IFT-IFC Changes XYZ Project (Re-measure and Value of Works)-Case Solution Sample

QUESTION

Submit one case study of 3000 words. The focus of the case study must be on a single project or piece(s) of work undertaken in the last 24 months. The project you choose MUST allow you to demonstrate technical competencies from your chosen pathway, and how you used the competency skills. It must be written as a professional report.

Name of case study:

Date the project or piece(s) of work were carried out:

Confidentiality statement

The following case study contains confidential information included for the purpose of the Assessment of Professional Competence. (Insert company), hereinafter termed (Insert either “the client/ My company/Board or Director”) and (Insert company) have given their consent to disclose details for the case study on the basis that the information is not to be used for any other purpose or by any person other than those authorised by the Royal Institution of Chartered Surveyors (e.g. staff and assessors).

Contents:

1. Introduction

2. My Approach

3. My Achievements

4. Conclusion

5. Appendix A – Competencies Achieved

6. Appendix B – Project Photographs/Plans

Total Word Count: xxxx words (Not including content list or Appendices)

1. Introduction

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What did you do?

What was your level of responsibility?

Who were the stakeholders?

What was the timeline?

(Suggested word count – 500 words)

2. My Approach

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Explain the issues to make it clear to the assessors why it became a challenge for you. Explain the options you considered and the solutions that you identified. Explain why some of the options were not feasible.

3. My Achievements

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4. Conclusion

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Appendix A – Competencies demonstrated in this case study

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Mandatory

Core

Optional

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Appendix B, C etc

You may insert illustrations, photographs or plans to this section. Please keep the attachments to a minimum ensuring they are relevant to the case study. Remember you need to use your appendices to support your case study and enhance the information you have provided. If it is not relevant don’t use it.

 

 

ANSWER

 

IFT-IFC Changes XYZ Project (Re-measure and Value of Works)

Disclosure

I have had permission from my employer and my client’s project manager to use this project for my critical analysis.

CONTENTS

Page

1. INTRODUCTION

2. PROJECT DESCRIPTION

3. MY ROLE

4. KEY ISSUES

5. DETERMINATION

6. SOLUTION

7. CONCLUSION AND EXPERIENCE GAINED

8. REFERENCES

  1. INTRODUCTION

This case study is prepared as part of the requirements for the final assessment of professional Competence application to be a member of the Royal Institute of Chartered Surveyors.

This case study reflects on my involvement as Cost Consultant on Quantity Surveyor role at XYZ project.

In normal practice during tender, IFT – (Issue for Tender) drawings are given to the bidders at tender time to price the blank BOQ.  It should be read in line with specifications to ensure proper pricing of the BOQ. In this project 32 sets of tender addendum queries (question and answer) were raised as clarification if something was not mentioned in the drawing but provided in the specification. Bidders should consider the cost of that clarification while pricing the particular item. After tender queries were all answered, another set of drawings – IFC – (Issue for Construction) drawings were provided by the Engineers to incorporate drawings and specifications that have been modified to include all the changes in the documents due to relevant of 32 sets of addenda, selection of alternate pricing options, and other negotiated changes. It should be identical in content to the contract documents. But in this project due to time constraint during tender negotiation and signing of Contract, IFC sets of drawings and specification were not included in the Contract documents while the 32 sets of queries and answer addendum were included in the Contract document. (All parties agreed)

  1. PROJECT DESCRIPTION

2.1 PROJECT DETAIL

Project name – XYZ

Type of Contract – Lump Sum

Form of contract – Red booked FIDIC 1999

Contract price –_____ million

Contract duration – 2 years

Contract start date – ______

Final completion date – _____

  1. MY ROLE

My role was the clients Cost Consultant as quantity surveyor (QS) with my employer ______. I was involved on this XYZ project in the post Contract stage working together with my Co-Quantity Surveyors. My duties and responsibilities is direct reporting to our Senior commercial manager as follow:

      • Involvement in establishing budget for EIAR- (Engineers Instruction Application Request) changes together with the Engineers and recommend to the client.

      • Evaluation of all variations, additional works, field changes, additions and omission, and incorporation of the same with the monthly cost report.

      • Assessment and recommendation of interim payment applications

      • Assess EI (Engineers Instruction) / variations, Contractor’s proposal and negotiation agreement with the Client and Contractor.

      • Assistance to the Project Manager in complying with corporate cost control procedures

      • Active participation in formal meetings with contractors and clients.

      • Management of project change control process

  1. KEY ISSUES

The key issue I will discuss in this report is how to identify and mitigate the IFT-IFC Contractor’s variations claim (worth 10million $). (sub-clause 13) [1.]

4.1 BACKGROUND

The XYZ project used Principles of Measurement (International) for Works of Construction (POMI) for writing the BOQ of the project. These principles setup by RICS provide a uniform basis for measurement of items and their pricing. It is used for quantitative valuation of items through the measurement of physical parameters in a scientific and universally standardised manner. This was stated in the tender documentation. [2.]

The contract to be signed was a lumpsum contract. In these contracts, a single “Lump Sum” price is agreed upon by the contractor and the client for all works of the project, before the commencement of the project. This is done when the project requirements are fairly rigid and straight forward and will not involve major changes in its designs. [3.]

After the commencement of the project, the Project Engineers initiated a variation regarding the project drawings. Against this variation, the contractor claimed time and cost entitlement and disagreed with the variation.

This issue may impact the project cost to the client as well as the time required for the project completion. The claim resolving procedure will require a team to analyse the issue from all angles and suggest solution to bring the cost down for the company. This will require a considerable amount of time to be implemented effectively.

4.2 ANALYSIS OF KEY ISSUES

Because IFC drawings were not included in the contract documents, the changes between IFT-IFC will be treated as “variations” under sub-clause 13. The Project engineers may initiate a variation anytime, before issuing the Taking over certificate as per sub-clause 13. However, the contractor may agree or disagree with the variation and as such, may claim for entitlement in terms of cost or time of completion.

The key issues were the following:

  1. Risk allocation – If the change in IFC-IFT drawings is valid, the Project manager and the Engineers will be responsible. The changes may be made as a result of value engineering, or after the tender addendum queries. Also, the value engineering additional is agreed upon by the client as well and as such, is also responsible.
  2. Variation – The contractor may claim for entitlement of extension of time against the engineer’s variation. According to sub clause 13 (variation procedure), since the contractor did not agree for variations prior to the contract, he is entitled for this extension as per sub clause 8.4, which he must convey to the engineer as soon as practicable. [4.]
  3. The changes from IFT to IFC were not clouded/ identify in the drawing and need to examine very carefully (IFT drawing to IFC drawing). These changes may be hard to point out in large scale projects, and hence should be clearly marked in any case to avoid future issues. The absence of clear distinctions will make it difficult when analysing drawing to drawing.
  4. Some specification changes – When the designs are changed, the engineers need to evaluate the cost for these changes according to sub clause 12. This evaluation should be done along with a representative from the contractor, otherwise the evaluation by the engineer shall be deemed final. Since the new works are instructed under variations, there is a need for valuation of changed specifications if these changes affect the project cost significantly, as per conditions given in sub clause 12.3.
  5. During assessment, Contractor keeps revising their claim – As per sub clause 20.1 (Contractor’s claims), the contractor may send interim claims at monthly intervals, when the variations have a continuing effect on the project. However, when the effect of the variations end, he is liable to file a claim within a 28-day period only. Hence, if the IFT-IFC drawing change has a continuing effect, contractor is allowed revised claims on a monthly interval.
  6. Program – As part of Contractor’s tender, IFT -IFC changes was not included. Hence, the project manager needs to inform the contractor regarding the same and instruct a variation in the design.
  7. Valuation – Contractors starting to claim IFT-IFC on account without knowing the final figure- it is affecting the Client’s cash flow. As per the book, the valuation of the changed designs can be done by the project engineers in the presence of the contractors, which will then affect the project cash flow. Until then, the cash flow cannot be altered and will be continued as agreed upon in the contract.
  8. Engineers inserted some additional item without informing the contractor – Since the contract signed was a lumpsum contract wherein the IFC designs were not submitted, the engineers may add some items to increase the cost efficiency of the project as observed after value engineering.
  9. Many items change from IFT to IFC as a result of value engineering for reducing the cost – This is within the book and contractor may be informed about the same via a variation.
  10. DETERMINATION

The project engineers of XYZ company initiate a variation informing the contractor regarding the changes in the designs and absence of the same in the contractor’s program. The contractor files a claim and demands entitlement in cost and time extension. The claim poses a risk to the company regarding the cost to company as well as the pace of work.

In view of the key issues explained earlier, we have a few options to mitigate the contractor’s variation claim. These options mainly involve a thorough understanding and use of the FIDIC 1999 book and the contract documentation. The options are:

5.1 OPTION 1 – Reject the (IFT-IFC) change

The client may straight out reject any changes in the project designs through the IFT to IFC stage. However, the book and laws binds the client to inform the contractors regarding design changes so that they may/may not incorporate the same into their program. It becomes obligatory on the part of the client, failing which, the contractor will not be liable to damages incurred. As such, rejecting any changes between IFC and IFT will mean that the variation is baseless and the contractor’s claim will be successful. This will be against the code of conduct of the Red book.

5.2 OPTION 2

Check high level review (agreed by principle only) within 3months

Agreed by principle (high level review) meaning in lumpsum contract, BOQ is not the basis of the scope of work. The contractor should not depend solely on it, since they have the maximum risk in these contracts. Scope of work should include IFT drawings, specification and tender queries question and answer.

In this option, changes will be examined between Contract documents against IFC drawings and specification. If Contractor doesn’t highlight the changes from IFT-to IFC, claim will be rejected by packages. It becomes necessary for the contractor to take the addendum and other documents into consideration to form the final designs. The detailed drawing to drawing analysis between the IFT and IFC makes sure that the minor details are covered, which the contractor might have missed earlier and hence forces them to reduce the cost entitlement claim.

Using high level review, we manage to reduce the claim from 39million USD to 12million USD, since most of the design changes were already present in the documents and the IFT drawings which were signed during the contract agreement, and the contractor’s claims are invalidated. This happened because the contractor was not thorough in his works and analysis and estimation of BOQ.

5.3 OPTION 3

We can also go for a two stage check on the contractor’s claims to further reduce the entitlement amount.

Stage 1- high level review / principle – examine the change drawing to drawing (IFT –IFC) (duration of work with in 3 months)

Stage 2- re-measure – examine the drawing to drawing, specifications and together with tender queries. (additional 9months)

When the agreement is signed, the addendum queries are also agreed upon by the contractor. These queries also contain information regarding the designs and drawing changes in the project, and as such may be used by the client in defence of the claims. The contractor is liable to take back the claims if these queries contain relevant information against the claims. As such, when 32 addendum are considered, they include all the design changes agreed upon and hence falsify the claim of the contractors. As a result, we come up with cost savings of additional 2.6million USD with 12 months. This happened because the contractor team were not aware of the rules and regulations of different types of contracts.

  1. SOLUTION

After the analysis of the possible options, the two stage option 3 comes out as the best option against the contractor’s variation claim. This is because it takes benefit of the contractor’s mistakes of falsely analysing the contract’s documents and IFT – IFC designs, as well as it makes use of the contract regulations and addendum queries to further reduce the cost entitlement claims.

The solution saved the company from a heavy cost entitlement claim and forced the contractors to take necessary steps to implement the new designs, elements and additional in the project without further objections.

  1. CONCLUSION AND ANALYSIS OF EXPERIENCE GAINED

I have learnt that changes/ variations are nearly unavoidable in all building contracts, no matter how simple the contract is. In a large scale contract, especially where the time is a big constraint, both parties may be negligent towards the contract documents which may create issues during the project implementation.

During the remeasure I found out that Cost Consultant who provided the BOQ did not incorporate all the changes from tender queries from 32 addendums in the final BOQ. These addendum files incorporated important design changes and were agreed upon at the time of contract signing. Contractor who priced the BOQ missed to price some of the additional items as well and it is understood deem to be included as it is a lumpsum Contract.

I completed the analysis and resolved the issue for the XYZ company and played my part well as the cost consultant in accordance with the FIDIC red book.

7.1 CONCLUSION

On the processes of re-measure I realized that because the IFC sets of drawing was not included in the Contract documents, the Engineers had time to revise the scope work by incorporating value engineering, instructed by the client. This will bring cost benefits to the clients and will also involve changes in the design of some elements. However, the action was completely under the rules and regulations of the lumpsum contract.

Our final complete re-measure resulted in cost savings of 2.6million USD. I therefore concluded that Contractor is expecting the change (IFT-IFC) as additional Variations.

But on the other hand the Engineers and client is expecting a cost saving due to value engineering. The re-measure claim was challenging since it required a lot of time to analyse the drawings and look at the correct places.

Option 3: was a long process but we turn the Contractors claim into cost savings to the client. The drawing to drawing analysis, considering the addendum queries as well took a long time but resulted in significant savings for the company and reduction in the cost claims. The design changes were under the rules of the contract and the engineers had the freedom to improve upon the designs through value engineering. As such, even after the contract was signed, through the use of addendum queries, the team was able to perform value engineering and cut costs of a number of additional.

Also, the Contractor’s re-measure claims were not properly done. I noticed that the quantity surveyor (QS) who performed the claim had made many mistakes such as:
1. QS did not consider the tender queries addendum. This resulted in missing items in the contractor’s program and hence false claims against the variation.
2. QS did not consider the latest tender drawing that can be found in tender addendum against IFC.
3. QS had lack of knowledge in estimating skills and contract agreement regulations and he missed the BOQ pricing estimations.
4. QS just simply measured the tender drawing without considering the specifications, finished schedule, minor item details etc.

7.2 EXPERIENCE GAINED

The assessment of the case was fairly challenging because of the grasp of the FIDIC 1999 book and knowledge required regarding the types of contracts. However, I was fair and objective during my assessments. We were not influenced to unfairly favour towards the Client. In a sense, I was working impartially towards the project benefits. The final verdict came out in the favour of the party which paid more attention towards the contracts documentation and worked within the framework. The contractor team on the other hand was poorly aware of the regulations and hence could not win the cost and time entitlement claim.

In resolving this, I was guided by RICS rules that required members to act honourably and with integrity and also to be objective. The FIDIC 1999 book gave clear instructions to handle different situations, giving a very objective approach to handle issues during the project. I now have a better understanding of the elements of the book and their co-relation with each other.

For analysing this issue from different perspectives, I had to interact a number of professionals and work closely with my fellow cost surveyors. I also had to read through the records and books thoroughly. This helped to improve my communication skills and knowledge acquisition skills. I know have a better connect with the community and improved grasp on the subject.

Finally, I learned and realised it was essential to have the knowledge and understanding of the form of contract for the project. Before, undertaking the evaluation, I ensured that I understood the contract and the project works information. In so doing, I was able to ascertain and argue where a claim was valid or a cost savings. As a result, I was able to provide a professional service to the client.

I feel that I was assisted well by my co surveyors, without which, I would have needed more time to understand and analyse the issues completely. I will aim to improve my understanding of the regulations with each project so that I may deliver better results in shorter sessions

Appendix A: Competencies demonstrated in this case study

Mandatory Core Optional
Decision Making Strategy Development Team Management
Communications Critical Thinking Business Acumen
Technical Competence

 

Appendix B: Images and illustrations

Example. in the BOQ and tender drawing counter top sink consist of counter top= 750usd lavatory with faucet 1000usd, but in IFC drawing design change to simple modern design lavatory. (see attached drawing in appendix A). Revised price (new rate / prime cost) = 1250 only. Therefore, each lavatory has a cost savings of 500usd each. If you have 600 number of lavatory we easily come up a cost savings of 600*500= 300,000usd in one item.

Ex. Image IFT drawing

 

Ex. Image IFC drawing

References

  1. FIDIC – conditions of contract for construction – 1999
  2. Principles of Measurement (International) for Works of Contract – 1979
  3. Lump sum contract. Available online at https://www.designingbuildings.co.uk/wiki/Lump_sum_contract
  4. Variations in contract. Available online at https://www.designingbuildings.co.uk/wiki/Variations_in_construction_contracts

 

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