Measurement and Payment

1. Measurement and Payment

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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)

13. 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 subs)

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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

20. 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

21. 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

22. 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.

23. Liquidated Damages during construction • Can have liquidated damages for missed milestones • Throws other contractors behind • Deduct from next progress payment

24. 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

25. Unbalanced Bids • Contractor raises prices on some items and lowers prices on others w/o changing total project cost • Should be rejected if found

26. 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

27. 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

28. 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

29. Measurement for Payment • Certain measurements do not represent true pay quantities • Pipeline paid for by amount shown on drawing • Drawing shows horizontal distance not length of pipeline on grade • Does not include pipe overlap (bell & spigot joint) • Contractor must take this into account when bidding job • RPR must know how to measure bid item

30. Rock and Earth Quantities • Compacted earth takes up less area than earth in natural state (shrinkage) • shrinkage depends on material and compaction methods • Fine Sand 6%, Sand and Gravel 8%, Ordinary Clay 10%, Loam 12%, Surface Soil 15% • Rock takes up more space when removed (swell) from ground

31. RPR and contractor should agree on a method of measuring material and use it throughout project • Truckloads of loose material • Water content can change weight of load • 10% WC = 500lbs extra / 10 ton load • Pay for materials in place as calculated from dimensions shown on the plans • Must be careful on a unit price bid to make sure contractor is not over excavating to use more material.

32. Paving Quantities • Small differences in depth can make a huge difference in price • 0.5” over a 12’ lane 1 mile long = 2200# • Also need to make sure that asphalt is at temperature when spread

33. Measurement Guidelines for Unit Price Quantities • Pipelines – depend on contract can be horizontal distance (drawings), measures along top of joined pipe • Do not measure along side of pipe • Curbs – top edge facing the street • Channels – use same location in channel for each measurement • Sewer Lines – measure edge of manhole to edge of manhole – manholes separate item

34. Fencing – horizontal or along top rail of fence • Pavements – area but watch for underruns on pavement thickness • Retaining walls – each wall is measured as a prism, where walls meet do not double count

35. Final Payment to Contractor • After CO contractor can apply for final payment • Contractor must pay all bills or other indebtedness • Must submit receipts, releases, and waivers of liens • Consent of Surety must be obtained • Less retainage

36. When computing contractor’s last payment consider for deduction in addition to retainage • Any liquidated damages • Twice the value of all outstanding punch list items • The value of any lien claims already on file • Final payment should not be approved until after formal acceptance of the work by owner (Notice of Substantial completion)