Measurement and Payment

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Measurement and Payment
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• 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

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• 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

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• 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

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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/
  contractors bid and is binding throughout job

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• 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

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Evaluation of Contractors Payment Requests

• Contractor submits request for payment at a
  prearranged date each month for previous months
  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

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• 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

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• 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

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Force Account

• Change order is a must
• Force account payments not authorized for supers.
  Allowances for supers is in contractors OP.
  Foremen working full time on item would be
  covered by account
• PM has authority to direct every aspect of force
  account work

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• 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 contractors stock

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• 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)

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• Payments for Extra Work and Change Orders
• Usually laid out in Contract
• Common is cost plus with a reasonable allowance
  for OP
• 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)

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• 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

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• 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

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• 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

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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

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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

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• 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
• Contractors bid was realistic
• Contractors costs were realistic
• Contractors actual costs were realistic
• Contractor was not responsible for any of the
  increased cost

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• 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

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• 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

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• 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.

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

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Interpreting the Contractors 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

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

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• 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 gt receive excessive early payments
  then default on the job
• Leaves Surety with too little to do job

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• 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 contractors should be in the same price
  range if normal bid

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• Resolving an Unbalanced Bid
• Easiest way is to reject all bids (owners
  perogative)
• Take bids to A/E point out area where possible
  error exists in estimate
• Get a new estimate
• Rebid job

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• 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

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• 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

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• 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.

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• 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

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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

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• 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

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• 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

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• When computing contractors 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)