualitlcation. Sometimes, the consultant quantity surveyors will also give advice to prepare a potential tenderer list, depends on the clients need. Generally, 4 to 8 tenders is enough, depends on value and nature of the work. Once the tenderers list is compiled, preliminary enquiry should be made to those contractors on list, asking those potential contractors whether they are interested to bid the project before formal invitation.
The outcome of the tender would be more satisfactory if the Contractor can decline at the earlier stage, and saving excessive papers for tender documents. 3. 2. 2 Tender Invitation and Submission During the compilation of the tenderers list, the consultant quantity surveyors should prepare the tender documents concurrently. So, as soon as the tender documents ready to be issue out (i. e. bill of quantities, drawings, specifications and client’s specific requirements), the tender will be issue to the tenderers with the invitation.
The good practice in the industry for the tendering period would be a minimum of 28 days in private sectors. This is a suggested fgure for traditional contract with no design responsibility from the contractors. For easier to analyze the capability of each contractor, usually the Employer will ask he tenderers to submit their own qualifications such as preliminary programme for the work, organization chart, etc. Details of those documents should be listed in the form of tender and also in the “Invitation to Tender” 3. 2. 3 Tender Assessment and Award All tenders should have received on the tender submission date.
Sometimes the Employer maybe request the tenderers to submit non-price material such as Job reference, organization chart, financial statement, etc. These materials should be evaluated independently of the examination of the priced documents. OCT, 2012) To xamine the tenders efficiently, an assessment criteria should have established by the Employer. Price-oriented or quality-oriented? The answer should affect the examination process of tenders. For the priced documents (i. e. bill of quantities or schedule of rates), it should be checked to detect any arithmetical errors.
Professional practice is that the tendered prices should never be altered without Justification. If there are any errors or discrepancies between BQ pages and the tender sum wrote in the form of the tender. There are procedures set out to deal with the above situation. Details of the errors should be given to the tenderers. If the said errors are rather minor in the contract sum, the tenderers may confirm the errors and abide his tender. Or the tenderers can withdraw his tender if he thinks the errors are unaffordable. However, it’s depend on the tenderer’s commercial decision.
Under this procedure, correction of the overall tender price is not permitted. OCT, 2012) It the tenderer decided to stand by his submitted tender and confirmation nas been reached with the Employer, the gross amount of errors should be converted into a discount factor, usually express in percentage of the corrected tender sum. In Hong Kong projects, this factor is usually endorsed together in the letter of intent or letter to acceptance to the Main contractor. Then the factor will be applied to the variation account where related to the BQ or SOR, except those preliminaries, prime cost rates, provisional sums. WSCC, 2010) After checking errors, if there are any changes affecting prices or design, tender queries should be issued to all tenderers and carry out a second tender exercise. All replied tender queries should bind into the contract document as contract correspondences and forming part of contract, especially those with cost mplications. Upon completion of evaluation of returned tenders and tender queries, the consultant quantity surveyor should prepare a tender report and recommend the tenderer which he preferred.
Then, the letter of intent or letter of acceptance should be sent out to complete the whole awarding process. 3. 3 Sub-contract The whole tendering procedures for sub contract can be divided at 3 sections as follows:- 3. 3. 1 Selection for a Specific Project When the contract was awarded to the Main Contractor as described above, the Main Contractor takes up total responsibility for the contract work. He cannot complete the hole work using only his own labour and worker. Sub-contractors is therefore needed, especially for E;M services, which require specialist sub-contractors.
Each structured main contractor should have his own domestic sub-contractors (DSC) list, the criteria for being qualified into the list depends on different main contractors. Common criteria includes work quality, safety and health record, financial conditions, insurance cover, etc. (CIB, 1997) To appoint sub-contractors for specific project, a preliminary tenderer list should be prepared by drawing up suitable sub-contractors in the company approved list. Confirmations should be seek from potential tenderers if they are interested to tender.
Numbers of tenders in the list should between four and six, for “construct only’ sub-contract. (CIB, 1997) Same as appointing main-contractor, upon complication of tender list, preliminary enquiry should be made with sufficient project details given to the proposed tenderers. Information including conditions of contracts, payment terms, amounts of retention, commencement date and completion date of main contract, etc. Clearly state all necessary information helps to reduce disputes between the main contractor and sub-contractors. CIB, 1997) 3. 3. Tender Invitation and Submission As a formal and good practice, a tender documents for acquiring prices is recommended. By using formal tender documents, offers from different sub- contractors are more easily to be analysed. In contrast, some main contractors may preterred simpler procedures such as asking sub-contractors to submit quotation themselves based on information received. However, in this report, formal tendering procedure are referred. For content of the tender documents, it’s basically the same with those described above in the Main contract section.
The tenders are to be sent out with the nvitations and date for submission of tenders should have stated in the invitations. The time for tendering should be 6 weeks for “construct only’ tenders. In case of any queries, the tenderers should submit in writing to request for clarifications from the main contractors. (CIB, 1997) Method statements may be requested to submit from the tenderers to better assess their capability for the work and cost incurred by the main contractor for providing temporary working platform and storage space, etc. 3. . 3 Tender Assessment and Awa rd Like the procedure of selecting Main-contractors, only tenders submit by the ubmission date would be evaluated. Non-price material like method statements should be assessed independently, different methods may affect potential costs incurred by the main-contractor. The priced document will be go through checking process first, any arithmetical errors are to be notified to the tenderer and ask whether he will stands by his tender price, procedures are generally same with those above described for main-contract.
If it’s possible, the tender prices should never be changed if the scope of works remain unchanged. (CIB, 1997) Subcontractors should then be chosen on the basis of the assessment criteria set own before issuing tender documents. The main contractor may arrange tender interview if he think it is necessary to clarify or amplify the submitted documents. Especially those preliminary items, such as provision of site office, storage, lifting equipment, insurance policy, etc. Responsibility for these items should clearly state and agree before awarding contract.
Any matters agreed during the interview should be recorded in writing for further reference. If the main contractor has decided to appoint the tenderers as his subcontractors for the projects, the letter of acceptance should be sent as a formal record here. (CIB, 1997) In case the tendering process for sub-contractors start before the award of main- contract and the preferred sub-contractor’s tender are to be used for main tender submission, the sub-contractor should be notified so the sub-contractor can arrange his resources more efficiently.
Upon the acceptance of the main contract tender, the main contractor should also accept that sub-contract tender price agreed before and notify the sub-contractor formally. Letter of acceptance should be sent to the preferred tenderers as a formal contractual record. (CIB, 1997) Conclusions Tendering procedures for main contract and sub contract has been briefly laborated in above passage. Major differences is illustrated by Figure 2 below.
Description Sub-contract Compilation of Tenderer List Consultant QS or Employer Main Contractor Tendering Period 8 weeks minimum 6 weeks minimum Nos. of Tenderers Figure 2 Comparison of Tendering Procedures For the tenderer list, the one used for tendering for main contract are usually recommend by the consultant quantity surveyors or the client have its own preferred list, based on reputation. In contrast, each main contractor have its own sub- contractors list based on their specialized trade.
For the tendering period, the codes suggested 8 weeks minimum for main contractors to prepare their tender for the Employer while 6 weeks minimum was suggested for sub-contractors to prepare their tender for main contractors. For numbers of tenderers, it is necessary to have sufficient numbers of tenderers to enable a fair competition. It’s suggested 4-8 tenders will be enough for tendering of main contracts, depends on the value and nature of the projects. Fewer numbers of tenderers would be enough for selecting sub-contractors, 4-6 tenderers is suggested in the Codes, depends on different trades.