HKIS (QSD) CPD

1. HKIS (QSD) CPD Topic : Contractor’s Pricing for Preliminaries Speaker : Mr. Paul K. L. Wong (Director of Chinney Construction Co. Ltd.) Date : 20th January 2011 Time : 7:00pm – 8:30pm Venue : Surveyors Learning Centre

2. Contractor’s Pricing for Preliminaries - Overview 1. There is no hard and fast rules to price preliminaries. 2. The purpose of this seminar is to cover the basic principles of building up cost and eventually pricing for preliminaries. 3. The speaker will share his experience in pricing preliminaries for submitting tenders of building projects. 4. A Sample Case will be discussed for compiling the preliminaries cost (not exhaustive) of a sample building project.

3. Method of Pricing Preliminaries 1. To allow % mark-up (based on similar previous projects) on the estimated cost of the project. 2. Build up the cost of preliminaries items (with significant cost implication not covered in BQ/SOR) in detail.

4. Factors to be Considered When Pricing Preliminaries • Standard preliminaries items (See Sample Case) • Contract requirements • Statutory requirements • Payment method for preliminaries items • Maximum % of preliminaries stated in the tender documents • Type of Contract (Lump sum with or w/o quantities) • Contract period (and actual construction period) • Amount of LD (and EOT clause) • Reputation of the Employer and Consultants • Mode of Sub-contracting • Location of the Site • Ground condition • Market condition • Contractor’s resources, financial capability and workload • Contractor’s pricing strategy

5. Prices to be Included in Preliminaries or BQ/SOR Prices for some items that may be included or absorbed in BQ/SOR. Examples: - 1. Items Included in BQ/SOR ● Hoarding ● ELS works ● Some testing items (e.g. water test for waterproofing and windows & performance test for curtain walls, etc.) ● Safety management ● Attendance on NSC works 2. Contractor’s Pricing Practice ● Mobile crane (included in the rates of structural steel works) ● Scaffolding (included in the rates of ceiling works) ● Wet cleaning (included in the rates of tiling works)

6. Payment Method for Preliminaries Items • Initial cost (e.g. premium for insurances, set up cost for site offices, tower crane, scaffolding, electricity and water, etc.) • Work related cost (e.g. setting out & levies, etc.) • Time related cost (e.g. watchmen & site management staff, etc.) • Removal cost (e.g. removal cost for site offices, tower crane, scaffolding, electricity and water, etc.) • Stipulated payment terms for preliminaries items Examples :- ● Payment for the excess amount priced in those preliminaries items (e.g. insurances) will be effected over the period of the Contract. ● Payment for time and work related items will be effected as per the proportion of the total value of the Main Contract Work. ● No payment will be included in interim payment for those preliminaries items with no amounts being inserted.

7. Preliminaries Items • Bond • Site Management • Setting out • Insurances • Levies • Site Cleaning • Plant • Safety Management • Environmental Management • Watchmen • Site Accommodation for Contractor • Site Offices for Employer’s Representatives • Transportation • * Entertainment and Other Expenses • Hoarding • Scaffolding • Water • Electricity • Testing and Sample • Other Items * No such relevant preliminaries items in BQ/SOR

8. Preliminaries Items • Bond 1. Performance bond or demand bond 2. Bond for Defects Liability Period (for the release of the Bond during the Contract period) 3. Required in the Contract? (Yes / No) 4. 1% / 5% /10% / x% / fixed amount of Contract Sum 5. Up to the issuance of Certificate of Practical Completion / Substantial Completion or Making Good Defects 6. Premium 7. Collateral 8. Tender Bond

9. Preliminaries Items • Site Management 1. Full time site management staff required in the Contract (e.g. Project Manager, Construction Manager, Site Agent, Project Co-ordinator, Labour Officer, Graduate Engineer & Apprentice, etc.) 2. Other site management and clerical staff 3. Direct site labour 4. Site management staff during defects liability period 5. Quantity surveying staff during contract period and final account period

10. Preliminaries Items • Setting out 1. To be subletted or done by Contractor’s in-house staff? 2. Land surveying (Initial setting out) 3. Setting out works (Levellers) 4. Surveying tools and equipment

11. Preliminaries Items 4. Insurances 1. Contractor All Risk (CAR) Insurance and Employee Compensation (EC) Insurance 2. To be effected by the Employer or the Contractor? 3. EC Insurance for NSC Works (to be effected by MC or NSC?) 4. Premium 5. Excess 6. CAR & EC Insurances during extended Contract period (Reimbursable?) 7. EC Insurance after Defects Liability Period 8. Professional Indemnity Insurance

12. Preliminaries Items • Levies 1. Construction Industry Levy (0.43% (including 0.03% of Construction Workers Registration Authority Levy) of Contract sum) 2. Pneumoconiosis and Mesothelioma Levy (0.25% of Contract sum) 3. HKCA levy (*0.03% (Contract sum ≧ $120M＜$1,000M) or *0.06% (Contract sum ≧$1,000M) of Contract sum of relevant Employer – HKSAR, HKHA, HKHS, AA, MTRC, Ocean Park and Science Park) * The indicated rates of levy are for building works contract.

13. Preliminaries Items 6. Site Cleaning 1. General site cleaning during progress of the Works 2. Wet cleaning 3. Final cleaning upon completion of the Works 4. Temporary refuse chute 5. Dumpling trucks 6. Trip ticket system

14. Preliminaries Items 7. Plant 1. Tower cranes (setting up, running and removal cost) 2. Material hoists (setting up, running and removal cost) 3. Passenger hoists (setting up, running and removal cost) 4. Concrete pump trucks 5. Trucks 6. Mobile cranes 7. Gondolas 8. Fuel 9. Small tools 10. Maintenance

15. Preliminaries Items 8. Safety Management 1. Safety audit at 6 months interval (* where the total no. of persons employed on Site ≧ 100 or Contract sum ≧ $100M) or safety review at 6 months interval (* where the total no. of persons employed on Site = 50-59) 2. Safety Officer (*1 No. full Safety Officer where the total no. of persons employed on Site ≧ 100) 3. Safety Supervisor (*1 No. full Safety Supervisor where the total no. of persons employed on Site ≧ 20) 4. General labour for safety duty 5. Safety tools (e.g. safety gloves & safety labels, etc.) 6. Safety materials (e.g. temporary barriers & temporary lift shaft doors etc.) 7. Safety precaution (e.g. fire extinguishers & fire pumps (* 1 fire pump / 30m high) with pipes for high rise buildings, etc.) * Statutory requirements

16. Preliminaries Items 9. Environmental Management 1. Environmental Officer 2. Environmental Supervisor 3. Dust control 4. Noise control 5. Temporary site drainage system 6. Vehicle washing bay 7. Wastewater treatment system

17. Preliminaries Items 10. Watchmen 1. Watchmen 2. Guard house 3. Handkey access control system 4. CCTV system

18. Preliminaries Items 11. Site Accommodation for Contractor 12. Site Offices for Employer’s Representatives 1. Site offices and facilities for Employer’s representatives (minimum requirements in the Contract) 2. Site offices and facilities for Contractor (& Sub-contractors) 3. Site storage area 4. Office furniture and equipment 5. Temporary latrines 6. Re-location of site offices and site storage area 7. Off site bending yard and storage area

19. Preliminaries Items 13. Transportation 1. Contract car or Contractor’s car 2. Shuttle bus (for remote site) 3. Car insurance and licence fee 4. Driver 5. Mobile phone (for driver) 6. Fuel 7. Maintenance cost of car

20. Preliminaries Items 14. Entertainment and Other Expenses 1. Work commencement ceremony, topping out ceremony & Lo Pan, etc. 2. Petty cash (for staff messing) 3. Progress photos 4. Combined services drawings & as-built drawings, etc. 5. Others

21. Preliminaries Items • Hoarding 1. New hoarding or take over existing hoarding 2. Covered walkway, hoarding, gantry, signboard and lighting, etc. 3. Maintenance 4. Alter hoarding to suit site operation 5. Alter gantry to suit site entrance 6. Temporary hoarding for fencing off site works (mainly for A&A works) 7. Removal of hoarding 8. Reinstate existing paving

22. Preliminaries Items • Scaffolding 1. External and internal scaffolding 2. Safety nylon mesh 3. Timber or steel board for working platform 4. Safety catch fence 5. Safety canopy at hoists and passenger lifts 6. Scaffolding in lift shafts 7. Ceiling scaffolding 8. Temporary working platform 9. Special temporary propping (e.g. for transfer plate)

23. Preliminaries Items 17. Water 1. Temporary water meter 2. Temporary pipe works, water tank & pump, etc. 3. Maintenance 4. Water fee 5. Removal cost for temporary water supply

24. Preliminaries Items 18. Electricity 1. Generator 2. Fuel 3. Temporary transformer room (＞400A) 4. Temporary main switch board 5. Temporary lighting 6. Electricians 7. Maintenance 8. Electricity fee 9. Removal cost for temporary electricity supply

25. Preliminaries Items • Testing and Sample 1. Testing fee (e.g. concrete & reinforcement, etc.) 2. Testing equipment (e.g. concrete cube mould, slump cone & curing tank, etc.) 3. Samples submission

26. Preliminaries Items • Other Items Some other items that may be required in the Contract or to suit the site conditions. Examples :- 1. Condition survey 2. Temporary steel working platform 3. Show flats 4. Diversion of existing services 5. Temporary works for obtaining Occupation Permit