Surveyor's Construction Handbook

161325
The
SU RVEYO RS'
CO N STRU CTI ON
HANDBOOK
Update 3 publishedDecember 1999
Update 2 published October1999
Update I published April 1999
Please note:References to the masculine include, where appropriate, the feminine.
ExtractsfromParry's Valuation and Conversion Tables, AW Davidson (1989),

(EstatesGazette)reproduced by permission ofthe College ofEstate Management
which ownsthe copyright.
Appendix A, Section 2.3 is reproduced from the BuildingCost Information Service publication,
StandardForm ofCostAnalysis: Principles,InstructionsandDefinitions (1969).
Published by RICS Business Services Limited

a wholly owned subsidiary of
The Royal Institution ofChartered Surveyors
underthe RICSBooks imprint
Surveyor Court
Westwood BusinessPark
Coventry CV4 8JE
UK
No responsibility for loss occasionedto any person actingor refraining from

actionas aresult ofthe materialincluded in this publication can be accepted by the
author or publisher.
ISBN 0 85406 865 1
© RICSApril 1998. Copyright in all or part ofthis publication rests withthe

RICS, and savebyprior consentofthe RICS, no part or parts shallbe reproduced
by any means electronic, mechanical, photocopying, recording or otherwise,now
knownorto be devised.
Printed in GreatBritain by Quorn SelectiveReproLtd, Loughborough.

Amendments
This document incorporates the following amendments

Ref Amendment Date
Update 1 including bulletin update Apr 99
Update 2 including bulletin update Oct 99
.
Update 3 includingbulletin update Dec 99
Amd/i
The
SURVEYORS'
CONSTRUCTION
HANDBOOK
BULLET IN
\AIELCOME TO THE INSTITUTION'S CONSTRUCTION HANDBOOK, WHICH IT IS
HOPED WILL BECOME THE HANDY FIRST POINT OF REFERENCE TO WHICH
SURVEYORS WILL TURN WHEN THEY WANT TO REFRESH THEIR MEMORIES
OR TACKLE A NEW CONSTRUCTION-RELATED PROBLEM.
j Guidance notes and It has been difficult to define the

information papers on scope of the handbook in order to
5)')i surveyors' practice in avoid the need for some members
((J/.ç the construction field to buy it just for one small part of
will no longer be pub- the contents.
Y lished separately. Law
and practice is constantly For the purposes of the handbook,
developing, and it is not easy for construction is defined to include
members to keep abreast of what new construction, conversion,
RICS material remains extant and to refurbishment works, alterations to
monitor fully publication of new the form of buildings, and civil
material. engineering works.
The new handbook will make this Maintenance is outside these

easier and, in time, more economic categories and building surveys will
for both members and the not be included. Nor will project
Institution, through the inclusion management and dispute resolution
of all the Institution's material in as separate services, or applications
this area in a loose-leafhandbook, for planning permission or building
which will be amended and regulations.
supplemented on a subscription
basis three times a year. Much good material is published by
others, such as the Construction
The handbook is intended primarily IndustryBoard and there is no point
for chartered building and quantity in duplicating this. So the handbook
surveyors, and aspiring members of will not try to be comprehensive. It
those divisions, but obviously it will will include material that the
also be of use to other professions relevant practice panels judge useful
involved with the construction to members, bearing in mind the
industry, especially lawyers and availability of other publications (to
insurers. which cross-referencewill be made).
The handbookis in five parts.
PART ONE: 'The client's requirements and
roles'will seek to help surveyors to work
with clients. It discusses the establishment
of their construction objectives and and
constraints, leading to the developmentof
construction briefs. It defines the client's
role during the construction process, and
comments on the engagement of
professionals involved in the construction
process.
PART TWO: 'Construction design and RICHARD COLLINS • KENNEDY AND PARTNERS
economics' will coverdevelopmentof the
design concept, feasibility studies, design
and economics (includinglife-cycle costing,
risk assessment,and cost-value
relationships), and confirmation of the
final design proposal.
PART THREE concerns 'Construction
planningand procurement'; that is, to the
time the construction contract is placed.
PART FOUR covers 'Construction
administrationand management'; that is,
all post contractmatters.
PART FIVE will provide additional guidance TERRY DAY • LAING LONDON
and information.
Material in the pipeline and for inclusion as

soon as possible includes:
life-cycle costing;
• ascertaining loss and expense;
• employer's requirements for design and
build;
• valuationof interim certificates;
• design and building procurement;
• extension of time underJCT contracts; GEOFF BREWER • BREWER CONSULTING
• liquidatedand ascertained damages;
• risk management;
• site resources/off-siteconstruction;
• supplychain management;
• the Disability Discrimination Act;
•
party walls'alert'.
This structure closely reflectsthe structure
of the construction-relatedRICS practice
panels, who have the substantial task and
responsibilityfor drafting the material and
settling it after appropriate consultation.
They are led respectively by: KEITH DEW • JOHN PELLING AND PARTNERS
1 The Co-ordinated Project Information and Maintenance Panel, is available via RICS
I Committee have published Uniclass, a Books. It provides advice on commissioning
classification system for construction infor- and carrying out this type of survey as well as
mation which can be used in libraries, for points to consider when collating and
projects or in a database to organise infor- managingdata.
mation. The RICS is a member of the
Committee which consists of representatives A Guidance on Building Surveys and
from the ICE, RIBA, CIBSE and the 9 Inspections of Commercial and Industrial
Construction Federation. Property is available via RICS Books. The
document covers taking instructions, through
Amendments have been made to preparationand inspection, to composing the
Approved Documents K and N (details report itself.
publishedin CSM Februaryissue).
The Department of the Environment,
The Building Employers' Confederation 1 0 Transport and the Regions has issued a
3 has now been officially reconstituted and consultationdrafton proposedamendments
includes such bodies as the Major to Regulation 7 of the Building Regulations
Contractors' Group, the Civil Engineering 1991 which requires that work is carried
Contractors' Association (CECA) and the out with proper, appropriate materials in a
House Builders' Federation (HBF) and will be workmanlike manner. The aim of the
known as the Construction Confederation.It amendments is to bring Regulation 7 into
becomes the RICS' partner in SMM7. line with its technical counterparts with a
functional Regulation supported by detailed
JCT Limited comes into operation on guidance in the Approved Document.
4 1 April 1998.
A revised draft of the Fire Safety Bill is
The Association of Corporate Approved 11 the subject of consultation between the
S Inspectors has now been recognised by Home Office and other professional groups
the DETR. In addition, its membership has including the RICS. Members will be
been widened to include members of non- informed of progress via CSM following
corporate bodies who act in the Approved further meetings with the Home Office and
Inspectorrole. the RICS.
Furtherconsultationon the proposed 'all A Bill is currently before Parliament

B in day work rate', halted by the previously 1 regarding payment of interest on late
mentionedchanges, are to resume now that commercial debts.
the Construction Confederation has agreed
its new internal committee structure. The Department of the Environment,
1 3 Transport and the Regions has issued
The BCIS has published a Guide to Daywork two separate but related consultation
Rates 199Z There is an annual updating papers: proposed amendments to Part J and
service also available to members for an its Approved Document, and a preliminary
additional fee. paper on 'Competent Persons'. The latter
concernsproposals that 'Competent Persons'
The Joint Development Board, a group could certify that work has been done in
7 consisting of RICS OS members and compliance with the Building Regulations,
representatives of the Association of Cost giving examples of work for which this
Engineers, has now published Industrial approach could be considered, including
Engineering Projects, a guide to the manage- some combustion installations.
ment of industrial engineering projects from
feasibility to commissioning and operation. 1 The HSE has published a revision of
I 4Construction Sheet 17, consisting of a
A new Guidance Note on Stock Condition four-sided AL checklist of Construction
8 Surveys, produced by the Building Survey Health and Safety.
1 Revisions to Approved DocumentB Fire A unique six-storey timber-framed
I Safety are out to consultation. 18 building research project has been
constructed at the BRE hanger at Cardington
Part L of the Building Regulations Energy under the Partners in Technology Scheme.
16
I Efficiency, is about to come under Research on areas such as disproportionate
review; the DETR have contracted Oscar collapse, fire safety and differential move-
Faber to assist in the first phase of the ment between timber frame and brick
review. cladding is anticipated.
A thorough review of the British Board The Government's Scheme for

17
I of Agrement has been announced. 1 9 Construction Contracts has been laid
Initially, this will assess the extent to which before Parliament. It is anticipated that
the Board's functions are necessary to the Part II of the Housing Grants, Construction
achievement of government policies and and Regeneration Act will be implemented in
whetherthese functions could be performed early May 1998. The RICS has set up a
most effectively as at present, privatised, working party to provide information and
contracted out or transferred to another guidance in the light of the legislation.
body. Articles on this subject are publishedin both
March and April CSM.
The Royal Institution of Chartered Surveyors

12 Great George Street
ParliamentSquare
London SW1P 3AD
Tel +44 (0)171 222 7000

Fax +44 (0)171 222 9430
Email info@rics.org.uk
web www.rics.org.uk
FOREWORD
Knowledge is of two kinds: we know a subject ourselves, or we know

where we can find informationupon it.
SamuelJohnson (1709—1784)
The fact that our professionserves a changing worldincreases the need for
it to rely on well thought-outand reliable practicesand procedures. Events
move at an ever-increasing pace, imposing a requirement for quicker
responsetimes. Modem communicationmethodssuch as facsimile and now
e-mail result in the need for information to be available almost instantly.
This is made more difficult by an industry growingin complexity and which
is subject to increasing customer expectations in terms of service and
quality.
The RECS has publishedthis Surveyors'ConstructionHandbook to help sur-

veyors meet these needs. It is intended to become an important source of
reliable informationand guidanceto all CharteredSurveyorswho practisein
construction. Much of the excellent information produced by the divisions
in the past has now been updated for inclusion. Other material not yet
revised will be added. The whole will be regularlyreviewed and updated as
necessary. RICS practice panels are continuingto produce information for
inclusionto make it auseful constructionreference document.
We hope that this Handbook will become an invaluableaid to your day-to-

day activities.
ChristopherPowell, FRICS
PRESIDENT, QUANTITYSURVEYORS DIVISION
Trevor Mole, FRICS

PRESIDENT, BUILDING SURVEYORS DIVISION
5
ACKNOWLEDGEMENTS
Major D.R. Bassett,Royal Engineers, for his contributionto the research

underpinningthe construction time charts in Part 3, Section 1; CentralUnit
for Procurement, HM Treasury, for permission to use CUP guides exten-
sively in the drafting ofPart 1, Section 1 and Part3, Section 1.
Professor J.A.J. Moohan, BA MA Hon. Assoc. RICS, The Nottingham

Trent University,for his support and his permissionto use the resources of
the Faculty in drafting Part 1, Section 1 andPart 3, Section 1.
Alan Turner,JP FRICS ACIArb, author of BuildingProcurement, for per-

missionto use a number of the diagrams from his text in Part3, Section 1.
CONTENTS
Foreword
Acknowledgements
Abbreviations
Introduction i
A Aim and Scope of this Handbook 1
B Arrangement of Content 1
C Statusof Content 2
D Currency of References 3
E Invitation 3
F SubscriptionService 3
Part 1: The Client 1
Section 1.1: The Client's Requirements and Roles 1

1.1.1 Establishing the Client's Objectives 1
1.1.2 The Role of the Principal Adviser 3
1.1.3 Project Brief 3
1.1.4 The Client's Role 4
1.1.5 The Client's Responsibilities 6
1.1.6 Appointmentof Project Manager (where appropriate) 8
1.1.7 Appointmentof Consultants 9
1.1.8 Partnering 11
Appendix A: Further Reading 1
Section 1.2: Value Engineering

Introduction 1
1.2.1 Why Value Engineering? 2
1.2.2 Applicability 2
1.2.3 At What Stage Should Value Engineering be Carried Out? 3
1.2.4 Who Should CarryOut Value Engineering? 4
1.2.5 How Long Should It Last? 4
1.2.6 Preparing for a Value Engineering Workshop 4
1.2.7 Functional Analysisof Design Relative to the Client's Requirements 5
1.2.8 Pricingthe FAST Diagram 6
1.2.9 Presenting a Design Solution to a Value Engineering Workshop 6
1.2.10 The Workshop 7
1.2.11 Assessing the Value of the Workshop 8
1.2.12 Implementingthe Results 8
1.2.13 Feedback from Post-Occupancy Evaluation 8
Appendix A: Typical Functions for a Health Centre 1
Appendix B: Typical Example of a Value Engineering Process 1
Appendix C: Further Reading 1
7
Part 2: Construction Design and Economics 1
Section 2.1: Pre-contract Cost Planningand Cost Management 1
Introduction 1
2.1.1 Pre-contract Cost Planningand Cost Management 2

2.1.2 Preliminary Cost Studies and Feasibility Studies 4
2.1.3 Budget 4
2.1.4 The Cost Plan at Outline Proposals Stage 8
2.1.5 The Cost Plan at Scheme Design Stage 11
2.1.6 Cost Checking 13
2.1.7 Action after Receiptof Tenders 14
Appendix A: Sources of Cost Information 1
Appendix B: Format of Budget and Cost Plans 1

Appendix C: Element Unit Quantities Generation for HypotheticalBuildings 1
Appendix D: Further Reading 1
Section 2.2: Life Cycle Costing 1
Introduction 1
2.2.1 The Client Context 1
2.2.2 The Life Cycle CostingCalculation 5
2.2.3 Tax Allowances, Incentives and Business Rates 10
2.2.4 Data Sources 14
2.2.5 Worked Examples 15
AppendixA: Residual Values 1
Appendix B: Obsolescence 1
Appendix C: Costs And Values 1
Appendix D: Glossary of Terms for Taxation 1
Appendix E: Examples of Items of Expenditure Likely to Attract

Taxation Allowances 1
Appendix F: Further Reading 1
Section 2.3: Elements for Buildings 1
Introduction 1
2.3.1 Elements 1
2.3.2 Elemental Cost Analysis 1

2.3.3 Other Uses 2
Appendix A: BCIS Standard Elements 1
Section 2.4: Design and Build - Guidance for Employer's Agents 1
Introduction 1
2.4.1 Background 2
2.4.2 Contract Documentation 3
2.4.3 Additional Services 3
2.4.4 Employer's Requirements and Contractor's Proposals
(including contract sum analysis) 5
2.4.5 Design and Build Variants 6
2.4.6 Novation 8
Appendix A: PotentialServices Associated with the Role of Employer's Agent 1
Appendix B: Employer's Requirements/Contractor'sProposal Checklist 1
8
Part 3: Construction Planning and Piócurement 1
Section 3.1: Developingan Appropriate BuildingProcurement Strate 1

Introduction 1
3.1.1 The Client 2
3.1.2 Procurement Strategy 14
3.1.3 Procurement Options 24
3.1.4 Selectionof Most Appropriate Procurement Strategy 39
3.1.5 Implementation 43
Appendix A: Contract Documentation, Practice Notes and Codes of Practice 1
Appendix B: Further Reading 1
Part 4: Construction Administration and Management 1
Section 4.1: The Problems of Practical Completion 1
Introduction 1
4.1.1 What Happens in Practice 1
4.1.2 Standard Form Approaches 3

4.1.3 Effects of Practical Completion 14
4.1.4 Methods for Dealingwith Practical Completion 15
4.1.5 Definitions 17
4.1.6 SubsidiaryIssues 23
Appendix A: General Objectives to be Achieved at Practical
Completion for Small to Medium-sized Building Projects 1
Appendix B: Table of Cases 1
Appendix C: Further Reading 1

Section 4.2: Ascertainingthe Amount of Loss and
Expense Incurred in Building Projects 1
Introduction 1
4.2.1 General Principles 1

4.2.2 Definitions 4
4.2.3 Entitlement 4
4.2.4 Ascertainment 7
4.2.5 Admissible Items 9
4.2.6 Inadmissible Items 13
AppendixA: Ascertainingthe Cost of Running a Site 1
Appendix B: Disruption 1
AppendixC: Ascertainingthe Cost of Head Office Overheads 1
Appendix D: Checklist of Items for which Loss and/or Expense are Allowed 1
Appendix E: Checklist of Steps Required when Considering

Submissions by Contractor 1
Appendix F: Further Reading 1
Section 4.3: The Management of Risk 1
Introduction 1
4.3.1 Definitions 2
4.3.2 The Rationale for Risk Management in the Construction Process 2
4.3.3 The Risk Management Process 4
4.3.4 Summary 12
Appendix A: Further Reading 1
9
Part 5: Additional Guidance and Information 1
Section 5.1: Surveying Safety 1

Section 5.2: Construction (Design and Management) Information 2
5.2.1 Schedule of Sources of Useful CDM Information 1
Section 5.3: Construction PracticePanel Roles Information 1
Section 5.4: Building Cost InformationService 1
Section 5.5: Building Maintenance Information 1
Index 1
10
LIST OF ABBREVIATIONS
ABE Association ofBuilding Engineers

ABI Association ofBritish Insurers
ACA Association ofConsultantArchitects
ACE Association ofConsulting Engineers
BCIS Building CostInformation Service
BEC Building Employers' Confederation
BMI Building Maintenance Information
BRECSU Building Research Energy Conservation Support Unit
BREEAM Building Research Establishment Environmental
Assessment Method
BSI Building Standards' Institution
BSRIA Building Services Research and Information Association
BWIC Builder'sWork in Connection
CA ContractAdministrator
CAWS CommonArrangement ofWorks Section for Building Works
CDM Construction (Design and Management)
CECA CivilEngineering Contractors' Association
CIB Construction Industry Board
CIBSE Chartered Institution ofBuilding Services Engineers
CIC ConstructionIndustry Council
CIRIA ConstructionIndustry Research and InformationAssociation
CCT Compulsory Competitive Tendering
CSM Chartered Surveyors Monthly
DBFO Design BuildFund and Operate
DoE Department ofthe Environment (now known as the DETR)
DOM Domestic Sub-Contract
DETR Department ofthe Environment, Transport and the Regions
(formerlythe DoE)
EC European Commission
EU European Union
FAST Functional Analysis Systems Technique
FCEC Federation of Civil EngineeringContractors
IIBF House Builders' Federation
H1VISO Her Majesty's Stationery Office (now known as
The Stationery Office)
HSE Health andSafety Executive
ICE Institution ofCivil Engineers
IFC Intermediate Form ofContract
JCT Joint Contracts Tribunal
LCC LifeCycle Costing
M&E Mechanical and Electrical
MERA Multiple Estimate RiskAnaylsis
MW MinorWorks
NEC New Engineering Contract
NEDO National Economics Development Office
NJCC National Joint Consultative Committee for Building
NSC Nominated Sub-Contract
PFI Private Finance Initiative
PSA Property Services Agency
11
RIBA RoyalInstitute ofBritish Architects
RICS Royal Institution ofChartered Surveyors
VAT Value Added Tax
WCD WithContractor's Design
WRC WaterResearch Centre
12
INDEX
Note: referencesareto paragraphs. Figuresand Tables are notincluded
balancingcharge Part 2 Section2: Appendix C6, D8

AbstractofParticulars 4.1.2.18(d) BCIS (Building Cost Information Service)2.3; 5.4
ACAForm ofBuildingAgreement(1990Revision) BCISBulletin Service5.4.2; 5.4.3; 5.4.8
4.1.1.10 BCISElementsfor DesignandBuild2.4.4.10; Part 2
acceleration 4.2.6.1(a); 4.2.6.2; 4.2.6.3 Section 4: Appendix A (Intro)
acceptance certificates 4.1.2.20(c) BCIS News5.4.8
accidents5.2.1 BCISOnline5.4.3;5.4.8
activityschedules 2.3.3.2 BCIS Quarterly Review5.4.11
adjudication 4.1(Intro); 4.1.4.1(b) BCIS standardelements 2.3.2.2; 2.3.3.2;Part2 Section 3:
administration cost Part 4 Section 2: AppendixAl Appendix A
admissible items 4.2.4.2; 4.2.5;Part 4 Section 2: BCIS StandardForm ofCostAnalysis 1.2.7.6; 2.3 (Intro);
Appendix C3, D 2.3.2.4; Part2 Section 4: Appendix B2.5
agentsee employer'sagent benchmarking 5.5.1;5.5.4
all—risks insurance 4.1.3.3;Part 4 Section 2:Appendix Al0 best-fitsolution3.1
all risks yield2.2.2.3(d) Blue Form4.1.2.16
allowances see taxallowances BMI (Building Maintenance Information) 5.5
alteration costs Part2 Section 2:AppendixC4 BMI BuildingMaintenancePrice Book 5.5.3
alternative designsolutionsPart2 Section 1: Appendix C
BMINews 5.5.5
analyses2.1.7.2(b); 5.4.6 BMI Quarterly Cost Briefing 5.5.2
analysis 1.2.7; 3.1.2.10 briefing 1.1.2.2
see also risk analysis BS 57503.1.1.13(c)
analysis checklist3.1.4.3
budget2.l;2.1.1.1—2.1.1.3;2.1.2.1;2.1.3;2.1.6.2
Appendix to the Form ofTender 4.1.2.12(b) seealsotime budget
application for reimbursement, written4.2.3.1(c);4.2.3.3
budgetformatPart2 Section 1: Appendix B
approval processes 3.1.1.9(c)
arbitration 4.1.2.5(c);4.1.3.1(e); 4.2.1.6 budgetpreparation methods2.1.3.4;2.3.1.2
arbitrator4.1.2.12(c); 4.2.1.5 budgeting5.5.1
architect as contract administrator 4.2(Intro) build insurance 4.1.4.3(b)
architect'sinformation 2.1.3.3(c);2.1.7.3(b) buildability 3.1.3.2
builder'swork 2.1.5.4(b); Part 2 Section3:
Architect'sList 4.1.2.10(d)
ascertained damages 4.1.4.4(e) Appendix A5N,A50
ascertainment 4.2 BuildingCost Information Service see BCIS
application 4.2.4.10 building life 2.2.1.8; 2.2.2(Intro); 2.2.2.1; 2.2.5.1;2.2.5.6(c);
costsversus prices 4.2.4.8 Part 2 Section 2: Appendix BI, B4
definition of4.2(Intro); 4.2.2.3 BuildingMaintenance Information see BMI
documentation for 4.2.3.4 buildingoptions, life cycle costing 2.2.2(lntro); 2.2.5.6
globalor individual 4.2.4.9 building projectPart 2 Section 4:
judgementin4.2.2.3;4.2.4.5 Appendix B2.2, B2.4;3.1.1.1—3.1.1.2;4.2
responsibility for 4.2.4.1—4.2.4.2 BuildingResearch Establishment 2.2.1.6
Association ofConsulting Engineers Part 3 Section 1: building standards and requirements 2.4.4.5
Appendix A building surveyor's information 2.1.3.3(c);2.1.4.3(c);
assumptions Part 2 Section 1: Appendix C 2.1.5.3(c); 2.1.7.3(b)
audittrail 4.3.2.4 building sustainability 2.2.1.8
Australian ruling4.1.6.4(k) businessrates2.2.3.7
authority, delegated 1.1.6.4(c); Part 2 Section4:
AppendixA(Intro) C
automatic practical completion 4.1.6.4(f) cables 2.1.5.4(b)
average riskpremiumdiscountrate 2.2.2.3(c) capital allowances 2.2.3(lntro); 2.2.3.2;2.2.3.3; 2.2.3.4;
2.2.5.5(f); Part 2 Section 2: Appendix D4
workedexample2.2.3.7; 2.2.5.6(h)
balancingadjustment 2.2.3.4(e);2.2.3.6 capital costs 2.2.(Intro); 2.2.2.4(a); 2.2.3(Intro);2.2.3.2;
balancingallowance 2.2.3.4(f);Part 2 Section2: 2.2.3.3; 2.2.5.1; 2.2.5.3;2.2.5.5(b)(f); 2.2.5.6;Part 2
AppendixA6,D8 Section 2:Appendix Cl
The Surveyors' ConstructionHandbook Index (12/99) Effective from 1/1/00 Page 1
13
capital expenditure 2.2.3.1; 2.2.3.3; 2.2.5.5(f);Part 2 completed part ofthe works4.1.2.18(d)
Section2:AppendixDl, D3,D6 completion
capital income2.2.5.5(d) date seecompletion date
CDM(construction (design and management)) sectional 4.1.6.5(c)
information 5.2 staged4.1.6.4(1)
regulations2.2.1.4; Part2 Section4: AppendixAl; Part 4 see alsoperfectcompletion; two-stagecompletion
Section 1: Appendix Al0 completion date 2.1.4.6; 4.1.2.17(c); 4.2.3.2;4.2.5.13
certificates see final certificates; interim certificates; completion distinctfrom practicalcompletion 4.1.5.1(d);
practicalcompletion 4.1.6.1(f)
certification ofcompletion 4.1.1.1; 4.1.1.3(d)(e)(f) completion for all practical purposes4.1.5.1(b)
change,avoidance of3.1.1.8(g); 3.1.1.14(a) completion process 4.1.2.20(c)
change controloverview3.1.1.14 completion time3.1.1.9(c)
changes 3.1.2.11(e) completion to time 4.1.5.3
after contract let 3.1.1.14(h) components 3.1.2.9(h)
late 3.1.1.8 computeraided design (CAD) 3.1.1.7(f)
prior to construction 3.1.1.14(g) computersoftware, risk analysis 4.3.3.4(b)
see also clientchanges; cost plan;tender documents conflict, dealingwith 1.1.5.4; 2.4.4.2
checklists Constructingthe Team see LathamReport
analysis 3.1.2.10 construction 3.1.2.8(a)
contractor'sproposalPart2 Section 4: Appendix B2 construction completion report4.1.2.20(c)
cost3.1.4.3 construction costs 2.2.1.3
employer'srequirement Part 2 Section 4: Appendix B2 construction (design and management) see CDM
items forwhich loss and/orexpenseallowed Part4 (construction(design and management))
Section 2: AppendixD construction management 3.1.1.4; 3.1.1.5; 3.1.2.5;3.1.2.9;
procurement selection3.1.4.2—3.1.4.3 3.1.3.6
risk4.3.3.3(b)(iii) Construction Task ForceI .2(Intro)
safety5.1 construction time 3.1.2.11(h)
submissions, steps when considering Part 4 Section 2: constructors, appointment of3.1.1.6
Appendix E consultants 2.4.4.9; 3.1.1.5;3.1.1.6
time3.1.4.3 appointment of1.1.7
CITBLevy 5.4.7 lead 2.4(Intro)
civil engineering 2.1 responsibilities of2.4.4.9
cladding Part4 Section 1: Appendix A6 consultants'information 2.1.3.3(h); 2.1.4.3(e)(h);
clerk ofworks2.4.3.4; 3.1.1.13(b); 4.2.5.4(b); Part4 2.1.5.3(e)(h); 2.1.7.3(b)(f)
Section 2: Appendix B2.1;5.2.1 consultation papers 5.3.1
client 1.1; 2.4(Intro); 2.4.4.3;2.4.4.5; 2.4.4.6; 5.2.1 consulting engineers 2.1.5.4(b)
clientand propertycosts 2.2.1.1 contingencyPart 2 Section 3: AppendixA8;3.1.1.8(d);
clientchanges 3.1.1.14(b) 3.1.1.14(1); 4.3.2.3
clientcontext, life cyclecosting 2.2.1 see also time contingency
clientneeds3.1 contingency allowance 1.1.5.3(e)
clientreserve 3.1.1.8 contingencyfunds3.1.1.8(m)
clientresources 3.1.2.11(c) contractadministration 5.5.1
clientsatisfaction3.1; 3.1.2.7 contractadministrator 2.4(Intro);4.1.4.1(a);4.2(Intro);
client systems 3.1.5.8(g) 4.2.1.9; 4.2.3.1(c);4.2.3.2;4.2.3.3;4.2.3.4;4.2.4.1;
clientuniqueness 3.1; 3.1.2.7 4.2.4.2; 4.2.4.3;4.2.4.10; Part4 Section 2:
client'sbrief1.2(Intro); 2.1.1.2; 2.4.4.8 Appendix B2
client's information 2.1.3.3(b)(f); 2.1 .4.3(a)(f); 2.1.5.3(a)(g); contractdocuments 2.4.2;Part2 Section4: Appendix BI;
2.1.7.3(a)(d) 3.1.1.4; Part 3 Section 1: Appendix A; Part4
client's input2.4.4.7 Section 1: AppendixAl
client's involvement 3.1; 3.1.1 contractimplementation and administration 3.1.1.5
client'sobjectives 1.1.1; 1.2(Intro); 1.2.1; 2.4.4.5; 2.4.4.7; 3.1 contractstages (designand build)
clientsrequirements 1.2.1.2; 1.2.6.2; 1.2.7 durationPart 2 Section 4: Appendix A3
client's responsibilities 1.1.5; 2.4.4.6; 2.4.4.7 post-contract Part 2 Section 4: Appendix A4
client'srole 1.1.4; 1.1.6; 3.1.1.6(a) pre-contractPart 2 Section4: Appendix A2
CodesofPractice Part 3 Section1: Appendix A; 4.1.4.1(e) contract sum 2.1.7.2(a); 4.1.3.2(b)
CodesofProcedure 2.4.4.10; Part 2 Section 4: analysis2.3.3.l(c)(d)(e);2.4.4
Appendix A (Intro); 3.1.1.6(b); 3.1.5.5(f) contractterms and conditions 3.1.2.7;4.2(Intro);4.2.1.11;
collateral contracts3.1.1.5(b) 4.2.1.12; 4.2.3.l(c)(d);4.2.3.3;4.2.4.2;4.2.5.13; 4.2.5.15;
commissioning 3.1.1.15 Part 4 Section 2: AppendixC4
competitive tenders 1.1.7.5 seealsocontracts
Page 2 Index (12/99) Effective from 1/1/00 The Surveyors' ConstructionHandbook
14
contractor 5.2 criteria
application 4.2.4.10 identification of3.1
loss andlor expense 4.2(Intro); 4.2.1.4;4.2.1.11; 4.2.1.12; primary3.1.2.8;3.1.2.9
4.2.1.15; 4.2.2.1; 4.2.3.1;4.2.3.2; 4.2.3.3;4.2.3.4;
4.2.3.6; 4.2.4.5;4.2.4.8; 4.2.6.4;Part 4 Section2: D
Appendix CI damage to works4.1.2.18(d)
performance monitoring 2.4.3.5 damages4.2.1.1; 4.2.1.2;4.2.1.3;4.2.1.5
responsibilities of2.4.4.9 data
selection of3.1.5.5(d) presentation2.2.5.4
submissions 4.2.4.3; Part 4 Section 2: Appendix E risk 4.3.3.3(b)(vi)
contractor'sinitiative 4.1.4.1(c) sources for costing 2.2.2.4;2.2.4
Contractor's List 4.1.2.10(c)(d) types of2.2.4
contractor'sproposals 2.3.3.1(b); 2.4.3.2;2.4.4;Part 2 dayworks 5.4.5;5.4.7;5.4.10
Section 4: Appendix B dayworkspreliminaries 5.4.7;5.4.10
contracts de minimusrule 4.1.5.l(c)(e);4.1.5.2; 4.1.6.4(g)
breach of4.2.1.1;4.2.1.3 decision-making process 1.1.5.5; 1.2.3.1; 4.3.2.4
rangeof3.1.2.7 decorationworks Part 4 Section 1: Appendix A7
standard3.1;3.1.2.7; 4.1(Intro); 4.1.1.1; 4.1.1.3(d) defects4.1(Intro)
seealsodesignand build contract; and individually,bytitle outstanding4.1.1.3(f); 4.1.2.12(c); 4.1.2.15(c); 4.1.4.2(c);
contractual arrangements3.1.5.7 4.1.4.3(a)
control document 2.1.5.2 remedying 4.1.5.4
controls 3.1.5.8 see alsolatentdefects; patentdefects; schedule ofdefects
conversion 2.1 defectscorrection 4.1.2.20(c)
Corporation Tax 2.2.3.4(a)(b)(c)(f) defectscorrection period 4.1.2.12(d); 4.1.5.1(f)
cost categories Part 2 Section 2: Appendix C defectsliability 4.1.2.1;4.1.2.6(c)
cost checking2.1.6;3.1.1.8(h) defectsliability period 4.1.2.20(c); 4.1.3.1(c)(f); 4.1.4.4(e);
cost checklist 3.1.4.3 4.1.5.2
cost comparison (worked example)2.2.5.5(h) definition ofthe project 1.1.1.7
cost consultant 1.1.7.1; 1.1.7.3 delay 3.1.1.9(f); 4.1.5.3;4.1.6.3(f);4.2.1.4; 4.2.1.7(b);
cost control 3.1.5.8(d) 4.2.2.2;4.2.3.1(f); 4.2.3.3(c);4.2.3.5;4.2.4.3;
cost control overview3.1.1.8 4.2.4.5;4.2.5.4(c)(e); 4.2.5.7;4.2.5.11; 4.2.5.13;
cost criterion 3.1.2.8(b) Part 4 Section 2: Appendix B, C4
cost estimates 1.1.5.3(d) see alsodisruption
cost index5.4.12; 5.5.2 demolish and rebuild,costing2.2.5.6
cost information Part 2 Section 1: Appendix A; 5.5.1—5.5.2 demolition costs Part 2 Section 2: Appendix A4
cost issues 3.1.2.11(f) density ofvertical division Part 2 Section 1:Appendix C;
cost limit2.1.1.3(a) 3.1.1.7
cost management, pre-contract 2.1; 2. 1.1 depreciation 2.2.3(Intro); 2.2.3.2;2.2.3.5(a); Part2 Section
cost models 2.1.4.4 2: Appendix D3, D6, D7,D8
life cycle(worked examples) 2.2.5 design 1.1.4.4; 2.3.1.2;3.1.1.13
cost plan 3.1.1.8(h) client-led2.3.3.1(d)
changes to 2.1.4.7; 2.1.5.6 contractor-led 2.3.3.1(d)
format Part2 Section 1:AppendixB functional analysisof 1.2.7; Part 1 Section 2: Appendix A
modification of2.1.6.4 setting of 3.1.1.7
outline proposals stage 2.1.4 Designand Build 2.1; 2.3.3.1; 2.4(Intro);3.1.1.4; 3.1.1.5;
scheme designstage 2.1.5 3.1.2.5; 3.1.2.9; 3.1.3.9
cost planning, pre-contract 2.1; 2.1.1 background 2.4.1
cost reports 2.1.3.7; 3.1.1.8(j) Code ofProcedure for Selective Tendering 2.4.4.10
cost risk3.1.2.9 contractdocumentation 2.4.2; Part 2 Section 4:
cost studies, preliminary 2.1.2 Appendix B1
cost targets 2.1.4.2; 2.1.5.1—2.1.5.2 design build contract
and
costs-in-use 2.1.1.2(d); 2.2.1.8; 3.1.1.8(e) contractor'sproposals 2.4.3.2; 2.4.4; Part 2 Section 4:
costing Appendix B
calculation 2.2.2; Part 2 Section 2: Appendix A3 employer'srequirements 2.4.3.2;2.4.4
see also life cyclecosting services,additional 2.4.3; Part 2 Section 4: Appendix AS
costs surveyorsas employer'sagent 2.4(lntro)
categories of2.2.2.4 variants2.4.5
excess2.1.6.4 see alsocontract stages (designand build)
indirect 4.2.3.1(b) designand construction period 2.1.4.6; 2.4.4.5
costsversus prices4.2.4.8 designand manage3.1.1.4; 3.1.2.5; 3.1.3.8
15
designbrief 1.2.12.3; 3.1.1.7 employer'sresponsibilities 2.4.4.9; Part 2 Section 4:
designbuild fund and operate(DBFO) 2.4.5.6 AppendixB
designfailure3.1.2.9(f) energyefficiency2.2.1.6
design(frozen) 3.1.1.9(h); 3.1.1.14(d) Engineer2.4.3.4;4.l.2.l2(b)(c); 4.1.2.13; 4.1.2.15(b)
designinput,initialPart 2: Section 4: Appendix Al engineering services2.1.5.4(b); 2.2.5.6(e)
designoptions, life cycle costing (worked examples) entitlement4.2.1.4;4.2.1.5;4.2.1.7;4.2.1.10; 4.2.1.12;
2.2.5.1;2.2.5.2 4.2.3; 4.2.4.5; 4.2.4.7;4.2.4.8;4.2.4.10; 4.2.5.11;
designoverview3.1.1.7 4.2.5.13; 4.2.6.4
entrancesPart 4 Section 1: AppendixA4
designperformance checklist 3.1.4.3
environmental impact3.1.1.7(a)
designprocess 2.1.1.2
designprogramme 1.2.3.3 estimatingand estimates3.1.1.8
evaluation 1.2.13; 2.1.4.4;4.2.1.11
designproposals 2.1.6;2.4.3.7 event 4.2.1.15; 4.2.3.2; 4.2.4.10;Part 4 Section2
designrisk 3.1.2.9(k)
Appendix C3, C4
designsolutionsl.2(Intro);1.2.2.1; 1.2.2.3; 1.2.3.1; 1.2.6.2;
existing building 2.2.5.6(c)(d)(f)
1.2.8.1; 1.2.9; 1.2.10.1(b)
expenditure
design stages1.2.3.1;2.1.1.4; 2.1.5 excess2.1.6.4
design team 1.1.2.2; 1.1.7.1—1.1.7.4; 1.2(Intro);1.2.12.2;
see alsocapital expenditure;revenueexpenditure
expense in buildingprojects4.2
3.1.5.5(c)
designer2.4.6.2;5.2 extension oftime4.1.3.2(d); 4.1.6.3(b); 4.1.6.5(c);4.2.3.2
designer'sinformation 2.1.3.3(c)(g); 2.1.4.3(b)(g); external works Part 2 Section3:AppendixA6; Part 2
2.1.5.3(b)(h); 2.1.7.3(b)(e) Section 4: Appendix B2.5.6;Part 4 Section 1:
developand construct 2.4.5.3;3.1.2.5; 3.1.3.9(b) Appendix A7
developers 1.1.1.3
digests 5.4.9;5.5.5 F
direct,definition of4.2.2.2 factorsbeyondcontrol3.1.2.11(b)
discountrate 2.2.2(Intro); 2.2.2.2; 2.2.2.3;2.2.2.4;2.2.5.1; FASTsee functional analysis systemstechnique(FAST)
2.2.5.2; 2.2.5.4; 2.2.5.5(e);2.2.5.6(b) fault free works 4.1.4.1(f);4.1.4.3(b); 4.1.5.1(a)
averageriskpremium2.2.2.3(c) FCECBlue Form ofSub-contract 4.1.2.16
no risk return2.2.2.3(b)(d) feasibilitystudies 2.1.2
selection 2.2.2.3(e) fees 1.2.8.2
test2.2.2.3(a) lump sum 1.1.7.8
discounting2.2.2.2; 2.2.5(lntro); 2.2.5.1;2.2.5.2 percentage 1.1.7.7
disposalcosts2.2.2.4(g) professional 1.1.7.6; 2.4.6.1
disputes4.1.2.5(c); 4.1.2.11; 4.1.4.1(f); 4.1.4.2(b) time charge 1.1.7.9
disruption 4.1.5.4; 4.2.1.4; 4.2.1.7(b); 4.2.3.1(c);4.2.3.5; fencingand security Part 4 Section 2: Appendix AS
4.2.4.5;4.2.5.4; Part 4 Section 2: Appendix B final certificates 4.1(Intro); 4.1.2.20(c)
seealsodelay FinanceActs 2.2.3.2;Part 2 Section 2: AppendixD3, D6
distribution Part 4 Section 2: Appendix A6 finance charges4.2.5.1;4.2.5.14; 4.2.5.15
documents see contract documents; reimbursement financial resources 3.1.5.3
documents; tenderdocuments financing charges4.1.6.2
Domestic Sub-contract DOM/1 4.1.2.3 financing costs 2.2.2.4(b); Part 2 Section2: Appendix C2
Domestic Sub-contract IN/SC 4.1.2.3(e) finishes 4.1.4.1(f);Part 4 Section 1: AppendixA7
internal Part 2 Section 3: Appendix A3; Part 2 Section 4:
drawings 2.1.4.2; 2.1.5.4;3.1.1.7
Appendix B2.5.3
first year allowances2.2.3.2;Part2 Section2: Appendix D6
E
fitting-out 3.1.1.16;3.1.2.6; 4.1.1.3(e); 4.1.6.4(k)(I);4.1.6.5(a)
early completion 4.1(Intro)
fittingsand furnishings Part 2 Section 3: Appendix A4;
earlypossession 4.1.2.19(c) Part 2 Section4: Appendix B2.5.4
electrical services see mechanical and electrical services fluctuationbonds4.1(Intro)
elementunit quantities Part 2 Section 1: AppendixC forecasting5.5.1
elemental cost analysis Part2 Section 1:Appendix A2.1; 2.3.2 frost damage 4.1.3.2(c)
elemental unit rate basis 2.1.5.4(a) function elements 1.2.7.5; 1.2.7.6; Part I Section 2:
elements for buildings2.3(Intro); 2.3.1 AppendixB
elements for designand build 2.4.4.10; Part 2 Section4: functional analysissystemstechnique(FAST) 1.2.7
Appendix A(Intro) FAST diagram1.2.7; 1.2.8; 1.2.10.1(a)
employer 2.4(Intro) functional decomposition 1.2.7.5
employer'sagent2.4(Intro);2.4.3; Part2 Section 4:
Appendix A G
Employer'sRepresentative4.1.2.14(a) GovernmentContractsGC/Works/1/Edition2 4.1.2.18
employer's requirements 2.3.3.1(a); 2.4.3.2;2.4.4; Part 2 GovernmentContracts GC/Works/1/Edition 3 4.1.2.19
Section 4: Appendix B governmentworks4.1.2.18
16
grants, regionaldevelopment 2.2.3.2 insurance risks 41.4.4(d)
GreenBook 4.1.2.20(a)(c) interestrates 2.2.2.2;2.2.2.3; 2.2.5.1;2.2.5.3;5.2.5.6
grossfloor area 2.1.6.3 interested parties 1.1.5.4
groundconditions 3.1.2.9(c) interim certificates 4.2.4.6
interim payments 2.3.3.1(e); 2.3.3.2
H interim valuations 2.3.3.1(e)
Handbook Introduction; 5.3.2 Intermediate Form 4.1.2.3(e);4.1.2.4; 4.1.2.7—4.1.2.8
handover3.1.1.16; 4.1.2.17(a) investment appraisal1.1.1.6
hazards 5.1; 5.2.1 investment tables (Parry's)2.2.5.7
headoffice4.2.5.1;4.2.5.8; 4.2.5.9;4.2.5.11; Part 4 ISO 90003.1.1.13(c)
Section2: Appendix All, C itemssee admissable items; inadmissable items
healthand safety2.2.1.4;4.3.1; 5.2
see alsosafety J
Health and Safety at Work Act 19745.1 JCT Forms ofBuildingContracts
Health and Safety Executive 4.3.1;5.1 Intermediate Form ofBuildingContract1984(IFC84)
healthand safetypolicystatement 5.1 4.1.2.4
hire charges4.2.5.3(c) NAM/SC Sub-Contract Conditions: for Sub—Contractors
holidays-with-pay 5.4.7 named underthe IFC 84 4.1.2.3(e)
HongKong decision 4.1.5.1(e) JCT 80 StandardForm ofBuildingContract4.1.2.1;
houserebuildingcosts 5.4.12
4.1.6.4(f); 4.2.1.9; 4.2.1.13; 4.2.3.1;4.2.3.2;4.2.3.4;
housingsinking fund 2.2.5.4 4.2.4.1; 4.2.4.6;4.2.6.2;Part 4 Section2:
Hudson'sapproach 4.1.5.3
Appendix D, E
humanresources 3.1.5.4 JCT Agreement forMinorBuildingWorks 1980 (MW8O)
4.1.2.6
I Management Contract 1987 4.1.2.8;4.2.1.13
ICE 5th Edition: Completion Certificate 4.1.2.13 Works Contract/2 4.1.2.9; 4.2.1.13
ICE 6th Edition: Substantial Completion 4.1.2.12; NSC/C NominatedSub-contract Conditions 4.1.2.2
4.1.5.1(f); 4.1.6.4(c) StandardForm ofBuilding Contract 1998 (JCT98)2.3.3.2
ICE Designand Construct Clause48(3) 4.1.2.12(d) Standard Form ofBuilding Contract WithContractor's
ICE Designand Construct Forms 4.1.2.14 Design2.4.2
ICE MinorWorks 4.1.2.15; 4.1.4.2(a); 4.1.5.1 Standard Form ofBuilding Contract WithContractor's
implementation 1.1.2.2; 3.1.2.7; 3.1.2.10; 3.1.5 Design(CD 81) 3.1.3.9(j); 4.1.2.5;4.2.1.13
implementation ofcontract3.1.1.5 Standard Form ofBuilding Contract WithContractor's
implementation process3.1; 3.1.1.3; 3.1.5 Design(CD 98) 2.3.3.1(e);2.4(Intro);2.4.2.1;
inadmissible items 4.2.6 2.4.2.2; 2.4.2.4
incentives 2.2.3; Part 2 Section 2 Appendix D5, D6 Standard Form ofPrime Cost Contract 1992 4.1.2.7
indicesPart2 Section 1: Appendix A2.3 JCT practicenote CDIA 2.3.3.1(a); 2.4(Intro);2.4.2.3;
Indices andForecasts5.4.4
2.4.4.1; Part 2 Section 4: Appendix A(Intro)
industrial buildingPart 2 Section 2:Appendix D4 JCT practicenote CDJB 2.4.2.3; Part2 Section 4:
inflation2.1.3.6; 2.1.4.8;2.1.5.7; 2.2.2.2;3.1.1.8(k); 4.2.5.7
Appendix A(Intro)
information JCT Standard Form: wording 4.2.1.14
general, designand build contractPart 2 Section 4: JCT variant forms ofcontract 4.1(Intro); 4.1.6.4(f)
Appendix B2.1 Joint Contracts Tribunal Part3 Section 1: Appendix A
preparationof2.1.4.4; 2.1.5.5 joint venture/negotiated project2.4.5.5
requirements 2.1.3.3; 2.1.4.3; 2.1.5.3; 2.1.7.3;Part 2
Section4: Appendix B2
seealsocost information; data; documents; recordsof K
costs Keating's analysis 4.1.5.2
information services 5.2—5.5 key decisions1.1.5.5(a); 3.1
initialcontroldocument 1.1.3.2 key elements 2.1.4.4
initial/first year allowances Part 2 Section 2: Appendix D6
inspection 2.4.3.4; 3.1.1.13 L
installations Part4 Section 1: Appendix A2.2 labour, disruption of4.2.5.4; Part 4 Section 2: Appendix
InstituteofChemical Engineers Forms (I Chem E) 4.1.2.20 B1.l
instructions late completion 3.1.2.9(m)
late 4.2.1.7(b); 4.2.4.10(c); 4.2.5.4(e) late finish3.1.1.9(e)
post-completion 4.1.6.3 latentdefects4.1(Intro);4.1.4.3(b)
insurance 3.1.2.9(f); 4.1.6.5(b); Part 4 Section 2: LathamReport2.2.1.3; 3.1.1.6;3.1.1.10
Appendix AlO; 4.3.3.5(b) LathamReview3.1.3.6(d)
insurance (BUILD) 3.1.3.9 legal contracts 3.1.2.2
I_i
liability measurement contracts3.1.3.5
at practical completion 4.1.3.1(a);4.1.3.2(c) mechanical and electrical (M & E) services 2.2.1.7;Part 4
determination of4.2(Intro) Section 1: Appendix A9
see also limitedliability minorworks4.1.2.6;4.1.2.15
life cyclecost mitigation4.2.3.1(e)
appraisal2.2.5.6(a)
payments 2.2.2.4 N
techniques 2.2(Intro) NamedSub-contract NAM/SC 4.1.2.3(e)
life cycle costing 1.2.10.l(c)(d); 2.1.1.2(d); 2.1.4.2; 2.2; NationalInsurance 5.4.7
3.1.1.10; 5.5.1 negligence2.4.3.1; 2.4.3.7
buildinglife 2.2.2.1 new building3.1.2.1
client context2.2.1 New EngineeringContract(NEC)4.1.2.17;4.1.6.4(d)
costingcalculation 2.2.2 new-build 2.1
costs and values Part 2 Section 2: Appendix C NJCC 2.4.4.10; Part 2 Section 4: Appendix A(Intro);Part3
data sources 2.2.4 Section 1:AppendixA
obsolescence 2.2.1.8; 2.2.2.1; Part 2 Section 2:Appendix B no risk returndiscountrate 2.2.2.3(b)(d)
residualvalues 2.2.2.1; 2.2.2.4(g); Part2 Section 2: NominatedSub-contract NSCIC4.1.2.2
AppendixA, C6 novation2.4.6
tax allowances
examples Part2 Section2:AppendixE 0
incentives and businessrates2.2.3 obsolescence 2.2.2.1; Part2 Section 2: AppendixB
tax relief, impacton 2.2.3 obsolescent properties2.2.1.8
terms for taxation Part2 Section 2:AppendixD occupancy 1.2.13; 5.5.5
worked examples 2.2.5 occupancy costs2.2.2.4(f);Part 2 Section 2:AppendixCS
life cycleinformation 2.1.5.5(c) occupation 3.1.1.16
life cycleperiod, mechanical and electrical 2.2.1.7 beneficial 4.1.4.2;4.1.4.4(c)
limitedliability3.1.2.9(g) prior to completion 4.1.6.4
liquidateddamages3.1.2.9(m); 4.1.4.3(c);4.1.4.4(e); readinessfor 4.1.3.6(d);4.1.4.2
4.1.5.3; 4.1.6.5(b)(c) offeringup 4.1.1.3(a); 4.1.2.17(a)
local authorityrequirements Part4 Section 1: offices,centralisation of2.2.5.5
Appendix A2.3 operationofthe building3.1.1.16
loss in buildingprojects4.2 operationcosts2.2.2.4(c);Part 2 Section 2:AppendixC3
lump sum contracts2.4.2.1; 4.1.2.20(a) operatives 5.4.10
lump sum price2.3.3.1(c);3.1.2.5; 3.1.2.9 options
appraisal criteria1.2.3.1(a); 2.2.1.2; 2.2.2
M building 2.2.5.2;2.2.5.6
machineiy see plantand machineiy choiceof3.1.2.lO; 3.1.3
maintenance and repairs5.5.3; 5.5.4 design2.2.5.1; 2.2.5.2
maintenance, costed planned2.2.5.4 maintenance 2.2.5.3
maintenance costs2.2.1.4; 2.2.2.4; 2.2.3(Intro); 2.2.3.2; organisational structure3.1.5.6
2.2.5.5(b)(c); Part 2 Section 2: AppendixC4, D2 organisations 5.2
annual 2.2.2.4(d); Part 2 Section 2: Appendix C4 outlineproposals stage 2.1.4
cyclical 2.2.5.5 overheads 2.2.1.6;4.2.5.8;Part 4 Section 2:AppendixC
example2.2.5.1(c) overlap3.1.2.8(b)
future 2.2.1.4 overrun3.1.2.9(c)
intermittent 2.2.2.4(e); Part 2 Section 2:AppendixC4 cost 3.1
tax relief2.2.3 time 3.1
maintenance ofthe building2.2.1.4; 3.1.1.16 over-specification 3.1.2.11(i)
maintenance option, life cyclecosting(worked example) overspending 3.1.1.8(j)(k)
2.2.5.3;2.2.5.6(h) overview see change control overview; costcontrol overview;
makinggood 4.1.1.3(d) designoverview; quality controloverview; time control
Management Contract 3.1.1.4; 3.1.2.5; 3.1.2.9; 4.1.2.8—4.1.2.9 overview
management contracting 3.1.3.7 owneroccupiers 1.1.1.3—1.1.1.4
manuals Part4 Section 1: Appendix Al0
marketconditions 3.1.1.8(1) P
marketsand marketing 5.3.1 pace 3.1.5.8(e)
materials 2.2.1.4;2.2.2.4;4.2.5.6; Part 4 Section2: packaging deal 2.4.5.2
AppendixA4, BI.3 parameters, quantityand quality 2.1.3.5;2.1.4.15;
matter4.2.1.15 2.1.5.1—2.1.5.3;2.1.5.5;2.1.6.3
measurement seequantities Parry's Valuation and InvestmentTables 2.2.5.7
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18
partial possession 4.1.2.4(c); 4.1.2.18(a)(d); 4.1.6.4(j); privatesector3.1.2.7
4.1.6.5(b) proceedings, rightto bring4.1.3.2(a)
partnering1.1.6(c); 1.1.8 processstart-up4.1.2.20(c)
patent defects4.1.5.2; 4.1.5.3 procurement
payments see fees; interim payments; life cyclecost options2.4(Intro); 3.1; 3.1.3
payments process 1.1.2.2; 1.1.4.2; 1.1.4.5
perfectcompletion 4.1.4.3;4.1.4.4(e) publicsector 1.1.8.3; 3.1
Europe 4.1.4.3(b) routes2.1
France4.1.4.3(b) strategy 1.1.7.1;2.4(Intro); 3.1.1.4; 3.1.2; 3.1.2.9; 3.1.2.10
see also fault free works development of3.l; 3.1.1.3;3.1.2
perfection, impossibility of4.1.5.1(d) selection of3.1.4
performance 2.4.4.4; 2.4.4.5; 3.1.2.11(i) professional advice3.1; 3.1.1.6
performance bonds4.1(Intro) professional adviser3.1.1.11(c)
performance criterion3.1 .2.8(b)(c) professionaljudgement4.2.1.9;4.2.4.5
performance failure3.1 professional services 5.3.1
performance requirements Part 2 Section4: Appendix B2.4 profit, loss of4.2.5.12; 4.2.5.13
performance risk 3.1.2.9 profit margins 3.1.1.8(1)
performance tests4.1.2.20(c) profittarget4.2.3.1(f)
periodicpayments 2.3.3.1(e) programme 3.1.1.9(a);3.1.5.8(e)
PFI see Private FinanceInitiative(PFI) progresssee stages ofa project;updating
physicalresources 3.1.5.5 projectbriefl.1.3; 1.1.5.3(a);3.l.1.1l;3.1.1.l3
pipework2.1.5.4(b) projectcharacteristics 3.1; 3.1.2.11(d)
plannedmaintenance, costed 2.2.5.4 project cycle3.1.2.10; 4.3.3.2
plannedmaintenance programme 2.2.5.4 projectevaluation 1.2.13
PlanningSupervisors 5.2.1 projectfunder(s) 1.1.5.3(b)
plant and machinery2.2.3.7;Part 4 Section 2: AppendixA3, project management 1.1.4.3; 1.1.5.2; 1.1.5.3(g); 4.3.2.3;
A4, A6, B1.2, D5 4.3.3.2
plantprojects4.1.2.20(b) Project Manager 1.1.4.2; 1.1.4.5; 1.1.6; 2.4(Intro); 3.1.2.8;
plantingPart 4 Section 1: Appendix A8 3.1.2.9; 4.1.2.17(c);4.1.2.19(d)
possession 4.1.2.17(c); 4.1.3.1(b); Part 4 Section 1: project monitoring 2.4.3.3
Appendix A3 projectobjectives 1.1.5.1(a); 3.1.1.11; 3.1.2.8;3.l.2.ll
fitness for 4.1.5.1 projecttesting 3.1.1.2
see also earlypossession; partial possession project type 1.1.2.2
practical completion project uniqueness 3.1.1.2
case decisions Part4 Section 1: AppendixB protection and safe practice5.1
definitions of4.1.4.2(a);4.1.5 provisional certificate4.1.4.4(c)
effects of4.1.3 PSAII (June 1994)4.1.2.11
methods 4.1.4 public, protection of5.1
objectives Part 4 Section 1: Appendix A publicsectorseeprocurement, publicsector
problemsof4.1 publicationsPart 2 Section 1:AppendixD; Part 3 Section 1:
standard formsand certification 4.1.2 Appendix B; Part 4 Section 1: Appendix C; 5.1
subsidiary issues,determination of4.1.6
see also earlycompletion; substantial completion Q
Practice notes 2.3.3.1; 2.4.2.3; Part 3 Section 1:AppendixA quality see parameters, quantityand quality
practicepanels 5.3 quality assurance 3.1.1.13(c)
Practicestatements 5.3.1 quality control 2.4.3.4; 3.1.5.8(f)
preliminaries Part 2 Section 3: AppendixA7;4.2.5.2; quality controloverview3.1.1.13
4.2.5.3;Part 4 Section 2: Appendix A; 5.4.5 quality/price mechanism 1.1.7.4
prescriptive requirements 2.4.4.4; Part 2 Section 4: quantities 2.1.4.4
Appendix B2.5 approximate 2.1.5.4(a);2.1.6.3
price premiums 3.1.2.9(c) see also element unit quantities
prices4.2.4.8;5.4.11; 5.5.3 quantity see parameters, quantity and quality
construction 3.1.1.8(1) quantity surveyor2.1.4.6;2.1.6.4
tender3.1.1.8(1) ascertainment by 4.2.4.2; 4.2.4.3; 4.2.4.4
pricing 1.2.8; 2.1.5.4(a) role of2.1; 2.1.1.3; 2.1.1.4;4.2(lntro)
pricingand risk 3.1.2.9(i) quantity surveyor's considerations Part 4 Section 2:
PrimeCost Contract4.1.2.7 Appendix B3, C3.2, C4
principal adviser 3.1.2.9(f) quantitysurveyor's information 2.1.3.3; 2.1.4.3;2.1.5.3;
role of 1.1.2; 1.1.4.5; 1.1.7.1;3.1.l.5;3.l.1.10 2.1.7.3; 4.2.6.5;
PrivateFinanceInitiative(PFI)2.2.1.5 Part 4 Section 2: AppendixB2
19
R ProbabilityI Impact matrix4.3.3.4
rebuild,costing2.2.5.6 workshops 4.3.2.5;4.3.3.3(a)(i)(b)(iv); 4.3.3.4(b)
receivership4.1.6.1(a) see alsouncertainty
records ofcosts 4.2.1.9; 4.2.1.11; 4.2.5.4(b); Part 4 risk profile 4.3.3.4
Section 2: Appendix C2 risk reduction 3.1.2.9(h)
rectification ofworks4.1.3.1(f) risk register 4.3.1.7;4.3.3.3(b)(v)(vi)
Red Book 4.1.2.20(a)(c) risk response4.3(Intro); 4.3.1.5;4.3.3.1;4.3.3.5
redevelopment 2.2.5.6(g) risk taker3.1.2.9(j)
refurbishment 2.1; 2.2.1.6;2.2.3;2.2.5.5;2.2.5.6; Part2 risk transfer3.1.2.9
Section 2: Appendix B5; 3.1.2.8(a) Royal InstituteofBritishArchitectsPart 3 Section 1:
regional development grants 2.2.3.2 Appendix A
regulations 5.2.1 Royal Institution ofChartered Surveyors Part 3 Section 1:
reimbursable contracts4.1.2.20(a) AppendixA
reimbursement 4.2(Intro); 4.2.15;4.2.4.5; 4.2.6.1 running charges4.2.5.3(d)
contractural entitlement 4.2.1.2;4.2.1.5; 4.2.3.1 runningcosts2.2.5.1(b)
documents 4.2.3.4
entitlement to4.2.3 S
extensions oftime 4.2.3.2
safety
ofsubcontractors 4.2.3.6 checklist5.1
submission cost 4.2.6.1(b); 4.2.6.4;4.2.6.5
legal duties5.1
writtenapplication4.2.3.3 see also health and safety
relationships (time, quality, cost) 3.1.1.9(g) Safety File Part4 Section 1: AppendixAl0
removalcosts4.2.5.3(b) saving2.1.6.4;3.1.1.8(j); 3.1.1.14(g)
renewalcosts2.2.5.5(g)
scaffolding Part 4 Section 2: Appendix A7
replacement costs 2.2.1.7; 2.2.2.4;2.2.3.4;2.2.5.1(d); Part 2 schedule ofdefects4.1.2.6(d)
Section 2: Appendix C4
Schedule ofRates 5.5.3
research 4.3.3.3(b)(i)(ii)
schemedesignstage 1.2.3
resequencing 3.1.1.9(g)
residualvalues 2.2.2.1;2.2.2.4(g); Part 2 Section 2: security Part4 Section 2: Appendix AS
selection process3.1.1.3; 3.1.2
AppendixA, C6
resources 3.1.5.3—3.1.5.5 sensitivity analysis 1.1.5.3(f); 2.2.5.5(i);3.1.1.8(c)
sequential seetraditionalstrategy
responsibility service engineer's information 2.1.3.3(e); 2.1.4.3(d);
additional Part 2 Section 4: AppendixB2.6
allocation of3.1.2.5;3.1.2.9 2.1.5.3(d)
services
delegated 1.1.6.3(b) mechanicaland electrical(M & F) 2.2.1.7
see also consultant; contractor; employer's
responsibilities provisioncostsPart 4 Section2: Appendix A8, A9
retail buildingsPart 2 Section 2: AppendixB5 standardelementsPart 2 Section3: AppendixAS; Part 2
retention 4.1.3.1(d); 4.1.4.4(e); 4.1.6.5(b) Section4: Appendix B2.5.5
Rethinking Construction I.2(Intro); 1.2.2.2 setting-up costs 4.2.5.3(a)
re-usable materials Part 2 Section 2: AppendixA4 shelland core contract 3.1.2.6
revenue allowances2.2.3.4;2.2.3.7 sinkingfund 2.2.2(Intro) 2.2.5.4
revenue costs 2.2.5.5(c) valuationand investment table 2.2.5.7
revenue expenditure Part2 Section2: Appendix D2 site cost Part 4 Section 2: AppendixA
RIBA PlanofWork 2.1.1.4 site meetings4.2.3.3(c)
RICS BuildingCost Information Service (BCIS) 2.1.3.4(b) site visits 5.1
risk 2.4.3.7; 3.1.1.8(m); 3.1.2.9; 4.3.1.1;4.3.2.9 snagging4.1.1.3(f)
residual3.1.2.9(1) snagginglist4.1.1.3(b)(c); 4.1.5.4
risk allocation 2.4.3.9;3.1.2.5; 3.1.2.9 specialistservices2.1.5.4(b)
risk analysis 3.1.1.8(c); 4.3(Intro);4.3.1.4;4.3.3.1; specification 2.3.3.1(b); 2.4.4.5; Part 2 Section 4:Appendix
4.3.3.3(a)(ii); 4.3.3.4 B2.3, B2.5; 3.1.1.13; 3.1.2.9(h); 3.1.3.9(f)(g)
risk assessment 5.2.1 squareindex Part 2 Section 1: AppendixC
risk averse 3.1.2.9(j) staffcost Part 4 Section 2: Appendix Al, All,C3
risk distribution 3.1; 3.1.2.9(m) stage payments 2.3.3.1(e)
risk identification 4.3(Intro); 4.3.1.3; 4.3.3.1;4.3.3.3 stages ofa project3.1.1.8(g)
risk management 3.1.2.9(j); 4.3(Intro); 4.3.1.2; 4.3.4 standardcontractssee contracts
assessment 4.3.2.6—9 standardelementssee BCISstandardelements
benefits 4.3.2.1;4.3.2.8 standardrules and practices 3.1.1.2
in construction process 4.3.2 standards and requirements 2.4.4.5
definitions 4.3.1 standardsand tests 4.1.4.1(d)
plan 4.3.1.6;4.3.3.2 statutorycontrols3.1.2.9(c)
Page 8 Index (12/99) Effective from 1/1/00 The Surveyors' Construction Handbook
20
statutoxyrequirements Part4 Section 1: Appendix A2 designand build 2.4.4.10
storage4.1.6.5(a) timeof3.1.I.8(l)
straightline allowances2.2.3.2 two-stage 2.4.5.4
Structural Engineer'sinformation 2.1.3.3.(e);2.1.4.3(d); tenderdocuments3.1.1.6(b)
2.1.5.3(d) changes from initial2.1.7.1
structurePart 4 Section 1: Appendix A5 tenderprice index5.4.5
subcontract completion 4.1.2.16 tenderproposals, evaluation of2.3.3.1(d)
Subcontract DOMI24.1.2.3(e) tenderstage 2.1.7
subcontract work4.1.2.2—4.1.2.3;5.4.5 termination 4.1.2.17(b)
subcontractors 3.1.2.9(g); 4.1.3.3 test discountrate 2.2.2.3(a)
domestic 4.1.2.3 tests
named 4.1.2.3(e) atcompletion 4.l.4.1(f)(g)
nominated4.1.2.2; 4.2.3.6; Part4 Section 2: Appendix B3.1 ofplant 4.1.4.1(f)
submission cost 4.2.6.1(b); 4.2.6.4;4.2.6.5 seealsostandards and tests
submissions 4.2(Intro); 4.2.4.3; 4.2.6.1;4.2.6.4; Part4 thirdparty events 3.1.1.8; 4.3.3.5(b)
Section2: Appendix D time 'atlarge' 4.1.6.3(b)
checklist Part4 Section 2: Appendix E timebudget 3.1.1.9(d)
substantial completion 4.1(lntro);4.1.1.3(f); 4.1.2.12; timechecklist3.1.4.3
4.1.2.13; 4.1.2.16; 4.1.5.1(f) timeconstraints3.1.1.9(i)
substantial performance 4.1.5.1(e);4.1.6.4(g) timecontingency3.1.1.9(i)
substructure Part 2 Section 3: Appendix Al; Part2 Section
timecontroloverview3.1.1.9
4: Appendix B2.5.1 timecost models3.1.2.11(h)
superstructure Part 2 Section 3: Appendix A2; Part2 timecriterion3.1.2.8(b)
Section 4: Appendix B2.5.2
timeframework 3.1.1.9(a)
Supervising Officer 4.1.2.18 timeplan 3.1.5.8(e)
supervision 5.1 timerisk 3.1.2.9
surveying and safe practice5.1 timescale 3.1.2.2
Surveying Safely 5.1
timing 3.1.2.11(g)
Surveyor 1.1.1.1
traditionalstrategy3.1.1.4; 3.1.2.5; 3.1.2.9; 3.1.3.4
professional judgement4.2.1.9;4.2.4.5
transfer ofbuilding 4.1.1.3(e)
sustainability see building sustainability
TreasuryBonds 2.2.2.3(b)(c)(d)
systems and controls 3.1.5.8
turnkey2.4.5.2
T two-stagecompletion 4.1.4.4
take-over3.1.1.16 two-stage tender2.4.5.4
takingover 4.1(Intro); 4.1.2.10; 4.1.2.17(b); 4.1.2.20(b) U
taking overcertificate 4.1.2.20(c)
tax allowances 2.2.3 ultimate cost3.1.2.2
applications 2.2.3.6 uncertainty 4.3.2.3
see also risk
categories defined Part 2 Section 2: Appendix D3
expenditure, examples ofPart 2 Section 2: Appendix E underpricing 4.2.3.1(a)
glossary ofterms Part 2 Section2: Appendix D uniqueness3.1; 3.1.1.2
unit quantities see elementunit quantities
types2.2.3.2
variables2.2.3.5 unit ratesPart2 Section 1: Appendix A2.1; A2.2
worked examples 2.2.3.7; 2.2.5.5(f); 2.2.5.6(h) updating3.1.1.7(e)
tax reliefsee tax allowances user functions1.2.7.5; 1.2.7.6; Part I Section 2: Appendix A
taxation user requirements 3.1.1.8
glossary ofterms Part 2 Section 2: Appendix D
issues and adjustments Part 2 Section 2:AppendixAS, V
A6, A7 valuationand investment tables(Parry's)2.2.5.7
seealsoCorporation Tax; VAT (Value Added Tax) value addedtax see VAT (Value Added Tax)
team 3.1.1.2 value categories Part 2 Section2: Appendix C
team development 4.3.2.5 value engineering 1.2(lntro); 2.1.1.5;2.2.1.2;3.1.1.12
temporaryaccommodation Part 4 Section 2:Appendix A2 applicability 1.2.2
temporary disconformity 4.1(Intro) implementation ofthe exercise1.2.4; 1.2.5; 1.2.12
temporary services Part 4 Section 2: Appendix A8, A9 process Part I Section2: Appendix B
temporary works/access Part 4 Section 2: AppendixA4 timing 1.2.3
tender use and function 1.2.1
acceptance of2.1 workshop 1.2(lntro); 1.2.3.1; 1.2.4.4; 1.2.5; 1.2.6;
cost2.3.2.2 1.2.9—11
21
value engineering panel 1.2.4;L2.6.2;-1.2.11.3; 1.2.12.1 waste4.2.5.6
value management 1.2(Intro); 1.2.1.2; 1.2.3.1; 3.1.1.11 water testing Part4 Section 1: Appendix A6
value management facilitator1.2(Intro); 1.2.4.1; 1.2.4.3; With Contractor'sDesignForm 4.1.2.3(e); 4.1.2.5
1.2.4.4; 1.2.6.2; 1.2.10.1(b)(c)(d) workedexamples
value for money 1.1.7.4; 1.2(Intro); 1.2.1.3; 3.1.1.6(c); life cyclecosting2.2.5
3.1.1.14(g) tax allowances 2.2.3.7
values, monetary see discountrate; discounting works
variation works2.4.5;4.1.3.1(f); 4.2.4.10(c); 4.2.5.4(e) outstanding4.1.1.3(f); 4.1.2.10(b); 4.1.2.12(c); 4.1.2.13;
VAT (\Talue Added Tax)1.2.8.2; 2.1.3.2(a); 2.2.3.3; 2.2.5.5(f); 4.1.2.15(c); 4.1.4.2(c);4.1.4.3(a);4.1.5.1(f)
2.4.6.1 packages2.4.5.2;3.1.2.5
vesting 4.1.2.18(d) workshops
risk management 4.3.2.5; 4.3.3.3(a)(i)(b)(iv); 4.3.3.4(b)
w value engineering l.2(Intro);1.2.3.1; 1.2.4.4; 1.2.5; 1.2.6;
wage rates 5.4.7 1.2.9—11
wallto floor ratio Part 2 Section 1: Appendix C 'writingdown'allowance Part2 Section 2: Appendix D7
warranty 3.1.2.9(g) writtenapplication for reimbursement 4.2.3.3; 4.2.6.1; 4.2.6.4
warranty contracts3.1.1.5(b) writtendown value Part2 Section 2: Appendix A6
22
INTRODUCTION
INTRODUCTION
A Aim and Scope of this Handbook
Al The aim of this Handbook is to help both building and quantity surveyors
to provide construction-related professional services effectively and effi-
ciently. It seeks to achieve this by providing guidance which reflects what
is often good custom and practice, and relevantinformation(including ref-
erences to other useful material). It should be appreciated that this
Handbook does not attempt comprehensive coverage of necessary or good
practice. The Handbook is addressed to surveyors providing services to
clients (as defined),not surveyorsundertakingthe role of the client's repre-
sentative who gives instructions to surveyors on behalf of the Client.
A2 'Construction' in this Handbook means new construction, conversion,

refurbishment works and alterations to the form of buildings, and also civil
engineering works. The contents of this Handbook apply across the com-
plete rangeof thisdefinitionunless otherwisestated. So 'construction' does
not embrace building surveysor buildingmaintenance.
A3 'Client' in this Handbookis used to include companiesand their Directors

or Officers, Trusts and their Trustees, partners, managers and employees
whomay instruct a surveyor.
A4 Throughout the Handbook, it is assumed that possession and necessary

access to the site are available and, in principle, the rights to construct the
development and use the buildings when constructed. The Handbook does
notcoverproject management services,obtainingplanning permission and
building regulation approvals, or dispute resolution.
A5 The document is drafted on the basis of UK law and practice, although

muchofit is relevantto practiceelsewhere.
B Arrangement of Content
B1 After sets of Definitions and Abbreviations which apply throughout, the

Handbook is arrangedin five Parts. The first four Parts represent sequential
phases of the construction process. The last Part, Part 5, provides
Additional Guidance and Information. Each part is followed by Further
Reading,to which the numberedcross referencesin the Parts apply.
B2 The first four Parts are as follows:
Part 1: TheClient seeks to help surveyorsto work with clients. It discusses

the establishment of their constructionobjectives and constraints, leading
TheSurveyors'ConstructionHandbook Introduction (4/98) Effective from1/6/98 Page 1
I '.
INTRODUCTION
to the developmentof construction briefs. It defines the client's roles

during the construction process, and comments on the engagement of
professionalsinvolved in the construction process.
Part Construction Design and Economics covers development of

2:
the design concept, feasibility studies, design and economics (including
life-cycle costing, risk assessment,-and cost-value relationships),and con-
firmationofthe final design proposal.
Part3 relates to ConstructionPlanning andProcurement, i.e. to the time the

constructioncontractis placed.
Part 4 covers ConstructionAdministration and Management,i.e. all post-

contractmatters.
AnyAppendicesare situated at the end of eachPart.
B3 An Index follows Part5.
C Status of Content
Cl For convenience,Guidance and Information is integrated. Each paragraph

is prefixedwith a or an to indicate its status.
C2 'Guidance', as the word implies, provides advice to Members of the RICS

on aspectsoftheirprofession.Where recommendedfor specificprofession-
al tasks, procedures are intended to embody 'best practice', i.e. procedures
which in the opinionofthe RICS meet a high standardof professionalcom-
petence.
Members are not required to follow the advice and recommendations con-
tained in such paragraphs. They should, however, note the following
points.
Shouldan allegation of professionalnegligencebe made against a surveyor,

the Court is likely to take account of the contentsof any relevantguidance
notes published by the RICS in deciding whether or not the surveyorhad
acted with reasonable competence.
In the opinion of the RICS, a Member conformingto the practicesrecom-

mended in this Note should have at least a partial defence to an allegation
of negligence by virtue of having followed those practices. However,
Members have the responsibility of deciding when it is appropriateto
follow the guidance. If the guidance has been followed in an appropriate
case, the Member will not necessarily be exonerated merely because the
recommendations were foundin 1UCS Guidance.
Page 2 -- Introduction(4/98) Effectivefrom 1/6/98 TheSurveyors'ConstructionHandbook

INTRODUCTION
On the other hand, it does not fOllowthat a Member will be adjudgednegli-

gent if he has not followed the practicesrecommended in this Handbook. It
is the responsibility of eachindividualsurveyorto decide on the appropriate
procedure to follow in any professional task. However, where Members
depart from any practices recommendedin this Handbook,they should do
so only for good reason. In the event of litigation, the Court may require
them to explain why they decided not to adopt a recommendedpractice.
In addition, Guidance Notes are relevantto professionalcompetence in that

each surveyor should be up to date and should have informed himself of
GuidanceNotes within a reasonable time oftheirpromulgation.
C3 Material classified as 'information' is intended to provide informationand

explanationsto Members of the RICS on specific topics of relevanceto the
profession. The function is not to recommend or advise on professional
procedures to be followed by surveyors. It is again, however, relevant to
professionalcompetence to the extent that a surveyorshould be up to date
and shouldhave informed himself of suchinformationwithin a reasonable
time of its promulgation.
Members should note that if an allegation of professionalnegligence is

made against a surveyor, the Court is likely to take account of the contents
of anyrelevant information publishedby the RICS in deciding whetheror
notthe surveyorhas acted with reasonablecompetence.
D Currency of References
The cases cited andthe editions quoted were up-to-date at the time ofwrit-
ing. However,readers should check currentrulings andadditions.
E Invitation
The Institution would welcome comments upon and suggestions for

additions and amendments to this Handbook. They should be provided in
writing to the Professional Services Department, The Royal Institution of
Chartered Surveyors, 12 Great George Street, Parliament Square, London
SW1P3AD.
F Subscription Service
All customers who bought a copy of The Surveyors' Construction

Handbookbetween May 1998 and April 1999 are entitled to membershipof
the Surveyors' Construction Handbook SubscriptionService at no further
cost.
The Surveyors' Construction Handbook Introduction (4/98) Effective from1/6/98 Page 3
25
INTRODUCTION
In order to continue receiving Amendments during 1999/2000 they will

need to renew their membership. Renewal notices, includingfull details of
charges payable, will be sent out to all members of the Surveyors'
ConstructionHandbookSubscriptionService in May 1999.
Any change of address should be notified to the address appearingbelow:
The Surveyors'ConstructionHandbookSubscriptionService
RICS Books
SurveyorCourt
Westwood Way
CoventryCV4 8JE
Tel: 0171 222 7000

or, for local dialling, 01203 694757
Page 4 Introduction(4/98) Effectivefrom1/6/98 TheSurveyors'Construction Handbook

PART 1, SECTION 1
PART ONE: THE CLIENT
SECTION 1: THE CLIENT'S REQUIREMENTS AND

ROLES
L1.1 Establishing the Client's Objectives
1.1.1.1 Client satisfaction will be maximised if the surveyor's advice and actions
reflectthe client's objectives in respect of the project.These objectivesmay
have been defined explicitly as requirements.If not, the surveyorshould be
able to assist with this and, in any event, raise the question with the client
or his appointed representative, although the scope for the surveyor to
reflectthese requirements in his services will dependin part upon the stage
at which the surveyor has been appointed.
1.1.1.2 The type of client will affect the criteria which must be met if the client is
to be satisfiedwith the project.
1.1.1.3 Owner occupiers are usually primarily concerned with building perfor-
mance in terms of functionality and costs in use. They may also be con-
cerned with image and building style. In this sense, value for money is a
keycriterion.Developers, on the other hand, may be drivenby market con-
ditions which enable the project to be let or sold at maximumcommercial
advantage. They may be predominantly concernedwith speed rather than
performance.
1.1.1.4 This is not to say that owner occupiers are unconcerned about time. Indeed,
certainty of completion date may be a key issue. Nor is it fair to suggest
that developers are unconcernedaboutbuilding performanceor cost. There
are market conditions where both ofthese issues maybecome important.
1.1.1.5 However, the client's purpose in initiating a building project is usually

driven by the need for the project as a functionalunit or as an investment.
There will usuallybe particular criteria for achievement which are critical
or important to each particularclient. Possible objectives are as follows:
(a) Cost-related
• minimise capital cost
• maximise capital cost/value ratio
• maximise
capital cost/worthto client ratio
• achievenecessary income cash flow profile
• minimise
management costs
• minimisemaintenance andinsurancecosts
• minimisetax liability
• respectcapitalcostconstraint
• be energy efficient
The Surveyors' Construction Handbook Part 1, Section 1(4/98) Effectivefrom1/6/98 Page 1
27
PART 1, SEcTION 1
(b) Marketability
• maximiseprompt or future disposal (freehold or otherwise)
(c) Use-related
• optimiseoperationalrequirementsof intended occupier(s)
• providegreatest flexibilityin potentialuses
• reflectintended occupier's requirements/preferences/abilityto afford
• meet social/management/occupier'sspecial needs (e.g. disabled)
(d) Environmental
• minimisehealth andsafety risks
• choose materialswhich reflect sustainability
• aestheticallyplease (e.g. impression on occupier's customers)
• minimiseany alterationsto specific features
• reflectplanningauthority's brief/policies
• minimisepotential opposition
• reflectcorporate style or personal preferences of proposed occupier/
employees
• maximisecomfort of occupants
• minimiseinconvenienceto others during construction
(e) Timing
• constructwithin a defined period
• minimiserisks of delay during construction
1.1.1.6 The importanceof each ofthese criteria will be relative to the objectives of
the client andto the extent to which he is able to cope with risk. It is impor-
tant that the clientseek investmentappraisal advice in respect ofthe project
and that the appraisal considers 'what if' questions to ensure that the
impact of changes of key components in the appraisal is clearly under-
stood.A charteredsurveyorwill be ableto assistthe client in these matters.
However,the giving of advice on some of the requirementslisted above is,
of course, outsidethe competenceof the surveyor.Where such a particular
requirementis importantto the client and outside the client's expertise, the
client shouldbe advisedto seek other professional advice.
1.1.1.7 The C1 believes thatmany construction projects suffer from poor defini-
tion due to inadequatetime andthought being given at an early stage. This
is often because there is a sense of urgencyfuelled by the desire for an
immediatesolution.Investingtime at the beginning of a projectin develop-
ing a completedefinitiontaking account of all the requirements will reduce
the likelihoodof changeslater. The later that changesare madein a project,
the more they are likely to costin both direct andknock-on effects.
1 cm
(1997),Briefing the Team,ThomasTelfordPublishing,London
Page 2 Part 1, Section 1(4/98) Effectivefrom1/6/98 The Surveyors'Construction Handbook

PART 1, SEcTIoN 1
1.1.2 The Role of the Principal Adviser
1.1.2.1 With the potential for the involvement of many consultants and/or con-
structors in a project and the range of contracts associated with their
employment, all but the most experienced client may need advice. The
advice offered should be informed and unbiased and it should be based
upon a logical analysisof the needs of the client, the type andcharacterof
the project and the range of appropriate strategies available.
1.1.2.2 This advice can be offered by a member of the client's design team or can
be a separatefunction. It may be more difficult for a design team member
to remainimpartialin carrying out this process and it is recommended1 that
any expert retainedshould be solely for this purpose.This functioncan be
identifiedas the role of the principal adviserandmay encompass:
(a)identifyingthe needs and (briefing)

requirementsofthe client
(b)identifyingthe characteristics
ofthe project (projecttype)
(c)matchingneeds andproject
characteristics with
appropriateprocurement
strategy (procurementprocess)
(d) facilitatingthe associated

selectionandcontractual
processesandpolicies (implementation)
1.1.2.3 Possible sources for the appointment of a principal adviser include a suit-
ably qualified and experienced construction professional such as a char-
tered surveyor.
1.1.3 Project Brief
1.1.3.1 The importanceof a clear project brief to the successfulcompletionof the

project and in ensuring appropriate performance of the project cannot be
over emphasised. The inexperienced client willneedprofessionalhelpfrom
the principal adviser or design team in its preparation of the brief. The
project brief is a comprehensive statement of the client's requirementsfor
the project based on close consultation betweenthe client andusers, cover-
ing:
Latham, M., Sir (1994), Constructing the Team: Joint Review of Procurement and Contractual
Arrangementsin the UnitedKingdom ConstructionIndustiy Final Report,}iMSO, London.
TheSurveyors' Construction Handbook Part 1, Section 1(4/98) Effectivefrom1/6/98 Page 3
29
PART 1, SECTION 1
(a) projectdescription;
(b) how it fits into the client's corporate plan (e.g. it may be part of a larger
planned development);
(c) number of people that are to occupy the building, together with their
space requirements;
(d) scheduleof accommodation;
(e) standards;
(f) equipmentandspecial services/requirements;
(g) whenthe building needs to be available foruse;
(h) quality andcostlimitations;
(i) life span;
(j) site; and
(k) statutory controls.
4) 1.1.3.2 This is the initial control document for the early planning of the project;
without it, little constructive work can be done. If all the information
required for the project brief is not readily available, it is better to issue it
in an incompleteform andto updateit progressively1.
1.1.4 The Client's Role
1.1.4.1 This Section explainsthe client's responsibilitiesthrough the life of a con-

struction project. In carrying out their role, clients, depending on their
knowledge and expertise, will need help from their principal adviser,pro-
ject managersand other consultants, whoseroles are also explainedin this
Handbook. This Section aims to outline the client's task in setting policy
andfermulatingstrategy, and explainshow it should be carried out.
.4) 1.1.4.2 The success of any project will depend upon the motivation given by the
client. Experiencedclients maytake a leading role in the procurementpro-
cess; less experiencedclients will need to seek advice or to appoint a prin-
cipal adviserto assist them. Where projects are of a large or complexnature
it may be advisable to considerthe appointment of aproject manager.
'Kelly, J., MacPherson, S. andMale, S. (1992), The BriefingProcess:AReview and Critique, RICS,
Department ofBuildingEngineering and Surveying, Heriot WattUniversity. Thisdocument is outof
print.
Page 4 Part 1, Section 1(4/98) Effective from1/6/98 The Surveyors'Construction Handbook

PART 1, SECTION 1
FIGURE TO INDICATE THE ACTIVITIES IN TH E PROCUREMENT PROCESS

Pre-Design Phase Pre-Construction Phase Construction Post-Construction
Client's Role (1.1.4) (Decisionto Build) ProcurementStrategy Design Overview Commissioning

(3.1.2) (03.1.1.7) (03.1.1.15)
Appoint PrincipalAdviser Design Overview* Cost ContmlOverview Occupationand Takeover

(1.1.2) (03.1.1.7) (03.1.1.8) (03.1.1.16)
Define Client's Responsibilities CostControlOverview* Time Control Overview
(1.1.5) (03.1.1.8) (03.1.1.9)
InvestmentAppraisal Life-CycleCosts Quality ControlOverview

(01.1.1.6) (03.1.1.10) (03.1.1.13)
Project Brief Value Engineering ChangeControl Overview

(1.1.3) (03.1.1.12) (03.1.1.14)
Appointment of PM (if Time Control Overview*

appropriate) (1.1.6) (03.1.1.9)
Appointment of Designand Quality ControlOverview*

Cost Consultants(1.1.7) (03.1.1.13)
ProcurementStrategy*(3.1.2) Appointmentof Constructors

(G3.1.1.6)
Value Management(03.1.1.11)
Procurement ProcurementStrategy
Strategy (3.1.2) Development(3.1.2)
Implementation Resources (Client) (3.1.5) Contractual Arrangements

(3.1.5) (03.1.5.7)
OrganisationalStructure Systemsand Contmls

(03.1.5.6) (03.1.5.8)
ContractualArrangements*
(03.1.5.7)
Systemsand Controls*
(03.1.5.8)
ImplementationPolicy
(03.1.5.2)
* Indicatesthe activitywill continue in thenext phase
Indicates thesectionofthis document referringto activity
1.1.4.3 Effective management is vital in any construction project. The client's

prime role is to establisha structurefor the managementof the project and
to make sure that it works. A crucial part of any effective management
structure is efficient communication. To perform effectively, all parties
must have timely access to all information relevant to their tasks and the
project's objectives and status.
1.1.4.4 The client has substantial influenceon the design of the project in respect
both of functionalefficiency and of overall appearance, and, therefore, has
to take particularcare to:
(a) understand fully the purpose of the building; ensure that the require-
ments of the users are accommodated; and communicate those require-
ments to the designers; and
(b) appoint designers with proven ability in designing buildings which

PART 1, 1
SCTtoN
satisfy users' requirements and harmonise with and contribute to the quality
of the built environment.The selectionof the right people is emphasised as
a key to success.
1.1.4.5 The accompanying figure indicates the activities in the procurement pro-
cess andwhen activities are usuallyperformed.As can be seen, the client's
role is significant, with a wide range of activities to perform and implement
before both the design and the constructionprocesses. In the performance
of these activities, the client can expect to be supported and advisedby the
principaladviseror (if appointed)the project manager.
1.1.5 The Client's Responsibilities
1.1.5.1 The client shouldset policy and outline strategy including:
(a) setting the project objectives;
(b) planningto meet the objectives;
(c) implementingthe plans;
(d) controllingtheirimplementation;
(e) arbitratingbetweenconflicting demands; and
(f) evaluatingthe completeproject againstthe objectives.
1.1.5.2 The client also has a dual managementfunction:
(a) to manage the client input; to co-ordinatefunctional and administrative

needs; to resolve conflicts; to act as the formal point of contact for the
project; and
(b) to supply the technical expertise, to assess, procure, monitor and

control the externalresources needed to implement the project.
1.1.5.3 In particular, the client should be satisfiedthat:
(a) the project brief is comprehensive and clear and has the full support of
the users1;
(b) any constraints demandedby the project funder(s) are known and their
impact understood;
1
Kelly, J., MacPherson, S., and Male, S. (1992), The Briefing Process: A Review and Critique, RIICS,
Department of BuildingEngineering and Surveying, Heriot Watt University. This documentis out of
print. CIB (1997), Briefing the Team,Thomas Telford Publishing, London.
Page 6 Part 1, Section 1(4/98) Effectivefrom 1/6/98 The Surveyors' ConstructionHandbook
3L
PART 1, SECT!ON 1
(c) the critical assumptions made in preparingthe initial estimates andpro-

grammesare valid,realistic andachievable;
(d) cost estimates are comprehensiveand include all capital and resource
costs;
(e) allowances made in the feasibility and viability assessments to cover

possible risks are sufficient (contingency allowance);
(1)substantialsensitivity analysis and 'what if' studies have been carried

outtoassess the effect of possible changed criteria on the viability of the
project; and
(g) plans are in place for adequate project management including systems
for cost, time, qualityandchange control.
1.1.5.4 The client should also co-ordinate and resolve conflicts between all inter-
ested sections ofthe client organisation including:
(a) usergroups— whowill work in the building;
(b) specialistgroups — responsiblefor technical systems within the build-

ing, e.g. communications, computers;
(c) facilities management — who will manage the completed building

including maintenance and security;
(d) finance and accounts— who will plan and control expenditureand pay
bills as they arise; and
(e) legal advisers— whowill adviseon and monitor the client's formalrela-
tionships with outside parties.
1.1.5.5 The client is responsiblefor ensuring that all necessary decisions are made
on time. Timely decisions are necessary to avoid delays and increased
costs: the decision-making process requiresas much planningand manage-
ment as any otheractivity. This will include:
(a) scheduling the key decisionsto be made;
(b) identifyingthe decisionmakers and their required procedures;
(c) ascertaining the time required for making decisions;
(d) establishinga formal programmefor decisions;
(e) warning decisionmakersregarding forthcoming submissions — making

sure items are on the agenda;
The Surveyors' ConstructionHandbook Part 1, Section 1(4/98) Effective from1/6/98 Page 7
33
PART 1, 1
1CTION
(f) preparing on time fully detailed submissions and/or presentations in

full compliance with proceduralrequirements;
(g) following up submissions throughoutthe decisionmaking process; and
(h) promptly communicating decisions made to the parties affected by

them.
L1.6 Appointmentof Project Manager (where appropriate)
1.1.6.1 Due to the complexity of modem buildings and the potentially large
number of parties involvedin the process the client may wish to appoint a
single person to draw the process together and manage it to ensure that the
overall performance, time, costandquality requirementsare achieved. The
project manager may be a member of the client organisation who is given
sole, or predominant, responsibility for the project. Project management
practices also exist to enable appointment to be made on a consultancy
basis. In this case, selection should be based upon resources, reputation,
andprice; andservicesshouldbe clearlyidentified.
1.1.6.2 It should be emphasisedthat the role of the project manager should be to

act as part ofthe client organisation.
1.1.6.3 The client's role upon the appointment of a project manager should
include:
(a) defining the criteriafor control and management of the project;
(b) managing the project manager's performance of delegated

responsibilities;
(c) monitoring the implementationby the project manager of control and

management systems;
(d) ensuring that the project manager receives decisionson time;
(e) assisting the project manager in the resolutionofproblems;
receiving andreviewingdetailedreports on the project from the project

(1)
manager;
(g) establishing with the project manager a common approach to major

issues whicharise; and
(h) maintaining with the project manager at all times an overview of the
project status in relationto the establishedobjectives.
Page 8 Part 1, Section 1 (4/98) Effectivefrom1/6/98 TheSurveyors' Construction Handbook
34
PART 1, SECTION 1
1.1.6.4 The client's relationshipwith a project manager will be crucial to the suc-
cess of the projectandwill requirecareful developmentandnurturingwith-
in the following guidelines:
(a) the client, though taking the project manager's advice, shouldlead, not
follow;
(b) no matter how much responsibility is delegated to the project manager,

the client will retain ultimate authority and, therefore, must have adequate
knowledge and information about the project to be able to exercise that
authority properly;
(c) the client should agree with the project manager the precise extent of
anydelegated authority together with those decisions reserved to the client;
(d) where a project manager has been appointed, the client will not form-
ally communicate directly with consultants and contractors employed on
the project: suchcommunications willalways be routed throughthe project
manager, although the contracts willbe direct with the client; and
(e) no matter what may be said in private, the client should publicly sup-
port the project managerandavoidany actions which couldunderminethat
manager's authority over the consultants andcontractors.
1.13 Appointment of Consultants
1.1.7.1 The process of selecting and appointing the design team and the cost con-
sultant is carried out by the client, but he may seek the advice of his prin-
cipal adviser. Theterms and conditions oftheseappointmentsare governed
by the procurementstrategy adopted forthe project.
1.1.7.2 The followingalternativesexistin selectingthe design team:
(a) single appointment — either of a multi-discipline firm which can itself

provide the full range of architectural and engineering design services
required, or of a lead consultant, normally the architect on building
projects, who will subcontract design of other disciplines to independent
professional firms and be responsiblefor their work and its co-ordination;
or
(b) separate appointments — for each of the design disciplines required,

one firm being appointed design team leader with responsibility for
co-ordinatingthe work carried outby the others.
The formerhas the benefit of administrative simplicityand of single source

responsibility for design. The latter offers the chance of selectingthe best
firm in each discipline but makes communicationmore difficult. The final
selection will dependon the particularfeatures of the project.
The Surveyors'Construction Handbook Part 1, Section 1(4/98) Effectivefrom1/6/98 35

PART 1, SECTION 1
1.1.7.3 The selection of the design team and cost consultant (and otherconsultants
as appropriate) will require the client making a balanced judgement on the
followingfactors,listed in order ofpriority:
(a) capability — the experienceof the firm in projects of similar size and
function and the availability within the firm of sufficient, uncommitted
resources for it to meet the demandsof the project; the demands ofthe pro-
jectprogrammemay be particularlyimportant;
(b) competence— the performanceof the firm on past projects, to be ascer-

tained bydetailed, confidential references from past clients; efficient
performanceby design consultantscannotbe takenfor granted;
(c) staff— the personalcapability and experienceofthe key staff whom the
firm proposes to employ on the project; and
(d) the cost — quoted by the firm; unless large differences exist between
offers from competing firms, this factor should not be critical.
1.1.7.4 Value for money, not lowest price, should be the aim in the selection of the
design team members. The Cm's Selecting Consultants for the Team:
Balancing Quality and Price' provides guidance on establishing a quality!
pricemechanism.
1.1.7.5 Guidelinesfor the value assessmentof competitive tenders in the procure-

ment of professional services have been published by the Construction
IndustryCouncil2.
1.1.7.6 Fees payable to professional consultants may be expressed in one of the

followingways:
(a) as a percentageofthe construction cost ofthe project;
(b) as a lump sum;
(c) on a time chargebasis; or
(d) a permutationofall three.
1.1.7.7 Percentage fees based on the out-turn construction costs are not generally
recommendedas they increase when cost overruns occur.
1.1.7.8 Lump sum fees may be the most satisfactory form of remuneration pro-
videdonly that the scope, value and timescale ofthe project can be established
CIB (1997), Selecting Consultants for the Team: Balancing Quality and Price, Thomas Telford
Publishing, London
2 Construction Industry Council (1994), The Procurement ofProfessional Services: Guidelinesfor the
Value Assessment ofCompetitive Tenders, CIC,London
36 Part 1, Seàtion 1(4/98) Effective from 1/6/98 The Surveyors' Construction Handbook
PART 1, SECTION 1
with reasonable accuracy before the appointments are made and that the
servicesto be providedby the consultants can be accurately defined. Where
lump sum fees are to be paid, the client will need to establish systems for
monitoring the consultants' performance to ensure that they provide the
full, specified serviceand do not skimp theirservices to save money.
1.1.7.9 Where time charge fees are to be paid, the final amount of fees payable is
not fixed and there is a substantialrisk that this amount may exceed initial
estimates.
1.1.8 Partnering
1.1.8.1 In recent years there has been much interest in the application of 'partner-
ing' in the constructionindustry. The CIB definesthis "as a structuredman-
agement approachto facilitate teamworkingacross contractual boundaries.
Its fundamentalcomponents are formalisedmutual objectives, agreedprob-
lem resolution methods, and an active search for continuous measurable
improvements". The CB advises that partnering should not be confused
with other good project management practice or with long-standingrela-
tionships, negotiated contracts or preferred supplier arrangements,all of
which lack the structureand objective measures that must support a part-
nering relationship.
1.1.8.2 The CIB states that the critical factor for partnering is the commitment of
all partners at all levels to make the project a success. The result is that the
partnering agreementdrives the relationshipbetween parties rather than the
contract document.
1.1.8.3 The CIB has published a report, Partnering in the Team1, the purpose of
which is to promote the uptake of good practice in partnering between
client and supplier at any point in the supply chain. The report provides a
guide to the disciplined frameworkof partnering, and describes five good
examples which were on site at the end of 1996. It is not a code ofpractice,
as there wasinsufficientexperience of its application in construction at that
time. Nor does it provide detailed step-by-step guidance at the working
level, because the working group identified two other reports well suited
for this purpose: the Reading Construction Forum's Trusting the Team2,
andthe EuropeanConstructionInstitute's Partnering in the Public Sector3,
endorsed by NM Treasury, the DoE, the National Audit Office and the
Audit Commission. This latter report is significant as it demonstrates how
partnering should be applied to projects after award of contract — hence
complyingwith the BC andUKregulations for public sector procurement.
(1997),Partneringin the Team,Thomas Telford Publishing, London

1 CIB
2 Reading Construction Forum (1995), Trusting the Team: the Best Practice Guide to Partnering in
Construction, Centrefor Strategic Studies inConstruction, Reading
a
3EuropeanConstruction Institute(1997), Partnering in the Public Sector: ToolkitfortheImplementation
ofPost-Award, Project SpecificPartneringon Construction Projects,Ed,Loughborough
The Surveyors' Construction Handbook Part 1, Section 1(4/98) Effective from1/6/98 Page 11
PART 1, SECTION 1, APPENDIX A
Appendix A: FurtherReading
CIB. Briefing the Team,ThomasTelford Publishing, London, 1997
CIB. Partnering in the Team, ThomasTelfordPublishing, London, 1997
CIB. Selecting Consultantsfor the Team: Balancing Quality and Price, Thomas
TelfordPublishing,London, 1997
ConstructionIndustry Council. The Procurement ofProfessional Services:

Guidelinesfor the ValueAssessmentofCompetitive Tenders, CIC, London, 1997
EuropeanConstructionInstitute. Partnering in the PublicSector: a Toolkitfor the

ImplementationofPost-Award, Project Specific Partneringon Construction
Projects, ECI, Loughborough, 1997
Kelly,J., MacPherson,S., andMale, S. TheBriefing Process: A Review and

Critique,RTCS, DepartmentofBuilding Engineeringand Surveying,HeriotWatt
University,1992. This documentis out of print.
Reading ConstructionForum. Trusting the Team: the Best PracticeGuideto

Partnering in Construction, Centrefor Strategic Studies in Construction,Reading,
1995
The Surveyors' ConstructionHandbook Part1, Section 1 Effectivefrom1/6/98 Page 1

AppendixA(4/98)
PART 1, SECTION2
PART ONE: THE CLIENT
SECTION 2: VALUE ENGINEERING
Introduction
Value management (and within it, value engineering) is a structured method

of eliminating waste from a client's brief and from the design on a
construction project before binding commitments are made. Used to deliver
more effective and better quality buildings, for example, through taking
unnecessary costs out of designs, value management ensures a clearer
understanding of the brief by all project participants and improves team
working. According to the Construction Task Force report, 'Rethinking
Construction'(published by the DETR in July 1998) it is practicedby up to a
quarter ofthe construction industry in the UK. The report also estimates that
while the objective of value management is to increase value, it can also
reduce costs by up to 10 per cent.
Value management is the wider term used in the UK to describethe overall

structured team-basedapproachto a construction project. It involves clearly
defining the client's strategic objectives, considering optimum design
solutions within the context of the client's business objectives and deciding
which oftheseprovides the optimum lifetime value to the client, as well as a
review of the whole process after occupancy. Value management includes
value engineering as part ofthisprocess.
Value engineering is a 'systematic approach to delivering the required

functions to the required quality at the least cost', i.e. a method of ensuring
that the client gets the best possible value for money in terms of safety,
performance and deliverytargets. It is a structuredform ofconsensus decision
making that compares and assesses the design solutions against the value
systems declaredby the client.
This section ofthe handbooklooksat the carrying out ofa valueengineering

exercise duringthe earlydesignphase ofaproject,i.e. an evaluation ofdesign
solutions againstthe client's brief Value engineering, as described here, can
be a stand-alone exercise (a value engineering workshop) or may be part of
an overall value management process.
In describing the value engineering process this section aims to assist

surveyors both in advisingclients on the use ofvalue engineering andtaking
part in a value engineeringexercise as part of the design team. It is not
intended for surveyors acting as value engineering facilitatorsand makes no
attemptto address the very particularskills requiredfor this role.
The Surveyors' Construction Handbook Part 1, Section 2 (12/99) Effective from 1/1/00 Page 1
39
PART 2
1,SEcTIoN
43 1.2.1 Why Value Engineering?
1.2.1.1 Value engineering has grown in popularity for the simple reason that it
actually works. Construction projects can often take on a life of their own
when membersof the design team become focused on their own particular
problems andtime constraints. Consequently, the true objectives ofthe client
get lost along the way. Value engineeringrelates design proposals directly
backto a client'sbusiness,thus ensuring that amanagement systemis inplace
which forces designers to justify their decisions when tested against the
client's requiredfunction.
1.2.1.2 A value engineering exercise can only relate design proposalsto a client's
businessrequirements ifearly value managementstudies have encapsulated
these requirements withinthe brief.Ifa value engineering exercise is carried
out in isolation from any strategicreview ofthe project requirements, it can
only act as a functional assessmentofthe technicaldesign solutions andtheir
relative cost. However, even in thislimitedfunctionit can still be very useful.
1.2.2 Applicability
1.2.2.1 The technique of value engineering can be employed on any project.

However, more complicated andhigher value buildingsare likely to benefit
the most (see figure 1). This is because it is more difficult to develop the
design brief in such instances and consequently a design solution may be
adopted withoutbeing questioned, usually because oftime constraints placed
upon the designers.
Figure 1: Projects Benefitingfrom ValueEngineering
High
Essential
Complexi
Optional
Low
Low High
Value
1.2.2.2 Many client organisations will only undertakevalue engineeringon schemes

over a certain value. For example, Railtrackwill carry out the technique on
projects valued at £250,000 or more and Northumbrian Water will only
considerit for projectsworth over Lim. Despitethis, there is no reasonwhy
the process should not be applied to smaller schemes. Furthermore, value
engineering will be invaluable whererepetitive schemes are being considered
Page 2 Part 1, Section 2 (12/99) Effective from 1/1/00 The Surveyors' ConstructionHandbook
40
PART 1, SECTION2
as improvements and savings cansbe inç9rporated into future schemes. They

can also be tested in practice,leadingto the sort ofcontinuous improvement
recommended by the 'RethinkingConstruction'report.
1.2.2.3 Value engineering works irrespective ofthe procurementroute taken. It is a

discipline upon the design team members and the clients who appoint them.
Where the contractor is mainly responsible for the design, for example,
design andbuild, develop andconstructor PFI projects,the technique is just
as appropriate in ensuring that a well-defined statement of requirements is
firstestablishedandthat subsequent design solutions address the functionof
the building most economically.
4 1.2.3 At What Stage Should Value Engineering be Carried Out?
1.2.3.1 The value engineering exercise should be carried out as early in the design
process as is appropriate to the size andnature ofthe project. For example,
when an experienced client has prepared the brief, or a value management
exercise has already examined the client's requirements, the value
engineering exercise (which will address the proposed design solutions) is
best done towards the end ofthe 'scheme design'. In other circumstances, it
may be usefulto examine the client'srequirements at an earlierstage. Several
workshopsmaybe necessaryat each ofthe crucial decision-making stagesof
a project:
(a) A first exercise (a functional analysis of requirements), to define the

project needs, could be carried out as early as 'option appraisal', and since
thiscouldgenerate the greatestbenefitto the clientthe timingis crucial. Carry
it outtoo early andnotenough will be known aboutthe problemsassociated
with the building function, whereas too late and minds become set on the
solutions formulated by the design team.
(b) A review ofthe project at 'outline design' could be conducted to ensure

that the decisions taken earlier have been implemented or, if changed, that
they still meet the functional requirements.
(c) Another review (a functional analysis of the solutions) would then be

carried out at 'scheme design' to test individual building elements involving
traditional cost planning/life cycle costing techniques.
1.2.3.2 This section of the handbookconsiders the evaluation ofa design at the end
of the scheme design phase, but the objectives and the process will be the
same whenever it is carried out.
1.2.3.3 It is importantthat time for the value engineeringprocess and any resultant
redesignis included in the scheme designprogramme at the outset.
The Surveyors' ConstructionHandbook Part 1, Section 2 (12/99) Effective from 1/1/00 Page 3
41
PART
1,SEcTIoN
2
4 1.2.4 Who Should Carry Out Value Engineering?
1.2.4.1 It is strongly recommended that avalue engineering exercise is organised by an

experienced value management facilitator to ensure that the value engineering
panelretainsits objectivity and that an unbiasedapproach is maintained.
1.2.4.2 Thevalue engineeringpanel shouldbe made up ofthe principal stakeholders

in the project namely, the client, the building users and the design team
(designer, engineers and quantity surveyor) and also the contractor, where
•
applicable. It is important that each ofthe panel membershas the authority to

makedecisions at the workshop. It may also be appropriate to include clients'
advisers, for example, letting agents or ratingvaluers.
1.2.4.3 The optimum size ofa value engineeringpanel would dependupon the size
•
and complexity ofthe project as well as the skills ofthe facilitator. However,
it is considered that panels of more than twelve members are difficult to
manage and should be avoided except in exceptional circumstances. Panels
with fewer than four members couldbe consideredineffective.
1.2.4.4 It is common practice in North America to appoint an outside team of

consultants to question the designteam's solutions. However, this practice has
been known to cause resentmentbetween the project team and the external
advisers and might therefore compromise the final design solutions. It is
considered that an experienced facilitator independent of the design team,
with an appropriately briefed panel, will ensure that the design team's
solutions are adequately tested at the workshop.
1.2.5 How Long Should It Last?
1.2.5.1 Thelength oftime taken over thevalueengineeringworkshop will dependon the

complexity ofthe project and the level of design detail that has been completed.
1.2.5.2 The '40-hour workshop' is the classic industrial value engineering standard.
However, two-day workshops at key points during the design process are
more commonin the UKconstruction industry.
1.2.6 Preparingfor a Value Engineering Workshop
1.2.6.1 Prior to the workshop, it is most important that an agenda is agreed by the
panel and distributedby the facilitator.
1.2.6.2 In addition to an agenda, a functional analysis of the client's requirements

shouldbe drawnup, either beforethe workshoptakesplace or as the firsttask
for the workshop. There are no hard and fastrules as to how this should be
achieved. It may be done by the facilitator andthe client or by a full meeting
of the value engineering panel. The design team must be well prepared to
U--?
PART 1, SECTION 2
propose andjustify design solutions. These will be challenged by other panel

memberswith the encouragement ofthe facilitator.
1.2.7 FunctionalAnalysis of Design Relative to the Client's Requirements
1.2.7.1 It shouldbe understoodthat it is notpossibleto findmeaningfulalternatives

to a technicalsolutionwithoutfirstidentifying the functionrequiredofit.
1.2.7.2 Functional analysis is any technique designed to appraisevalue by careful

analysisof function. This can be simple 'brainstorming'ofthe functions and
possible alternatives, but the most common method is using a functional
analysissystems technique (FAST) diagram.
1.2.7.3 TheFASTsystem uses a 'function diagram'whichidentifies the basicfunction

'what is required' on the left-hand side and moredetailed secondary functions
working from left to right untilall the means ofachieving these functions 'how
are they to be fulfilled' are identified on the right. Seefigure2 for an example
ofaFASTdiagram.Itshouldbeunderstood thatthis is abroad-brush technique.
1.2.7.4 Most practitioners insist that functions are defined in terms of 'active
verb/measurable noun (or phrase)' combinations, for example, 'minimise
energy consumption'.This improvesclarity, helps all panelmembersdevelop
a shared understanding and promotesthe examination process. These should
be interrogated by asking 'why' the client requiresthis in order to examine
how it shouldbe achieved.
Figure 2: FASTDiagram
Working from left to right.

HOW? -p-- - -
how is ittobe provided —currentsolution
- -HOW?
WHAT?
what isrequired
WHY? - - - -
whyis itto be provided this way —
challenge solution andsuggest alternatives
Sub-function (Al)
r Elemental (Al.1)
Secondary L Elemental (Al.2)
function (A) Sub-function (A2)
Sub-function (A3)
Secondary r
function(B) Sub-functions
Basic
function
(Clientsneed)
Secondary
function (C)
r Sub-functions
Secondary
function (D)
r Sub-functions
43
PART 1, SECTION 2
1.2.7.5 The process of setting up a FAST diagram is of matching the functional

elements of the building (object functions) to the client's requiredfunctions
(user functions). The functional requirements need to be broken down until
they are reflectedin elementswhich canbe priced(and built). This process is
called 'functional decomposition'. For example, the requirement for
increased energy efficiency might be provided by increased levels of
insulationwhich might be achievedby changesto all or any ofroof, walls,
floor, windows and doors or finishes. The number of levels 'of
decomposition' requiredcannotbe predetermined.
1.2.7.6 A list oftypical user functions for a health centre is included in AppendixA.
Function elements (object functions) are defined in the BCIS publication,
StandardForm ofCostAnalysis: Principles,InstructionsandDefinitions and
iiSection2.3 ofthishandbook.
Atypical example ofa value engineering process is included in AppendixB.
1.2.8 Pricingthe FAST Diagram

1.2.8.1 As the FASTdiagramprogressesand different solutions arefound,itbecomes
possible to establish alternative costs for achieving a given function.
However, it is important that all functions are clearly defined if costs of
alternative proposalsare to be meaningful. Also, it shouldbe rememberedthat
it is the design solutions to the functional requirements that are beingpriced
and compared to the value and importance that the client puts on that
function. For example, the client can identif, the value of savings from
reduced energy consumptionor may rank this as important for other reasons.
The value engineering team's task is to put a price on the various design
solutions suggestedthat will achieve this end. It is creativity in finding the
most economical solution that is the essence of the value engineering
exercise.
1.2.8.2 Fees and value added tax (VAT) and other financialand fiscal matters may
also need to be considered.
1.2.9 Presenting a Design Solution to a Value Engineering Workshop
1.2.9.1 Design solutions should be presented as designers normally would to any

panel of users. However, they should expect to be questioned quite
extensively. They should keep an open mind and maintain objectivity in
justifying their proposals because the objective is to find the most cost-
effective solution, not to criticise for the sake of it. On the other hand,
designers shouldbe preparedto stand by their design solution ifthey think it
is correct for the functionbeing considered.
Page 6 Part 1, Section 2 (12/99) Elfective from 1/1/00 The Surveyors'ConstructionHandbook
44
PART 1, SECTION 2
4 1.2.lOlheWorkshop
1.2.10.1 A value engineering workshop will work through phases of information,

speculation, evaluation, development and presentation:
(a) The 'informationphase' identifies the spaces,elementsand components in

terms of the functions they fulfill. It asks the questions about what is the
prime functionofan element?; what are it's subsidiary functions?; what does
it cost?; what is it's value? It is at this stage that the FAST diagram is
developed and it is against the background ofthis information that the value
engineering evaluation will be made.
(b) 'Speculation' is the brainstorming stage which will generate the ideas
from which solutions will be developed. It is importantthat each member of
the panel thinks positively. The facilitator will ensure that no one is allowed
to become overly criticalofanothermember's contribution in orderthat ideas
flow. All ideas shouldbe logged at this stage. However, in order to encourage
ideabuilding,they shouldnot be analysedor rejected. It is important that the
underlying functions ofsuggestions for improvement are listedfor evaluation
later. Design solutions should not be developedat this stage to ensure that
'what is to be achieved'is properly addressed. All optional solutions should
only be considered at the evaluation stage.
(c) 'Evaluation' is the analysis of the ideas generated by the earlier

speculation. Again, a positive feeling will be encouraged by the facilitator
with advantages/disadvantages beingdiscussed in an even-handed manner. At
this stagesome ideaswill be rejected andthe best takenforward.It is essential
to ensure that all the ramifications of any suggested changes should be
considered. For example, ifthe exercisehas suggesteda changeto a piece of
M&E equipment, the effects on the control management systems and
structural requirements must also be considered.
Life cycle costingcan be an importantfactorin the processwhen considering

optional solutions but the criticality ofthis aspect will hinge on the client's
philosophy.
(d) 'Development'of the ideas to be taken forward will be initiated at the

meetinganda programme establishedfor completion ofthis stage. Oftenthe
detailed development including life cycle costing, if appropriate, will be
continued beyond the initial meeting and the outcome presented to a
subsequent meeting for the panelto determine which design options to adopt.
(e) 'Presentation'takesthe form ofa reportpreparedby the facilitator which

records in some detail all elements of the study and concludes with those
options to be incorporated in the developeddesign. This report is normally
presentedto the clientby the valueengineering panel at a meetingheld within
one or two weeks ofthe date ofthe workshop.
45
PART 1, SECTION 2
1.2.10.2 Theworkshopshouldfocusonexpensiveitemsor 'mismatches',for example,

parts ofthe FAST diagram which are importantto the clientbut which have
been allocated little moneyor have cost a lot ofmoney but do not contribute
to the function.
1.2.11 Assessing the Value of the Workshop

1.2.11.1 Areas for researchlchange identifiedat the workshop could be grouped into
three categories:
(i) those that are removed/changed and result in reduced cost;
(ii) those that are added/changed and result in additional cost; and
(iii)those that are identified for investigationbut not implemented
1.2.11.2 The financial benefit should then be identified against all elements within
categories (i) or (ii).
1.2.11.3 Amajor benefitofthe workshopwhich willbe enjoyed by the panel members

is a better understanding of the project functions and commonownership of
the team-baseddesigns solutions which have evolved.
• 1.2.12 Implementing the Results

1.2.12.1 The value engineering panel's decisionsare recommendations that need to be
acceptedby all stakeholders. Those stakeholders that arenot part ofthe panel
are likely to have a right to comment before decisions are adopted.
1.2.12.2 Once the workshop'sproposalshave been sanctioned by the client, decisions

shouldbe fed backto the designteam, briefingthose members whoseworkis
affected as to why the changes were made.
1.2.12.3 Ifnecessary, amendments to the designbrief, designprogramme and scope of

professional team's brief shouldbe incorporated intothese documents.
1.2.13 Feedback from Post-OccupancyEvaluation
1.2.13.1 It is important for any clientto carry out a projectreview to demonstrate how
project objectives have been achievedand particularproblems overcome. As
part of the project evaluation process, it should be established whetherthe
project represents best value for money and whether or not key design
changes made as a result of value engineering have achieved the benefits
expected. These should always be set against the cost of carrying out the
exercise.
Page 8 Part 1, Section 2 (12/99) Effective from 1/1/00 The Surveyors' Construction Handbook
LL
Appendix A: Typical Functions for a Health Centre
Providegood
conditions Reception areaofadequatesize
forpatients
Consulting rooms - sufficientnumber
Publictransportavailability
Parking availability
Closeness to patients'homes
Goodaccessto and withinthe building(including disabled

access)
Toiletfacilities
Crèche facility
Provide good
conditions Office ofadequate size
for staff
Office efficient/flexible layout
Healthcare Office lighting andheating

provision by
meansofa Office privacy
healthcentre Convenient for staff commuting
Parking availability
Rest roomfacilities
Provide
suitable Consulting rooms ofadequate size with soothing decor
spaces
Reception areaattractive and comfortable
Storage space suitablysized and located
Ensure
administrative Adequacy ofspace
convenience
Flexibility oflayouttousers
Sufficiency ofrecordstorage/retrieval
The Surveyors' Construction Handbook Part 1, Section 2 Effective from 1/1/00 Page 1
Appendix A (12/99)
47
PART 1, SEcTIoN 2, APPENDIX B
Appendix B: Typical Example of a Value Engineering Process
Bi BACKGROUND
A retail client with a regular development programme for a series of new

stores (typical size 8,000m2) entered into a partnering agreement with key
membersofthe construction team for four new projects.
To encourage value engineering, the partnering contractors share in any

savings that relate to any acceptedproposals.
For two ofthese projects the client optedfor a design and build contract for
the servicesinstallations (mechanical, sprinklersandelectrical).
In an effortto reduce costsandultimatelyaddvalue to the schemes, the client

set a target of reducingthe costs on these projects by 10 per cent, with no
material effecton quality or health and safety.
To set a benchmark forthisreduction model cost plan costsfor a typical store

(derived from historical records) were modified to suit the new scheme
layouts.Allowances were included for any items that were classified as 'site
specific' (e.g. acoustic requirements stipulatedby the districtsurveyor). Cost
plan figures were based on the client's current specification.
Due to the volume of developments undertaken by the client and the

repetitive natureofthe works, the savings generatedby value engineering can
be incorporated in any future schemes.
B2 SPECIFICEXAMPLE:VENTILATION TO SALES FLOOR
The original design was based on previous solutions and included

'traditional'ventilation.
Atthe 'informationphase', the functional requirement, including the needfor

ventilation, was examined against the client's desire to reduce capital costs.
This identified that a highproportionofthe costofthe mechanical installation
related to the provision of ventilation to the sales floor of the store @lant,
distribution ductwork, diffusers, etc.)
At the 'speculation phase', the client's engineering department worked

closely with the mechanical partnering contractor to consider alternative
methodsof ventilating the sales floor ofthe store.
The alternative methodofventilationproposedwas ofthe displacement type.

With displacement ventilation, air is only conditionedat the level at which
occupiers are breathing.Air is introducedat low level and at low velocity.
Natural convection currents are utilisedto remove excess heat and pollutants
out of the occupied zone. There is a saving in the amount of ductwork
required, as only two runs of ductwork are needed on the sales floor. (The
The Surveyors' ConstructionHandbook Part 1, Section 2 Effective from 1/1/00 Page 1
Appendix B (12/99)
48
PART 1, SECTION 2, APPENDIX B
traditional method is designed for four separate branches of ductwork.) The

new specification requiresdiffusersofthe displacement type, with the facility
ofautomatically varyingthe air throw pattern whetherin heating or cooling
mode.
Furthermore, the proposedsystem requiredventilationto the occupiedzone

only rather than the full building space. This has resulted in capital cost
savings on plant andin the likely runningcosts ofthe system.
The evaluation identifiedsignificant savings.
Summary ofValue Engineering Exercise
Original installation: Traditional ventilation
Value engineering proposal: Displacementventilation
Benefits: Savingon air handlingplant size

Savingon chillerplant size
Savingon sales floor ductwork
Savings on capital cost: Air handlingplant 10%

Chillerplant 5%
Ductwork and diffusers 25%
At the 'developmentphase', the proposedmethod was discussedwith other

membersofthe design team to ensure that any impact on the otherbuilding
elements, the project programme andthe interfacewith other subcontractors
were taken into account.
Page 2 Part 1, Section 2 Effective from 1/1/00 The Surveyors' ConstructionHandbook

Appendix B (12/99)
49
PART 1, SECTION 2, APPENDIX C
Appendix C: Further Reading
British Standards Institute. Value Engineering, Value Analysis Vocabulary - Part 1:

Value Analysis andFunctionalAnalysis, British Standards Institution, London 1997
BuildingCost Information Service. Elementsfor Design andBuild, BCIS Ltd, 1996
Building Cost Information Service. Standard Form of Cost Analysis; Principles,

InstructionsandDefinitions, BCIS Ltd, 1969 (Reprinted 1997)
Connaughton, John, N., Green, Stuart, D., Construction Industry Research and
Information Association. ValueManagement in Corstruction:A Client Guide, CIRIA,
London, 1996
Dell'isola, Alphonse. Value Engineeringin the ConstructionIndustry, Van Nostrand

Reinhold Co., New York, 1983
Dell'isola,Alphonse. ValueEngineering:Practical Software Applications for Design,

Construction, Maintenanceand Operations, R. S. Means& Co., Kingston, MA, 1997
Green, Stuart,D. and Popper, Peter,A. ValueEngineering: TheSearchfor UnnecessaryCost,

CharteredInstitute ofBuilding, Berkshire, 1990
Institution of Civil Engineers. Creating Value in Engineering, Thomas Telford

Publishing, London, 1996
Kelly, John andMale, Stephen. A Studyof Value Management andQuantitySurveying

Practice, Surveyors Publications, London 1988
Kelly, J.R. and Male, S.P. A Study of Value Engineering and Quantity Surveying
Practice, Heriott-Watt University, Edinburgh, 1989
Kelly, J.R. andMale, S.P., Heriot-Watt University, DepartmentofBuildingEngineering

and Surveying, Royal Institution of Chartered Surveyors. The Practice of Value
Management: Enhancing Valueor Cutting Cost? RICS, London, 1991
Law, Alastair, G. An Introduction to Value Engineering: A New Technique in

TechnologyAssessment andEvaluation, Alastair G. Law, Washington DC, 1981
May, Susan, C., College of Estate Management. Value Engineering and Value
Management: A CPD Study Pack, College ofEstate Management, Reading, 1994
Mole, Kelly, Fernie, Grongvist and Bowles. The Value Management Benchmark: Good
PracticeFrameworkfor ClientsandPractitioners.Thomas TelfordPublishing,London 1998
Norton, Brian, R. and McElligott, William, C. Value Managementin Construction: A

Practical Guide, Macmillan, Basingstoke, 1995
Appendix C (12/99)
50
Palmer, Angela. A Critique of Value Management, Chartered Institute of Building,

Berkshire, 1990
Royal Institution of CharteredSurveyors. Value and the Client (paperspresented at a

conference held at the RICSOn 29January 1992), RICS, London, 1992
Smith, J., Jackson,, N., Wyatt, R., Smyth, H., Beck, M., Chapman, K., Shirazi, A.,
Hampson, K., Royal Institution of Chartered Surveyors. Can Any Facilitator Run a
ValueEngineering Workshop?RICS, London, 1998
Zimmerman, Lany, W. and Hart, Glen, D. Value Engineering: A Practical Approachfor

Owners, DesignersandContractors, VanNostrandReinhold& Co, New York, 1982

AppendixC (12/99)
51
PART 2, SECTWN1
PART TWO: CONSTRUCTION DESIGN AND ECONOMICS
SECTION 1: PRE-CONTRACT COST PLANNING AND

COST MANAGEMENT
Introduction
This Sectionof the Handbook sets out procedures which enable pre-
contract cost management of building projects to be carried out from the
client's brief, through the various design stages to the acceptance of a con-
tractor'stender.
Control of costs can oniy be achieved by the actions of the whole project
team, including the client. The quantity surveyor's role is to facilitate the
design processby systematicapplication of cost criteria so as to maintain a
sensible and economic relationship between cost, quality, utility and
appearance which thus helps in achieving the client's requirementswithin
the agreed budget.
The information and guidance which follow are based on a traditionally

procured new-build project, but varying client requirements and different
procurementmethodsmay prevent implementationof some aspects of the
following procedures. In practice, the design of the elementsmay proceed
at different speeds andthe stages described here may overlap. However, the
principles of budget, cost plan, cost checks and reconciliationshould be
adhered to whenever possible. (See the figure showingthe outline of the
cost planningprocedure.)
On projects where non-traditionalprocurementroutes are used, the respon-

sibility for developing the cost plan may change but the stages suggested
here remain appropriate. For example, on Design and Build (D&B)
schemes, the client's quantity surveyorwill be responsiblefor the cost plan
at feasibility and outline proposal stage and the D&B contractor's quantity
surveyor will be responsible for developing the costplan with the contrac-
tor's designteam to produce the tender.
The process described would apply to refurbishment or conversion

schemes and the elemental approachwould be suitable even if all elements
were not required.
The procedures are not designedfor use with civil engineering projects,but
should providea frameworkappropriate to civil engineeringneeds.
52
PART 2, SECTION 1
OUTLINE OF COST PLANNING PROCEDURE
Inception
Design Stage A Feasibility Outline
L _B Proposals Scheme
(references are to
the RIBA Plan of Work; — — Design Detail
see G2.1.1.4) — D — Design Production
E Information Bills of
itieser
Prepare Prepare • Prepare • Cost Cost • Final • Analysis

feasibilily costplans outline checks checks cost of costs
QS Cost Control Tasks studies of possible costplan check
solutions • Develop
detailed
costplan
Deliverable Reports
Budget Outline Detailed Cost

cost 4 cost 4 analysis
plan plan
Confirm Confirm Confirm

KeyDecision Stages limitof outline detailed
expenditure costplan castplan
2.1.1 Pre-contractCost Planning and Cost Management
2.1.1.1 DEFINmON
Pre-contractcostplanningis the techniqueby which the budgetis allocated
to the various elements of an intended building project to provide the
design team with a balanced cost framework within which to produce a
successful design. It allows for the redistribution of the budget between
elementsas the design develops.
Cost managementis the total process which ensuresthat the contract sum is
withinthe client's approvedbudget or cost limit. It is the process ofhelping
the design team design to a cost rather than the quantity surveyor costing a
design.
Page 2 Part 2, Section 1(4/98) EffectiveFrom 1/6/98 TheSurveyors' Construction Handbook

PART 2, SEcTIoN 1
2.1.1.2 OBJECTIVES
(a) To ensure that the client obtainsan economical and efficient projectin
accordancewith the agreed brief andbudget;
(b) To make the design process more efficient, thus reducing the time
needed to producea successfuldesign;
(c) To ensure that all requirements arising from the client's brief to the
design team are includedin the cost planning process (e.g. the engineering
services shouldalsobe subjectto the costplanning process); and
(d) To advise the client and membersof the design team of cost-in-use or
life-cycle costingtechniques.
2.1.1.3 GENERALLY
(a) A general principle applies throughout the cost planning process that
any agreedbudget or cost limit is seen as the maximum cost, andthe quan-
tity surveyorshould,at all times, work with the otherdesign team members
to satisfy the client at a lower cost if possible, whilst still maintainingthe
desired objectivesfor quality andfunction.
(b) If, at any time, sums have been included in the approved budget, for
example, for abnormal site costs which subsequently are found to have
been wholly or partially unnecessary, the consequential saving should
always be notifiedto the client.
2.1.1.4 DESIGNSTAGES
References to Design Stages are to the RIBA Plan of Work (taken from the
RIBA Handbook ofArchitectural Practice and Management) and refer to
the main stagesthrough which a projectdesign typically passes. The links to
the costplanningprocedures outlined in thisSection are summarisedhere:
Design Stages Quantity Surveyor
Stage B: Feasibility Prepare feasibility studies and determine

the budget
Stage C: OutlineProposals Consider with client and design team
alternative strategies andprepare costplan
Stage D: SchemeDesign Carry out cost checks and update cost

plan if necessary
Stage E: Detail Design
Stage F: ProductionInformation Carry out cost checks
Stage H: Tender Action Preparereconciliation statement
TheSurveyors'Construction Handbook Part2,Sectionl(4/98) Effectivefrom1/6/98 Page3

PART 2, SECTION 1
2.1.1.5 VALUE ENGINEERING

<I)
A valueengineering exercise maybe carried outon all orpart of the design
during the design process.
This mightaffect both the client's requirementsandthe chosendesign solu-

tion andchanges would, therefore,affect the budgetandthe costplan.
2.1.2 PreHminary Cost Studies and Feasibility Studies
2.1.2.1 It is recommended, as a matter of importance, that before and during the

formulation of the client's brief (Design Stage B: Feasibility),the quantity
surveyor, in consultation with other members of the design team and the
client, should undertake such feasibility studies as may be necessary to
ensure that the client's requirements can be reasonably accommodated
within the finance that is available for the project. The client's budget is
established as a result of these studies. (See 2.1.3.)
2.1.3 Budget
2.1.3.1 DEFINITION
Budget is the total expenditureauthorisedby the client whichis the respon-
sibility of the design team at the end of the feasibilitystage (Design Stage
B).
2.1.3.2 OBJECTiVES
(a) To establish the limit of expenditure necessary to meet the client's

brief. The client's and project's status with regard to VAT (Value Added
Tax) will alsoneed to be established;
(b) To providethe client with a statement of the likely area and quality of
building, which is achievable within the limit of expenditure;
(c) To provide a statement of the recommendedmethods of construction

and of the contractual procedures to achieve the required occupationdate;
and
(d) To provide the client with alternativebudgets for different occupation

dates and qualities of building,if appropriate.
<> 2.1.3.3 INFORMATION REQUIREMENTS
(a) The ideal requirementsfrom the client and membersofthe project team
to the quantity surveyor are given below. On projects where this level of
information is not available, the quantity surveyorshould state clearly any
assumptionsmade.It is possible to produce a typicalelementalestimate for
Page 4 Part 2, Section 1(4/98) Effective From 1/6/98 TheSurveyors'ConstructionHandbook

PART 2, SECTION 1
a particular type of building from very little information, but it is important

to clarify as many informationissues as possible before such an estimateis
accepted as the budgetfor a particular project.
(b) Information requiredfrom the client:

• location of the site; availability of the site for commencementof
construction work;
• in conjunction with the designer, architect or building surveyor, a
schedule of accommodation;
• names of other similar buildingsofbroadlysuitable quality if appro-.
priate;
• the required occupation dateorphased occupationdates;
• any specificrequirementsrelatingto life-cycle costs;
• any specificrequirementsas to specification and/or procedures;
• requirements in respectof the treatment ofinflation;
• instructions regarding Construction (Design and Management)
Regulations; and
• the client's VAT status and any other tax matters which may affect
the overall costofthe project.
(c) Information required from the designer, architect, building surveyor, or

other source:
• approximatelocationof the building on the site;
• advice on necessary storey heightsfor any specialist areas shown on
schedule of accommodation;
• advice on statutoryregulations;
• advice on routes ofpublic sewers and the like;
• designer's conceptof building; and
• names of similarprojects previouslydesigned by the practice.
(d) Information requiredfrom the structural engineer:

• advice on probableground conditions;
• advice on probablefloor loadings;and
• anyinformationon structural solutions.
(e) Information requiredfrom the servicesengineer:

• advice on areas of building which will require specialist engineering
services;
• anyinformationon the types ofsystems; and
• advice on availability ofpublic utilityservices.
Note: If the quantity surveyor is not responsible for cost planning the
engineering services, this should be clearly stated in the budget and cost
plan.
The information from the quantity surveyor to the design team is as

follows:
The Surveyors' Construction Handbook Part 2, Section 1(4/98) Effectivefrom 1/6/98 Page 5
53
PART 2, SECTION 1
(An exampleof a format for the quantity surveyor's report is given in

AppendixB to this Section.)
(f) Information to be providedto the client involvesa report containing:

• the budget, with alternativeproposalsif appropriate;
• a statement of the basis of the budget calculation including any
importantassumptionsmade;
• a statementsettingoutthe programmefor design andconstruction on
which the budget is based;
• an outline cash-flowforecast;
• a statementof anyitems notincluded;and
• assumptions in respect of inflation forecasts and current/future
market conditions.
(g) Informationto be provided to the designer:

• a copy ofthe report sentto the client; and
• a more detailed statement of the quantity and quality parameters
includedin the calculations.
(h) Informationto be provided to other consultants:

• suchquantity and qualityparametersas relate to theirarea of design.
2.1.3.4 METHODS OF PREPARATION
(a) The method of preparation depends on the type of project involved.

Unusual projects, projects of great complexity and projects containing a
large element of alterations are more difficultto budget accurately at an
early stage.
(b) For most types of project, it is possibleto build up an elemental budget

using the parameters set out under This can be based on cost
information from previous projects, from the 1UCS Building Cost
Information Service (BCIS), other published sources, or on an appropriate
cost model.
(c) The main elemental quantities ofhypothetical buildings can be generated

using agreed parameters, to which rates applicable to agreed quality and
performance standards can be applied.An example of a method of calculat-
inghypothetical quantitiesis describedin AppendixC to this Section.
(d) Once the budget has been established,it provides the first cost plan for
the project, and the frameworkfor the actualdesign to be developed.
2.1.3.5 STATEMENT OF QUANTITY AND QUALITY PARAMETERS

The main parameters which should normally be incorporatedin the calcula-
tion are as follows (the list is not exhaustive):
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PART 2, SECTION 1
(a) Quantity
• in addition to the briefed areas, a statementof the allowances (e.g.
circulation)used to calculate a gross floor area;
• the number of storeys of a possible solution;
• the storey height(s);
• the square indexor wall/floorratio (see AppendixC to this Section);
• the density of vertical divisionor partitionlfloorratio (see Appendix
C to this Section);
• proportionof windowarea;
• floor loadings;
• thermal resistancevaluesoffabric;
• air change rates;
• heating and hot-waterloads;
• lighting levels;
• total electricalload;
• areas ofthe brief with
specialfunctionsof significantcost;
• road areaandnumberof car parking spaces;
• pavedpedestrianareas; and
• length of boundary walls or fencing.
(b) Quality
• A general statement of quality and specification which relates to the
rates used for the budget calculation. This should cover specifically
at least the following: foundations, roof, external walls, floors and
vertical circulation,internalvertical division, internal finishes, light-
ing and other services. External works should include roads, paths,
landscape, boundary walls and fences, and service mains, planting
andthe like.
<> 2.1.3.6 INFLATION
(a) The prediction of future inflation may not be necessary for some
clients, anda statementof costat currentpricesmay be adequate. Where an
assessment of inflation is required for more than a few months ahead, a
range of probable inflationis best provided. This can be calculated using
predictions published, for example by BCIS or the Department of the
Environment,Transportand the Regions. The assumptionsupon which the
predictionis made should be stated.
(b) Some clients, particularlyin the public sector, have their own inflation
controls. Where the client requests that a particular level of inflation be
included in the budget, the quantity surveyorshould inform the clientif he
believesit to be unrealistic.
2.1.3.7 COST REPORTING

If at anytime during the designprocessit becomesapparent that the agreed
budget is likely to be exceeded withoutthe brief being changed, the client
should be informed and instructions requested. Likewise, if it becomes
The Surveyors' Construction Handbook Part 2, Section 1 (4/98) Effectivefrom1/6/98 Page 7

PART 2, SECTION 1
apparent that the whole of the agreedbudget will not be required,the client
shouldbe informed.
2.1.4 The Cost Plan at Outline Proposals Stage
2.1.4.1 DEFINITION
The costplan at outline proposals stage is a statement of the probablecost
ofthe project at Design Stage C which sets outthe cost targets for the main
elements of a building, togetherwith their approximatequantity and quality
parameters.
2.1.4.2 OBJECTIVES
(a) To describe, together with the outline proposal drawings, the chosen
distributionof the resources withinthe budgetto provide a balanceddesign
to meet the client's needs;
(b) To set costtargets for the mainelementsso that, as the design develops,
the targets can be checked and adjustmentsmade so that the overallcostof
the project is managed withinthe budget;
(c) To providethe design team with controlswhich communicate the costs,

quantity, quality andtime parameters to be followed;and
(d) To provide the opportunity for considerationof life-cycle costs.
2.1.4.3 INFORMATIONREQUIREMENTS
The basic information requirements from the members of the project team
to be providedto the quantity surveyorare as follows:
(a) Informationrequired from the client:

• the budget. Where alternativebudgets have been quotedin the bud-
get report, the clientmust state his preferredalternative;
• confirmation of the programme for design and construction times
statedin the budgetreport;
• confirmationof the brief;
• acceptance or variation of any other matters withinthe budget report;
and
• authorityto proceed.
(b) Informationrequired fromthe designer:

• outline
drawings ofthe building and site works indicatingalternative
solutions;and
• an indication ofthe preferred specification for the main elements.
(c) Informationrequired from the structural engineer:

• outline proposals or alternativestructural solutions.
Page 8 Part 2, Section 1(4/98) Effective From 1/6/98 TheSurveyors'Construction Handbook

PART 2, SECTION 1
(d) Information required from the services engineer:

• outline proposals for installations,indicatingany alternative systems;
and
• an indication of the preferred specification, after acceptance by the
designer of its visual implications.
(e) Information required from specialistconsultants:

• outline proposals.
The basic information requirements from the quantity surveyor to the

design team are as follows:
(An example of a format for the quantity surveyor's report is given in

Appendix B to this Section.)
(0 Information to be providedto the client involves a reportcontaining:

• a statement of cost;
• a broad indication of the specification;
• a statement of floor areas;
• a request for decisions on any alternative proposals and/or procure-
ment routes, with advice thereon;
• an updated cash-flow forecast;
• allowances for contingenciesand design reserve; and
• an update of inflationprojections.
(g) Information to be provided to the designer:

• a copy of the documents sent to the client; and
• the costplan with target costsfor eachelement.
(h) Information to be provided to other consultants:

• such quality andquantity parametersas relateto their design respon-
sibilities and target costs.
4) 2.1.4.4 METHODS OF PREPARATION
(a) The method of preparation should be appropriate to the level of detail

availablefor eachelement andmaybe:
• the measurement of approximate quantities and the application of
rates to the quantities generated;
• comparison of the requirements with analyses ofprevious projects of
a similar character;
• useof appropriate costmodels; and/or
• a mixture of the above methods.
(b) Evaluation should be made of the alternativeforms of construction,or

systems, of the 'key' elements, e.g. structural elements, and service instal-
lations. The 'key' elements on each project will vary. However, they are
likely to be those with major financial consequences, and to include the
structural and service elements.
PART 2, SECTION 1
2.1.4.5 STATEMENTOF QUANTITYAND QUALITY PARAMETERS

The quantity surveyor's statementshould include the following:
(a) Quantity
Confirmation of informationprovided at budget stage with the additionof:
• the areas of the accommodationdivided into use classification (e.g.
office/classroom space, sanitary accommodation space, plant-room
space, circulation space), totalledto give gross floor area; and
• a scheduleof those items for which lump sum allowanceshave been
incorporated and a note on the sources ofthis information.
(b) Quality
• a statement of quality and specification, in a similar format to that
provided at budget stage, expandedto incorporate additional infor-
mation. The parameters should follow those included at the budget
stage, and where possible, be based upon the outline drawings and
preferredspecifications.
2.1.4.6 DESIGNAND CONSTRUCTIONPERIOD
(a) In establishing the outline costplan,it is recommended that the quantity

surveyor take account of proposals made by the other members of the
design team and their effects upon both the design and construction
programmes.
(b) If completion dates are critical, components and/or systems should be

selected with a view to the availability of acceptable alternatives so as to
avoid supply difficulties.
2.1.4.7 CONTROLLING CHANGES TO THE CosiPLAN

Should a change be proposedto the outline costplan, or to the scope of the
work,the following procedures shouldbe implemented:
• all relevantmembersofthe design team shouldbe informed;

• the designershould confirm his agreement, in principle,to the proposal;
• no proposal shouldbe incorporatedinto the cost plan without the agree-
mentof the quantity surveyor,and his confirmationor otherwisethat the
proposal can be met within the elemental target;
• where the proposal involvesadditionalcost over the elementaltarget, or
would cause the total budget to be exceeded, the quantity surveyor
should identify to the design team alternative savings that are available in
order to maintainthe overall budget;
• the quantity surveyor should take into account, when considering a
proposed change, any likely effect on the design and construction
programme;
• in all considerations of alternative proposals, the use of consultants for
additional work should take into account any consequentialaddition to
professional fees. In particular, this applies to consulting engineers,
whose fees are calculated only on specific parts of the project; and
Page 10 Part 2, Section 1(4/98) Effective From 1/6/98 TheSurveyors'ConstructionHandbook

PART 2, SECTION 1
upon the determination of a proposed change, the quantity surveyor

shouldcommunicate to the client and all membersof the design team, the
effects of such change andprovide an updated cost plan.
2.1.4.8 INFLATION
Anychangesin inflationforecastsshould be reportedperiodically.
2.1.5 The Cost Plan at SchemeDesign Stage
Note: If the cost plan has been produced at an earlier design stage only
updatingmaybe required.
<> 2.1.5.1 DEFINITION

The cost planat scheme design stage is a statementof the cost of a selected
designat Design Stage D which details the cost targets for all elements of a
building,together with the quantityandquality parameters described by the
scheme drawings and specifications.
2.1.5.2 OBJECTIVES
(a) To set out for the design team the actual distribution of resources
described bythe scheme design;
(b) To set cost targets for all the elements so that, as the detail design
develops, the targets are checked and adjustments made in order that the
overallcost of the project is managed withinthe budget; and
(c) To provide the whole design team with a control document which
describes, in detail, the costs, quantity, quality and time parameters which
have been adopted.
4) 2.1.5.3 INFORMATION REQUIREMENTS

The information to be providedto the quantity surveyoris as follows:
(a) Information required from the client:

• confirmation or otherwise that the cost plan prepared at the outline
stageis accepted;
• confirmation of the brief;
• an indicationof anypreferred alternatives in a previous costplan;
• acceptance or variation of anyother matters within the previous cost
plan report; and
• authority to proceed.
(b) Information required from the designer:

• scheme drawingsand scheme specifications.
(c) Information required from the structural engineer:

• scheme drawingsand scheme specifications;
The Surveyors'Construction Handbook Part 2, Section 1(4/98) Effectivefrom1/6/98 Page U
62
PART 2, SECTION 1
o confirmationof floor loadings and the like; and

• provisionalindication ofreinforcement weights, where appropriate.
(d) Informationrequired from the services engineer:

• scheme drawingsand scheme specifications;and
• detaileddesign parameters, e.g. heatloads, and electricalloads.
(e) Informationrequired from specialist consultants:

• scheme drawingsand scheme specifications.
The basic information requirements from the quantity surveyor to the

design team are as follows:
(An example of a format for the quantity surveyor's report is given in

AppendixB to thisSection.)
(f) Informationto be provided to the client, involvesareport containing:

• a statementofthe cost;
• a statementofthe specification;
• a statementofthe floor areas;
• a statementofthe proposed design andconstructionprogramme;
• a cash-flowforecast, where appropriate;
• a statementofthe relevantlife-cycle costs, where appropriate;and
• an update of inflationforecasts.
(g) Informationto be provided to the designer:

• a copy of documentssent to the client; and
• the costplan with targetcostsfor eachelement.
(h) Informationto be provided to the other consultants:

• such quality and quantity parameters as relate to their area of design
andtheirtarget costs.
2.1.5.4 METHODS OF PREPARATION
(a) The method of preparation is normally by measurementof approximate

quantities from the proposed scheme drawings. The degree of detail to be
measuredshould relateto the cost significanceofthe elementsin the partic-
ular design. The pricingshould be similarlyrelated.Someelementsmay still
be most suitably pricedon an elementalunit rate basis, wherethe cost signif-
icance is low. Majorelementswill normallyneed to be priced in greater detail.
(b) The preliminary engineering and specialist services scheme drawings

and outline specification notes will be required from the consulting engin-
eers, from which approximatequantities of equipment canbe measuredand
priced using all-in rates. Pipework and cables will normally still need to be
priced on an overall basis relating to floor area or service points at this
stage. This ensures that the likely implications of the builder's work are
understoodby the design team and the costs are taken into account.
Page 12 Part 2, Section 1 (4/98) Effective From 1/6/98 The Surveyors' Construction Handbook
PART 2, SECTION 1
4 2.1.5.5 STATEMENTOF QUANTITY AND QuALITYPARAMETERS

The quantitysurveyor's statement should include the following:
(a) Quantity
confirmationof the information providedat outlineproposal stage
(b) Quality
a statementof quality and specificationbased on scheme drawings in suffi-
cient detail to provide control of the production informationdrawingsby
the designerand consultants
(c) Life-cycleinformation
a statement of the likely relevantmaintenance,cleaning,and running costs
which are required or implied by the scheme design proposals and the
expectedlife of major components.
4) 2.1.5.6 CONTROLLING CHANGES TO THE COST PLAN

The principleshave been described inc.2.1.4.7.
4) 2.1.5.7 INFLATION
Any changesin inflationforecasts should be reported.
2.1.6 Cost Checking
2.1.6.1 DEFINITION
Cost checking is the process of calculating the costs of specific design
proposals and comparing them with the cost plan during the whole design
process (DesignStages D—F).
4) 2.1.6.2 OBJECTIVES
(a) To confirm that as the design develops, the cost remains within the
budget; and
(b) To reduce the abortive design work and lost time caused through pro-
ceeding too far in the design process before realisationthat the budgetwill
be exceeded.
2.1.6.3 PRINCIPLES
(a) The methods will vary according to the stage reached in the design
process.Normally,however, this takes the form of measurement of approx-
imate quantitiesfrom the consultants' drawingsto provide a check on the
quantity and quality of parameters set down in the appropriate cost plan.
The gross floor areashould always be the first check at any stage.
(b) The dominant considerationsin deciding the prioritiesfor cost checking

elementsare as follows:
The Surveyors'Construction Handbook Part 2, Section 1 (4/98) Effective from1/6/98 Page 13

PART 2, SECTION 1
• the cost significance of an element related to the total cost of the

project;and
• the known variabilityin cost of any element. Shoulda wide range of
costbe possible in an element, it becomes necessaryto cost check it
before checking any elements of low variability but of the same
overall cost significance.
<> 2.1.6.4 IDENTIFICATIONAN]) NOTIFICATIONOF EXCESSCOSTS
(a) It is recommended that judgement be applied before notifying the

designerof possible excess expenditurein a particularelement.If an excess
revealed during cost checking is of such significance that it is highly
improbablethat compensating savings are available elsewhere, then such
excess should be reported immediately and the design team be asked to
considermodificationof the cost plan. If, however, the excess (or saving)
revealedin an element is relatively small and there are still a number of
elements to be checked, it is usually more appropriateto advise the designer
of the differenceand to suggestthat action is held until other cost checks
havebeen carried out.
(b) It is important for the quantity surveyorto maintain records of the cost
checking process, and to set down in summary the value of the elements
cost checked compared with the cost plan targets. Identification of the
drawings and informationupon which the cost check has been based is also
important.
2.1.7 Action after Receipt of Tenders
2.1.7.1 DEF1MTION
(a) Action after receipt of tenders is that required at the tender stage
(Design Stage H) in analysingeach tenderandupdatinginformationfor the
clientandconsultants.
(b) The following points shouldbe noted:

• In most cases, sound cost planning will producetenders within bud-
get. If, dueto market conditionsor latechangesin designs and speci-
fication, adjustments need to be made to a tender, information on
potentialsavings will needto be identifiedby the design team; and
• If there are significant changes from the initial tender documents,
consideration should be given to the need for seeking revised
tenders.
2.1.7.2 OBJECTIVES
(a) To obtain a contract sum within the approvedbudget; and
(b) To provide suitable analyses for future projects.
Page 14 Part 2, Section 1(4/98) EffectiveFrom 1/6/98 The Surveyors'Construction Handbook
cDs
PART 2, SECTION 1
2.1.7.3 INFORMATIONREQUIREMENTS
Information to be provided to the quantity surveyoris as follows:
(a) Information required from the client:

• acceptance ofpotential savings, if required;
• details in respect of any analyses required. (Where the client body is
a Public Authority or similar, where standard analyses are always
required, consideration of this matter should be given during the
preparation ofthe Bills of Quantities); and
• permission to submit analyses to BCIS if appropriate.
(b) Information required from the designer, architect, building surveyor

and other consultants:
• a provisional list ofpotentialareas of saving (to be considered during
tendering period andbefore tenderacceptance);and

• a detailed list of drawings and other sources of data from which to
determine actual savings,if required.
(c) Information required from othersources:

• indexing of the tender by BCIS to establish confirmation of tender
levels, if appropriate.
The basic information requirements from the quantity surveyor are as

follows:
(d) Information to be provided to the client involvesa reportcontaining:

• a statement ofthe costreconciled to the latest budget;
• any further information in respect of the construction programme;
and
• an updated preliminary cash-flow forecast, where appropriate.
(e) Informationto be provided to the designer:

• a copy of documents sentto the client; and
• a detailed reconciliation betweenthe tender and the latest costplan.
(f) Information to be providd to the otherconsultants:

• such information as relates to their area of design and associated
costs.
The Surveyors'Construction Handbook Part2, Section 1(4/98) Effectivefrom 1/6/98 Page 15

Appendix A: Sources of Cost Information
Al OBJECTIVE
To ensurethat all costs usedare up to date and accurate.
A2 SOURCES
A2.l Elemental cost analysis

• in-house cost analyses ofprevious projects;
• BuildingCost Information Service (BCIS); and
• Architects'Journal.
A2.2 Unit rate information

• in-house priced bills of quantities;
• specialistsuppliers' quotations;
• Spon's (B & FN Spon) — a range of price books coveringmost areas of
construction;
• Laxton's— a range of price books coveringmost areasof construction;
• ti Wessex — a rangeofprice books coveringmost areas of construction;
• Griffiths Building Price Book;
• BuildingMaintenanceInformation'sBuildingMaintenancePriceBook;
and
• GleniganCost Information Services — Material Price Guides.
Note: Currenteditions of price books are available from RICS Books.
A2.3 PublishedIndices
• tenderindices andcost studies on regional variations— BCIS;
• the published indices ofthe Departmentof the Environment,Transport
and the Regions;
• PriceAdjustment Formulaefor ConstructionContracts(NEDO) Indices
Department ofthe Environment,Transport andthe Regions;
—
• Architects'Journal; and
• Building.
A3 TheUse ofPublishedInformation
The following points should be consideredcarefully when using any ofthe

above information:
• differential rates of inflation on various aspects/elements of the
building;
• acute shortages in specifictrades at differenttimes;
• regionalvariations;
• market conditions applicableto informationbased on project specific
information such as elemental costanalyses and bills of quantities;
• external publishedinformation;
The Surveyors'Construction Handbook Part 2, Section1, EffectiveFrom 1/6/98 Page 1

ndi(4/98)
67
• consideration of the tenderperiod of the analysis and its relationshipto

the currentprojects tender period;
• high levels of inflationdemand constant checking and revision of rates
andprices;
• the assumptionthat cost information in elementalcost analysis is ten-
dered price information, whereas a significant amount could be in
prime cost or provisionalsums;
• initial quotationsfrom specialists are likely to be low;
• building regulations can be statutorily amended, e.g. energy conserva-
tion measures have increased the 'U' value (a measurementof thermal
resistance) requirements for insulation properties of roofs and walls.
Care must thereforebe taken to ensure that the analysis usedis consis-
tent with currentbuilding standards;
• firmprice or fluctuating contract terms;
• special planning conditions applying either to the analysed or to the
currentproject; and
• site-specific constraintsin either the analysed or currentproject.
Page 2 Part 2, Section 1, Effectivefrom 1/6/98 TheSurveyors' ConstructionHandbook

AppendixB(4/98)
68
Appendix B: Format of Budget and Cost Plans
BI OBJECTIVE
B1.1 To communicate clearlythe basis ofthe budgetand cost plans to the

client, designerand consultants.
B2 FORMAT
B2.1 The presentationof information to the client and design team shouldbe of
a high standard. Budget and cost plans resultfrom the application of a high
level of professionalskill, and the format of documents should reflect the
importance that the profession attaches to this service.
B2.2 The example format included here is intended to be an example of good

practice showingthe main areas of informationthat may require coverage.
The presentationand content will need to be adjustedto meet the specific
requirements of individual organisations and their clients. The 'Report to
Client and Design Team' is intended as a guide as to what can be provided
to a client to ensure that there is a clear statement of the budget or cost
limits, its inclusions and exclusions, together with the total programmeto
which the budget relates and the standards which have been used in its
calculation.These are client orientated. Provisionis made for the quantity
surveyor to suggest alternatives which the client may wish to consider. A
copy of informationalso sent to the client should also be sentto the design
team.
B2.3 Additionalinformation to be sent to the designteam once the costplan is

prepared is set out in the 'Report to the Design Team'. The main
parameters affecting the cost targets should be clearly set out.
B2.4 The level of detail to be included in these documents should relate to the
size andcomplexityof projects. Simpleprojects may require less informa-
tion than shownin the example; complexprojects significantly more.
The Surveyors'Construction Handbook Part2, Section 1, Effective from1/6/98 Page 1

AnnqjxB (4/98)
REPORT TO CLIENT AND DESIGN TEAM (referred to in B2.2 of this Section)
CONSTRUCTION BUDGET AND PROGRAMME

Client
Project
Location
r
Budget serial number:
COSTS(for basis see sheet )

Price base date: 19
New building work:
Site works:
Alterations:
Construction Costs (at stated price base)
Estimated inflationto probable tender date of
Construction Costs at Tender
Estimated increased costs payableto

contractors duringconstruction period
Construction Costs at Completion
Professional Feesof All Consultants

including expenses
Value Added Tax — On construction %
On fees %
Total Budgetof Construction Works and Fees
Exclusions from budget
Page 2 Part2,Section 1, Effective from1/6/98 TheSurveyors'ConstructionHandbook

Appendix B (4/98) 7O
REPORT TO CLIENT AND DESIGN TEAM (continued)
TIME
Preliminary/Final Programme (weeks)

as Budget Cost Alternative 1 Alternative 2
Client decision to accept budget and proceed 0 0 0
Final brief and scheme design approved
Receipt of first tenders
Formation of contract
Construction commencement
Client occupation: phase

phase
phase
phase
Total Cost Variation (including fees)
Contractorand /or construction implicationsof programme
The alternativetime scales shown make the following assumptions:
Alternative1
Alternative2
CASH FLOW FORECAST -

Quarterlyfrom acceptanceof budget and authority to proceed (including fees)
IQ 2Q 3Q 4Q 5Q EQ 7Q 8Q EQ 1OQ 11Q 12Q Balance Total
AsBudget Cost
Alternative I
Alternative 2
Note: All figures in thousands Construction commencement quarterindicated by 'C'

Occupation quarter indicated by '0' Balanceshown normallypayable during first year of occupation
The Surveyors' ConstructionHandbook Part 2, Section 1, Effectivefrom1/6/98 Page 3
-1I
PART 2, SEcTIoN 1, APPENDIX B
BASISOF BUDGET
Areas
Schedule of accommodation Area m2 Mm. floor to Max. floor Comment

ceiling height (m) loadings — kN/m2
TOTAL FLOORAREA
Quality Standards
Externalelevations:
Internal finishes:
Heating& ventilation:
Lighting:
Site works:
Other (specify):
Exclusionsfrom budget:
Page 4 Part 2,Section 1, Effective from1/6/98 The Surveyors' Construction Handbook

- - -
AppendixB (4/98) 72
Alternative standards
Alternatives Cost: Comment

extra/saving
Budget preparedby:
Signature: Date:
Firm:
TheSurveyors'ConstructionHandbook Part 2, Section 1, Effectivefrom1/6/98 Page5 -
AppendixB (4/98)
REPORT TO DESIGN TEAM (referred to in B22 of this Section)
TECHNICAL QUANTITY ANDQUALITY PARAMETERS
Budget serial number
BUILDING
Quantity
Grossfloor area m2
Maximum square index (Perimeter on plan m.)
No. of storeys Floor to ceiling heights:

lowest floor m.
intermediate floors m.
highest floor m.
Floor/roof zone m.
Calculated external wall/floor ratio Proportion of glazed external wall area %
Density of vertical division (length of partitions and internalwalls measured over

dooropenings m.)
Calculated partition/floor ratio
Lifts Number Type
Stairs: numberof flights
Structural
Ground bearing pressure kN/m2 Ground water level
Floor loadings: Ground kN/m' (maximum live)

Intermediate kN/m (maximum live)
Highest kN/m' (maximum live)
Roof loading: kN/m' (maximum live)
Environmental
Fabric'U' values: Roof W/m2C
Walls (average) W/m2'C
Ground Floor W/m2'C
Air change rates and air temperature

(Specify spaces and rates/hourand minimum temperatures)
Heating load kW ( W/m2)
Hot water load kW
Page 6 Part 2, Section 1, Effectivefrom1/6/98 TheSurveyors' Construction Handbook

Appendix B (4/98)
74-
PART 2, SEcTION 1, APPENDIX B
REPORT TO DESIGN TEAM (continued)
TECHNICAL QUANTITY AND QUALITY PARAMETERS (continued)
Lightinglevels
(Specify spaces, lux level and load in W/m2)
Total lighting load kW ( w/m2)
Total power load kW ( w/m2)
Special areas with higher than average service or other costs (specify)
Other
External Works
Site area hectares
Road area m2 Car Parking: Number of spaces No.
Area m2
Pedestrian paved ares m2
Boundary walls or fencing m2
Other
If quantitiescalculated from drawings state drawing number(s) etc.
TheSurveyors' ConstructionHandbook Part 2, Section 1, Effectivefrom1/6/98 Page 7

AppendixB (4/98)
COST PLAN Building
Element Total cost Cost per m2 Element unit Element unit

quantity rate
1 Substructure
2A Frame
2B Upper floors
2C Roof
2D Stairs
2E External walls
2F Windows and external doors
2G Internal wallsand partitions
2H Internal doors
2 Superstructure
3A Wall finishes
3B Floor finishes
3C Ceiling finishes .
3 Internal finishes
4 Fittings
5A Sanitary appliances
5B Services equipment
5C Disposal installations
5D Water installations
5E Heat source
5F Space heating and air treatment
5G Ventilating systems
5H Electrical installations
51 Gas installations
5J Lift and conveyorinstallations
5K Protective installations
5L Communicationsinstallations
5M Special installations
5N Builder's work in connection
50 Builder's profit and attendance
5 Services
Building sub-total
6A Site works
6B Drainage
6C External services
6D Minor building works
6 External works
7 Preliminaries
Total (less contingencies)
8 Contingencies
Construction costs
Page 8 Part 2, Section 1, Effectivefrom1/6/98 The Surveyors' ConstructionHandbook

Appendix B (4/98)
SPECIFICATION Building
Elements Specification included in Alternatives Cost + or —

budget/cost plan
1 Substructure
2A Frame
2B Upper floors
2C Roof
2D Stairs
2E External walls
2G Internal walls and partitions
2H Internal doors
3A Wall finishes
3B Floor finishes
3C Ceilingfinishes
4 Fittings and furnishings
5C Disposal installations
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AppendixB (4/98)
77
SPECIFICATION Building
Elements Specification included in Alternatives Cost + or—

budget/cost plan
5E Heat source
51 Gas installations
5J Liftandconveyor installations
5L Communication installations
5N Builder's work in connection with

services
50 Builder's profit and attendance on

services
6A Site work
6B Drainage
6D Minorbuilding works
Page 10 Part 2, Section 1, Effective from 1/6/98 The Surveyors' ConstructionHandbook

—
AppendixB (4/98)
REPORT TO DESIGN TEAM
COSTTARGETS
Building Price base 19
Elements Parameter Rate Target cost Cost per m2
The Surveyors' ConstructionHandbook Part 2, Section1, Effective from1/6/98 Pagell

AppendixB (4/98)
7c
Appendix C: Element Unit Quantities Generation for Hypothetical

Buildings
Where very little quantity information is available at the early stages of a project,
estimates of elemental quantities can be produced using standard formulae and
typical assumptions. Some of the most common formulae and some worked exam-
ples are given here.
WALLTO FLOOR RATIO
This is a simple method of expressing the relationship of the external walls to

internal floor area. It is the ratio ofthe area ofexternal walls (includingwindowsand
doors) to the gross internalfloor area.
Formulaw = e where e = area of external walls including windows

A and doors
=
A gross internal floor area
w = wallto floor ratio
SQUAREINDEX
This -is an alternative way of expressingthe relationship betweenthe floor area and
the external walls. It describesthe degree to which the perimeterlength of an actual
building exceeds that of a building of the same area which is a perfect square. Any
single storey building can be described, as can also multi-storeybuildings, with a
constant shape on eachfloor.
Formula s = p wherep = perimeterlength on plan

4'1 a a = area on plan (not the gross floor area in
multi-storey buildings)
s = square index
DENSITYOF VERTICALDIVISION
This density provides a coarse measure of the amount of partitioning, loadbearing

walls, etc. that a building contains. As the formula includes the perimeter of the
building, it takes into account the contributionto the enclosureof spaces that this
makes.
Formula d = ( p) + L where p = sumofthe perimeterlengths of a

A building measured on each floor
L total length of partitions, etc. measured
over doors
A gross internal floor area
d = densityof vertical division
The Surveyors'ConstructionHandbook Part 2, Section 1,

Append ix C (4/98)
—--Effectivefrom1/8/98
-
Page 1
Example of element quantity generation for a hypothetical building
ASSUMPTIONS
From brief, gross floor area 1350m2 (includingcirculation)

Site areadictates a two storey solution= 2 storeys
Average floor to ceiling height: 2.7 m.
Assumed floor/roof zone: 0.6 m.
Squareindex*: 1.4
Wall to floor ratio*: 0.7
Percentage of windowsanddoors in external walls*: 30%
Densityofvertical division*: 0.3
Area ofground floor = 675 m2
* These parameterscan be based on informationfrom typical or similar schemes.
CALCULATION OF ELEMENT UNIT QUANTITIES

Element Formulae Calculation Parameter
Substructure
A
— —1350
675 m2
n 2
IA\ —
1350\
=
Upperfloors (n—i) (— (2—1) J 675 m2
2 I
A +0.3(4s'Ti) 1350 + 0.3 (4 X 1.4 'J7)

Roof area on plan — — = 718 m2
n 2
(0.3isassumedwallwidth)
A X1 1350 X 0.7 = 945 m2

External walls(md.
windows &externaldoors)t
or
n (4s'fi)
x (Floor ceiling height+zone)
2(4 x 1.4 'I) (2.7+0.6) = 960 m2
Internal vertical dA—n(4s'Ji) (0.3X 1350)—2(4 x 1.4'17) x 2.7 = 700 m2

division
2 2
x Floor toceiling height
Gross floorarea 135Dm2
The quantities calculated in this, or similar ways, can then be used with selected
element unit rates to calculate budgets and cost plans for projects in the earliest
stages of design, or for checking the approximate cost difference of alternative
design solutions.
tApercentagecan be used to split 'wall' from 'window', e.g. window anddoor area
externalwalls X w = 945 m2 X 30% = 284 m2.
Page 2 Part 2, Section 1, Effectivefrom1/6/98 The Surveyors' ConstructionHandbook

AppendixC(4/98)
PART 2, SEcTIoN 1, APPENDIX C
where A= gross floor area

n= number of storeys
a= groundfloor area
s= square index
f= floor to wall ratio
d= densityof vertical division
w= percentage of windowsanddoors in external walls.
The Surveyors' Construction Handbook Part 2, Section 1, Effective From 1/6/98 Page 3
Appendix C (4/98)
PART 2, SECTION 1, APPENDIX D
Appendix D: FurtherReading
A selection of further reading is given below. Whilst not comprehensiveit is consid

ered to be appropriate. Copies of articles and older books are available from the
RICS Library whilst currentbooks are available from RICS Books.
BOOKS
Ahuja, Hira N. Successful ConstructionCost Control, John Wiley & Sons,

NewYork, 1980
Ashworth, A. Building Economics and Cost Control: WorkedSolutions,

Butterworths, London, 1983
Ashworth, Allan. Cost StudiesofBuildings, Longman ScientificandTechnical,

Harlow, 1994
Bathurst, PeterE. and Butler, DavidA. BuildingCostControl Techniques and

Economics, Heinemann, London, 1973
Bathurst, Peter E. and Butler, DavidA. BuildingCostControlTechniques and

Economics, Heinemann,London, 1980
Brandon, Peter, S. BuildingCost Techniques: New Directions,B & FN Spoil, 1982

{0419129405]
Brandon, P.S. (ed.) CostModellingand Computers, B & FN Spon, London, 1987
Building Cost InformationService. Elementsfor Design andBuild, BCIS Ltd, 1996
Building Cost InformationService. InstructionsandDefinition, BCIS Ltd, 1979

(Reprinted 1995)
Cartlidge, DuncanP. and Mehrtens,Ian N. Practical CostPlanning: A Guidefor

Surveyors andArchitects,Hutchinson,London, 1982
Ferry, Douglas J. andBrandon, Peter S. CostPlanningofBuildings,

BSP Professional Books, 1991 {0632023678]
Gruneberg, Stephen L. and Weight, David H. FeasibilityStudies in Construction,

Mitchell, London, 1990
Institution of CivilEngineers.ManagementofInternational ConstructionProjects,

Thomas Telford, London, 1985
Jaggar, D.M. CivilEngineeringCostAnalysis(CECA), LiverpoolJohn Moores

University, BCIS, 1997
Kharbanda, O.P. andStaliworthy, E.A. Project Cost Control inAction,Gower

Technical Press,Aldershot,Hants, 1987
The Surveyors'ConstructionHandbook Part 2, Section1, Effectivefrom 1/6/98 Page 1.

AppendixD(4/98)
PART 2, SEcTIoN 1, APPENDIX D
Latham,M., Sir. Constructingthe Team: Joint Review ofProcurement and

ContractualArrangementsin the UnitedKingdom ConstructionIndustry Final
Report,HMSO,London, 1994
Miller,Francis.Buildingand Civil Engineering Cost-Value Comparisons,Ruthtrek

Limited,Heme Bay, Kent, 1992
Morton,R. andJaggar, D. Design and the EconomicsofBuilding,E & FN Spon,

1995
Neil, James N. ConstructingCostEstimatingfor Project Control,Prentice Hall Inc.,

1982
Nisbet, James.Estimatingand Cost Control,B.T. Batsford Ltd., 1961
Pilcher, Roy.Project Cost Controlin Construction,Blackwell Scientific

PublicationsLtd, Oxford, 1994
Royal Institutionof CharteredSurveyors. TheProcurement Guide, RICS Books,

1996
Seeley, Ivor H. BuildingEconomics:Appraisal and ControlofBuilding Design,

Cost andEfficiency, Macmillan,Basingstoke,1996
Stone,PeterA. BuildingDesignEvaluation: Costs-in-Use, B & FN Spon Ltd. 1967
Stone,Peter A. BuildingEconomy, 3rd edition, Pergamon, 1983
Ward, Sol A. CostEngineeringfor Effective Project Control,John Wiley & Sons,

New York, 1992
Wilson, R.M.S. Cost ControlHandbook,Gower Publishing,Aldershot, Hants, 1983
ARTICLESAND REPORTS
Abdullah, R.Z. Meetiiig the Problems of Cost Control Systems.Building Technology

andManagement24(4) August/September1988, 14—16(3)
Baxendale, A.T. "Integration of Time andCost Control". CharteredInstitute of

Building,ConstructionPapers 7, 1992
Betts, M. ConsultantCost Controlin The PacificRim. CostEngineering, 34 (1)

January 1992, 17—24 (8)
Bowen, P. InterpersonalCommunicationin Cost PlanningDuring the Building.

ConstructionManagement& Economics, (1996) 14, 395—404 (10) [ABS55769]
Costing Services. Building Services14(11) November1992, 25—31 (7)
Farrow,J.J. and Rutter, D.K. "PerformanceSetting and Monitoringon Building

Projects". CIOB ConstructionPapers 67, 1996
Page2 Part 2, Section 1, Effective from 1/6/98 TheSurveyors' ConstructionHandbook

AppendixD (4/98) - - -- —
PART 2, SECTION 1, APPENDIX D
Ferry, D.J.O. "Life CycleCostñg: A Radftá1 Approach". CIRIA Report 122, 1991
Gilmour, J. ANew Approachto Early Stage Estimating. CharteredQuantity

Surveyor, 11(9) May 1989, 36—38 (2) [ABS40876]
Kaka, A.P. ModellingStandard Cost Commitment Curvesfor Contractors' Cash

Flow. ConstructionManagement& Economics, 11(4) July 1993, 271—283 (13)
Ministry of EducationBuilding BulletinNo. 4. "Cost Study". First Edition March

1951, SecondEdition March 1957,Third Edition 1972
Ministry of Public Building& Works/International TuterMachines Ltd. "Cost

Controlin BuildingDesign".R & D BuildingManagementHandbook, HIvISO,
London, 1968
Morris,A. ARationalApproachto Cost.Building,260 (7889) 21 April 1995, 33 (1)

[ABS52660]
Organisation for Economic Co-operation and Development. "School Building

ResourcesandtheirEffectiveUse", 1966
Skitmore, M., Stradling,S., Tuohy,A. andMkwezalamba, H. "The Accuracy of

ConstructionPrice Forecasting",University of Salford, 1990
Southgate, T. ANew Approach.Chartered QuantitySurveyor, 11(3) November

1988, 35—36 (2) [ABS40177]
Watson, B. Cost PlanningEngineeringServicesContracts.CostEngineer,28(4)

1990, 8—10 (3) [ABS43 111]
Watson, K. Procurement— The Key Area for Cost Control. Construction Computing,
(52)April 1996, 12—13 (2)
The Surveyors' Construction Handbook Part2, Section 1, Effective from1/6/98 Page 3

AppendixD(4/98)
PART TWO: CONSTRUCTION DESIGN & ECONOMICS
SECTION 2: LIFE CYCLE COSTING
Introduction
It is becoming increasingly important that investment appraisal uses a

whole life approach in a more systematic way than at present. Major con-
struction clients are now insisting upon an analysis of life cycle costs and
notjust capital costs.
The life cycle cost (LCC) of an asset is defined as the present value of the
total cost of that asset over its operating life (including initial capital cost,
occupation costs, operating costs and the cost or benefit of the eventual
disposal ofthe asset at the endofits life).
Life cycle costtechniques can be used,for example,to:
• evaluate design options at the elementalor component level;

• evaluate total building options, for example refurbishment versus
newbuild;
• determine optimummaintenancestrategies;
• analyse relocation strategies;and
• determine sinking fundrequirementsto finance plannedmaintenance
programmes.
Worked examples forthe above are included in 2.2.5.
The objective of this Section is to inform chartered surveyors of the

increasing need to adopt life cycle costing (2.2.1) and to introduce them to
the techniques andtheir application.
2.2.1 The Client Context
2.2.1.1 Following the recessionofthe early 1990sconstruction clients aregenerally

more streamlined and competitive and some recognise that their ongoing
property costs may provide them with the business 'edge' they need. There
is therefore increased attention to life cycle costing. The following Sub-
sections expand on this trendby coveringrecent changes inthe industry and
theireffect on LCC.
2.2.1.2 VALUEENGINEERING
Value engineering involves preparing structured option appraisals during
the design process so demonstrating value for money for clients. Its use is
The Surveyors' Construction Handbook Part2, Section 2(4/99) Effectivefrom1/6/99 Page 1

increasing and with it comes the opportunity and need for LCC to be part
ofthe options appraisal criteria.
2.2.1.3 THE LATHAM REPORT
Sir Michael Latham's report Constructingthe Team1, calls for a 30% real
reduction in construction costs. This statement includes life cycle costs.
The report also strongly advocates the need to 'build right first time' in
which environment life cycle cost calculations (involving assumptions
about future maintenance) have morecredibility.
2.2.1.4 CONSTRUCTION (DESIGN AND MANAGEMENT) REGULATIONS 1994

The Construction (Design and Management) Regulations 1994 place a
specific duty upon clients and their designers to consider the potential
hazards associated with the construction process during design, and
furthermore to consider the health and safety implications of maintaining
the structure when complete. Such increased focus on maintenance may
therefore encourage greater consideration of maintenance costs. This
principleis enshrined in Regulation13(2)(a)(i) and (ii) which states:
"(2) Every designershall:
(a) ensure that any designhe preparesand which he is aware will

be used for the purposesof constructionwork includes among
the design considerationsadequateregardto the need:
(i) to avoid foreseeablerisks to the health and safety of

any person at work carrying out construction work or
cleaningwork in or on the structure at any time, or of
any person who may be affected by the work of such a
person at work,
(ii) to combat at sourcerisks to the health and safety of any

person at work carrying out construction work or
cleaningwork in or on the structure at any time, or of
anyperson who may be affectedby the work of sucha
person at work."
It follows that the selectionof materialsfor certain elements of a structure

that may involvemaintenance, (particularly where access to those elements
involvesworkingat height), complies with the spirit of Regulation 13. For
example, the selectionof PVCu windowframes with 'easy clean' hinges
involves limited maintenance and allows cleaning from the inside.
Similarly marble flooringis cheaper than cork tiles over a 60-year period
and whilethe decisionto use marbleis economicallysound it also removes
health hazardsassociatedwith fumes and vapourreleased when cork has to
1 Latham,M., Sir,
(1994), Constructing the Team: Joint Review ofProcurementand Contractual
Arrangementsin the United Kingdom Construction Industry:Final Report,HMSOLondon
Page 2 Effectivefrom1/6/99 Part 2, Section 2(4/99) TheSurveyors'ConstructionHandbook
87
be resealed. In purely capital cost terms, the selection of the materials
referred to above may be more expensive than their traditional counter-
parts.
The use of life cycle costing places initial capital cost in the context of
future maintenance expenditure, and helps justify decisions which have
beneficialhealth and safety implications.
2.2.1.5 Tiii PiUVATEFINANCETMTIATIVE(PFI)

The PFI is driven by a cash flow which is achieved by the private sector
provider delivering a service to the client. This service will include the
management of a building which should be heated, cooled, lighted,
cleaned,maintained, secured,insured andrenovated. This cash flow should
sufficiently cover all costs and outgoings, leaving the provider with a
surplusor profitwhich shouldbe commensuratewith his risk exposure.
It is therefore critical that the provider accuratelypredictsthe costin use of

the service or the facility over its operational life so that he can calculate
the cash flows generated by the assets over the term of the contract. Such
data is vital so as to negotiate the complexities of the contract to both
parties' satisfaction. To assist this process some suppliers give guaranteed
long-term costs, e.g. for lifts and kitchen equipment. By reducing costs
over this term it should be financially viable for the private sector to
provide a serviceto the public sector andto achieve an acceptable return.
Life cycle costs and their accurate prediction, control and reduction are
critical to the successful performance of a PFI deal.
2.2.1.6 ENERGY EFFICIENCY IssuEs IN RELATION TO BUILDING PROJECTS

Studies by the Building Research Establishment through the BRECSU
(Building Research Energy Conservation Support Unit) 'Best Practice
Programme' have found that energy consumed to heat, light and service
buildings accounts for almost half of the UK's energy bill, and there is
considerablescope to reduce it. Office buildings were found to have the
highest energy costs, especially prestigious, air conditioned property
(typically £20/rn2 per year in 1991 compared to £15/rn2 for the same 'best
practice' office).
There is commonfeeling that property overheadsare too large,with energy

bills contributing significantly to the operating costs. Energy costs are
potentially one of the most controllable items of overheads and life cycle
costing can be used as a tool for predicting the benefits of investment in
energy efficiency. Typical investments for analysis would be economic
thickness of insulation, energy efficient services, building energy manage-
ment systeminstallations, intelligentbuildings, energy conscious refurbish-
ment of buildings and passive cooling techniques versus air conditioned
design. For example, a manufacturercan supply a light bulb some ten times
more expensive that a normal one, however, it lasts longer, uses less
The Surveyors' Construction Handbook Part2, Section 2(4/99) Effectivefrom1/6/99 Page3

electricity and performs better. Similarly, condensing gas boilers can save
10—20% of fossil fuel bills with payback in five years.
It is also worth noting that oil is bec6ming increasinglyharder to extract

andenvironmentalconcerns generallywill increase in the very near future.
Sainsbury has been the first grocery retailer to produce an environmental
report and recognises that energy probably accounts for its single biggest
direct environmental impact. Significantly it is also the third largest
controllablecostin running atypical supermarket.
2.2.1.7 MECHANICAL AND ELECTRICALBUILDING SERVICES

The increasing capital cost significance and complexity of M & E services
has resulted in greater cost emphasis during the early design stages. Such
costing is increasingly carried out by a specialist Quantity Surveyor so
bringing greater opportunity to focus on M & B life cycle costs which are a
significant proportion of a building's cost in use, accounted for by the
operation, energy use and replacementcosts associated with the M & B
installations.
2.2.1.8 BUILDING SUSTAINABILITY

If there is to be a consciousshift of opiniontowards sustainable buildings
i.e. those which have a viable life expectancy beyond their initial designed
use, then there has to be a simultaneous re-examination of a building's
costs in use or perhapsmore correctly costs in uses.
Buildings have not been traditionally designed for anything beyond their
immediate requirement.However, as more are being converted to alterna-
tive uses it is probably only a matter of time before investors in property
callfor propertiesto be constructed with a view to extendingthe building's
usable life, e.g. conversion to house a growingless mobile andaged popu-
lation. Such consideration is more valid the shorter the predicted current
building life, e.g. some light industrial units for English Partnerships have
been designed for a ten-yearlife. Similarly, HertfordshireCounty Council
have housing and nursing homes with a 20-yearlife expectancy.
Such a concept will require building layouts and structures to be more

flexible with maintenance, re-servicing and conversion to alternative uses
being simplified andmade more economical. A costin use study at design
stage may justify larger bay sizes, raised flooring or greater storey heights
to demonstratecontinualviability for future generations.
A costin use study wouldexplore the economicsinvolved of using a build-

ing for its notional design life and for its intended use in the usual way.
However, supplementary investigations would explore potential alternative
uses for the building and the conversion cost (and possibly the cost in use
for afurthernotionalperiod).If sufficient consideration were to be given at
the initial design stage for potential future uses of a building, it could be
used to demonstrate the continued asset value of the property and go a
Page 4 Effectivefrom1/6/99 Part 2, Section 2(4/99) TheSurveyors'ConstructionHandbook

considerableway to minimisingthe obsolescentpropertieswhich currently
dominatecertainmarket sectors.
2.2.2 The Life Cycle Costing Calculation
INTRODUCTION
The calculation generally involves the appraisal of options, each option
having different capital and future costs. To determine and analyse the
future costs it is necessaryto establish:
• the buildinglife;
• the discountrate (which, expressedsimply, is the differencebetween
the interest and inflation rate andis used to convert future payments
to presentvalues);
• the cost and frequency of future payments (at the component,
elemental or total building level as appropriate);
• any tax implications (see 2.2.3).
2.2.2.1 THE BUILDING LHE

An essentialelementoflife cycle costingis definingthe life cycle periodto
be adopted.An assessment must therefore be made of the life of the invest-
ment — 'building life'.
Typically the relevantbuilding life willbe the period over whichthe organisa-
tion, for whom the study is being conducted, will be expected to hold an
interestin the building, and wouldtake intoaccount the residual value.
At the end of the life of a building, the building (or component) and the
land will have a residual value. In the case of relatively short life cycles or
high value land, residual values can be very significant factors in deter-
mining the optimum life cycle cost options. Residual values are briefly
discussed in AppendixA (and worked example 2.2.5.3 includes a residual
value in the calculation).
When the buildinglife is assessed to be over 40 years, the precise life is not
critical for the purposes of life cycle costing (as discounting, explained
below, minimisesthe effectof such futurepayments).In cases where calcu-
lations are based on a relatively shortbuildinglife, say 20 years or less, the
assessmentofthe time horizons must be consideredwith special care.
Building life is influenced by obsolescence, the causes of which are

summarised inAppendixB.
2.2.2.2 THE DISCOUNT RATE

The life cycle cost technique is concernedwith the assessmentof the time
stream of costs and revenues that will flow throughoutthe life of a con-
structionproject option.
The Surveyors'ConstructionHandbook Part 2, Section 2(4/99) Effectivefrom1/6/99 Page 5
cic
As 'money today' has a different value from 'money tomorrow' or 'money
in ten years' time', a technique has to be adopted that will express future
costs or revenues in present values. The process of converting 'future
money'to 'present money' is calleddiscounting.
Discountinginvolves establishing the discount rate to be used. In making

the decisionon a discountrate for a particular project, somejudgement will
need to be made about the degree of risk return (interest) and the likely
levelsof futureinflationrates.
Interest rates are particular to the client and the degree of risk. It is there-
fore essential to involvethe client (and his accountantif appropriate)in the
process andreach agreementon the discount rate to be used.
Economists, accountants and clients will all have different views about
future levels of inflation and interest rates. Some forecasters may take the
view that as different categories of cost inflate at different rates, these
differences should be taken into account in setting discount rates. These
diversitiesof view 'before the fact' makeit difficultto recommendanyfirm
guidelinesfor surveyorsto adoptfor selectingdiscount rates.
There are two main approaches to discounting:
(a) use a rate which 'implies' inflation of future costs and values (in this
casefuture costs and values will be pricedat today's prices);
(b) use a rate which requires an 'explicit treatment' of inflation in relation

to future costs and values, (in this case future costs and values will be
priced at today's prices and adjusted by a factor to reflectfuture inflation).
It is suggestedthat it is easier to dealwith the former situation where future

costs and values are assessed at current prices. Three approaches on the
selectionof discountrates are given for guidance purposes and in each the
future costs are priced at current prices.
2.2.2.3 DiscouNT RATE METHODS
(a) Test DiscountRate

In the absence of better information it is recommendedthat a test discount
rate should be used.
This recommendationis based on the assumption that when inflationrates

are reasonably low, i.e. less than 15%, there is quite a stable relationship
between inflationand the bank base interest rate, implying a real discount
rate of between 4% and 5% (i.e. the interest rate is 4 to 5% greaterthan
inflation). It is recommendedthat in the circumstances, where no better
Page6 Effective from1/6/99 Part 2, Section2(4/99) The Surveyors'ConstructionHandbook
9!
informationis available, a test.discount rate of 4% is used. This method is
often adopted in the public sector where minimal risk associated with the
investmentis assumed.
(b) No risk return discountrate

Investmentin long-term Treasury Bonds can be assumed as having no risk,
and are a good reflection of the return to be expected on other investments
where there is no risk. Therefore the discount rate can be taken as the
TreasuryBond rate less an allowance for the expectedrate of inflation. On
thisbasis the discount rate would be assessed as:
TreasuryBond rate of return 8%

Less
Inflation 5%
No risk return discountrate 3%
(c) Averagerisk premium discount rate

The average return on equities reflects the interest required on an average
risk. The excess of this rate of return over that expected from the above
TreasuryBonds can then be taken as the premium expectedfor the average
risk. On this basis the average risk premium could therefore be calculated
as:
Averageequityrate return 16%

Less
TreasuryBond rate 8%
Average risk premium discount rate 8%
Therefore if construction is deemed to be half as risky as equities, the

discountrate for constructioninvestment could be assessed as:
No risk return 3%
Constructionpremium risk (8% X ) 4%
Averageconstructionrisk return discount rate 7%
(d) A further approachto establishing a discountrate is to analysetransac-

tions involving the sale of comparable properties, and to utilise the 'all
risks'yield as the discountrate.
In the examples of the calculation ofdiscount rates, concurrentinterest and

inflation rates have been added and subtracted in order to clarify the
methodology. This is mathematically imprecise. The actual calculation will
need to be compounded.

In the 'no risk return discount rate' method, for example, the calculation
should be as follows:
TreasuryBond rate of return 8%

Inflationrate 5%
Discount rate (i.e. TreasuryBond rate net ofinflation)
—
—
(1 + Treasury Bondrate)
(1 + Inflation rate)
1.08
= 0.02857
2.857%
The same methodology should be adopted for actual calculations using

other methods.As an approximation howeverthis maybe ignored.
(e) In summary, the effect of futurepaymentson an LCC calculationis in

inverse proportion to the level of discountrates i.e. the higher the discount
rate the less effect future payments have on the LCC calculation. For
example, a risk taking client is less likely to spend money on the building
to reduce future costs since he can use this money to get a higher return
elsewhere.
Selectionofa suitable discountrate is crucialas it can overwhelm all other

decisions.
Once the discount rate is established valuation tables can be used to

convert future payments to present value. For example, the present value
of £100 to be paid in five years' time at a discount rate of£4%
£100 X 0.82192 (from valuationtables at 2.2.5.7 'present value of £1') =

£82.19.
Such conversion of future paymentsto present value provides a basis for

comparing alternativeexpenditures.
2.2.2.4 TIE COST AND FREQUENCY OF FUTURE PAYMENTS

The costs are generally dealt with using current prices (using the discount
rate to allow for inflation), with assumptions made regarding when pay-
ments will occur in the future. 2.2.4 includes possible sources for such data.
Depending upon requirements, some calculations will be relatively

straightforward (see the option appraisal exercise for internal doors as
Page8 Effective from1/6/99 Part2, Section2(4/99) The Surveyors' ConstructionHandbook

shown in the worked examples). However, all expenditurethroughout the
life of the building could be included if the total building analysis were
required.
Themajor categories ofcosts are:

• capital costs
• financingcosts
• operationcosts
• annualmaintenancecosts
• intermittentmaintenance,replacement andalterations costs
•
occupancycosts
• residual values and disposal costs.
An expandedcheck list of costs is given in Appendix C.
Estimates for these costs will be based upon assumptions about future
events and should be clearly stated. Indeed an additional advantage of life
cycle costing is that it requires design assumptions to be stated explicitly
ratherthan implied.
Although current costs are generally used, it is important that future cost
assessmentshould reflect any expected divergenceof a specific cost from
the level of inflationallowedin the discount rate. For example, it would be
unwiseto assume that market conditions would remain unchangedfor any
extended period when tender levels for building work are very depressed.
Some allowanceshould therefore be made to adjust current building prices
to more normal market conditions when pricing future building work.
The level of detail used will be dictated by the availability of infonnation

and the requirementsof the client.
The following costs for each category should be considered and where
necessaryestablishedwith the client.
(a) Capital costs — include land, building, professional fees, furniture and
equipment,or permanentimprovements thereto, which form assets for the
business to use in its operation, with an intended useful life of more than
one year. The significance of any tax benefits and grants should be estab-
lished with the client.
(b) Financing costs — the methodof funding the project should include,
inter alia, the cost effect of alternative sources of funds, the future flexi-
bility of funds in terms of amounts and sources, andgearing. Consideration
shouldalso be givento
• the accountingeffect of capital employed;
• constructionperiod finance charges andlong-term finance costs; and
• the taxationimplicationsof the various options.
The Surveyors' Construction Handbook Part2, Section 2(4/99) Effectivefrom 1/6/99 Page 9
(c) Operation costs — include estimates of rent, rates, energy costs, clean-
ing costs, building related staffing costs andother staffing costs.
(d) Annual maintenance costs — average maintenance costs are available

but once details of design are completed,a more relevantestimate can be
produced based on information obtained from manufacturers or main-
tenance managers.
(e) Intermittent maintenance, replacementand alteration costs — replace-

ment costs canbe produced using normalcost estimating techniques.
In seeking a realistic assessment of the life of materials and components,

reference should be made to manufacturers, maintenancemanagers and
other sources ofsuch data(as discussedin 2.2.4).
(f) Occupancy costs — the cost of performing the function for which the
building is intended (e.g. producing motor vehicles). Occupancy costs are
distinguishedfrom operation costs, as they relate to costs attributableto a
specificprocess undertaken by the client,which may change withinthe life
of the building. As an example, a car manufacturermay change to the
production of heavy goods vehicles. This would impact on his occupancy
costs, whereas his building related operation costs could be relatively
unchanged. Some clients mightnot require the surveyorto take these costs
into account, as not relating directlyto the building.
(g) Residual values and disposal costs — estimate of the resale value and
the cost of disposing of the building, plant, land and other assets after the
expiry of the life cycle. Many buildings, particularly those with an 'open
market value' will have a significantresidual value. Care shouldbe taken in
assessingthis value as it can have a major effect on the life cycle costing
calculations (seeAppendix A).
2.2.3 Tax Allowances, Incentives and Business Rates
INTRODUCTION
This Sub-section deals with the effect of taxation allowances and incen-
tives available for expenditure upon property and construction applicable
in the United Kingdom to date, during the life of the asset. A glossary of
terms is included inAppendix D.
Currently,legislation offers tax relief by allowingexpenditure upon certain

assets to be depreciated, and to be offset against a private commercial
organisation's taxableprofits.
Tax relief is available on both capital and revenue expenditure. Capital

costs receive this relief by way of capital allowances which are deductible
items from the taxpayer's taxation liability account. Maintenancecosts are
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95
a charge on the profit and lois account, which again reduces the tax
payable.
The significanceof tax relief depends upon the amount of allowableexp-

enditure. This varies considerably,being dependent uponthe type and function
ofthe asset, its design and sophistication (particularly in respectof services)
andwhetheror notthe projectis anew building or a refurbishment.
The impact oftax relief on the life cycle evaluationlessensproportionately

with the ratio of allowableexpenditure to the total expenditureandthe tim-
ing ofrelief, which is dependenton the annual rate of taxationallowances.
For example,a new oil refinerywill have a greater proportion of allowance
than a shop unit shell. It is also worthnotingthat capital allowances tend to
be greater on plant than on buildings, so making the use of efficientplant
more attractivethan increasingthe thermalefficiency ofthe building.
The impact of tax relief shouldbe sensitivelytested at the earliestpossible

stage. A detailed estimate of the allowable expenditure should only be
prepared if tax relief is found to be significant.
2.2.3.1 The following example shows the net discounted cost, after tax relief, of
£1,000 spent on differingtypes ofexpenditure.
Where capital Where capital

allowances allowances
are allowed are allowed Relief given
on 50% of on 100% of on
capital capital maintenance
No relief expenditure expenditure 100%
£ £ £ £
Expenditure 1,000 1,000 1,000 1,000
Tax relief assuming 35%

Corporation Tax 1111 222 350
Net discounted cost after

tax relief 1,000 889 778 650
1 i.e. 50%of £1,000 x 25% reducing blancex 35% Corporation Tax withfuture allowancesdis-
counted at 10% per annum (a discounting calculation is required in order to establish the
above figures).
2.2.3.2 TYPES OF ALLOWANCES

The types of allowancesandrates of depreciation often change.
Following the FinanceAct 1985, capital allowances available that relate to

Real Property were as follows:
The Surveyors' Construction Handbook Part2, Section 2 (4/99) Effectivefrom1/6/99 Page 11

Allowable expenditure Timingor percentage per annum
Plant and machinery 25% (reducing balance)
Industrial buildings 4% (straight line)
Agricultural buildings 4% (straight line)
Dredging 4% (straight line)
Scientific research 100%
Cemeteriesand crematoria Ratio based upon grave spaces used
Dwelling houses let on assuredtenancies —
only expenditureexpended priorto
1 April 1987 4% (straight line)
Hotels 4% (straight line)
Enterprisezone building expenditure 100%
Mining and certain related construction works 40%plus a ratio based upon usable life
Subsequent to the Finance Act 1997 first year allowances were changed and
at the time of writingwere still being finalised.
In certain circumstances allowances may be at a higher rate i.e. they relate

to specific incentives, certain assisted projects or expenditure relates to a
transitionalperiod e.g. terms of the FinanceAct 1984 (applicable until 31
March 1987).
Different types of allowances, initial, first year and writing down are
explainedin the Glossary ofTerms (AppendixD).
Straightline allowancesare calculated as a percentage of original costand

at 4% the allowance is spread evenly over 25 years. A reducing balance
computation is achieved each year by first deducting all previous
allowance amounts from original cost and then applying the allowable
percentageto the balance, i.e. 25% in the first year, 25% of 75% in the
second, and so on. While the building itself may be subject to a 4%
straight line allowance the plant and machinery in the building will
receive a 25% reducingbalance.
It should be noted that the significant part of capital allowance relief on a

25% reducing balancebasis comes in the first five to seven years. This is
included in the above examplewhere the tax relief amount is a product of
the incrementalannualwritingdown allowance,discounted.
Regional developmentgrants (or their Northern Ireland equivalent) may

also be available. These are not treated as taxable and may be disregarded
when assessing the capitalcostupon whichtax relief is calculated.
Currentlythe running and maintenancecosts of an asset are deductible in

full (i.e. 100% allowance) againsttaxable profits in the year of expenditure.
2.2.3.3 VAWE ADDED TAX (VAT)

Capital allowances are given against the net capital cost to the taxpayer.
Therefore, as VAT is part of that capital cost, clients will incur differing
overall capital expenditure for the same item depending uponwhether they
can or cannot recover, or recover only a proportionof, the VAT.
Page 12 Effectivefrom1/6/99 Part 2, Section 2(4/99) The Surveyors' ConstructionHandbook

2.2.3.4 CALCULATEONOF THE EFFECT OF CAPITALAND REVENUEALLOWANCES
Before calculating the effect of taxation allowances, certain parameters
need to be ascertained:
(a) the CorporationTax and allowancesrate that will be current at the date
of construction of first use;
(b) the future Corporation Tax and allowance rate at the date of replace-
ment;
(c) the CorporationTax rate current at dates between date of construction

of first use and the date of replacement, against which revenue running
costs can be charged;
(d) whether the owner will be liable to tax during the period between the
date of construction or first use and the date of replacement, and if the
ownerwill have sufficienttaxable profits to use the allowances generatedin
any oneyear;
(e) whether the item's economic life will be shorter than the tax write
downperiod. This will either generatean added writedownamountwhen it
is demolished, or if the item or building is to be sold at the end of its
economiclife, its profit or loss on cost. These circumstances will generatea
taxable profit or loss on proceeds above or below the tax write down value
and will attracta balancing adjustment;
(f) the value of the balancing allowances, chargesor taxable profits needs
to be consideredagainst the relevant Corporation Taxrate;
(g) the impact ofthese adjustmentsthereforeneedsto betaken into account

in the life cycle costing assessment.
Caution is further necessary as there are specific restrictions. The recipient

has to prove to the Inland Revenue that he qualifies for allowances (i.e. the
entitlements are aimed at providing incentives for commercial organisa-
tions and therefore expenditure upon residential property is largely
excluded. Entitlements are also restrictedbetweenconnected persons).
2.2.3.5 DYNAMICS
The surveyor should therefore appreciate the variables and frequent
changesthat occur in respect to the application oftaxationallowances.
These arisebecause:
(a) the Governmentuses taxation to imposefiscalpolicy and influence the

economy and therefore statutes are introducedamending previous rates of
depreciation, regulationsand entitlements;
(b) the interpretationofentitlementis affectedby caselaw precedents.
96
(c) the InlandRevenuepracticesandextra statutory concessionsdevelop to
address specific issues or vagaries.
2.2.3.6 APPLICATIONS
Taxation allowances provide the opportunity for innovative funding
arrangements whereby the tax relief can be 'exported' to a party who can
enjoymorebenefitfrom the entitlement.
They also need to be advised during property transfers so the relevant

balancing adjustments can be calculated and the purchasersadvisedof their
proper entitlements.
2.2.3.7 WORKED EXAMPLES

Worked example 2.2.5.3 summarises the effect of capital and revenue
allowances. Worked example 2.2.5.6 includes a detailed calculation of the
capital and revenue allowances.
Business Rates
Large plant and machinery regarded as an integral part of the building can
attract additionalrates whichcan be influenced by designniceties (such as how
theplantis covered over). Expert advice should be sought in such a situation.
Furtherreadingfor taxation
Capital Allowances, Tolley Publishing Co. Ltd

Tolley 's — generally
publishedannually
Butterworths Yellow Tax Handbook, Butterworth & Co. (Publishers) Ltd —

abstract of Statutes
Tax Statutes and StatutoryInstruments,CCH Editions Ltd — incorporating

extra statutoryconcessions
2.2.4 Data Sources
Lack of data in a suitable formatfor maintenance,replacement and energy

costs is said to be a significant reason for LCC rarely being carried out at
present. Notwithstanding this, Building Surveyors and Facility Managers
will often have valuable in-house data. Furthermore, professional judge-
ment shouldnot be disregarded.
LCC calculations requireinformationregardingthe durability of materials!

components, and/or energy costs. Lack of such accurate data in suitablea
format may affect the credibility of the LCC calculation.However, while
historic datais useful, reality is dependent upon individual design, installation
and usage as well as technicaldevelopment.
Page 14 Effectivefrom 1/6/99 Part 2, Section 2(4/99) TheSurveyors'ConstructionHandbook
ct9
Whilst the selection of,data sourcesgiven in AppendixF is not comprehen-
sive, it gives an indication of the level of information available. Trade
literature which is a prime source of detailedinformationis not included.
2.2.5 Worked Examples
INTRODUCTION
Life cycle costing can be usedin numerous situations.The intentionof this
Sub-sectionis to give the reader an appreciationof its application, as used
by surveyors in practice, and the relative complexitiesof associatedcalcu-
lations, ranging from a simple elementaloption appraisal to complex total
building analyses.
The examples follow in order of complexity, worked examples 2.2.5.1 and

2.2.5.2 will readily convey the principles of life cycle costing including
discounting. The remainder consider more detailed scenarios.
2.2.5.1 DESIGNOPTION: INTERNAL DooRs

This example is kindly provided by Messrs Gardiner & Theobald,
Chartered Quantity Surveyors.The objective is to evaluate four compara-
tive specifications over a building life of 60 years using a discountrate of
4% (7% interest rate less 3% inflationrate). The informationis summarised
in the table below with an explanation of the calculation for Option 1
detailed at (a) to (d) below.Any tax implications are excluded.
(a) The presentvaluefor purchasingthe doors is obviouslythe same as the

capitalcost: £35,000
(b) For the annual running costs:

• £lO.891m2 X 20 m2 = £218
• £218 incurred every year for 60 years at 4% discount
= £218 X 22.6* = £4,927present value
(c) For maintenance the present cost of £6,040 for new ironmongeryand
repaintingtaking place in, say Year 12 at 4% discount
£6,040 x 0.62459** = £3,773
(d) The replacementcost after 40 years

= £35,000(present cost) X 0.20828**= £7,290
• The total presentvalue of the capital cost, annual running cost, main-
tenanceandreplacement costs
= £57,037 showing option 1 is the most expensivelife cycle cost
* from valuation tables at 2.2.5.7 (year's purchase or present value of
£1 per period)
**from valuationtables at 2.2.5.7 (presentvalueof£1)
The Surveyors' Construction Handbook Part2, Section 2 (4/99) Effectivefrom1/6/99 Page 15

PROJECT: Life Cycle Model SHEET NUMBER: LCCM5
ELEMENT: Internal Doors
Unit 20m2
OPTION 1 OPTION2 OPTION3 OPTION4

PROJECTLIFE 60 Years Aluminium Glazed Hardwood Glazed Softwood Metal
Discount Rate 4.00% perannum VisionPanels
Finish Life Finish Life Finish Life Finish Life

40Years 30 Years 20 Years 30 Years
Discount Rateof 4.00% perannum
(Interest Rate (7%),Inflation (3%)) Maintenance Maintenance Maintenance Maintenance

Period Period Period Period
4Years 4Years 4Years 4Years
COSTS Estimated Present Estimated Present Estimated Present Estimated Present
Cost Value Cost Value Cost Value Cost Value
CapitalCosts
Aluminium Glazed £ 1750.00 m2 35,000 35,000
HardwoodGlazed
Vision Panels £ 1000.00 m2 20,000 20,000
Softwood £ 700.00m2 14,000 14,000
Metal £ 850.0Dm2 17,000 17,000
— — — —
Contingency
Total Year1 Capital Costs 35,000 20,000 14,000 17,000
AnnualRunningCosts
Aluminium Glazed £ 10.89 m2 218 4,927
HardwoodGlazed
VisionPanels £ 9.99 m2 200 4,520
Softwood £ 5.90 m2 118 2,670
Metal £ 17.99 m2 360 8,140
Total AnnualRunningCosts 13,068 4,927 11,988 4,520 7,080 2,670 21,588 8,140
Maintenance Year Present

Cost
OPTION 1 Repaint 4 340 340 291
Repaint 8 340 340 248
Newironmongery
Repaint 12 6,040 6,040 3,773
Repaint 16 340 340 182
Repaint 20 340 340 155
Newironmongery
Repaint 24 6,040 6,040 2,356
Repaint 28 340 340 113
Repaint 32 340 340 97
Newironmongery
Repaint 36 6,040 6,040 1,472
Repaint 40 340 340 71
Repaint 44 340 340 61
New ironmongery
Repaint 48 6,040 6,040 919
Repaint 52 340 340 44
Repaint 56 340 340 38
Repaint 8 300 300 219
Newironmongery
Repaint 12 6,000 6,000 3,748
Repaint 16 300 300 160
Repaint 20 300 300 137
Newironmongery
Repaint 24 6,000 6,000 2,341
Repaint 28 300 300 100
Repaint 32 300 300 86
Newironmongery
Repaint 36 6,000 6,000 1,462
Repaint 40 300 300 62
Repaint 44 300 300 53
Continued overleaf
Page 16 Effectivefrom1/6/99 Part 2, Section 2(4/99) The Surveyors' ConstructionHandbook
0\
PROJECT: Life Cycle Model (continued) SHEET NUMBER: LCCM5
ELEMENT: InternalDoors
Unit: 2Dm2
OPTION1 OPTION2 OPTION3 OPTION4

PROJECT LIFE 60 Years Aluminium Glazed Hardwood Glazed Softwood Metal
DiscountRate 4.00% perannum VisionPanels
Finish Life Finish Life Finish Life Finish Life

40 Years 30 Years 20 Years 30 Years
DiscountRate of 4.00%perannum
(InterestRate (7%), Inflation (3%)) Maintenance Maintenance Maintenance Maintenance

Period Period Period Period
4Years 4Years 4Years 4Years


Cost
Newironmongery
Repaint 48 6,000 6,000 913
Repaint 52 300 300 39
Repaint 56 300 300 33

Repaint 8 320 320 234
Newironmongery
Repaint 12 3,820 3,820 2,386
Repaint 16 320 320 171
Repaint 20 320 320 146

Newironmongery
Repaint 24 3,820 3,820 1,490
Repaint 28 320 320 107
Repaint 32 320 320 91
Newironmongery
Repaint 36 3,820 3,820 931
Repaint 40 320 320 67

Repaint 44 320 320 57
Newironmongery
Repaint 48 3,820 3,820 581
Repaint 52 320 320 42

Repaint 56 320 320 36
OPTION4 Repaint 4 300 300 256
Repaint 8 300 300 219
Repaint 12 6,100 6,100 3,810
Repaint 16 300 300 160
Repaint 20 300 300 137
Repaint 24 6,100 6,100 2,380
Repaint 28 300 300 100
Repaint 32 300 300 86
Repaint 36 6,100 6,100 1,486
Repaint 40 300 300 62
Repaint 44 300 300 53
Repaint 48 6,100 6,100 928
Repaint 52 300 300 39
Repaint 56 300 300 33
Replacement Year Present
Cost
OPTION1 40 35,000 35,000 7,290
OPTION2 30 20,000 20,000 6,166
OPTION3 20 14,000 14,000 6,389
40 14,000 14,000 2,916
OPTION4 30 17,000 17,000 5,241
Total Maintenance/ReplacementCosts 62,560 17,109 47,000 15,776 46,480 15,917 44,400 14,993
Total RunningCosts 75,628 22,037 58,988 20,297 53,560 18,586 65,988 23,132
Total NetPresentValue of Life Cycle Costs 57,037 40,297 32,586 40,132
The Surveyors'ConstructionHandbook Part 2, Section 2(4/99) Effective from1/6/99 Page 17
to2
2.2.5.2 BUILDING SERVICES DESIGN OpnoN: AIR CONDIITIONINGAND UNDER FLOOR
TRUNKING VERSUSHOT WATER HEATING AND RING MAIN ELECTRICS
This example is again provided by Messrs Gardiner & Theobald. The
objectiveis to evaluate the above options for a building of 3,000 m2 floor
area, a life of 60 years anda discountrate of4% (7% interest less 3% infla-
tion). The informationis summarised overleaf with the methodology for
the calculation being exactly as that for the previous example.Any taxation
implicationsare excluded.
Page 18 Effective from1/6/99 Part 2, Section 2 (4/99) TheSurveyors' ConstructionHandbook

Element: Services
Unit:3,000 m2
OPTION1 OPTION2 OPTION3 OPTION4

PROJECT LIFE 60 Years
DiscountRate 4% per annum AirConditioning NWHeating&
U/Floor Trunking RingMain Electrics
DiscountRate of 4% perannum Finish Life Finish Life Finish Life Finish Life
(Interest Rate (7%),Inflation (3%)) 15 Years 25Years
MaintenancePeriod Maintenance Period Maintenance Period Maintenance Period

5Years 7Years Years Years

Capital Cost
AirConditioningU/FloorTrunking £ 25Dm2 750,000 750,000
HW Heating & RingMain Electric £ 15Dm2 450,000 450,000
Contingency 5% 37,500 22,500
Total Year I Capital Costs 787,500 472,500
Annual Running Costs

AirConditioningU/FloorTrunking £25.00m2 75,000 1,696,762
HW Heating &Ring Main Electric £5.00m2 15,000 339,352
TotalAnnualCosts 4,500,000 1,696,762 900,000 339,352

Cost
OPTION1 5 5,000 5,000 4,110
Overhall Equipment 10 5,000 5,000 3,378
Overhall Equipment 45 5,000 5,000 856
OPTION2 7 2,000 2,000 1,520

General repainVrepair 14 2,000 2,000 1,155
General repainVrepair 21 2,000 2,000 878
OPTION3
OPTION4
Replacement Year Present

Cost
OPTION1 15 600,000 600,000 333,159
30 600,000 600,000 184,991
45 600,000 600,000 102,719
OPTION2 25 300,000 300,000 112,535
50 300,000 300,000 42,214
OPTION3
OPTION4
Total Maintenance/ReplacementCosts 1,855,000 641,278 616,000 160,375
Total Running Costs 6,355,000 2,338,040 1,516,000 499,728
Total NetPresentValueof Life

CycleCost 3,125,540 972,228
TheSurveyors'ConstructionHandbook Part 2, Section 2(4/99) Effective from 1/6/99 Page 19
lcL-
2.2.5.3 MAINTENANCEOPTION: WITHIWITHOUTCLEANING GANTRY
This exampleis kindly providedby Gerald Hall.
The followingfigure comparestwo options, firstly to providethe cleaning

gantry and secondly to omit the gantry. The capital cost and costs
associatedwith anticipated maintenancewere calculated by using normal
cost estimating techniques.
Assumedcriteria:
- BuildingLife 25 years
— VAT assumedto remain at current levels with the client
being an 'enduser' under VAT rules 17.5%
—
Gantrycapital cost £30,000
— The gantry will have a residual value £2,000
—
Capital cost for openinglights in lieu of gantry £5,000
— Discountrate (assumingthe interest rate will average 11%
over 25 years andthe inflationrate 6%) 5%
—
CorporationTax 33%
Taxation Calculation
The capital cost for plantand machineryreceives a 25% reducing balance.

Maintenanceandrunningcosts receive 100% allowance.
Year 1 with gantry calculation:

£
Capital £35,250 X 25% X 33% = 2,908
Maintenance £881 X 33% = 291
3,199
Year 2 with gantry calculation:

£
Capital £35,250less 25% X 25% X 33% = 2,181
Maintenance £881 X 33% = 291
2,472
The methodology applies for the rest of the 25 years as summarised over-
leaf.
The client initially consideredthat the gantry would pay for itself due to
savings in maintenanceandcleaning cost.
However:
with gantry investment £36,510present value

withoutgantryinvestment £26,447present value
Page20 Effectivefrom1/6/99 Part 2, Section 2(4/99) TheSurveyors' ConstructionHandbook

-I
CD
COMPARATIVE COMPONENT LIFE CYCLE COSTING CLIENT:
0)
PROJECT TITLE: Retail Development/Shopping Mall
CD
JOB NO:
C,, OPTION: Cleaning with' gantry — curtain walling to new facade
C)
0
C,, TOTAL TOTAL Lesstax NETTOTAL
Costs VAT17.5% Present PRESENT CUMULATIVE
0 inc VAT allowance value of VALUE PRESENT
0 Year Capital Financing Operation Maintenance Occupancy Disposal/ £1 VALUE
residual value @5%
= Annual Intermittent
— — — — — — 0 1.000
0 0 30,000 30,000 5,250 35,250 35,250 35,250 35,250
0
0 — — — — — —
1 750 750 131 881 3,199 (2,318) 0.952 (?,207) 33,043
2 — — 750 — — — 750 131 881 0.907
2,472 (1,591) (1,443) — 31,600
3 — — — 750 250 — — 175 0.864
1,000 1,175 2,024 (849) (733) 30,866
— — — 750 — — — 750 131 881 0.823
4 1,518 (637) (524) 30,343
— 750 — — — 750 131 881 0.784
5 1,211 (330) (258) 30,084
6 — 750 1,750 — — 2,500 438 2,938 1,660 1,278 0.746 953 31,037
7 — — — 750 — — — 750 131 881 808 73 0.711 52 31,089
8 — 750 — — — 750 131 881 679 202 0.677 137
N) 31,226
Co 9 — 750 250 — — 175 679 496 0.645 320
CD 1,000 1,175 31,546
0 — — — — — —
0 10 750 750 131 881 509 372 0.614 229 31,775
=
N) 11 — — 750 — — — 750 131 881 454 427 0.585 250 32,024
12 750 — — 438 0.557
1,750 2,500 2,938 1,092 1,846 1,028 33,052
13 — 750 — — — 750 131 881 383 498 0.530 264 33,31
— — — 750 — — — 750 131 881 360 521 0.505 263
14 33,580
——
15 — — 750 250 — — 175 440 735 0.481 354
1,000 1,175 33,933
— — — 750 — .— — 750 131 881 330 551 0.458 253
16 34,186
-—
17 — — — 750 — — — 750 131 881 320 561 0.436 245
- — 34,431
18 — — 750 — — 438 991 809

—__— 1,750 2,500 2,938 1,947 0.416 — 35,239
— — — 750 — — —
19 750 131 881 307 574 0.396 227 35,467
- -
F — — — 750 — — —
20 750 131 881 303 578 0.377 218 35,685
21 — — — 750 250 — — 1,000 175 397 778 0.359 279
- 1,175 35,964
— — 750 — — — 750 131 881 298 583 0.342 199
22 36,163
—__—
23 — — — 750 — — — 750 131 881 296 585 0.326 191 36,354
24 — 750 1,750 — — 438 973 0.310 609

2,500 2,938 1,965 36,963
750 — — 131 311 0.295
25 (2,000) (1,250) (1,119) (1,430) (422) 36,541
-D
TOTAL PRESENTVALUEAT END OF INVESTMENTLIFE 36,541
N)
lob
0•0
CD COMPARATIVE COMPONENT LIFE CYCLE COSTING (continuation of table on page 21)
6 Capital cost as plant and machinery with 100% tax allowance — £

FORECASTER'S ASSUMPTIONS ie 1st year 2,908
1 The capital cost includes allowances for preliminaries and associated 7 Maintenanceand running costs with 100% allowance — ie 1st year 291
builders work. total 3,199
2 Details of the maintenance requirements and cost estimates can be 8 Taxation allowances are subject to negotiation and agreement.
provided upon request.
9 Discount rate:
3 The life cycle costing is based on an agreed investment life of 25 years.
1 (i) Interest rate — 11% average over 25 years;
4 It is assumed that VAT will remain at around 17.5% and the client is the (ii) Inflation rate — 7% average over 25 years:
end user' under VAT rules.
(1+ 11%)
5 There are disposal cost advantages with this option. (1 + 7%) —1 x 100% = 5% discount rate.
-u
U,
C,.)
CD
C-,
0
—I
CD
C,)
CD
0
C)
0
=
C,,
C.,
0
DC
=
0
0
0
0
—4
CD
COMPARATIVE COMPONENT LIFE CYCLE COSTING CLIENT:
C,)
PROJECT TITLE: Retail Development/Shopping Mall
CD
0 JOB NO:
OPTION: Cleaning 'without' a gantry — curtain walling to new facade
C-)
0
C,, TOTAL TOTAL Lesstax NETTOTAL Present PRESENT CUMULATIVE
Costs VAT17.5%
inc VAT allowance value of VALUE PRESENT
C,
Year Capital Financing Operation Maintenance Occupancy Disposal/ £1 VALUE
0 residual value © 5%
Annual Intermittent
— — — — — —
0 5,000 5,000 875 5,875 0 5,875 1.000 5,875 5,875
0
0 — — — — — —
1 1,500 1,500 283 1,763 582 1,181 0.952 1,124 6,999
. — — — 263 582 0.907
2 1,500 1,500 1,763 1,181 1,071 8,070
— — —
3 1,500 1,500 263 1,763 582 1,181 0.884 1,020 9,090
— — — — —
4 1,500 1,500 263 1,763 582 1,181 0.823 971 10,061
— — — — — —
5 1,500 1,500 263 1,763 582 1,181 0.784 925 10,986
— — — — — 525 0.746
6 1,500 1,500 3,000 3,525 1,163 2,362 1,763 12,749
— — — — —. 0.711
- 7 1,500 1,500 263 1,763 582 1,181 839 13,587
— — — — 0.677
I'.) 8 1,500 1,500 263 1,763 582 1,181 799 14,386
C/) — — — — — 263 582 0.645 761
CD 9 1,500 1,500 1,763 1,181 15,147
C.,
— — — — — 582 0.614 725
0 10 1,500 1,500 263 1,763 1,181 15,872
N.) 11 — — — — — 263 582 0.585 690
1,500 1,500 1,763 1,181 16,562
— — — — — 0.557
12 1,500 6,500 1,138 7,638 2,521 5,117 2,849 19,411
. — — — 263 582 0.530 626
13 1,500 1,500 1,763 1,181 20,037
— — — 263 582 0.505 596
14 1,500 1,500 1,763 1,181 20,634
15 — — — — — 263 582 0.481 568
1,500 1,500 1,763 1,181 21,202
16 — — — — — — 263 582 0.458 541
1,500 1,500 1,763 1,181 21,742
— — — — —
17 1,500 1,500 263 1,763 582 1,181 0.436 515 22,257
18 — — 1,500 1,500 - — — 3,000 525 3,525 1,163 2,362 0.416 981 23,239
19
- — —
- 1,500 — — —
1,500 263 1,763 582 — 1,181 0.396 467 23,706
— — — — — 263 582 0.377 445
20 1,500 1,500 1,763 1,181 24,151
21 — — — — 263 582 0.359 424
1,500 1,500 1,763 1,181 24,575
.. — — — 263 582 0.342 404
22 1,500 1,500 1,763 1,181 24,978
— — — — 263 582 0.362 384
23 1,500 1,500 1,763 1,181 25,363
— — — — — 525 0.310 732
24 1,500 1,500 3,000 3,525 1,163 2,362 26,095
— — — 263 582 0.295 349
25 1,500 1,500 1,763 1,181 26,444
TOTAL PRESENT VALUEAT END OF INVESTMENTLIFE 26,444

N.)
C)
tc8/
COMPARATIVE COMPONENT LIFE CYCLE COSTING (continuation of table on page 23)
6 Capital cost as plant and machinery with 100% tax allowance — NIL.
FORECASTER'S ASSUMPTIONS
7 Maintenance and running costs with 100% allowance.
1 The capital cost allows for opening lights now required, without capital
allowances. 8 Taxation allowances are subject to negotiation and agreement.
2 Details of the maintenance requirements and cost estimates can be 9 Discount rate:
provided upon request. (i) Interest rate — 11% average over 25 years.
3 The life cycle costing is based on an agreed investment life of 25 years. (ii) Inflation rate — 7% average over 25 years.
(1+ 11%)
4 It is assumed that VAT will remain at around 17.5% and the client is the
'end user' under VAT rules. (1 + 7%) — 1 X 100% = 5% discount
5 There are no disposal cost advantages with this option.
-I
CD
C,,
0
(a
C)
C
C/)
C
C,
0
=
C-
0
0
0
2.2.5.4 HOUSING SINXINGFuND (BASED UPON COSTED PLANNEDMAINTENANCE)
(a) Background
This example is kindly provided by Ian Sloan of Armour Construction
Consultants.
HousingAssociations and Co-operativesin Scotlandgenerally requestthat

their investment/sinkingfundrequirementsare preparedin accordance with
the Scottish Federation of Housing Associations' (SFIiA) 'Planned
Maintenance and Repairs (Revised), Guidance Booklet No 3' publishedin
January 1997.
There are various ways ofpresentingthe data. One method widelyaccepted

is shown below, on two spreadsheets,a Planned Maintenance Programme,
and a 'costed' Planned Maintenance Programme which establishes in this
case the presentvalue offuture costs.
The spreadsheets can be 'fine tuned' to meet specific clientrequirements. In

due course they can be adapted to allow historical information to be fed
into the programme, which then allows actual costs and maintenance
periods incurred to form the basis of the life cycle costs, thereby providing
a more accurate projection.
(b) Brief
The client needed to establish the capital to be invested for a new build
housing project to cover all maintenanceandrepairs for the next 60 years.
The discount rate is 6%.
An example of the calculationshown overleaf is:
Year 15, total maintenance and repairexpenditure at currentprices
= £9,013
£9,013 X 0.41726* = £3,761
i.e. £3,761 would have to be invested now for 15 years at 6% compound

interest in order to meet the costs in Year 15 of £9,013. In summary
£24,942 would have to be investednow at 6% to cover all maintenance and
repairs for the next 60 years.
The data couldalso be presented as an annual sinkingfund e.g. the amount

to be invested for each of 15 years at 6% compound interest in order to
meet the costsin Year 15 of £9,013 is:
£9,013 X 0.04296** = £387
* from valuationtablesat 2.2.5.7 (present value of £1)

** from valuation tables at 2.2.5.7 (annual sinking fund)
TheSurveyors'Construction Handbook Part 2, Section 2(4/99) Effectivefrom1/6/99 Page 25

am
CD
PLAN NED MAINTENANCEPROGRAM ME KEY 0 = Inspect/Consider A = Inspect and Remedy I = Testuntil 0 = Inspect&
C'-)
0) EXAMPLE Renewal/Replacement until Replacement replacement Decorate
Date Printed 02/12/98 Cumulative

—
CODE ELEMENT SUB-ELEMENT COMPONENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Coat
1.1 STRUCTURE 1.1.1. Roofs Timber A A A A A A 0

STRIJC- 1.1.2. Flears Timber A A A A A A 0
TURE 1.1.3. Openings Cancrete/Brick A A A A A A 0
1.2 STAIRS 1.2.1. Stairs Timber A A A A A A 0
1.2.2. Handrailsetc Timber A A A A A o 0
2.1 ROOF 2.1.1.Reef Tiles etc Concrete Tilea A A A A A A A A A A A A A A A A 0 A A A A A A A A A A 0
2.1.2.Flashings Lead AAAAAAAAAOAAAAAA AAAOAAAAAAAAAO 0
2.1.3.Gutternetc UPVC AAAAAAAAAAAAAAOA AAAAAAAAAAAAAO 0
—
2.2 EXTERNALWALLS 2.2.L Walls FacingBrick A A A A A A 0
2.2.2. Rendering A A A A A A 0
2.2.3. Ventilation A A A A A A 0
EXT 2.3 WINDOWS 2.3.1.WindnwOp Timber/Glans A A A A A A A A A A A A A A A A 0 A A A A A A A A A A 0
FABRIC 2.3.2.Peinting A A AA A A A A A A AA A A A A WA A A AA AAA A 0
2.3.3. Painting 0 0 0 0 0 0 0 0 0
2.3.4.Ironmnngery AAAAAAAAAOAAAAAA AAAOAAAAAAAAAO 0
C', 2.4 EXTERNAL DOORS Timber/ Metal A A A A A A A A A A A A A A A A A A A A A A A A A A A A A 0
CD 2.4.1. DearOperation
C.,
0 2.4.2. Pointing A A A A 0 A A A 0
= 0 0 0 0 0 0 0 0 0 0
C'-) 2.4.3. Painting 0
2.4.4.Ironrnongery AAAAAOAAAAAA AAA®AAAAAAAAAO 0
(.0 3.1 INTERNAL WAj.IS 3.1.1. WaIls & Opens Brick/ pbnard A A A A A A 0
3.1.2. Wall Tiling Ceramic A A 0 A A A 0
3.2 CEILINGS 3.2.1. Ceilings Plasterboard A A A A A A 0
INT 3.3 FLOORS 3.3.1. Flanring Timber/Vinyl A A 0 A A 0 0
FABRIC 3.3.2. Skirtinga Timber A A A A A A 0
3.4 DOORS Timber A A A A A A A A A A A A A A A A A A A A A A A A A A A A A 0 0
3.4.1.DeerOperatian
3.4.2.Ironmongery AAAAAAAAAAAAAA®A AAAAAAAAAAAAA0 0
-1 FlITS 4.1 FITTINGS&FURNISII 4.1.1.KitchenUnits Uvits/Warktaps A A A A A A A A A 0 A A A A A A A A A 0 A A A A A A 0 A A A 0
CD
0, FURN 4.1.2.Grabrailsetc AAAAAAAAA0AAAAAA AAAOAAAAAAAAA0 0
5.1 SANITARYAPPLIANCES Wcs,baths,whbs A A A A A A A A A A A A A A 0 A A A A A A A A A A A A A 0 0

5.1.1.Sanitaryware
5.2 SERVICES EQUIPMENT 5.2.1. Kitchen sinks Stainless steel A A A A A A A A A 0 A A A A A A A A A 0 A A A A A A A A A 0 0
0
5.3 WATER SUPPLY 5.3.1. Water storage A A A A A 0 0
C, T T T T 0
0 5.3.2. Wuter pipes etc T I
C,, A A A A A A 0
SER- 5.3.3. Insulatien
C) VICES 5.4.1 INTERNAL DRAINAGE 5.4.2.1 Pipes & Fittns I I T T I T 0

0 5.4.2 DISPOSAL INST 5.4.1.1 Pipes & Fittns T T T T 1 0
0 5.5 HEAT SOURCE 5.5.1 Radiators/fires I 1 0 T T 0 0

0 5.6 HEAT SYSTEM 5.6.1. Boilers/equipment A A A A A A A A A 0 A A A A A A A A A 0 A A A A A A A A A 0 0
0
0 A A A A A A A A A A A A A A A A A A A 0 0
0 5.7 VENTILATION 5.7.1.Fansetc A A A A A A A 0 0
—I
CD
PLANNED MAINTENANCEPROGRAMME KEY ®= Inspect/Consider A = InspectandRemedy T = Testentil $ = lnspect&
C)
EXAMPLE (Continued) Renewal!Replacement until Replacement replacement Decorate
CD
Date Printed 02/12/98 Cumulative
0
0) CODE ELEMENT SUB-ELEMENT COMPONENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Cost
C) 5.8 ELECTRICALINST 5.8.1.Pewerandlighting A A 0 A A 0 0
0
=
0) 5.8.2. Switchgear A A 0 A A 0 0
C, 5.8.3 External Lighting Close Light A 0 A 0 A 0 0
0 SER- 5.9 GAS INSTALLATION 5.9.1. Equipment & supply T I I T T 0 0
=
= VICES 5.10 LIFT INSTALLATION — 0
DO
= 5.11 PROTECTIVEINST 5.11.1 TV systemetc T 0 T 0 T o 0
0 5.11.2.Smokedetectors A A A A 0 A A A A 0 A A A A 0 A A A A 0 A A A A 0 A A A A 0 0
0
5.1.2 COMMUNICATION 5.12.1. Doorentry A A A A A A A A A 0 A A A A A A A A A 0 A A A A A A A A A 0 0
5.12.2. Telephones T T 0 T T 0 0
6.1.1 LANDSCAPING 6.1.1.1. Roads, fnstpoths A A A A A A A A A A A A A A 0 A A A A A A A A A A A A A A 0 0

6.1.1.2. Grass/planting A A A A A A A A A A A A A A A A A A A A A A A A A A A A A ® 0
EXT 612 BOUNDARIES& 6.1.2.1.Fencesundgates A A 0 A A 0 A A 0 A A 0 A A 0 A A 0 A A 0 A A 0 A A 0 A A 0 0
WORKS ENCLOSURES 6.1.2.2. Walls etc A A A A A A 0
6.1.2.3. Clethes poles 0 o e e 0 0 0 o e 0 0

DO
6.2 DRAINAGE 6.2.1.Pipeo&tittiogs A A A A A 0 0
6.2.2. Manholes etc A A A A A A 0

C,)
CD 6.3 EXTERNAL SERVICES 6.3.1. Ducts & culIeo A A A A A 0 0
C,
0 6.4 OUTBUILDINGS 6.4.1.
Binstores/plutts A A A A A 0 0
= COSTIN 0000sf £ 0.00 0.00 0.00 0.00 0.00 0.00 0.60 0.00 0.0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.000.000.000.000.000.000.000.000.000.000.000.000.00
-tl
DO
o.Q
CD
-U
Do PLANNED MAINTENANCEPROGRAMME (COSTED)
CD
EXAMPLE Date Printed 02/12/98 Years Cumulative
N.)
00 Cost
CODE ELEMENT SUB-ELEMENT COMPONENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
1.1 Structure 1.1.1. Reefs Timber 50 50 50 50 50 50 300
STRUC- 1.1.2. Floors Timber ) 100 100 100 100 100 100 600
)
TURE 1.1.3. Openinga) Concrete/Brick ) 0
1.2 Stairs 1.2.1. Stairs Timber 25 25 25 25 25 25 150
1.2.2. Handrails etc Timber 140 140
2.1 Roof 2.1.1. Roof Tiles etc Concrete Tiles 75 75 75 75 75 75 75 75 75 75 75 75 75 75 75 75 75 7575 380 7 5 75 75 75 7 5 75 75 75 75 75 4,555
2.1.2. Flashings Lead 20 20 20 20 20 20 20 20 20 150 20 20 20 20 20 20 20 20 20 150 20 20 20 20 20 20 20 20 20 150 990
2.1.3. Getters etc UPVC 20 20 20 20 20 20 20 20 20 20 20 20 20 20 220 20 20 20 20 20 2 0 20 20 20 20 20 20 20 20 220 1,060
2.2 Externalwalls 2.2.1. Walls Facing Brick 20 20 20 20 20 20 120
2.2.2. Rendering inc inc inc inc in c inc 0

2.2.3. Ventilation inc inc inc inc in c mc o
Windows Timber/Gloss 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 1
0 10 10 100 10 10 10 10 10 10 10 10 1
0 10 2,390
EXT 2.3 2.3.1.WindowOp
FABRIC 2.32. Pointing 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 inc 10 10 10 10 1 0 10 10 10 10 10 290
2.3.3. Painting 100 10 0 10 0 100 100 100 100 100 10 0 100 1,000
2.3.4. Ironmengery inc in inc inc inc inc inc inc inc 210 inc inc inc inc inc inc inc inc inc inc inc inc inc inc ioc inc inc inc inc 210 420
2.4 Externaldoers 2.4.1. DoorOperation Timber/Metal 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 400 5 5 5 5 5 5 5 5 5 5 545
5 55 55 55 5 55 55 55 55 555 inc5 5 55 55 55 55 145

2.4.2.Paintiog
2.4.3. Paistiog 60 60 60 60 60 60 inc 60 60 60 540
2.4.4. Ironmongery inc in inc ioc Inc Inc inc inc in c 60 inc inc inc inc inc inc inc inc in c inc Inc inc inc mc in c inc in c inc ioc 60 120
Internal walls 3.1.1. WaIls 10 10 10 10 10 10 60

3.1 & Open's Brick/pboard
3.1.2. Wall Tiling Ceramic inc inc 275 inc in c 275 550
3.2 Ceilings 3.2.1. Ceilings Plasterboard 20 20 20 20 20 20 120

—
INT 3.3 Floors 3.3.1. Flooring Timber/Vinyl 50 50 290 50 50 290 780
FABRIC 3.3.2. Skirtinga Timber inc sc inc inc inc inc 0

3.4 Doers 3.4.1. DoorOperatien Timber 83 83 83 83 83 83 83 83 83 83 83 83 83 83 83 83 83 8383 838 3 83 83 83 83 83 83 83 83 200 3,607
3.4.2. Ironmongery inc inc inc inc inc inc inc inc in c mc inc inc inc inc 400 inc inc inc in c ioc inc inc inc inc in c inc in c inc inc 480 960
FITTS 4.1 Fittings & Furnish 4.1.1. Kitchen Units Units/Werktsps 60 60 60 60 60 60 60 60 6 0 800 60 60 60 60 60 60 60 6060 800 60 60 60 60 60 60 60 60 60 800 4,020
-4 10 10 10 10 10 10 10 10 1 0 200 10 10 10 10 10 10 1
0 1010 200 10 10 10 10 10 10 10 10 10 200 870
= FURN 4.1.2. Grab rails etc
CD
Co 5.1 5.1.1. Sanitaryware Wcs, baths,whbs 5 5 5 5 5 5 5 5 5 5 5 5 5 5 450 5 5 5 5 5 5 5 5 5 5 5 5 5 5 450 1,040
Sanitary Appliances
= inc inc in c inc inc 160 485
5.2 ServicesEquipment 5.2.1. Kitchensinks Stainless steel inc inc Inc inc inc ixc inc inc in c 160 inc Inc inc inc 5 inc inc inc in c 160 Inc inc inc inc
5.3 5.3.1.Waterstorage 125 125 125 125 125 250 875

0 WaterSupply
en 5.3.2. Water pipes etc inc inc inc inc in c 125 125
C) inc in c inc 0
0 SER- 5.3.3. Insulation ion inc inc
en 60 60 60 60 60 360
VICES 5.4.1 Internal drainage 5.4.2.1 Pipes & Fittns 60
C, 5.4.2 inst 5.4.1.1 Pipes& Fittos inc inc inc inc inc inc 0
Disposal
0 5.5 Heatsource 5.5.1 Radiators/fires 20 20 650 20 20 650 1,380
= 5.6 Heatsystem 5.6.1. Boilers/equipment 40 40 40 40 40 40 40 40 4 0 750 40 40 40 40 40 40 40 4040 750 40 40 40 40 40 40 40 40 40 750 3,330
0)
0 5.7 Ventilation 5.7.1. Fanx etc 5 5 5 5 5 5 5 5 5 200 5 5 5 5 5 5 5 5 5 200 5 5 5 5 5 5 5 5 5 200 735
0
0 100 100 1500 100 100 500
0 5.8 Electrical inst 5.8.1. Power and lighting 3,400
-1
PLANNED MAI NTENANCE PROGRAMME (COSTED) (Continued)
cI EXAMPLE Date Printed 02/12/98 Years
Cumulative
CODE ELEMENT SUB-ELEMENT COMPONENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Cost
5.8.2. Switchgear inc inc mc inc inc inc 0
5.8.3 External Lighting Close Light inc 100 inc 100 inc inc 200
5.9 Gas installation 5.9.1. Equipment& supply 25 25 25 25 25 25 150
— 0
SER- 5.10 Lift installation
VICES 5.11 Protective inst 5.11.1 TV systemetc 25 150 25 150 25 150 525
5.11.2. Smoke detectors 10 10 10 10 75 io io 10 75 10 10 10 10 75 10 10 10 10 75 10 10 10 10 75 10 10 10 10 75 690
5.1.2 Communication 5.12.1. Doorentry n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/s n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/n n /a n/a 0
5.12.2. Telephones 10 10 100 10 10 10 0 240
ii 6.1.1 Landscaping 6.1.1.1. Roads, footpaths 50 50 50 50 50 50 50 50 50 50 50 50 50 50 500 50 50 50 50 50 50 50 50 50 50 50 50 50 50 500 2,400
6.1.1.2. Grass/ planting 100 100 100 100 100 100 10 0 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 10 0 100 100 1 00 750 3,650
6.1.2 Boundaries & 6.1.2.1. Fences and gales 10 10 500 10 10 500 10 10 500 10 10 500 10 10 3000 10 10 500 10 10 500 10 10 500 10 10 500 10 10 3000 10,200
EXT Enclosures 6.1.2.2. Walls etc 50 50 50 50 50 50 300
WORKS 6.1.2.3. Clothes pales 40 40 40 40 200 40 40 40 40 750 1,270
62 Drainage 6.2.1. Pipes & fittings 100 100 100 100 100 500 1,000
6.2.2. Manholes etc inc inc inc inc inc inc 0

C,
6.3 External uervices 6.3.1. Ducts & cables 25 25 25 25 25 400 525
6.4 Outbuildings 6.4.1. Binstures/ platts 50 50 50 50 50 500 750
C, TOTAL COST PER YEAR £ 518 518 1208 518 1448 1208 51 8 518 1208 4068 518 1208 518 518 9013 518 518 1208 518 8673 1048 518 518 1208 1448 51 81209 518 518 5460 57,902 (Yrs 1—30)
0 PRESENT VALUE 489 461 1014 410 1082 852 34 4 325 715 2272 273 600 243 229 3761 204 192 423 171 2704 308 144 136 298 337 11 4 251 101 96 2692 21241 (Yrsl—30)
r'-3
(at discountrote 086%)
31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60(Yro 31—60) (Yrs 1—60)
Repeat Years
Current Cost peryr 518 518 1208 518 1448 1208 51 8 518 1208 4068 518 1208 518 518 9013 518 518 1208 518 8673 1048 518 518 1208 1448 51 81208 518 51815460 £57902 £115804
(Current coot)
PresentValue 85 80 177 71 188 148 60 51 124 395 48 105 42 40 655 36 33 74 30 471 54 25 24 52 59 20 44 18 17 469 £3701 £24942
(PresentVOlue)
rn
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C,
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0
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2.2.5.5 CENTRALISATIONOF OFFICESSTUDY
(a) Brief
This exampleis kindly providedby Gerald Hall.
The client wished to investigate a centralisation (of offices) strategy as a

means to improve business efficiency in an increasingly competitive
market.The offices were originallyspread out over threemain sites.
Three options were identified:
• do nothing, althoughthis would require repair andrefurbishment of

the existingoffices;
• centraliseat locationA and construct additional new offices;
• centraliseat locationB andconstruct additional newoffices.
(b) Capital Costs

These were calculated using traditional cost estimating and included
cyclical capital costs. The distinction between cyclical capital costs and
cyclicalmaintenancecosts is often vague, those costs in excess of £10,000
are includedin the capital cost element under the assumptionthey would be
part of the capital costprogramme.
Relocation costs (labour and plant required to transport office equipment,

stores, machinery, compound materials and stationery items) are included
under Year 0 on the assumptionthey would be complete within 12 months
and a contingencyfor new furniture included.
(c) Revenue Costs

• fuel: the energymanager provided existing costs which were usedas
the basis for the new proposal;
• water costs were excluded(the clientwas a water company);
• maintenancecosts under £10,000;
• rates were not provided by the client by the deadline and are there-
foreexcluded;
• cleaningcosts are based on existing cleaning costs and judgement;
• securitycosts are based on existing security costs andjudgement;
• operation costs for this client included waste removal, water coolers,
sanitary hire, mail collections, fire prevention, telephones, hygiene,
insurances. Againthis was based on existing client data plusjudgement.
Evenwith constantstaffnumbers these costsreducewith centralisation;
• staffing costs were excludedas they would remain constant.
(d) Capital Income

Options 2 and 3 will free up existing space for sale and rent which are
includedas a deductionagainst expenditure.
(e) Discount Rates

In accordance with the client guidelines the investment horizon is 40 years
and the discountrate 8%.
Page 30 Effectivefrom1/6/99 Part 2,Section 2(4/99) The Surveyors'ConstructionHandbook
us
(f) Tax Implications
Tax allowances have been excluded on the basis that this study is a minor
part ofthe overall companybusinessandassumptions are notappropriate.
However it is worthnoting that:
• Value AddedTax on all capital costs could affectthe financial benefits

of options 2 and 3 which requireconsiderable capital expenditure;
• CapitalAllowanceswouldhelp support options 2 and3.
(g) Renewal and RefurbishmentCosts

General building refurbishment has been allowed in ten-year cycles;
electrical and mechanical plant replaced after 20 years with a refurbish-
ment after ten years or mid-life; felt roofs replacedafter 20 years; profiled
metal decking, windows and doors after 30 years. All costs are calculated
using traditional cost estimatingandincludedas presentcosts.
(h) Cost Comparison

The detailed calculationis summarised over for option2 which is the most
cost effectiveover 40 years.
Year 0 Expenditure Year 40 Net PresentValue
£ £
Option 1 £203,000 £1,960,950
Option 2 £1,164,900 £1,607,896
Option 3 £1,262,100 £1,843,068
(i) Sensitivity Analysis

An analysisof different discountrates and time frame confirmoption 2 as
the most favourable.
Discount Life Cycle Option 1 Option 2 Option 3

Rates £ £ £
6% 0 287,900 1,164,900 1,262,100
6% 20 1,859,000 1,593,000 1,826,100
6% 40 2,444,420 1,762,522 2,047,091
8% 0 287,900 1,164,900 1,262,100
8% 20 1,614,000 1,515,000 1,721,100
8% 40 1,960,950 1,607,896 1,843,068
10% 0 287,900 1,164,900 1,262,100
10% 20 1,423,000 1,451,000 1,638,100
10% 40 1,632,562 1,506,721 1,709,146
TheSurveyors'ConstructionHandbook Part 2, Section 2(4/99) Effective from1/6/99 Page 31
ilk
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CLIENT WATER COMPANY LIMITED
C,.)
I") JOB TITLE CENTRALISATION OF AREA OFFICE STUDY
JOB NO 3985
DATE 29th MARCH 1996
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 TatalValue
YEAR(SEPT1996)
£000 £000
Capital Coats -
1176 0 0 0 8 0 0 0 0 0 190 0 0 0 0 0 0 0 0 0 300 0 0 0 0 0 0 0 0 0 393 0 0 0 0 0 0 0 0 0 310 2369
BuildingWorks
RelecatienCostsl5.5 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 00 00 0 00 00 00 00 00 00 00 0 0 16
Furniture 8.5 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 00 0000000000000000000 0 0 9
Value 1200 0 0 0 0 0 0 0 0 0 190 0 0 0 0 0 0 0 0 0 300 0 0 0 0 0 0 0 0 0 393 0 0 0 0 0 0 0 0 0 310 2,393
Capital Income
AnnualRental -7.5 -7.5 -7.5 -7.5 -7.5 -7.5 -7.5 -7.5 -7.5 -7.5 -7.5 -7.5 -7.5 -7.5 -7.5 -7.5 -7.5 -7.5 -7.5-7.5 -7.5-7.5-7.5-7.5-7.5-7.5-7.5-7.5-7.5-7.5-7.5-7.5-7.5-7.5-7.5-7.5-7.5-7.5-7.5-7.5 -7.5 -308
LandSnIe-55 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 08 0000000000000000000 0 0 -55
Value-62.5-7.5 -8 -8 -8 -8 -8 -8 -8 -8 -8 -8 -8 -8 -8 -8 -8 -8 -8 -8-8-8-8-8-8-8-8-8-8-8-8-8-8-8-8-8-8-8-8 -8 -8 -363
RevenueCents
Fuel 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.41.41.41.41.41.41.41.41.41.4 1.41.41.41.41.41.41.41.41.4 1.4 1.4 57
-U
D) Water 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 492
0000000000000000000 1212
Maintenance 121212 1212 12121212121212121212121212121212121212
C,, 0 0 0 0 0 0
CD Rates 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 00 0000000000000000000
1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 9.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.71.71.7 1.71.71.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 70
0 Cleaning
7.1 7.1 7.1 7.1 7.1 7.1 7.1 7.1 7.1 7.1 7.1 7.1 7.1 7.1 7.1 7.1 7.1 7.17.17.17.17.17.17.17.17.17.1 7.17.17.17.17.17.17.17.17.1 7.1 7.1 291
Security 7.1 7.1 7.1
5.2 5.2 5.2 5.2 5.2 5.2 5.2 5.2 5.2 5.2 5.2 5.2 5.2 5.2 5.2 5.2 5.2 5.2 5.2 5.2 5.25.25.25.25.25.25.25.25.25.2 5.25.25.25.25.25.25.25.25.2 5.2 5.2 213
OperatienCnots
StaitCosts 0 0 0 0 0 0 8 0 0 0 8 0 0 0 0 0 0 8 00 0000000000000000080 0 0 0
Value 27.4 27.4 27.4 27.4 27.4 27.4 27.4 27.4 27.4 27.4 27.4 27.4 27.4 27.4 27.4 27.4 27.4 27.4 27.4 27.4 27.427.427.427.427.4 7.427.427.427.427.427.427.427.427.427.427.427.427.4 7.4 27.4 27.4 1,123
NetCash Flew 1164.9 19.9 19.9 19.9 19.9 19.9 19.9 19.9 19.9 19.9 209.9 19.9 19.9 19.9 19.9 19.9 19.9 19.9 19.9 19.9 19.919_S19.9 19.9 19.9 9.9 19.9 19.9 19.9 19.9 12.9 19.9 19.9 19.9 19.9 19.9 19.9 19.9 19.9 19.9 329.9 8
Present Value of £1@8% 1 0.93 0.86 0.79 0.74 0.68 8.63 0.58 0.54 0.5 0.46 0.43 0.4 0.37 0.34 0.32 0.29 8.27 8.25 8.23 0.21 0.2 0.18 0.17 8.16 .15 0.14 0.13 0.12 0.11 0.1 0.09 0.09 8.08 0.07 0.07 0.06 0.06 .05 0.05 0.05
0165 18 17 16 05 14 13 12 11 10 97 9 8 7 7 6 6 5 5 5 69 4 4 3 3 3 3 2 2 2 41 2 2 2 1 1 1 1 1 1 15 1608
NET PRESENTVALUE
EXPENDITURE NPVC=1,607,896
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C)
0
00
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2.2.5.6 TOTAL BUILDING OPTIciN: DEMOLISH ANI REBUILD VERSUS REFURBISHMENT
(a) Brief
The life cycle cost appraisal is to evaluate the life cycle cost effects of the
followingoptions:
• demolish existing building and rebuild to the client's specific
requirements incorporating 'all-air'air conditioningsystems;
• refurbish the existing building to meet, as far as practicable, the
client's requirements, re-using existing systems wherever possible.
The appraisal is to include all taxation implications for comparative

purposes.
VAT is to be includedas the client is VAT-exempt.
The followingcosts are to be excluded:
— costs associatedwith the purchase ofland;

—
financingcharges associatedwith the redevelopment;
— costs associatedwith the removal and temporary re-housing of staff
duringthe constructionperiod;
—
occupancy costs;
— residualvalues ofland or buildings.
(b) Discount Rate

The building is in owner-occupation and the client's accountants have
advisedthe use of a long-termgovernmentstock interest rate of 7%.
The client has been advised that an inflation rate of 3% is a reasonable

assessment.
The discountrate calculationis as follows
—
[(1.07) 1]
X 100 = 3.88%
[(1.03) 1
The client has agreedthat the discountrate can be rounded to 4%.
(c) Building Life

It has been agreedwith the clientto use a 20-yearlife cycle.
(d) Description of Existing Building

Late 1950s office block of multi-storeyframed construction with curtain
wall cladding to front and rear. Solid party walls to both sides. Single-
storey concretebasement.
(e) Description of Existing Engineering Services

Gas-fired low pressure hot water boiler situated in basement serving
perimeter convector system with warm air ventilation to central parts of
The Surveyors'ConstructionHandbook Part 2, Section 2(4/99) Effectivefrom1/6/99 Page 33

the building. Fluorescent luminairesto all office areas andtungstenfittings
to circulation.
(f) Condition of the Existing Building

The buildingis structurally sound with few defects; however, it is in a poor
state of decorativerepair.
(g) BasicRequirementsof the Redevelopment

Grossinternal area 1500 m2
Ratio of net to gross internal area 70%
Number of occupants 110
Ratio ofoccupantsto net internal floor area 9.7 m2
External wall area (excluding party wails) 700 m2
The adjacentbuildings will continue to remain in use as offices during and

afterthe development.
The structural engineers have advised that no work is required to party

walls, otherthan temporary shoring.
(h) Summary
NetPresentValue
£k
OPTIONA
demolish existingbuilding andrebuild to the
client's specificrequirements, incorporating
'all air' air conditioningsystems; 3889
OPTIONB
refurbish the existing building to meet as far as
practicable,the client'srequirements,re-using
systems whereverpossible. 2177
% difference (A extraon B) 79%
The net presentvalue is a key factor in the option appraisal. Howeverother

less tangiblebenefits and disadvantagesof each option should be carefully
consideredin relation to the business objectives. It is also recommended
that a sensitivity analysis be carried out, for instance to look at different
discountrates andtime frames.
The calculationofthe above is detailed below.
Page 34 Effectivefrom1/6/99 Part 2, Section 2 (4/99) The Surveyors'Construction Handbook

-I
CD
Cd) LIFE CYCLE COST SUMMARY
CD OPTIONA
C Year 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
C,,
C) Costs £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k
C
=
C,,
2154 - - - - - - - - - - - - - - - - - . - -
Capital
C
C., - - - - - - - - - - - - - - - - -
Financing - - - -
C
= -
= Operation 104 104 104 104 104 104 104 104 104 104 104 104 104 104 104 104 104 104 104 104
=
C- Maintenance:
C
C annual - 27 27 27 27 27 27 27 27 27 27 27 27 27 27 27 27 27 27 27 27
intermittent - - - - - 6 3 - - - 62 3 21 - - 22 3 - - - 86
- - - - - - - - - - - - - - - - - - - - -
Occupancy
- - - - - - - - - - - - - - - - - - - - -
Disposal/ residual value
Total 2154 131 131 131 131 137 134 131 131 131 193 134 152 131 131 153 134 131 131 131 217
VAT 17% 377 23 23 23 23 24 23 23 23 23 34 23 27 23 23 27 23 23 23 23 40
N.) Total (inc VAT) 2531 154 154 154 154 161 157 154 154 154 227 152 179 154 154 180 157 154 154 154 257
Co
CD Less Tax allowance 0 102 88 78 70 67 61 57 55 53 74 52 55 48 48 56 49 48 48 48 80
C,
C NET TOTAL 2531 52 66 76 84 94 96 97 99 101 153 105 124 106 106 124 108 106 106 106 177
C
Present value of £1 at 4% 1 .9615 .9246 .8890 .8548 8219 .7903 .7599 .7307 .7026 .6756 .6496 .6246 .6006 .5775 .5553 .5339 .5134 .4936 .4746 .4564
Present value 2531 50 61 68 72 77 76 74 72 71 103 68 77 64 61 69 58 54 52 50 81
TOTAL NET PRESENTVALUE£3889k
m
CD
C,
CD
C
2
-u
Co
CM
ici
LIFE CYCLE COST SUMMARY
C,
OPTION B
Year 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Costs £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k
904 - - - - - - - - - • - - - . - - - - - -
Capital
- - - - - - - - - - - - - - - - - - - - -
Financing
- 89 89 89 89 89 89 89 89 89 89 89 89 89 89 89 89 89 89 89 89
Operation
Maintenance:
annual - 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15
- - - - - - - - 45 3 21 - - 32 3 - - - 69
intermittent 17 3
- - - - - - - - - - - - - - - - - - - - -
Occupancy
- - - - - - - - - - - - - - - - - - - - -
Disposal! residual value
Total 904 104 104 104 104 121 107 104 104 104 149 107 125 104 104 136 107 104 104 104 173
VAT 17.5% 158 18 18 18 18 21 19 18 18 18 26 19 22 18 18 24 19 18 18 18 30
Total (inc VAT) 1062 122 122 122 122 142 126 122 122 122 175 126 147 122 122 160 126 122 122 122 203
LessTaxallowance 0 75 66 59 54 56 48 44 43 42 57 41 46 38 38 50 39 38 38 38 63
NET TOTAL 1062 47 56 63 68 86 78 78 79 80 118 85 101 84 84 110 87 84 84 84 140
Presentvalueof1 1 .9615 .9246 .8890 .8548 .8219 .7903 .7599 .7307 .7026 .6756 .6496 .6246 .6006 .5775 .5553 .5339 .5134 .4936 .4746 .4564
at4%
Present value 1062 45 52 56 58 71 62 59 58 56 80 55 63 50 49 61 46 43 41 40 64
TOTAL NET PRESENTVALUE£2177k
-1
CD
0
C)
0
C)
C,
0
=
0
0
0
0
CAPITAL
OPTION A OPTION B
GFA: 1500m2 Total cost £/m2GFA Total cost £/m2GFA

Elemental Cost Plan £k £ £k £
Demolition 70.0 47.0 14.0 9.0
Substructure 42.0 28.0 — —
Superstructure 315.0 210.0 17.5 12.0
External walls 490.0 327.0 101.0 67.0
Internal walls 14.5 10.0 54.0 36.0
Internal finishings 84.0 56.0 105.0 70.0
Fittings/fixtures 2.0 1.0 —
Sanitary appliances 9.5 6.0 9.5 6.0
Public Health services 21.0 14.0 21.0 14.0
Mechanical services 252.0 168.0 94.5 63.0
Electrical services 147.0 98.0 126.0 84.0
Liftinstallation 77.0 51.0 91.0 60.0
External work 21.0 14.0 7.0 5.0
Drainage 8.5 6.0 3.0 2.0
Sub-total 1553.5 1036.0 643.5 429.0
Preliminaries 232.0 15% 96.5 15%

(% of sub-total)
Contingencies 46,5 3% 19.5 3%

(% of sub'total)
Total construction cost 1833.0 1222.0 759.5 506.0
Professional fees 321.0 17.5% 144.5 19%

(% of construction cost)
Total capitalcoststo 2154.0 904.0

life cycle cost summary
TheSurveyors' Construction Handbook Part 2, Section 2(4/99) Effectivefrom1/6/99 Page 37
122
OP ERATION
OPTIONA OPTION B
£ per annum £ per annum
Energy see nextpage 13617 9964
Cleaning
OPTIONA 10500
Budget allowance £7.00 per m2
OPTION B
Budget allowance £9.00 per m2 13500
NB: existingbuidingmaterials more labour

intensive for cleaning
Rates (including water rates)
OPTION A
OPTION B
NB: air conditioned building attracts

higher rates
Insurance
Buildingfabric replacement
OPTION A
Budget allowance 0.2% of building cost 4308
(2154)
OPTION B
Budget allowance 0.2%of building cost 1808
(9O4)
Total operation costs 88272

103425
Total£k to life cycle cost summary 89

104
Page 38 Effectivefrom1/6/99 Part2, Section2(4/99) The Surveyors' Construction Handbook

—
CD
C,, ENERGY
CD
0 SYSTEM OPTION A OPTION B
U,
C)
C)
Building Diversity Unit Area Energy Area Energy
U)
usage energy rate rate
C) cost
0
(hrsper (%) (p/kwh) m' w/m' kwh* £ per m' w/m' kwh* £ per
annum) annum annum
C)-
0
0 (a) (b) (c) (d) (e) (f) (g) (d) (e) (f) (g)
f x c/lOU f X c/lOU
Gas
Heating—Option A 2000 50 1.076** 1500 160 240,000 2582 1500 190 285,000 3067
N)
C/)
CD
C, Electricity
0
N) Lighting 2200 80 5.50 1500 20 52,800 2904 1500 20 52,800 2904
Small Power 2200 100 5.50 1500 10 33,000 1815 1500 10 33,000 1815
Power for mechanical services 2200 60 5.50 1500 58*** 114,840 6316 1500 20 39,600 2178
Total energy costs to operation costs summary 13617 9964
* NB: formula for kwh = area (d) X energy rate (e) X unit energy cost (c) X building usage (a) x diversity (b)
1000
** Gas Board rate per therm 30p

1 therm = 27.8kwh
rate per kwh = 35.2/27.8 = 1.076
-vi
Di *** Assume cooling load 120 watts/m2
Dvi
CD Conversion rate electricity to cooling 2.5:1
0,
c.0 Thereforew/m2 for cooling 120/2.5 = 48 ÷ 10 (other mechanical plant) = 58
JL
ANNUAL MAINTENANCE
OPTION A OPTION B
£/m2 £perannum £/m2 £perannum
General building maintenance 4.00 6000 4.00 6000
Engineeringservicesmaintenance 12.00* 18000 4.00 6000
Lifts—service agreement 1.50 2250 1.50 2250
Total annual maintenancecosts £26,250 £14,250
Total £k to life cycle costsummary £27k £15k
* NB: full air conditioning maintenancefor

Option A
Page 40 Effectivefrom 1/6/99 Part 2, Section2(4/99) The Surveyors'ConstructionHandbook
25
-I
CD
0)
CD
INTERMITTENTMAINTENANCE
CD OPTION A
CD
C,, Year 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
C,
CD Costs £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £h £k £k £k
C,,
Roof renewal — — — — — — . — 10
CD
C)
— — — — — — — — — 0.5 — — — — 0.5 — — — — 0.5
CD Externaldecoration (fire escapes only) 0.5
=
Internal finishings:
— — — — — — 3.0 — — — — 3.0 21 — — — 3.0 — — — 14
CD
carpets
CD
— — — — — 5.5 — — — — 5.5 — — — — 5.5 — — — — 5.5
paintwork,etc.
Engineeringservices:
— — — — — — — — — — 42 — — — — — — — — — 42
mechanical(equipment)
— — — — — — — — — — 14 — — — — 14
electrical(luminaires)
— — — — — — — — — — — — — — — 15.5 — — — — —
lifts(majoroverhaul)
0 Totals — — — — — 6 3 — — — 62 3.0 21 — — 21.5 3.0 — — — 86
Total £k to life cyclecost summary — — — — — 6 3 — — — 62 3 21 — — 22 3 — — — 86

0)
CD
C, OPTION B
CD
Year 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Costs £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k
Roofrenewal — — — — — — — — — — — — — — — — — — — — 10
External decoration (facades,etc.) — — — — — 11 — — — — 11 — — — — 11 — — — 11
Internal finishings:
— — — — — — 3.0 — — — — 3.0 21 — — — 3.0 — — — 14
carpets
— — — — — 5.5 — — — — 5.5 — — — — 5.5 — — — — 5.5
paintwork,etc.
Engineeringservices:
— — — — — — — — — — 14 — — — — — — — — — 14
I mechanical(equipment)
— — — — — — — i4 — — — — — —
electrical(luminaires)
— — — — — — — — — — — 15.5 — — — — —
lifts(majoroverhaul)
— — — — — 16.5 3.0 — — — 44.5 3.0 21 — — 32 3.0 — — — 68.5
Totals
— — — — — 17 3.0 — — — 45 3 21 — — 32 3 — — — 69
Total £k to life cyclecost summary
C,
aD
CD
TAX
VAT CHARGEABLE
VALUE VAT RATE OPTION A OPTION B
£k % £k £k
OPTION A Capital costs 1833 17 320.8

Fees 321 17 56.2
OPTION B Capital costs 759.5 17 132.9

Fees 144.5 17 25.3
Total VAT to
capital costs 377 158.2
Total£k to
life cycle 377 158
cost
summary -________________
VAT is chargeable directlyon all running costs items and appears on the summary.
Corporation Tax
The client currently payscorporation tax at the rate of 31%.
Thispercentagehas been assumed for all calculations.
Tax allowance - running costs
100% tax deductible based upon total inclusiveof VAT*, e.g. running cost £100
VAT £17.50
Total £117.50
Tax allowance 31% £36.43
Tax allowance - capital costs

Certain capital items are classified as plant and machinery(see appendix E) and are tax deductibleat a rate of 25%
per annum on reducing balance, e.g. capital item £10,000
First year tax allowance10,000 X 25% X 31%
Secondyear tax allowance7,500x 25% x 31%
Tax allowancescan only be allowed oneyear in arrears.
* This is only applicable when the clientis an end user and exemptfrom VAT. If, in the course of his business, the
clientcan claim back VAT he cannot claim tax relief on this portion of his costs.
Page 42 Effectivefrom1/6/99 Part 2, Section 2 (4/99) The Surveyors' ConstructionHandbook
2J1
-I
CD
0) TAX ALLOWANCE
=
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
£k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k £k
OPTIONA
Capital allowances
Total allowancessee next page
£696k(inc VAT)@25% p.a.
— 174 131 98 73 55 41 31 23 17 13 10 — — — — — — — — —
reducingbalance
Running cost allowances
F;
From LCC summary(inc VAT) 154 154 154 154 161 157 154 154 154 227 157 179 154 154 150 157 154 154 154 257
Total 328 285 252 227 216 198 185 177 171 240 167 179 154 154 180 157 154 154 154 257
Applycurrent tax rate31%
Total£k to LCC summary 102 88 78 70 67 61 57 55 53 74 52 55 48 48 56 49 48 48 48 80
OPTION B
-',
Capital allowances
Total allowancessee next page
C,)
CD
C, £482.lk (inc VAT) @25% pa.
— 90 68 51 38 29 21 16 12 9 7 — — — — — — — — —
0 reducingbalance 121
Running cost allowances

From LCCsummary(inc 122 122 122 122 142 126 122 122 122 175 126 147 122 122 160 126 122 122 122 203
VAT)
Total 243 212 190 173 180 155 143 138 134 184 133 147 122 122 160 126 122 122 122 203
Applycurrent tax rate31%
Total£k to LCC summary 75 66 59 54 56 48 44 43 42 57 41 46 38 38 50 39 38 38 38 63
-ø
CAPITALALLOWANCE Proposed capitalal!owancefortaxationpurposes
Subject tonegotiation and agreementwiththe Inland Revenue on evidence of eventualcosts
OPTION A OPTION B
GFA: 1500m2 Total cost %tax allowable Tax allowable Total cost %tax allowable Taxallowabl Remarks
£k £k £k £k £k £k
Elemental cost plan

70 — — 14 — —
Demolition
Substructure 42 — — — —
315 — — 17.5 30 5.3 BWICallowableon

Superstructure
refurbishment
Externalwalls 490 — — 101 — —
Internal walls 14.5 — — 54 30 16.2 BWICallowableon

refurbishment
Internalfinishings 84 — — 105 — —
2.0 20 0.4 — — —
Fittings/fixtures
Sanitary appliances 9.5 100 9.5 9.5 100 9.5
PublicHealthservices 21 — — 21 — —
Mechanicalservices 252 100 252.0 94.5 100 94.5

Electricalservices 147 60 88.2 126 60 75.6 Officelighting and associated
switchgearnotallowable
Lift installation 77 100 77.0 91 100 91.0
Externalwork 21 — - 7 — —
8.5 — — 3 — —
Drainage
Sub-total 1553.5 27.5 427.1 643.5 45.4 292.1

Preliminaries 233 27.5 64.1 96.5 45.4 43.8 Taken on proportionof
(% of sub-total) constructioncosts
Contingencies 46.5 27.5 12.8 19.5 45.4 8.9
(%of sub-total)
Total constructioncost 1833 759.5
Professionalfees 321 27.5 88.3 144.5 45.4 65.6
(% of constructioncost)
VAT 377 27.5 103.7 158 45.4 71.7 Option A—Fees only
Total tax-allowablecapital 696 482.1

costs to previouspage
Page 44 Effectivefrom1/6/99 Part 2, Section 2(4/99) TheSurveyors'Construction Handbook

2.2.5.7 A SELECTIONFROM PARRY'S VALUATiONAND I1VESTMENTTABLES
(for full tables reference is madeto Parry's Valuation andInvestment Tables,
A WDavidson(1989), (11th Edition) (Estates Gazette)
No Income Tax YEARS' PURCHASE Single Rate
RATEPER CENT
Years 2 3 4 5 6 7 8
1 0.9804 0.9709 0.9615 0.9524 0.9434 0.9346 0.9259

2 1.9416 1.9135 1.8861 1.8594 1.8334 1.8080 1.7833
3 2.8839 2.8286 2.7751 2.7232 2.6730 2.6243 2.5771
4 3.8077 3.7171 3.6299 3.5460 3.4651 3.3872 3.3121
5 4.7135 4.5797 4.4518 4.3295 4.2124 4.1002 3.9927
6 5.6014 5.4172 5.2421 5.0757 4.9173 4.7665 4.6229
7 6.4720 6.2303 6.0021 5.7864 5.5824 5.3893 5.2064
8 7.3255 7.0197 6.7327 6.4632 6.2098 5.9713 5.7466
9 8.1622 7.7861 7.4353 7.1078 6.8017 6.5152 6.2469
10 8.9826 8.5302 8.1109 7.7217 7.3601 7.0236 6.7101
11 9.7868 9.2526 8.7605 8.3064 7.8869 7.4987 7.1390
12 10.5753 9.9540 9.3851 8.8633 8.3838 7.9427 7.5361
13 11.3484 10.6350 9.9856 9.3936 8.8527 8.3577 7.9038
14 12.1062 11.2961 10.5631 9.8986 9.2950 8.7455 8.2442
15 12.8493 11.9379 111184 10.3797 9.7122 9.1079 8.5595
16 13.5777 12.5611 11.6523 10.8378 10.1059 9.4466 8.8514
17 14.2919 13.1661 12.1657 11.2741 10.4773 9.7632 9.1216
18 14.9920 13.7535 12.6593 11.6896 10.8276 10.0591 9.3719
19 15.6785 14.3238 13.1339 12.0853 11.1581 10.3356 9.6036
20 16.3514 14.8775 13.5903 12.4622 11.4699 10.5940 9.8181
21 17.0112 15.4150 14.0292 12.8212 11.7641 10.8355 10.0168
22 17.6580 15.9369 14.4511 13.1630 12.0416 11.0612 10.2007
23 18.2922 16.4436 14.8568 13.4886 12.3034 11.2722 10.3711
24 18.9139 16.9355 15.2470 13.7986 12.5504 11.4693 10.5288
25 19.5235 17.4131 15.6221 14.0939 12.7834 11.6536 10.6748
26 20.1210 17.8768 15.9828 14.3752 13.0032 11.8258 10.8100
27 20.7069 18.3270 16.3296 14.6430 13.2105 11.9867 10.9352
28 21.2813 18.7641 16.6631 14.8981 13.4062 12.1371 11.0511
29 21.8444 19.1885 16.9837 15.1411 13.5907 12.2777 11.1584
30 22.3965 19.6004 17.2920 15.3725 13.7648 12.4090 11.2578
31 22.9377 20.0004 17.5885 15.5928 13.9291 12.5318 11.3498
32 23.4683 20.3888 17.8736 15.8027 14.0840 12.6466 11.4350
33 23.9886 20.7658 18.1476 16.0025 14.2302 12.7538 11.5139
34 24.4986 21.1318 18.4112 16.1929 14.3681 12.8540 11.5869
35 24.9986 21.4872 18.6646 16.3742 14.4982 12.9477 11.6546
36 25.4888 21.8323 18.9083 16.5469 14.6210 13.0352 11.7172
37 25.9695 22.1672 19.1426 16.7113 14.7368 13.1170 11.7752
38 26.4406 22.4925 19.3679 16.8679 14.8460 13.1935 11.8289
39 26.9026 22.8082 19.5845 17.0170 14.9491 13.2649 11.8786
40 27.3555 23.1148 19.7928 17.1591 15.0463 13.3317 11.9246
41 27.7995 23.4124 19.9931 17.2944 15.1380 13.3941 11.9672
42 28.2348 23.7014 20.1856 17.4232 15.2245 13.4524 12.0067
43 28.6616 23.9819 20.3708 17.5459 15.3062 13.5070 12.0432
44 29.0800 24.2543 20.5488 17.6628 15.3832 13.5579 12.0771
45 29.4902 24.5187 20.7200 17.7741 15.4558 13.6055 12.1084
46 29.8923 24.7754 20.8847 17.8801 15.5244 13.6500 12.1374
47 30.2866 25.0247 21.0429 17.9810 15.5890 13.6916 12.1643
48 30.6731 25.2667 21.1951 18.0772 15.6500 13.7305 12.1891
49 31.0521 25.5017 21.3415 18.1687 15.7076 13.7668 12.2122
50 31.4236 25.7298 21.4822 18.2559 15.7619 13.8007 12.2335
60 34.7609 27.6756 22.6235 18.9293 16.1614 14.0392 12.3766
TheSurveyors'ConstructionHandbook Part 2, Section 2(4/99) Effectivefrom1/6/99 Page 45

No Income Tax PRESENT VALUE OF £1.
RATE PER CENT
Years 2 3 4 5 6 7 8
1 .9803922 .9708738 .9615385 .9523810 .9433962 .9345794 .9259259
2 .9611688 .9425959 .9245562 .9070295 .8899964 .8734387 .8573388

3 .9423223 .9151417 .8889964 .8638376 .8396193 .8162979 .7938322
4 .9238454 .8884870 .8548042 .8227025 .7920937 .7628952 .7350299
5 .9057308 .8626088 .8219271 .7835262 .7472582 .7129862 .6805832
6 .8879714 .8374843 .7903145 .7462154 .7049605 .6663422 .6301696
7 .8705602 .8130915 .7599178 .7106813 .6650571 .6227497 .5834904
8 .8534904 .7894092 .7306902 .6768394 .6274124 .5820091 .5402689
9 .8367553 .7664167 .7025867 .6446089 .5918985 .5439337 .5002490
10 .8203483 .7440939 .6755642 .6139133 .5583948 .5083493 .4631935
11 .8042630 .7224213 .6495809 .5846793 .5267875 .4750928 .4288829

12 .7884932 .7013799 .6245970 .5568374 .4969694 .4440120 .3971138
13 .7730325 .6809513 .6005741 .5303214 .4688390 .4149644 .3676979
14 .7578750 .6611178 .5774751 .5050680 .4423010 .3878172 .3404610
15 .7430147 .6418619 .5552645 .4810171 .4172651 .3624460 .3152417
16 .7284458 .6231669 .5339082 .4581115 .3936463 .3387346 .2918905
17 .7141626 .6050164 .5133732 .4362967 .3713644 .3165744 .2702690

18 .7001594 .5873946 .4936281 .4155207 .3503438 .2958639 .2502490
19 .6864308 .5702860 .4746424 .3957340 .3305130 .2765083 .2317121
20 .6729713 .5536758 .4563869 .3768895 .3118047 .2584190 .2145482

21 .6597758 .5375493 .4388336 .3589424 .2941554 .2415131 .1986557
22 .6468390 .5218925 .4219554 .3418499 .2775051 .2257132 .1839405
23 .6341559 .5066917 .4057263 .3255713 .2617973 .2109469 .1703153

24 .6217215 .4919337 .3901215 .3100679 .2469785 .1971466 .1576993
25 .6095309 .4776056 .3751168 .2953028 .2329986 .1842492 .1460179
26 .5975793 .4636947 .3606892 .2812407 .2198100 .1721955 .1352018
27 .5858620 .4501891 .3468166 .2678483 .2073680 .1609304 .1251868
28 .5743746 .4370768 .3334775 .2550936 .1956301 .1504022 .1159137
29 .5631123 .4243464 .3206514 .2429463 .1845567 .1405628 .1073275
30 .5520709 .4119868 .3083187 .2313774 .1741101 .1313671 .0993773
31 .5412460 .3999871 .2964603 .2203595 .1642548 .1227730 .0920160
32 .5306333 .3883370 .2850579 .2098662 .1549574 .1147411 .0852000
33 .5202287 .3770262 .2740942 .1998725 .1461862 .1072347 .0788889
34 .5100282 .3660449 .2635521 .1903548 .1379115 .1002193 .0730453
35 .5000276 .3553834 .2534155 .1812903 .1301052 .0936629 .0676345
36 .4902232 .3450324 .2436687 .1726574 .1227408 .0875355 .0626246
37 .4806109 .3349829 .2342968 .1644356 .1157932 .0818088 .0579857
38 .4711872 .3252262 .2252854 .1566054 .1092389 .0764569 .0536905
39 .4619482 .3157535 .2166206 .1491480 .1030555 .0714550 .0497134
40 .4528904 .3065568 .2082890 .1420457 .0972222 .0667804 .0460309
41 .4440102 .2976280 .2002779 .1352816 .0917190 .0624116 .0426212
42 .4353041 .2889592 .1925749 .1288396 .0865274 .0583286 .0394641
43 .4267688 .2805429 .1851682 .1227044 .0816296 .0545127 .0365408
44 .4184007 .2723718 .1780463 .1168613 .0770091 .0509464 .0338341
45 .4101968 .2644386 .1711984 .1112965 .0726501 .0476135 .0313279
46 .4021 537 .2567365 .1646139 .1059967 .0685378 .0444986 .0290073

47 .3942684 .2492588 .1582826 .1009492 .0646583 .0415875 .0268586
48 .3865376 .2419988 .1521948 .0961421 .0609984 .0388668 .0248691
49 .3789584 .2349503 .1463411 .0915639 .0575457 .0363241 .0230269

50 .3715279 .2281071 .1407126 .0872037 .0542884 .0339478 .0213212
60 .3047823 .1697331 .0950604 .0535355 .0303143 .0172573 .0098759
'-
Page 46 Effectivefrom1/6/99 Part2,Section 2(4/99) The Surveyors'Construction Handbook

1
No Income Tax ANNUAL SINKING FUND FORTHE REDEMPTIONOF £1 CAPITALINVESTED
RATEPER CENT
Years 2 3 4 5 6 7 8
1 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000

2 .4950495 .4926108 .4901961 .4878049 .4854369 .4830918 .4807692
3 .3267547 .3235304 .3203485 .3172086 .3141098 .3110517 .3080335
4 .2426238 .2390270 .2354900 .2320118 .2285915 .2252281 .2219208
5 .1921584 .1883546 .1846271 .1809748 .1773964 .1738907 .1704565
6 .1585258 .1545975 .1507619 .1470175 .1433626 .1397958 .1363154
7 .1345120 .1305064 .1266096 .1228198 .1191350 .1155532 .1120724
8 .1165098 .1124564 .1085278 .1047218 .1010359 .0974678 .0940148
9 .1025154 .0984339 .0944930 .0906901 .0870222 .0834865 .0800797
10 .0913265 .0872305 .0832909 .0795046 .0758680 .0723775 .0690295
11 .0821779 .0780774 .0741490 .0703889 .0667929 .0633569 .0600763
12 .0745596 .0704621 .0665522 .0628254 .0592770 .0559020 .0526950
13 .0681184 .0640295 .0601437 .0564558 .0529601 .0496508 .0465218
14 .0626020 .0585263 .0546690 .0510240 .0475849 .0443449 .0412969
15 .0578255 .0537666 .0499411 .0463423 .0429628 .0397946 .0368295
16 .0536501 .0496108 .0458200 .0422699 .0389521 .0358576 .0329769
17 .0499698 .0459525 .0421985 .0386991 .0354448 .0324252 .0296294
18 .0467021 .0427087 .0389933 .0355462 .0323565 .0294126 .0267021
19 .0437818 .0398139 .0361386 .0327450 .0296209 .0267530 .0241276
20 .0411567 .0372157 .0335818 .0302426 .0271846 .0243929 .0218522
21 .0387848 .0348718 .0312801 .0279961 .0250045 .0222890 .0198323
22 .0366314 .0327474 .0291988 .0259705 .0230456 .0204058 .0180321
23 .0346681 .0308139 .0273091 .0241368 .0212785 .0187139 .0164222
24 .0328711 .0290474 .0255868 .0224709 .0196790 .0171890 .0149780
25 .0312204 .0274279 .0240120 .0209525 .0182267 .0158105 .0136788

26 .0296992 .0259383 .0225674 .0195643 .0169043 .0145610 .0125071
27 .0282931 .0245642 .0212385 .0182919 .0156972 .0134257 .0114481
28 .0269897 .0232932 .0200130 .0171225 .0145926 .0123919 .0104889
29 .0257784 .0221147 .0188799 .0160455 .0135796 .0114487 .0096185
30 .0246499 .0210193 .0178301 .0150514 .0126489 .0105864 .0088274
-
31 .0235963 .0199989 .0168554 .0141321 .0117922 .0097969 .0081073
32 .0226106 .0190466 .0159486 .0132804 .0110023 .0090729 .0074508
33 .0216865 .0181561 .0151036 .0124900 .0102729 .0084081 .0068516
34 .0208187 .0173220 .0143148 .0117554 .0095984 .0077967 .0063041
35 .0200022 .0165393 .0135773 .0110717 .0089739 .0072340 .0058033
36 .0192329 .0158038 .0128869 .0104345 .0083948 .0067153 .0053447
37 .0185068 .0151116 .0122396 .0098398 .0078574 .0062368 .0049244
38 .0178206 .0144593 .0116319 .0092842 .0073581 .0057951 .0045389
39 .0171711 .0138439 .0110608 .0087646 .0068938 .0053868 .0041851
40 .0165557 .0132624 .0105235 .0082782 .0064615 .0050091 .0038602
41 .0159719 .0127124 .0100174 .0078223 .0060589 .0046596 .0035615
42 .0154173 .0121917 .0095402 .0073947 .0056834 .0043359 .0032868
43 .0148899 .0116981 .0090899 .0069933 .0053331 .0040359 .0030341
44 .0143879 .0112298 .0086645 .0066163 .0050061 .0037577 .0028015
45 .0139096 .0107852 .0082625 .0062617 .0047005 .0034996 .0025873
46 .0134534 .0103625 .0078820 .0059282 .0044149 .0032600 .0023899
47 .0130179 .0099605 .0075219 .0056142 .0041477 .0030374 .0022080
48 .0126018 .0095778 .0071806 .0053184 .0038977 .0028307 .0020403
49 .0122040 .0092131 .0068571 .0050396 .0036636 .0026385 .0018856
50 .0118232 .0088655 .0065502 .0047767 .0034443 .0024598 .0017429
60 .0087680 .0061330 .0042018 .0028282
Extractsfrom Pany's Valuation ana Investment Tables, A W Davidson (1989), (11th

Edition) (Estates Gazette) reproduced bypermissionofthe College ofEstate Management
which ownsthe copyright.
The Surveyors'ConstructionHandbook Part 2, Section 2(4/99) Effective from1/6/99 Page 47

'I Appendix A: Residual Values
Al At the end of the life of a building, the component/buildingand the land

will have a residual value.
A2 There will be one of two situations. Either the building will have reached
the end ofits life, with no alternativeuse, or the building will have reached
the endofthe life for its plannedpurpose, but does have an alternativeuse.
A3 In either situationthe residualvalue of the building and/orthe land may be

significant and will need to be carefully assessed as it may have a
substantialeffect on life cycle costing calculations. Residual values will be
of particular significance if the time horizon used for life cycle costing
calculations is relatively short.
A4 In considering residualvalues, an allowance should be made for the cost of

disposing of plant and equipment and for the demolition of buildings, if
appropriate. In assessing demolition costs, allowance should be made for
the value of anyre-usablematerials.
A5 Owners also need to be cognisant of taxation issues and whether these

affecttheirproperty/buildingdecisions.
A6 There are strict guidelinesfor taxation adjustments that arise at disposal. If

the plant andmachineryis 'scrapped' the remainingvalue is written off and
a balancing allowance brought into account. Alternatively if the building
(and the plant and machinery contained therein) is sold, the vendor should
declarewhetherallowanceshave been claimed.An adjustmentto their after
tax cost will arise dependingupon whetherthe disposal value is greater or
less than the written downvalue remaining on the vendor's accounts.
A7 This area of tax advice is experiencing increased scrutinyfrom the Inland

Revenue and the District Valuer's Department, as parties to property
transactions sometimes select/contract disposal values of tax relievable
components with specific tax planning objectives.
TheSurveyors'Construction Handbook Part 2, Section 2, Effectivefrom1/6/99 Page 1

AppendixA(4/99)
i33
< Appendix B: Obsolescence
Bi Buildinglife is influenced by obsolescence. Almost all its forms relate to

economic considerations. However, six different forms of obsolescencecan
be categorisedas:
• physical
• economic
• functional
• technological
• social
• legal.
B2 Buildingsusually end their 'life' before the end of their physical life. The
most common reasons for buildings becoming obsolete are probably
economic and functional considerations. Buildings designed for a specific
specialised use, with little or no flexibilityfor changing theiruse, are there-
fore likely to have shorter lives than buildings offering flexibility for the
change of functionofthebuilding.
B3 The table below gives definitions and examples of each form of obsoles-
cence:
Definition of Basis for Examples of
Types of typeof assessment of factors leadingto
obsolescence obsolescence buildinglife obsolescence
Physical Life of the How long Deterioration of

buildingto when will the external brick walls
physical collapse building affecting their
is possible. stand up? structuralstability.
Deterioration of
suspended concrete
floors, containinghigh
alumina cement, in
multi-storey buildings,
affecting structural
stability.
Economic Life of the How long will The value of the land
buildingto when the building be on which the building
occupation is not economic for stands is more than
considered to be the client to the capitalised full
the leastcost own or rental value that could
alternative of operate? be derived from
meeting a letting the building.
particular
objective. The asset would
achieve a better rate
of return in the
possessionof
another, or in the
redevelopment or
refurbishment scheme.
The Surveyors'Construction Handbook Part 2, Section 2, Effectivefrom 1/6/99 Page 1

AppendixB (4/99)
Definition of Basis for Examples of
Types of type of assessment of factors leading to
obsolescence obsolescence building life obsolescence
Functional Lif of the How longwill Cinemas converted

buildingto when the building be into bingo halls,
the building used for the village railway
cedses to function purpose for which stations converted
for the same it was built? into private houses.
purpose as that
for which it was
buiIt.
Technological Life of the How longwill the Prestigeoffice unable

buiiding until the building be to accommodate
building is no technologically introduction of high
loner superiorto level of computing
technologically alternatives? facilities.
superiorto
alternatives. Storage warehouse
unable to
accommodatethe
introduction of
robotics for goods
handling.
Social and Legal Thelife of a How longwill the Timberfootball stand

buildinguntil the buildingmeet replaced (following
time when human human desires, Bradford Football
desIre or legal (with the exclusion Club fire disaster).
requirement of economic
dictates considerations). Multi.storey flats in
replacement for innercity demolished
reasons other (following social and
than economic community
considerations, problems).
B4 Notwithstanding the difficulty of the task, the surveyor, in consultation

with the client, should make an informed assessmentof the building life to
be used in anyparticular study.In making that assessment the surveyorwill
need to take account of a number of factors which may influence the final
assessmentof building life in any particular case.
B5 While the above examples relate to the whole building, obsolescence of

elements or components is also relevant, for examplemajor refurbishment
of retail buildings at say 15-yearintervals to remain attractive.
Page 2 Effectivefrom1/6/99 Part 2, Section2, TheSurveyors'Construction Handbook

Appendix B c4L99)
Appendix C: Costs And Values
The following checklist provides suggestions for cost and value categories to be
considered. This list is not exhaustive and items may need to be added or others
disregardedas applicableto anyparticular project.
Cl CAPITALCOSTS
Cl.l Land
Cl.2 Feeson acquisition
Cl.3 Design team professionalfees
Cl.4 Demolition andsite clearance
Cl.5 Constructionprice forbuilding work
Cl.6 Costof statutoryconsents
Cl.7 DevelopmentLand Tax
Cl.8 CapitalGains Tax
C1.9 ValueAdded Tax
C1.lO Furnishings
Cl.ll Other capital costs
Cl.12 Commissioningexpenses
Cl.13 Decanting charges
C2 FINANCING COSTS
C2.l Finance for land purchase and during construction
C2.2 Finance during period of intended occupation
C2.3 Loancharges (public sector)
C3 OPERATION COSTS
C3.l Energy
C3.2 Cleaning
C3.3 Rates
C3.4 Insurances
C3.5 Security andHealth
C3.6 Staff (relatedto the building)
C3.7 Managementand administrationofthe building
C3.8 Landcharges
C3.9 Energy conservationmeasures
C3.lO Internal planting
C3.11 Equipment associated with occupier's occupation
C4 AIuAL MAINTENANCE COSTS,INTERMiTTENTMAINTENANCE,REPLACEMENT

AND ALTERATION COSTS
C4.l Main structure
C4.2 External decorations
C4.3 Internal decorations
C4.4 Finishes, fixtures and fittings
C4.5 Plumbing and sanitary services
C4.6 Heat source
C4.7 Spaceheating andair treatment
The Surveyors'Construction Handbook Part 2, Section 2, Effectivefrom 1/6/99 Page 1

AppendixC(4/99)
C4.8 Ventilating systems
C4.9 Electricalinstallations
C4.10 Gas installations
C4.11 Life and conveyorinstallation
C4.12 Communications installation
C4.13 Special and protectiveinstallations
C4.14 Externalworks
C4.15 Gardening
C5 OCCUPANCYCOSTS
C5.1 Client's occupancy costs
C6 RESIDUAL VALUES
C6.1 Resale value— building, land and plant and equipment
C6.2 Related costs — demolition and site clearance and disposal of fees and
charges
C6.3 Capital Gains Taxand balancingcharges
Page 2 Effectivefrom1/6/99 Part 2, Secton 2, The Surveyors'ConstructionHandbook

AppedixC(4/99)
L3TJ
Appendix D: Glossaryof Terms for Taxation
Dl CAPITALEXPENDITURE
Money expendedin acquiring long life assets which includes land, build-
ings, permanent improvements or additions/extensionsto existing assets
including associated professional fees, furniture and equipment thereto,
which are intendedfor use in the carryingout ofbusiness operations. These
assets should have a useful life of more than oneyear.
D2 REVENUE EXPENDITURE
Expenditure incurred as a trading expense e.g. salaries, consumables,
occupancy and regular maintenance costs.
D3 TAXATION'DEPRECIATION'ALLOWANCES(FORTAXATIONPURPOSES)
This is a collective term fortaxation relief affordedto commercial(tax pay-
ing) organisations to offset the cost of capital expenditure incurred upon
assetsused for the purposesoftheirtrade.
As explained in 2.2.3 there are various types of taxation allowance andthe

proportion of initial expenditurewhich attracts tax relief is often varied by
successive FinanceActs.
This should be differentiated from the rate of depreciation adopted by

accountants/auditors when preparing company management accounts to
allow provisionfor replacementof assets. This is because the depreciation
allowance for taxationpurposesis fixed by legislation.
When an asset is disposed of a review of the allowances received is

requiredandan adjustment may be necessary.
D4 INDUSTRIALBUILDING
Industrial buildings or structureswhich qualify for capital allowances are
defined in the statutes CAA 1968 S7 and CAA 1990 S18. These include
factories, manufacturing, storage, docks, tunnels and mines. There are
specific rules which apply where part of the building is used for a non-
qualifyingpurpose.
D5 PLr ANDMACHINERY
This type of tax relief was introducedafter the second world war to provide
an incentive to industry to replaceequipmentused in industry andcommerce.
The precise definition of plant and machinery is frequently contested in the

courts. To assist clarification examples of items likely to attract taxation
relief are illustratedin AppendixE.
D6 INITIAL ALLOWANCES/FIRSTYEARALLOWANCES
These were introducedto provide an accelerationto the standard rate of
annual tax relief (depreciation allowance) being a proportion ofthe original
capital expenditure.
The Surveyors'ConstructionHandbook Part 2, Section 2, Effectivefrom1/6/99 Page 1

Appendix D (4/99)
Governmentsuse successive Finance Acts to vary the proportionawarded
to increase or reduce this incentive as a method of influencingor stimulat-
ingcapital investmentwithinthe commercialsector of the economy.
D7 ANNUAL 'WRITINGDOWN' ALLOWANCE

This is the annual depreciation allowanceawarded in respectto 'qualifying
expenditure' as a proportion of the residual balance of the initial expendi-
ture i.e. original cost less the amounts already calculated and benefiting
from tax relief.
D8 BALANCING ALLOWANCE
Upon disposal of an asset a comparisonbetween its value and the written
down amount remaining on the owner's accounts is required.
If the asset is sold for a sum in excess of the vendor's after tax relief cost,
then a 'profit' has arisen which is subject to an adjustmentto the deprecia-
tion allowance (i.e. reductionof tax relief), termed a 'balancing charge'.
Alternatively, if the asset is 'scrapped' or disposed of at low value
(compared with the residual amount) then an additional tax relief is
awarded,termed a 'balancing allowance'.
Page 2 Effectivefrom1/6/99 Part 2, Section 2, TheSurveyors' Construction Handbook

Appendix D (4/99)
3c
Appendix E: Examples of Items of Expenditure Likelyto AttractTaxation
Allowances
Item Plant and equipment
Finishes/fixtures/ 1. Wall finishes where theycan be removed from the building,

fittings e.g. curtains, curtain track, battens for fixing
2. Floorfinishes such as carpets and any floor finishing that
can be removed from the building
3. Door mats and matwell frames
4. Suspended ceilings which are airtight and can be used as an
extract system or any ceiling which is an integralpart of the
heating, ventilating or air conditioning system
5. Any movable fixtures and fittings
6. Demountablepartitions
7. Curtains, blinds and furnishing
8. Cupboards,lockers,shelves, display counters, chalkboards,
dustbins, cloakroom fittings, telephone booths
Plumbing and 1. Sanitary fittings (not the pipework)

sanitary services 2. Vanity units
3. Soap dispensers
4. Mirrors
5. Demountabletoilet partitions
6. Coathooks and racks
7. Towel rails and cabinets
8. Toilet roll holders
9. Tanks
Heat source 1. Boilers and equipment, fuel pumps, waterpumps, flue, etc.
(not the pipeworkfrom the boiler)
2. Boiler bases and foundations
3. Oil storage tanks and foundations
4. Fuel hoppers, ash removal plant
5. Control equipment to the heating system
6. Builder's work in connection with the heat source
7. Part cost of boilerroom
Space heatingand 1. Equipment in connection with heating, air conditioningand

air treatment hot waterinstallation (not the pipework or ducting)
2. Builder's work in connection with the equipment
3. Plant room
4. Electrical and mechanical control system
5. Solar heating systems
6. Insulation to pipework
Ventilation systems 1. Dust and fumeextraction equipment including ductworkand

builder's work in connection
2. Extract fans and builder's work
3. Ventilators
4. Instrumentationcontrols
Electrical installations 1. Electrical installation to all plant and equipment (excludes

conduit and wiringto power and lightingfor the building
generally)
2. Light fittings
3. Emergency lighting
4. Switchgearand transformers
5. Control gear and distributionboards
6. Plant rooms
7. Builder's workin connection with the electrical installation
Gas installations 1. Gas fires, cookers and equipment including flues and
builder's work in connection
TheSurveyors' Construction Handbook Part 2, Section2, Effectivefrom1/6/99 Page 1

Appendix E(4/99)
140
Item Plant and equipment
Liftand conveyor 1. Lift installation complete including builder'swork in

installations connection with lift motors, lift guides and plant room
2. Escalators and hoists are as for lifts
Communications 1. Clocks
installations 2. Sound distribution, bells, signals and the like
3. Fire alarms
4. Burglar alarms
5. Telephone installation
6. Builder's work in connection with communication installations
Special installations/ 1. Sprinklersystem

protective installations 2. Dry riser system
3. Hosereel system
4. CO2 system
5. Fire extinguishers
6. Refrigeration equipment
7. Kitchen equipment
8. Laundry equipment
9. Health equipment
10. Laboratory equipment
ii. Manufacturing equipment
12. Incinerators and flues
13. Water heaters
14. Hand dryers
15. Window cleaninghoists and equipmentincluding track, motors
and ancillary builder's work
16. Refusedisposal equipmentincluding ancillary builder's work
17. Lightning conductorsand earthingsystems
18. Occupational equipmentassociated with the buildinguser
19. Computer equipmentand all ancillarywork
20. Crane gantries
21. Al! builder'swork in connection with items ito
20 above
Special items within a 1. Removablefire escapes
building(the items 2. Shelving
shownare only given 3. Safes and strong rooms
as indicative of the 4. Roller shutters
types of item) 5. Ladders
6. Dock levellers
7. Signs/noticeboards
8. Interiorplanting
External works 1. External signs
2. Traffic signs, crash barriers
3. Drainage where it is specificallyrequired for plant and
equipment
4. Cycle racks
Page 2 Effectivefrom 1/6/99 Part 2, Section 2, The Surveyors'ConstructionHandbook

Appenr E(4/99)
141
Appendix F: Further Reading
Ferry, D.J.O., FlanaganR., Life Cycle Costing:A RadicalApproach, Construction

IndustryResearchandInformationAssociation (CIRTAReport 122), London, 1991
Flanagan,Roger, Norman, George, Furbur,J. David & Townsend,Geoffrey M., Life

Cycle CostingFor Construction, SurveyorsPublications, London, 1983
Flanagan,Roger, Norman, George Meadows,Justin Robinson, GrahamLife Cycle

Costing: Theory andPractice, BSP ProfessionalBooks, Oxford, 1989
GuidanceNote No. 35: Life Cycle Costing, Central Unit on

HIvI Treasury.
Procurement, TiM Treasury, London, 1992
Data Sources
BernardWilliamsAssociates, Facilities Economics.Bernard WilliamsAssociates,

BuildingEconomicsBureau Ltd, Kent. Tel: 0181 460 1111, 1995. A comprehensive
studyincluding hard costs.
BMI. Energy Consumption Study, Building MaintenanceInformation, 12 Great

George Street, London, SW1P 3AD, Tel: 0171 222 7000, 1996. Covers typical
energycosts for differentbuilding types.
BMI. Occupancy CostPlanning, BuildingMaintenanceInformation,contactdetails

as above, 1992.Includesaddresses ofnumerous trade and professionalorganisations
as possible data sources.
BML Review ofMaintenance and OccupancyCosts, Building Maintenance

Information,contactdetails as above, 1994
British Standard7543: 1992 Guide to Durability ofBuildingsand Building

Elements, Products and Components,British Standards Institution, London, 1992
BuildingResearch EnergyConservationSupport Unit. Energy EfficiencyBest

Practice Programme.Building Research Energy ConservationSupportUnit,
Watford, WD2 7JR.Tel: 01923 664 258. Includes numerous good practice case
studies, good practiceguides and energy consumptionguides for differentbuilding
types including costings.
CIB. CIB W80 report96: Prediction ofServiceLife ofBuildingMaterials and

Components
CIBSE. CIBSE Guide, Section B18, Owning and Operating Costs. Chartered
Institute of BuildingServicesEngineers, London. Gives indicative details ofenergy
consumption, maintenancecosts andrough life spans for plant (currentlybeing
updatedin more detail).
TheSurveyors'Construction Handbook Part 2, Section2, Effectivefrom1/6/99 Page 1
Appendix F (4/99)
HAPM ComponentLife Manual. E & FN Spon. Tel: 0171 204 2481, 1995.
Comprehensivelife-span assessments for over 500 housing components based on
insured life assessments.
ISO Guide to Service LifePlanning ofBuildings(under preparationat the time of

writing but it will include a methodofestimatingthe durability of individual
building components).
Jones Lang Wootton. Office Service ChargesAnalysis1995, JonesLang Wootton,

London, 1995. A review of 300 buildings includingunit costs.
Kirk, StephenJ., Dell'isola, AlphonseJ., Life Cycle Costing ForDesign

Professionals, (2' Edition), McGraw-Hill mc, NewYork, 1995. Includes45 pages
of maintenance and replacementdata (in dollars)coveringall elements.
NBA ConstructionConsultants.MaintenanceCycles andLifeExpectanciesof

Building Components andElements: a guide to dataandsources.NBA
Construction Consultants
PSA Costin Use Tables, 3rd Edition, LondonHMSO 1991. Includeselemental

analysis of cleaning,maintenanceandrepair costs.
RICS. LifeExpectancies ofBuildingComponents. RICS ResearchPaper Series No

11, 1992. Preliminary results from a survey ofBuildingSurveyors'views.
Page 2 Effective from 1/6/99 Part 2, Section 2, The Surveyors' ConstructionHandbook

AppendixF(4/99)
PART 2, SECTION 3
PART TWO: CONSTRUCTION DESIGN & ECONOMICS
SECTION 3: ELEMENTS FOR BUILDINGS
Introduction
The Building Cost Information Service (BCIS) elements were originally

producedfor use in costplanning, i.e.,the development ofa designwith a pre-
setbudgetandwere published inthe BCIS document, StandardForm ofCost
Analysis: Principles, Instructions and Definitions. However, since their
introduction elements have become widely used for structuring building
information in value engineering, specifications, contract drafting and tender
evaluation as well as for costplanning/cost analysis.
This section discusses some ofthe uses for elemental information and gives a
complete definition for each element. The elements are also referred to in
other sections ofthe handbook.
<> 2.3.1 Elements
2.3.1.1 An element is a part ofa building which fulfils a specificfunctionor functions

irrespective of its design, specification or construction, for example, the
element 'externalwalls' provides the external vertical envelope to a building,
separating the internal and external environment, irrespective ofhow it may
be constructed.
2.3.1.2 Elements relate to the design process. Therefore, budget estimates are
normallypreparedin elemental form and developing the designs are normally
described and costed in thismanner.
2.3.2 Elemental Cost Analysis
2.3.2.1 An elemental cost analysis is preparedfollowing the receipt and acceptance

ofa tender for building work.
2.3.2.2 The tender cost is broken down into the standard BCIS elements (see
Appendix A) using the definitions to determine which items should be
included in any particularelement.
2.3.2.3 The elemental cost analysis can then be used to estimate futureprojects ofa
similartype.
2.3.2.4 For further information on the preparationofan elemental cost analysisusing

the BCIS elements, please refer to the BCIS publication, Standard Form of
CostAnalysis. Principles, InstructionsandDefinitions.
PART 2, SECTION 3
4) 2.3.3 Other Uses
Thestandardelements can be usedsuccessfully for otherpurposes,as detailed

in the following subsections.
2.3.3.1 DESIGNAND BUILD
In the procurement of designand build projects there has been an increase in

theuse ofelements to structure both employer'srequirements andthe contract
sum analysis. However, the use ofnon-standard elements and definitions can
be confusing. Standard elements, on the other hand, encourage a structured
thoughtprocess and producemore coherent employer's requirements. This
helps to avoid some conflicting statements that may arise in contract
documents ifstandardelements are not used.
(a) Employer Requirements

The Joint Contracts Tribunal (JCT) practice note on the Standard Form of
Building Contract With Contractor's Design, CD/lA states that the
employer's requirements may be little more than a description of
accommodation required, or may be anything up to full 'scheme design' or
further, prepared for the employer
- by his own consultants or other
professional advisers:
'Any design inputfrom the employer must be embodiedin the
employer'srequirements as there is no provision for design input
from the employer duringthe course ofthe contract.
'There is no set format for the employer'srequirements, but if
anything beyond basic accommodation requirements is being given,
particularly where an outlinespecification is being prepared,setting
it out in design elements will be helpfulto both the employer and the
contractor.
'Usingthe element hea4ings to structure the requirements will act as a

checklist for the employer and his representatives in producing any
design requirements they may have. It also means that the
requirements are presented to the contractor in a form that will assist
him in developing his designproposal.
'Elements are the most helpful form for structuring specifications to
be included in the employer'srequirements. Performance
specifications and outline specifications naturally fit into an
elemental format. Where a more detailed specification is requiredit
may be more helpful to give performance requirements in elemental
form, with the more detailed specification in trade (work sections)
form, where necessary.
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t4-S
PART 2, SECTION 3
i
(b) Contractor Proposals
The contractor's proposals should follow the format of the employer's
requirements. The preparation of the specification for materials and
workmanship in elemental form facilitates the development of the
specification alongside the design and tendering process. It also highlights
any amendments to the employer's requirements either proposed by the
contractor or requestedby the client.
(c) ContractSum Analysis

Designandbuild contracts are for a lump sum price, but the standardforms
of contractprovide for a contractsum analysis for assistingthe employerin
assessing tenders, for checking interim payments and for valuation of
changes in the employer's requirements. The use of standard elements to
format the contract sum analysis makes the foregoingprocedures simpler
(see Section 2.3.3.1 (e)).
(d) EvaluationofTender Proposals

On client-led design projects where tenders are based on a detailed set of
employer'srequirements and a highlydeveloped design, the employer should
in theory be able to accept the lowest tender. Comparison of the tender with
the cost plan element by element helps in assessing the contractor's
compliance with the employer's design. Where alternative solutions have
been put forward for particularelements, the existence of an elemental cost
plan andan elemental contractsum analysis prove invaluable in assessing the
tendervalue.
Contractor's proposals on contractor-led design projects should be

systematically checked to ensurethat they meet the employer'srequirements.
The structuring of the requirements, the proposal and the contract sum
analysis in consistent elemental form greatlyassists in this process. Indeed, it
is difficult to imagine any successful detailed technical checkofatender that
did not followa design elemental form. Ifthe contractor'sproposalswere not
structured in thisway,the processwouldbe much more difficult.
Contract sum analyses presented in consistent elemental form allow

comparison both with the client's quantity surveyor'soriginal cost plan and
betweenthe competing tenders. This identifies where individual tendershave
proposedany elemental solutions with a significantly different cost.
(e) InterimPayments
The JCT Standard Form ofBuildingContract With Contractor's Design 1998
(CD98) provides for the use of one of two methods for interim payments.
Alternative Ais by stage payments andAlternative B is by periodicpayments.
If the contractsum analysis has been set out elementally it lends itselfto
Alternative A, as elements and sub-elements provide easily definable stages.
PART 2, SECTWN 3
With Alternative B - periodic payments - an elementalbreakdown of the

contract sum analysis makes valuations relatively easy, particularly if
different design solutions within a single element are identifiedseparately.
For example, aperiodicpaymentforthe external walls wouldbe a simple task
of proportioning the amount of external wall completed to the total. This
overcomes some of the problems that arise in checking interim valuations
where the contractsum analysishas been preparedin trade formatbut no bill
of quantities or quantified schedule ofrateshas beenprovided.
2.3.3.2 AcTIvITYSCHEDULES
The JCT Standard Form of Building Contract 1998 (JCT98) contains an

option for the contractor to include an activity schedule for use in interim
payments. The activity schedule is defined as 'the scheduleof activities as
attachedto the Appendixwith each activity priced and with the sum ofthose
prices being the contract sum excluding provisional sums, prime cost sums
and any contractor'sprofitthereon'. Ifthe contractor does includean activity
schedule, it must be by agreement with the employer.
There is no standard format stipulated for the activity schedule. However,

using a BCIS standard list of elements (Appendix A) to providean activity
scheduleeliminates any problems with definitions. Furthermore, an elemental
breakdown makes valuation for interimpayments simple (see Section 2.3.3.1
(e)) and overcomes some ofthe problemsthat may ariseifactivity schedules
havebeen broken down into trades.
The use of an activity schedule broken down into BCIS standard elements
would also allow an elemental cost analysis to be completed relatively easily
and wouldbe particularly useful ifprojects have beenprocuredwithoutbills
ofquantities.
Page 4 Part 2, Section 3 (10/99) Effeëtivefrom 1/11/99 The Surveyors' ConstructionHandbook

Appendix A: BCIS Standard Elements
(Please also refer to the notes whichfollow the definitions)
SUBSTRUCTURE
All workbelow underside ofscreedor where no screed exists to undersideof

lowest floor finish including damp-proofmembrane, together with relevant
excavations and foundations.
2 SUPERSTRUCTURE
2A Frame
Loadbearing framework of concrete, steel or timber. Main floor and roof

beams, ties and rooftrusses of framed buildings. Casing to stanchions and
beams for structural or protective purposes.
2B Upperfloors
Upper floors, balconies and structural screeds, suspended floors over or in
basements.
2C Roof
2C1 Roofstructure
Construction, including eaves and verges, plates andceilingjoists,
trusses, gable ends, internal walls and chimneys above plate level,
parapet walls andbalustrades.
2C2 Roofcoverings
Roofscreeds and finishings. Battening, felt, slating, tiling and the like.
Flashings andtrims. Insulation. Eaves and verge treatment.
2C3 Roofdrainage
Gutters where not integral with roofstructure, rainwater heads and roof
outlets. (Rainwater downpipes to be included in 'Internal drainage'
(5C1).)
2C4 Rooflights
Rooflights, opening gear, frame, kerb and glazing. Pavement lights.

—
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AppendixA(1O/99)
148
2D Stairs
2D1 Stair structure

Construction oframps, stairs and landings other than at floor levels.
Ladders. Escape staircases.
2D2Stairfinishes
Finishes to treads, risers, landings (other than at floor levels), ramp
surfaces, strings and soffits.
2D3 Stair balustradesandhandrails

Balustrades and handrails to stairs, landings andstairwells.
2E Externalwalls
External enclosing walls including that to basements but excluding items
included with 'Roof structure' (2C1). Chimneys forming part of external
walls up to plate level. Curtain walling, sheetingrails and cladding. Vertical
tanking. Insulation. Appliedexternal finishes.
2F Windowsand externaldoors
2F1 Windows
Sashes, frames, linings and trims. Ironmongery and glazing. Shop
fronts. Lintels, sills, cavity damp-proofcourses andwork to reveals of
openings.
2F2 Externaldoors
Doors, fanlights and sidelights. Frames, linings andtrims.
Ironmongery and glazing. Lintels, thresholds, cavity damp-proof
courses and work to reveals ofopenings.

Internal walls, partitions and insulation. Chimneys forming part of internal
walls up to plate level. Screens, borrowed lights and glazing. Moveable
space-dividing partitions.Internal balustrades excluding items includedwith
'Stair balustrades and handrails'(2D3).
211 Internal doors
Doors, fanlights and sidelights. Slidingand folding doors. Hatches. Frames,

linings and trims. Ironmongery and glazing. Lintels, thresholds and 'workto
reveals of openings.
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AppendixA (10/99)
3 INTERNAL FINISHES
3A Wall finishes
Preparatory work and finishes to surfaces of waIls internally. Picture, dado

and similarrails.
3B Floorfinishes
Preparatory work, screeds, skirtings and finishes to floor surfaces excluding

itemsincluded with 'Stair finishes'(2D2) andstructural screedsincluded with
'Upper floors' (2B)
3C Ceiling finishes
3Cl Finishes to ceilings

Preparatory work andfinishes to surfaces ofsoffits excluding items
included with 'Stair finishes' (2D2) but including sides andsoffitsof
beams not forming part ofa wall surface. Cornices, coves.
3C2 Suspended ceilings

Construction and finishes ofsuspended ceilings.
4 FITTINGSAND FURNISHINGS
4A Fittings and furnishings

4A1 Fittings, fixturesandfurniture
Fixed and loose fittings and furniture including shelving, cupboards,
wardrobes, benches, seating, counters and the like. Blinds, blind
boxes, curtaintracks and pelmets. Blackboards, pin-up boards, notice
boards, signs, lettering, mirrors and the like. Ironmongery, other than
to doors and windows.
4A2 Softfurnishings
Curtains, loose carpets or similar soft furnishing materials.
4A3 Works ofart

Works ofart ifnot included in a finishes element or elsewhere.
4A4Equipment
Non-mechanical and non-electrical equipment related to the function
or need ofthe building (e.g. gymnasia equipment).

-
Appendix A (10/99)
1s
5 SERVICES
Baths, basins, sinks, etc. WC's, slop sinks, urinals and the like. Toilet-roll
holders, towel rails, etc. Traps,wastefittings; overflows and taps as appropriate.
SB Servicesequipment
Kitchen, laundry, hospital and dental equipment and other specialist

mechanical and electrical equipment related to the functionofthe building.
SC Disposalinstallations
5C1 Internal drainage
Waste pipes to 'Sanitary appliances' (5A) and 'Services equipment' (5B).
Soil, anti-syphonageandventilationpipes. Rainwater downpipes. Floor
channels and gratings and drains in ground within buildings up to external
face ofexternal walls.
5C2 Refuse disposal

Refuse ducts,waste disposal (grinding) units, chutes and bins. Local
incinerators andflues thereto. Paper shredders andincinerators.
SD Waterinstallations
5D1 Water— mains supply
Incoming water main from external face ofexternal wall at point of
entryinto building including valves,watermeters,rising main to (but
excluding) storage tanks andmaintaps. Insulation.
5D2 Cold waterservices

Storagetanks, pumps, pressure boosters, distribution pipeworkto
sanitary appliances and to services equipment. Valves and taps not
included with 'Sanitary appliances' (5A) and/or 'Services equipment'
(5B). Insulation.
5D3 Hot water services

Hot water and/or mixed waterservices. Storagecylinders, pumps,
calorifiers, instantaneous water heaters, distribution pipeworkto
sanitary appliances and services equipment. Valves and taps not
included with 'Sanitary appliances' (5A) and/or 'Services equipment'
(SB). Insulation.
5D4 Steam andcondensate

Steam distributionand condensatereturn pipework to and from services
equipment within the building including all valves,fittings, etc.
Insulation.
Page 4 Part 2, Section 3 Effectivefrom 1/11/99 The Surveyors' ConstructionHandbook

Appendix A (10/99)
PART 2, SEcTIoN 3, APPENDIX A
SE Heat sourè
Boilers, mounting, firing equipment, pressurising equipment, instrumentation
and control, ID andPD fans, gantries, flues and chimneys, fuel conveyors and
calorifiers. Cold and treated water supplies and tanks, fuel oil and/or gas
supplies, storage tanks, etc., pipework, (water or steam mains) pumps, valves
and other equipment. Insulation.
SF Space heating and air treatment

5F 1 Waterand/or steam (heatingonly)
Heat emission units (radiators, pipe coils, etc.) valves and fittings,
instrumentation and control and distribution pipework from 'Heat
source' (5E).
SF2 Ducted warm air (heatingonly)

Ductwork, grilles, fans, filters, etc., instrumentation and control.
5F3 Electricity (heatingonly)

Cable heatingsystems, off-peakheating system, including storage
radiators.
5F4Local heating (heating only)

Fireplaces (exceptflues),radiant heaters, small electrical or gas
appliances, etc.
5F5 Other heatingsystems (heatingonly)
5F6 Heatingwith ventilation (air treated locally)

Distribution pipeworkducting, grilles, heat emission units including
heating calorifiers, exceptthose which are part of 'Heat source' (SB)
instrumentation and control.
SF7 Heatingwith ventilation (air treated centrally)

All works as detailed under 5F6 for system where air treated centrally.
5F8Heating with cooling (air treated locally)

All work as detailed under 5F6 including chilled watersystems and/or
cold or treated water feeds. The whole ofthe costs ofthe cooling plant
and distribution pipework to local cooling units shallbe shown
separately.
SF9 Heating with cooling (air treated centrally)

All workdetailed under 5F8 for systemwhere air treated centrally.
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- ArnndixA (10/99)
Mechanical ventilating system not incorporating heating or cooling
installations including dust and fume extraction and fresh air injection, unit
extractfans, rotating ventilators and instrumentation andcontrols.
5H1 Electric source andmains

All workfrom external face ofbuildingup to and includinglocal
distribution boards including main switchgear, main and sub-main
cables, control,gear, power factorcorrection equipment, stand-by
equipment, earthing, etc.
5H2Electricpower supplies
All wiring, cables, conduits, switches from local distribution boards,
etc., to and including outletpoints for individual installations.
5H3 Electric lighting

All wiring, cables, conduits, switches, etc. from local distribution
boards and fittings to andincluding outlet points.
5H4Electric lightingfittings
Lighting fittings including fixing.
SI Gas installations
Town and natural gas services from meter or from point ofentry where there
is no individual meter: distribution pipework to appliances and equipment.
5J Lift and conveyorinstallations
5Jl Lfis andhoists

The complete installation incli.dinggantries, trolleys, blocks, hooks and
ropes, downshop leads, pendani controls and electrical work from and
including isolator.
5J2Escalators
As detailed under 5J1.
5J3 Conveyors
As detailed under 5J1..
5K1 Sprinkler installations

The complete sprinkler, installation and CO2 extinguishingsystem.
Includingtanks, control mechanism, etc.
Paga 6 Part 2, Section 3 Effective from 1/11/99 The Surveyors' Construction Handbook
AppendixA(1O/99)
•L53
PART2, SECTION 3, -APPENDIX A
51(2 Fire-fighting installbIton

Hosereels, hand extinguishers, asbestos blankets,water and sand
buckets,foaminlets, dry risers (and wet risers where only servingfire-
fighting equipment).
5K3 Lightningprotection
The complete lightning protection installation from finials conductor
tapes, to and including earthing.
5L Communication installation
Warning installations (fire and theft)
Burglarand security alarms

Firealarms
Visual and audio installations
Door signals
Timed signals
Call signals
Clocks
Telephones
Publicaddress
Radio
Television
Pneumatic message systems
All other mechanicaland/or electrical installations (separatelyidentifiable)which
have not been included elsewhere, e.g. chemical gases; medical gases; vacuum
cleaning; window cleaning equipment and cradles; compressedair; treated water;
refrigeratedstOres.
5N Builder's work in connectionwith services
Builder'swork in connection with mechanical and electrical services.
50 Builder's profitand attendance on services
Builder's profit and attendance in connection with mechanical and electrical

services.
Part 2,Section 3
The Surveyors' ConstructionHandbook
— AppendixA (10/99)
Effectivefrom 1/11/99 Fage 7
'SI-I-
PART 2, SECTION 3,APPENbIXA
6 EXTERNAL WORKS
6A Site works
6A1 Sitepreparations
Clearance anddemolitions. Preparatory earth worksto form new
contours.
6A2Surfacetreatments
Roads and associated footways
Vehicle parks
Pathsandpavedareas
Playingfields
Playgrounds
Games courts
Retaining walls
Landdrainage
Landscape work
6A3 Site enclosure anddivision

Gates and entrances. Fencing, wallingandhedges.
6A4Fittings andfurniture
Notice boards, flag poles, seats, signs.
6B Drainage
Surface water drainage. Foul drainage. Sewage treatment.
6C1 Watermains
Main from existing supply up to external face ofbuilding.
6C2 Fire mains

Main from existing supplyup to external face ofbuilding; fire
hydrants.
6C3 Heating mains

Main from existing supply or heat sourceup to externalface of
building.
6C4 Gas mains

6C5 Electric mains

6C6 Sitelighting
Distribution, fittings and equipment.
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AppendixA (10/99)
6C7 Other mains andservices

Mains relating to other service installations (eachshown separately).
6C8 Builder's work in connection with external services

Builder'sworkin connection with externalmechanical andelectrical
services: e.g. pits, trenches, ducts, etc.
6C9 Builder profit andattendance on external mechanicalandelectrical

services.
6D Minor building work
6D1 Ancillary buildings

Separate minor buildings such as sub-stations, bicycle stores,
horticultural buildings and the like, inclusive of local engineering
services.
6D2 Alterationsto existing buildings

Alterations and minor additions, shoring, repair andmaintenance to
existing buildings.
7 PRELIMINARIES
Priced items in preliminaries bill and summary but excluding contractors'

price adjustments. This is not classed as an element but is included for
allocation ofcosts.
8 EMPLOYERS CONTINGENCIES
This is not classedas an element but is included for allocation of costs.
Notes
Substructure
(a) Where lowest floor construction does not otherwise providea platform,
the flooringsurfaceshallbe includedwith this element (e.g. ifjoisted floor,
floor boarding would be included here).
(b) Stanchions and columns (with relevant castings) shall be included with
'Frame' (2A).
(c) External enclosing walls to basements shall be included with 'External
walls' (2E).
2A Frame
(a) Structural walls which form an integralpart ofthe loadbearing framework
shall be included either with 'External walls' (2E) or 'Internal walls and
partitions' (2G) as appropriate.
(b) Beams which form an integral part of a floor or roofwhich cannot be
segregatedtherefrom shallbe included in the appropriate element.
The Surveyors' ConstructionHandbook Part 2,SectiOn.3 Effective from 1/11/99 Page9

AppendixA (10/99)
(c) In unframedbuildings roof beams and trusses and floor beams shall be
included with 'Upper floors' (2B) or 'Roofstructure'(2C1) as appropriate.
(d) If the 'Stair structure' (2D1) has had to be included in this element it
should be noted.
2B Upper floors
(a) Where floor construction does not otherwise provide a platform the
flooring surface shall be included with thiselement (e.g. ifjoisted floor, floor
boardingswouldbe included here).
(b) Beams which form an integral part of a floor slab shall be includedwith
this element.
(c) If the 'Stair structure' (2D1) has had to be included in this element it
shouldbe noted.
2C1 Roof structure

(a) Trusseswhich form part ofa whole building framework shall be included
in 'Frame' (2A).
(b) Beams which form an integral part of a roof shall be included with this
element.
(c) Roofhousings(e.g. lift motor and plantrooms)shallbe broken downinto
the appropriate constituent elements.
2D1 Stair structure

(a) The cost of external escape staircases shallbe shown separately.
(b) Ifthe stair structurehas had to be included in the elements 'Frame' (2A)
or 'Upper floors' (2B)this should be stated.
2E External walls
(a) Ifwalls are self-finished on internalface,this shallbe stated.
3A Wall finishes
(a) Surfaces which are self-finished .(e.g. self-finished partitions, fair-faced
work) shall be included in the appropriate element.
(b) Insulation whichis awal1 finishing shall be included here.
3B Floor finishes
(a) Where the floor construction does not otherwise provide a platform the
flooring surface will be included either in 'Substructure' (1A) or 'Upper
floors' (2B) as appropriate. Access floors.
3C Ceiling finishes
(a) Where ceilings principally provide a source ofheat, artificiallighting or
ventilation, they shall be included with the appropriate 'Services' element.
4Al Fittings,fixtures and furniture

(a) Ironmongery to 'Windowsandexternal doors' and 'Internal doors' should
be included in (2F) and (2H) respectively.
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Appendix A (10/99)
157
4A3 Worksófa1
(a) Where items in this element have,a significant effect on other elements a
note should be included in the appropriate element.
(a) Local incinerators shallbe included with 'Refuse disposal' (5C2).
5C1 Internal drainage

(a) Rainwater gutters are included in 'Roofdrainage' (2C3).
5D2 Cold waterservices

(a) Header tanks, cold water supplies, etc. for heating systems should be
included in 'Heat source' (5E).
5D4 Steam and condensate

(a) Steam and condensate pipework installed in connection with space
heating, or the like, shall be includedas appropriate with 'Heat source' (5E)
or 'Space heating and air treatment' (5F).
5E Heat source
(a) Chimneys and flues which are an integral part of the structureshall be
includedwith the appropriate structural element.
(b) Local heat source shall be includedwith 'Local heating' (5F4).

System described as having:
(a) 'Air treated locally' shall be deemed to include all systems where air
treatment (heating or cooling) is performedeither in or adjacentto the space
to be treated.
(b) 'Air treated centrally' shall be deemed to include all systems where air
treatment (heating or cooling) is performed at a central point and ductedto the
space being treated.
5F3 Space heating and air treatment - Electricity (heatingonly)

(a) Electrically-operated heat emission units other than storage radiators
should be included under 'Local heating' (5F4).
5H1 Electricsource and mains

(a) Installation for electric heating ('built-in' systems)shall be included with
'Space heatingandair treatment' (5F3).
5J1 Lifts and hoists

(a) Special structural work, e.g. lift walls, lift motor rooms, etc., shall be
included in the appropriate structural elements.
(b) Remaining electrical work shall be included with 'Electrical powersupplies'
(5H2).
(c) Each type oflift or hoist shall be stated separately where appropriate.
The Surveyors' Construction Handbook Part 2, Section. 3 Effective from 1/11/99 Page 11
AppenJAi1D/99)
5K1 Sprinkler installations

(a) Electrical work shall be included with 'Electrical power supplies' (5H2).
(a) Each installation shall be stated separately where appropriate.
(b) The cost ofthework in connection with electrical supply shallbe included
with 'Electricalpower supplies' (5H2).
(a) The cost ofeachinstallation shall, where appropriate, be shownseparately.
(b) Items deemed to be included under 'Refrigerated stores' comprises all
plant required to provide refrigerated conditions (i.e. cooling towers,
compressors, instrumentation and controls, cold room thermal insulationand
vapour sealing, coldroom doors, etc.)for cold rooms, refrigerated stores and
the like otherthanthatrequiredfor 'Spaceheating and airtreatment' (SF8 and
SF9).
SN Builder'swork in connection with services

(a) Builder's work in connection with each of the services elements shall,
where possible, be shownseparately.
(b) Where tank rooms, housings andthe like are includedin the gross floor
area, their component parts shall be includedunder the appropriate elements.
Where this is not the case the items shall be included here.
50 Builder's profit andattendance on services

(a) Theprofitandattendance in connection with each ofthe serviceselements
shall, wherepossible, be shown separately.
6B Drainage
(a) To include all drainage works (other than land drainage included with
'Surface treatment' (6A2)) outside the building, to and including disposal
point, connection to sewer or to treatment plants.
6C8 Builder'swork in connection with external services

(a) Builder's work shall be stated separately for each installation where
appropriate.
6C9 Builder'sprofitand attendance on externalmechanical and electricalservices

(a) Profit and attendances shall be stated separately for each installation
where appropriate.
Page 12 Part 2, Section 3 Effectivefrom 1/11/99 The Surveyors' Construction Handbook

Appendix A (10/99) -
159
PART 2, SEcTION4
PART TWO: CONSTRUCtION bESIGN & ECONOMICS
SECTION 4: DESIGN AND BUILD - GUIDANCE FOR

EMPLOYERS' AGENTS
Introduction
This section describes some of the tasks and responsibilities that surveyors
may be asked to undertake when appointed as an employer's agent on a
design and build contract.
(Note: The organisation or person commissioning a building is referredto in

this section as both the clientand the employer. Generally, the term 'client' is
used in relationship to his employer's agent and 'employer' to denote his
relationship to the contractor.)
At its most basic, the role of the employer'sagent is to act on behalf ofthe
client in the matters specified in the contract. However, in practice there are
a wide range oftasksthat a client may ask an employer'sagentto undertake.
This section is not about procurement options; it assumes that all optional
procurement strategies have been carefully considered by clients and their
advisorsand that the decisionhas been madeto adopt design and build. With
regardto procurement strategies, reference shouldbe made to Part3, Section
1 of this handbook ('Developing an Appropriate Building Procurement
Strategy') which provides extensive guidance on selection of the most
appropriate option for the procurement ofbuildings.
'Design and build' describes contracts whereby the contractor assumes

responsibility both for completing the design for the works and for carrying
out the construction in return for a fixed lump sum.
There are a number of 'standard' forms of design and build contracts, but
where specific reference is made in this section, it is to the currentedition of
the Joint Contracts Tribunal (JCT) Standard FormofBuildingContract With
Contractor's Design 1998 (CD 98). This form ofcontractmakes no provision
for a contract administrator (CA) and all matters which would have been
certifiedby the CAare ascribedto either the client or the contractor.
The JCT practice note, CD/lA states that, 'Because the employer will almost
certainly be a corporate body of one kind or another, provision is made for a
person to be named to act as the employer's agent for the purposes of the
contract.The contract treats the acts ofthe agent as those ofthe employer.Unless
therefore the employer specifically otherwise states in his requirements, the
contractor can andmust regard the employer's agent as the duly authorisedagent
ofthe employer for theperformance ofany oftheactions ofthe employer under
1br
PART 2, SECTION 4
the contract conditions.Whatever qualification the employer's agent may

possess he acts as the employer and in no way acts as certifier or valuer as
between the employer andthe contractor.The employer isentitled to remove and
appoint his agent at willbut must inform the contractor ofhis agent'sidentity.'
It should be noted that the prescribed duties of the employer's agent are
restricted to 'access to documents on site' and 'access to works, workshops,
etc.'. Importantly however, the contract also allows the client to delegatehis
responsibilities underthe contract andinpractice this is usuallywhat happens.
Theservicesofanemployer'sagentcanbeprovidedby any oneoftheconstruction

professionals(determinedby the nature ofthe project) but often it is a chartered
surveyor.On more complexprojectsthe role ofemployer's agent may sometimes
be provided by a team comprising the 'lead' consultant, with other consultants
advising on matters relativeto their respective disciplines. In such circumstances,
thefunctionoftheleadconsultantmaynotbedissimilartothat ofaproject manager.
InAppendixAthe services whichmaybe requestedfrom an employer'sagent

are set out. However, the scope ofthe role can vary considerably depending
uponthe particularcircumstances ofthe commission. It wouldbe unusual for
any client to require all the services listed in AppendixA, but they serve to
indicate the extent to which this role can be developed.
• 2.4.1
2.4.1.1
Background
Design and build is not a new concept. Many historic buildings have been
procuredin this way and the technique has been used for simple industrial
shell buildings. However, in recent years the use of design and build has
extended to cover a significant number ofbuildingprojects ofall types.
2.4.1.2 It is thoughtthat design and buildhas become more popularbecause clients

believedthatin some circumstances thetraditionalroutefailedto delivertheir
projects on time and to budget.
2.4.1.3 Proponents of design

and build claim that it can deliver co-ordinated
planning, reduced professional fees, improved lead-in times, shorter
construction programmes and cost savings, as well as providing greater cost
certaintyfor clientsthrough a single point ofcontact.
2.4.1.4 Responsibility for the development ofthe design, as well as the construction
of a project, is firmly placed with the contractor. This is perceivedto clarify
any litigation or disputebetweenthe parties to the contract.
2.4.1.5 Proponents ofdesign and build also claim that it can allow tenderersto bring
their skills to the design which, throughthe competitive process, can deliver
benefits to the client in terms ofbuildabiltiy. Furthermore, tendererscan take
account of current availability of labour, materials and plant in their design
and pricingconsiderations.
PART 2, SECTION 4
2.4.2 Contract Documentation
2.4.2.1 The JCT Standard Form of Building Contract With Contractor's Design was
first introduced inresponse to demand fora form ofcontract whichallowed the
contractor to cany out a complete contract (including designdevelopment) for
a lump sum.
2.4.2.2 Throughout its life the JCT Standard Form of Building Contract With
Contractor's Design has been subject to many amendments to account for
changes inthe law, regulations affecting building development andincreasing
expectations andinvolvement of clients.
2.4.2.3 Alongside the JCT contracts, there are two relevant practice notes which
should be referred to:
(a) CD/lA which gives guidance on:

•the 'With Contractor's Design' form of contract;
•the employer'srequirements;
•the contractor'sproposals;
•the contractsum analysis;
•value added tax (VAT); and
• insurance - contractor's designliability.
(b) CD/lB which offers further detailed guidance on:

•the form ofcontract;
•the contractsum analysis; and
• application offormula adjustment.
2.4.2.4 In Englandand Wales the contract documents under this form are:
•the employer'srequirements;
•the contractor'sproposals;
•the contract sum analysis; and
•the articlesind conditions set outin the form including optional
supplementary provisions and appendices.
2.4.3 Additional Services
2.4.3.1 Thelist in Appendix A is intentionallycomprehensive and involves some duties

whichmaybe beyond a surveyor's normal skills. Great care should be exercised
by the employer's agent in advising on which duties to incorporate within the
commissioning contract. An inability to deliver a service could expose the
employer's agentto claims for negligence from boththe client andthe contractor.
2.4.3.2 The employer'sagent will normally be involvedfrom the outset and will be
instrumental in producing the contract documentation, including the
employer's requirements based on the brief developed with the client.
Thereafter, he can arrange or assistwiththe selection oftenderersandarrange
the formal tendering process. Subsequently he can review the contractor's
PART 2, SEcTIoN 4
proposals (including the developed design and the contract sum analysis) to
ensure that all aspects of the employer'srequirements have been met with
particularreference to quality, time and cost issues.
2.4.3.3 Where the employer's agent has been delegatedthe authorityby the client, he is
responsible for ensuring that the project is carried out in accordance with the
conditions of contract, employer's requirements, contractor's proposals and
contract sum analysis. The role willusually include monitoring the construction
processto ensurebestpractice, controllingexpenditureand overseeing contractor
compliance with all current regulations. Typically, it will also involve the
administrationofthe project interms ofdesignand cost by sanctioningall design
issues and by instructingany changes. The employer's agent will be responsible
for checkingthecontractor'svaluationsand confirminginterim and final payment
amounts to the client in accordancewith the contract conditions.
2.4.3.4 Ifa day-to-day inspection is requiredthis should be carried outby a clerk of

works, resident engineer or qualitycontrol inspectorand shouldbe the subject
ofa separate agreement outsidethe employer'sagent commission.
2.4.3.5 The role of employer'sagent is not just one of monitoring the contractor's
performance; good practice requires an active approachto ensure that the
contractor undertakes all ofhis responsibilities under the contract. However,
the employer's agent should not hinder or prevent the contractor from
fulfilling his duties.
2.4.3.6 The employer's agent should advise the employer on those roles that are
within his competency, which attract a duty of care similar to that under
traditionalprocurement methods and advise the employer on the appointment
of any other consultants requiredto fulfil any additional roles.
2.4.3.7 A recent court decision held the employer's agent responsible for failure to
comment on high risk design elements of the contractor'sproposals and an
ongoing failureto approvethe contractor'sdesign development proposals. It
would be an unusual project arrangement if these essential tasks were not
delegated by the client to the employer's agent. On the other hand, the duty
to approve the contractor's design development and drawing should be
included expressly or by implication in the contractbetweenthe client and the
employer'sagent.
2.4.3.8 The service provided by an employer'sagent may vary considerably. A full

examination of Appendix A will help to identify the elements of service
appropriate to a particular project which should be agreed with the client,
recordedand communicated to all parties.
2.4.3.9 Design and build is fundamentally about the allocation ofrisk and responsibility.
Therefore,itis strongly recommendedthat the agent's contractual responsibilitiesas
delegated by the client, together with any additional duties he has agreed to
undertakeonbehalfofthe client, are clearlydefinedandrecorded,andthatthe client
understandsthe position.
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PART 2, SECTON 4
2.4.4 Employer's Requirementsand Contractor's Proposals (including

contract sum analysis)
2.4.4.1 The JCT practicenote, CD/lA offers limited guidance on the completion of
the employer'srequirements.
2.4.4.2 Thecontractor'sproposals and the employer'srequirements takentogetherset

out the scope ofthe works, so it is important that the proposals are examined
in detail andthat they match therequirements. Anyareasofconflict should be
resolvedsincethe contractassumes theyare compatible when it is signed.
2.4.4.3 Theappointedemployer'sagent has an obligation to guidethe client, provide

technical and professional advice and draft the employer'srequirements in
order to protectthe client and to ensurethe projectis completed.
2.4.4.4 The employer'srequirements canbe by way ofperformance specification, or

on a prescriptive basis where a great deal of designmay have beenproduced
initially.
2.4.4.5 The employer's agentandthe employer should agreebetween themthe standard

of performance and the requirements of the building. The employer's agent
should offer guidance on the effect that this might have on the contractor's
flexibility in design and construction. Someclients may require a detailed level
ofspecification.However, ifthe employer's requirements become unnecessarily
prescriptiveas tothe contractor'sbasic constructionmethods, the contractor may
lose sight ofthe client's real requirements. The requirements should always be
sufficientlydetailed to ensurethe client obtains the buildinghe needs. Therefore,
greatcare should be exercised by the employer's agentin advising the client on
the appropriatelevel ofdetail tobe provided in theemployer's requirements and
that requested in the contractor's proposal.
2.4.4.6 The employer's agent should try to encourage the client to concentrate on the
purpose, performance and desired end requirements ofthe project and to avoid
involvement in the constructionmethod.
2.4.4.7 It is, however, most important that the client's input is sufficiently detailed to
enable the production of clear and concise 'employer's requirements' to
achieve the client's objectives. The requirements should also be
comprehensive enoughto avoid amendments duringthe constmctionprocess
as these can be very costly.
2.4.4.8 All relevant parts of the client's brief should be given in the employer's
requirements. Additional requirements arising from meetings during the
tender process shouldbe incorporated into the requirements by amendment.
There should be no misunderstanding as to what comprises the employer's
requirements. Similarly, any amendments to the contractor'sproposals after
they have been submittedshould be incorporated. Any ambiguity between
thesetwo documents could giverise to conflict at a later date.
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164
PART 2, SECTION 4
2.4.4.9 Contractors are only responsible for that whichthey designor specify; in turn
employers or their consultants are responsiblefor all that they design and/or
specify, unlesstherehas been apre-agreedlimitation to the contract. Thus, in
order for the employer to maximise the benefit from design and build, the
extent of any designing and specifying by prescription in the employer's
requirements shOuld be limited to those elements in hich the employer
requiressuch control.
2.4.4.10 The Building Cost Information Service (BCIS) publication, Elements for
DesignandBuildoffers guidance to employer'sagents on the use ofbuilding
elements for structuring the employer's requirements and the contractor's
proposals/contract sum analysis. Elementsfor DesignandBuildis considered
to be important supplementary reading. The list of elements, and their
definition, is also given in Section 2.3 ofthishandbook.
Note should also be made ofthe Code of Procedure for SelectiveTendering

for Design andBuildpublished by the National Joint Consultative Committee
for Building(NJCC) in 1985 and as amended from time to time.
Appendix B is a checklist of matters which should be considered when

compiling employer's requirements and checking contractor's proposals. The
list covers themajormatters andthe elements thatrelateto buildings in general.
Itcannot be exhaustive whenapplied to anyparticular buildings.Any chartered
surveyors acting as employer's agents should make themselves aware of all
matters which are relevant to the client and his business so as to ensurethat the
employer's requirements/contractor's proposal reflects his needs.
2.4.5 Design and Build Variants
2.4.5.1 The forms of design andbuild contractallow for the production of variation
to the conventional design and buildcontract, for example:
•packagedeal;
•turnkey;
• develop and construct;
•two-stage ten4eT;
•joint venture/negotiated; and
• design buildfund and operate
2.4,5.2 PACKAGINGDEAL AND TURNKEY
Package deal and turnkey are both expressions used to describetraditional

design and build, but with the absoluteminimum ofclientinvolvement in the
design development (or the building operations). A turnkey contract
additionally requires that the building is fully fitted out to enable immediate
operation by the end user.
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PART 2, SECTiON 4
2.4.5.3 DEVELOPANDCONSTRUCT
Develop andconstructis the name given to the 'variant' wherethe client, as

part of the employer'srequirements, imposes a design and/or specification
developed to a greater degree than most (for example, listing specific
manufacturers' products). The contractor is obliged to adopt this data and
shouldreflectthis developed designinformation in his contractor'sproposals.
A fully developed preliminary design may negate many of the advantages

associatedwith conventional design and build. However, the client may be
happy to forego these advantages and to impose his own particular
design/specification in return for other benefits perceived to derive from a
design and build procurement strategy.
2.4.5.4 Two-STAGETENDER
Two-stage tender requests seek to obtain proposals from a number of

tenderers from which one is selected. That tenderer then works up the
preferredsubmission in greater detail.
2.4.5.5 JOINT VENTURE/NEGOTIATED
Joint venture/negotiated projects arise when a client is approached by a

contractor/developer with a proposal which broadly aligns with the client's
needs. Many successful projects have been carried out using this route with
considerable benefit to the client. Clearly,the earlier the employer's agent can be
introduced the better, since his involvement should help limit any abortive
design.
2.4.5.6 DESIGN BUILD FUND OPERATE
Design build fundand operate (DBFO) contracts have been created as a result
of the private finance initiative. Although this form ofprocurement has been
listed as a design and buildvariantit should be remembered that the end user
never actually owns the building (unless otherwise provided). CD 98 is not
therefore appropriate as part ofthe primary agreement, although itcould feature
in sub-contract. In most instances, the client willappoint a shadow design team
to ensure that user's requirements are properly established and communicated
to the bidders. The shadowtéamchecks the offers received to ensurethat the
user's requirements have been addressed and continues to monitor design and
development with the preferred bidder. Thereafter the shadowteam ensures that
the building incorporates the specified user requirements.
Irrespective of design and build variant employed, the service of the

employer'sagent doesnot alter radicallyand can still be developedfrom the
items ofservice listed in AppendixA.
166
PART 2, SECTION 4
246 Novation
2.4.6.1 Novation can be employed on any of the design and build variants and
involvesthe transferofthe client's contractwith his designer(or designers)
to the successful contractor, this arrangement having been included in the
tenderdocuments. The contractor assumesthe responsibility for the payment
of fees and associated value added tax (VAT), and receives the benefit of
continuity ofdesign. Oftenwhennovationis implemented, it is not appliedto
the quantity surveyorwho remains with the client acting as the employer's
agent duringthe designdevelopment andconstruction phase. Novationis not
defined in CD 98, althoughit is widely practised.
2.4.6.2 Where designers are novated it is important for clients to understand that their
designers' allegiance transfers from the client to the contractor. This transfer of
allegiance should be properly explained to the client prior to his deciding to
imp1ementnovation. It is also important that the employer's agent advises on
selecting appropriate designers and contractors and that the transfer of roles
occurs and is maintained.
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167
Appendix A: Potential Services Associated with the

Role of Employer's Agent
The services to be provided should follow JCT practice notes, CD/lA and CD/lB
together with the NJCC's Code of Procedure for Selective Tendering for Design and
Build (1995).
Reference shouldalso be madeto the BCIS publication, ElementsforDesignandBuild

whichprovides guidance on howto structure documents for design and buildcontracts.
The scope of services should be fuily agreed betweenthe employer's agent and the
client at the outset ofthe commission and all interested parties should be informedas
to the extent ofdelegated authority.
Al INITIAL DESIGN INPUT
•
Advising on the need for specialist appointments where necessary
including appointments under CDM (Regulations) 1994 (also
competency andresource check).
•
Agreeing with the client the scopeofthe employer'srequirements
(including the need for preliminary design, if any) andensuring that
these are 'signed off'.
•
Examining land transfer documents to clarifyboundary positions
including an assessment ofthe likely impact of existing easements
(including rights oflight, rights ofway, restrictive covenants and so
forth).
•
Initiating measuredsurvey with levels.
•
Preparing or procuring preliminary design for the development.
• Establishing with the client the programme to suit fundingavailability.
•
Assessing suitability and cost effectiveness of general andstructural
design.
• Reviewing scheme under Town and Country Planning Acts including
consultations with local planningauthority leadingto initialoutline
town planningapplication. (Note: Submission offormal full town and
country planning application is normally at a later stage (see A2) and
sometimes this application is by the contractor.)
• On projects involving the refurbishment of existing buildings the
provision ofdesign, cost assessment and submission offormaltown
and countryplanningapplications.
• Investigating/establishing location of existing servicesto site with
local and statutory authorities.
• Initiating and reviewing sub.-soil reports.
• Consulting as appropriate with relevantagencies, for example, English
Nature andEnglish Heritage.
•
Advising on the implementation ofthe ConstructionActandany other
relevantlegislation.

(10/99)
168
PART. 2, SECTION 4, APPENDIX A
A2 PRE-CONTRACT
•
Advising on the need for further specialistappointmentswherenecessary.
•
Preparing cost estimate/structured cost plan.
•
Advising on need for risk analysisto includemarketresearchto
underpinfinancial viability.
•
Advising on any possible archaeological implications for the site.
•
Reviewing sub-soil reports and commenting on foundation design and
contamination considerations.
•
Assessing environmental impact andadvising generally on
environmental issues.
• Conducting local public investigations as related to town planning,
including consultation with building occupiers prior to submitting a
full town and country planning application.
•
Arranging drawings and performance specification for mechanicaland
electrical services.
•
Arranging design/cost audit at appropriate work stages if appropriate.
•
Advising on the need for provision of Party Wall or Access to
Neighbouring Land ActAgreements.
• Advising on secure by design.
•
Developing projectbrief with client andreflecting same in the
employer'srequirements.
• Establishing with client the format ofthe contract sum analysis.
• Assisting with completion offormal applicationsin connection with
approvalsrelating to funding,necessary consents and other requirements.
•
Advising level ofcontingenciesand preparing appropriatedaywork clause.
•
Advising on tendering options including single- or two-stage tendering,
develop and construct or joint venture.
•
Advising on optional clauses in standard forms ofcontract, in particular
CD 98 supplementaryprovisionswhichprovide both parties with time
and cost certainty.
•
Advising on dispute resolution.
• In consultationwith client finalising the employer's requirements
document and arranging for this to be formally 'signed off' by the client.
• Where applicable, advising (after interview ifrequired) on the
selection of suitable tenderersincluding their capacity, resources,
financial and tax exemption status.
•
Reviewing andreportingon tenders receivedfor the project including
comparison with cost plan andcomment on programmeproposedby
each.
• Advisingon all aspects offuture maintenance ofthe completed
development.
• Advisingon services installation andfuture maintenance to these
services including checking andcommenting upon working drawings
producedby tenderers.
• Advisingon energy ratings, forexample,National Housing Energy
Rating and Standard AssessmentProcedure.
• Ensure access auditis executed (to meet the requirements ofthe
DisabilityDiscrimination Act).

Appendix A (10/99)
• Auditingcoftactor's prbpbsais (including designanddetailed

drawings) to ensure compliance with employer'srequirements, town
and countryplanning, building regulatipns andany further criteria
imposedupon the project by external organisations.
• Advisingon decennial insurance provisionsifrequired.
•
Preparing cash flow forecasts.
•
Advising on necessityfor and wording ofperformance bonds and
where applicable parent company guarantees.
• In conjunction with the client's brokerreviewingcontractor's and
client's insurances (including professional indemnity insurance of
designers).
• Preparing and agreeing a schedule ofrates for valuation or negotiation
purposes.
• Advisingboth clientand tenderer on anyagreed amendments to the
employer's requirements following receipt ofcontractor'sproposals
and otherrelevantinputs.
• Providinginformation to clientin connection with post-tender
documentation for lender/funder.
• Agreeing with contractorcash flowbasedon stage or periodic payments.
• Arrangingfor all necessary collateral warranties to be preparedand
completed by contractor, sub-contractors and consultants.
• Arranging for the appointment of a clerk ofworks.
• Advisingon assignment and sub-contracting (including design).
• Advisingon novationofdesigners'contracts, if appropriate.
• Preparing contract documentation, ensuring that the order of
precedence in the event of adjudication has been clarified. Also,
agreeing documentation with bQthparties and arranging execution.
Visiting the site with the contractor andagreeing by schedule and
photographic records existing condition of any buildings to be
retained. Also, roads, footpaths, trees, shrubs andother similaritems
liableto be damaged.
• Attending site with contractor and assisting in arranging closureof
roads and footpaths.
A3 CONTRACT DuRATIoN
• Issuingletters ofintent where appropriate.

• Distributing contract documents in accordance with the contract.
• Approving/monitoring/commenting, as appropriate, on contractor's
design development.
• Visiting the construction site. (The number of site visits dependent
upon stage of construction (or as agreedwith client) and may be
weeklyduring initial stages until all superstructure erectedand
complete.)
• Ensuring that there are regular properly conducted site meetings with
a chairman operating to a prescribed agenda and formalminutes.
• Attending all site meetings.
• Generally monitoring the works in terms ofquality and progress.
• Assessing compliance with contract conditions by contractor.
The Surveyors Construction Handbook Part 2, Section 4 Effective from 1/11/99 Page
AppendixA (10/99)
170
• Assessingcompliance ofservice installations.

• Regularlyreportingto client, in a format agreedwith the client,
mattersofinterest, for example, quality, progressagainstprogramme,
site organisation and labour employed. Also, defects andweather
stoppages, etc. -
• Monitoringspend rate against cash flow forecastsincludingearnedvalue

analysis.
• Ensuring that there is no adjustment to the contract sum other than as
provided in the contract.
• Issuinginstructionsonbehalfofthe clientto instigatechangesto the design
quality or quantityofthe works or on any other matter as required by the

contract.
• Measuring for and agreeing with contractor any variationsresulting
from changes to the employer's requirements during construction as
well as the expenditure ofany provisional sums.
• Agreeing valuation of fluctuations in the cost of labour, plant and
materials.
• Addressingrequests from contractors for payment ofoff-sitematerial.
• Receiving requests, assessing, preparing, grantingand issuing any
notice ofextension oftime.
• Negotiating and agreeing any loss and expense claims submitted in
writingby the contractor.
• Checking contractor'svaluations for stage or periodic paymentsand
notifyingthe client.
• Preparing and issuing financialstatements as may be requiredby the
client.
• Ensuring that appropriateVAT is leviedin accordance with current
legislation.
• Ensuring compliance with all reservedmatters contained withinTown
and Country Planning Certificate.
• Ensuring that adoptionprocedure is put in hand at appropriate stage
and following through to achieveadoption prior to handoverand to
include for drainage installation.
• Issuingwhere applicable non-completion certificate and advising on
the implications ofimposition as well as the amount ofliquidatedand
ascertained damages which may be deducted by the client from any
paymentcertified.
• Ensuring that all requiredtests are carried out by the contractor and
documented proofprovidedprior to practical completion.
•
Issuing certificate ofpractical co,mpletion.
•
Checking contractor'sfinalaccountandissuingfinal statements.
•
Issuingall otherfinal statements relatingto the final accountsthat
may be requiredby the client.
• Preparingsnagging lists.
• Arrangingand attending pre-handoverinspections.
• Ensuring that all snagging items are rectifiedbefore inviting client to
receivehandover.
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AppendixA (10/99)
ill -
Ensuring th4rOvisioi bf bthft"lnformation compiled in manual

form and supplied to the client at completion ofconstruction process -
user'smanualand/or computer disk.
• Ensuring that all service installations are completed in accord with
original approved design attending finalcommissioning andprocuring
test certificates.
• Arranging and attending handover sessions.
A4 POST-CONTRACT
• Receiving health and safety file from planning supervisorand delivering

to client.
• Onpartialpossession and/or sectional completion agreeing value
thereof
• Ensuring compliance with any insurance requirements.
• Advisingon values for building insurance purposes.
• Reviewing means ofescapeas built andensuring procurementof fire
certificate by the contractor.
• Issuingnotices ofpractical completion on client satisfaction or
beneficial occupation, if appropriate.
• Obtaining final clearance certificates from local authority in
connection with compliance with buildingregulations.
• Preparing post-contract schedules of defects after occupation and
arranging for rectification by contractor andon completion notifying
client.
• Issuingnoticeson making good defects at end ofdefects liability
period,examining the rectifiedworks and certifying completion of
making good defects where applicable.
A5 GENERALADDITIONAL SERVICES
• Dealing witliessentialitems ofdefect that arise duringmaintenance

periods.
•
Resolving any latent defects.
•
Advising on alternative means ofremedyingdefects.
•
Advising on insolvency ofany party involvedwith the contract.
•
Advisingon obtainingstatutoryapprovals such as registrationfor food
preparation.
• Advising on provision ofpost-handoverservice relating to ongoing
maintenance.
•
Prepariñ capital allowances and revenue schedules.
• Advising on special design requirements, for example Feng Shui, if
applicable.
• Advising on contingency planning andbusiness recoveryfor select
buildings, for example, terrorist insurance, bomb threats and

construction ofcommunication rooms.
The Surveyors Construction Handbook Part 2, Section 4 Effective from 1/11/99 Page 5
ppendixA (10/99)
Appendix B: EflipIoye's Requiremeiit/Cbhtractor's Proposal Checklist

Bi CONTRACT DOCUMENTATION
The contract documentation will include:

• the
employer'srequirements
• the contractor's
proposal
• the contractsum
analysis
• the articleconditions,
optional supplementary provisions and
appendices set out in the form ofcontract.
The employer's requirements can be a brief statement of the client's

accommodation requirements, an outline design or a fully worked up
design. The contractor's proposalsshould be in sufficient detail to allow
the clienttojudge betweenthe tenderson designas well as price.
The requiredlevel of detail will vary from clientto client and contractto
contractbut it is suggested that information on this checklist wouldbe the
minimum requirement.
Where little design work has been carried out before tenders and proposals
are invited, a performance specification would be normally required.
However, where a great deal of design work has taken place a prescriptive
specificationwouldbe needed.
B2 CHECKLIST
(Note that this listis not intended to be exhaustivein total or in anysection)
B2. 1 GeneralInformation
• Projecttitle
• Employer
• Employer'sagent
• List ofdrawings andotherinformation accompanying documents
• Location, including a narrative on the proposeduse/userofthe building.
An indication of the employer's business and overall objectives (to
providea feel for the eventual product)
• Access to site
• Site boundary defined
• Form ofcontract
• Permissible modification to standard form ofcontract
• Details ofappendices to the conditions of contract
Form ofcontract sum analysis
B2.2 Building andAccommodation Outline

Outline description ofthe building
Accommodation schedule
• schedule ofnet usable areas
(including definition of occupancy)
• scheduleof occupancy numbers and durationofoccupancy
• circulation requirements
ppendix B (10/99)
'73
Basis of design
Conceptual design statement and drawings

• site layout
• plans
• elevations
• sections
• relevantworkingdetails
• site works and landscaping layouts
• sketch perspectives
• structural design
• services design
Design standards
• legislation or standards
• details ofstandards which apply (for examplecodes ofpractice)
• statementofworkmanship
• tolerances
• CDM regulations
Aesthetics
• specific aesthetic needs (otherthan planningrequirements)
Integration ofcomponents
• relationship with each other
• methodsof dealing with interfaces
• methodofdealingwith services installations. For example, level of
concealment of services and architectural treatments to exposed
surfaces
B2.3 Form ofDetailedSpecflcation

(Note: The detailed employer's requirements can be drafted in performance
specificationterms, or inprescriptiveterms (contractor delivery) by including
detailed specification and drawings, or a combination of performance and
prescriptive specification.)
The scope of work (see Section B2.4) assumes an employer's requirement

draftedinperformancespecification terms andthe contractor'sproposalsshould
convertthese performancespecificationsintoclearlydefined design proposals.
The specifications and design checklist (see Section B2.5) can be used in
preparing employer's requirements or a specification for a contractor's
proposal.
Aperformance specification should bechecked to ascertain thatit is feasible

to design a structure with therequirements given andthat thereisno conflict
between performance andother prescriptive requirements given.

Appendix B (10/99) - - -i
J7Lt
B2.4 Scope ofWork (Perforinance;Reqüfrenients)

Performance specification may relate to the whole building or include
elements or both. The following are some matter whichmay be addressed.
Image/description ofkey areas

•
drawings
• sketches
• statements
Flexibility
•
flexibility of accommodation.
• flexibility of
design
Energy
• energy conservation and heat measures
• insulation values
• Building research establishment environmental assessmentmethod
(BREEAM) certification rating

•
plantroom layouts
Loading requirements
Details of deadand imposed loadings
Facilitiesfor disabled
• provision statementto comply with building regulations andcurrent
disability legislation
• specific needs of disabled
Building configuration
• written statement and/or drawing
• relationship of accommodation
• size ofaccommodation
• purpose
• layout
• dimensional constraints including clear heights underslabs and beams
• naturallighting - lux levels andmethodofmeasurement
• naturalventilation
• column grid arrangement including projections from walls, etc.
• clear ceilings/soffit heights
• tolerances
• vehicleaccess door heights and widths
• toilet/bathroom/locker room requirements
• kitchen/catering requirements
• restaurant/vending requirements
• plant room configuration
• noise breakoutbetweenrooms

pppendixB (10/99)
p5
• storage space, cleaners, cupboards, maintenance facilities

• access for cleaning and maintenance
•
security
Means of escape
Plantrooms
Externalworks
• car
parking
• leisure facilities
• environmental considerations
• visual effects
• waste disposal
• emergency vehicle access
• water features
•
loading bays
• existing site features and treatments
• function
buildingswithinexternals
• site survey
B2.5 SpecjIcationsandDesign
Specification ofperformance, or the form ofconstruction, kind and quality
maybe givenin elemental or otherformat. The standard elementsare listed
below. (Please see Section 2.3 of this handbook or the BCIS publication,
StandardForm ofCostAnalysis for definition ofelements.)
1 Substructure
2 Superstructure
2AFrame
2B Upper floors
2CRoof
2C1 Roofstructure
2C2 Roof coverings
2C3 Roofdrainage
2C4 Roof lights
2D Stairs
2D1 Stairstructure
2D2 Stairfinishes
2D3 Stairbalustradesandhandrails
2E External walls
2F1 Windows
2F2 External Doors
2G1 WC cubicles
2H Internal doors
3 Internal finishes
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Appendix B (10/99)
lJb
3AWall filishes
3B Floor finishes
3C Ceiling finishes
3C1 Finishes to ceilings
3C2 Suspended ceilings
4 Fittings and furnishings
4AFittingsand furnishings
4A1 Fittings, fixtures and furniture
4A2 Soft furnishings
4A3 Works ofart
4A4 Equipment
5 Services +
SB Services equipment
5C Disposalinstallations
SC1 Internaldrainage
5C2 Refuse disposal
5D1 Water mains supply
5D2 Cold water service
5D3 Hot water service
5D4 Steam and condensate
5E Heat source
SF1 Water and/or steam (heating only)
5F2Ductedwarm air (heating only)
SF3 Electricity (heating only)
SF4 Local heating(heating only)
SF5 Otherheating systems (heating only)
SF6 Heating with ventilation (air heated locally)
SF7 Heating with ventilation(air heated centrally)
SF8 Heating with cooling (air heated locally)
SF9 Heatingwith cooling (air heated centrally)
SG Ventilating systems
SH Electrical installations
SH1 Electricsource and mains
SH2 Electricpower supplies
SH3 Electriclighting
5H4Electriclightingfittings
SI Gas installation
SJ Lift and conveyor installations
SJ1 Lifts and hoists
5J2 Escalators
SJ3 Conveyors
SKi Sprinkler installation
SK2 Fire-fighting installations

Appendix B (10/99)
ni
5K3 Lightningprotection
Details ofeach installation
5N Builder'swork in connection with services
50 Builder'sprofit and attendance on services
6 Externalworks
6A Siteworks
6A1 Sitepreparation
6A2 Surface treatment
6A3 Site enclosure and division
6A4Fittingsand furniture
6B Drainage
6C External Services
6C1 Water mains
6C2 Fire mains
6C3 Heating mains
6C4 Gas mains
6C5 Electric mains
6C6 Site lighting
6C7 Other mains and services
6C8 Builder'swork in conjunction with external services
6C9 Builder'sprofit and attendance on external mechanicaland
electrical services
6D Minorbuilding work
6D1 Ancillary buildings
6D2Alterations to existing buildings
B2.6 Particular Requirements

Additional Responsibilities
The employer's requirements should statewho is responsiblefor all matters
that affectthe construction ofthe building including suchmatters as:
Siteinvestigations
• soil
survey
•
ground conditions
• topographical surveys
•
existing services
• hazardous waste
•
archaeological features
Development controls or other controls

• planningpermission (including reservedmatters)
• building regulations
• WaterAuthority
• LicensingAuthority (liqour)
•
Licensing Authority (entertainments)
• fire officer
requirements

Appendix B (10/99)
I7.
PART 2, SECTION 4, APPENDIXB
• factoryinspector
• environmental health officer
• employer's building insurers (ifappropriate)
• Traffic Planning Authority
• utilities
• National Rivers Authority
• Any other authority or statutory undertaker whichhas jurisdiction
with regardto the works
Establish responsibility for fees payable in connection with above
Other legislation or provisions
Adjoining premises
• rights ofaccess to adjoining premises
Trespass, nuisance
• contractorto acquire rights as requiredand absolve theemployer of
responsibility
Use and maintenance of existing:

• roads
• sewers
• services
Ifthe responsibility for any ofthesematters is to be with the contractor the

client should include disclaimers in any information which is providedto
the contractor.
Information requirements
The employer'srequirements should give details of all records, drawings,
etc., requiredto be handedover on completion including:
• record drawings
• maintenance manuals
• CAD data disks
• design calculations
• staff training requirements
• warranties and guarantees
Exclusions
Give details of items not to be designed andlor constructed by the
contractor and the requirements and responsibilities for integrating these
intothe works
Future developments
Provide details ofany provisions requiredfor future developments
-
Appendix B (10/99)
PART 3, SEcTIoN 1
PART THREE: CONSTRUCTION PLANNING AND

PROCUREMENT
SECTION 1: DEVELOPING AN APPROPRIATE

BUILDING PROCUREMENT STRATEGY
Introduction
This Section providesboth clients and their advisers with procedures

which will assist them in the selection of an appropriate procurement
strategy for a building project.
The strategy developed for the purpose of project procurement should

resultfrom an objective assessmentof client needsand project characteris-
tics, since it is consideredthat there will be no single strategy suitable for
all projects and all clients. Choice of an inappropriate strategy may, how-
ever, result in a failure to meet client objectives, disappointment and
potential dispute.
The selection process should, therefore, provide a best-fit solution based

on good judgement and which is acceptable in terms of the identified
criteria and the acceptabledistributionofrisk.
The selection of an appropriateprocurementstrategy is identified as a key

decision in terms of achieving client objectives. Conversely,an inappro-
priate choice can be a key factor in performance failure, resulting in cost
and time overruns and poor building performance. This Section looks at
the client's involvement (3.1.1), the development of procurement
strategies (3.1.2), procurementoptions (3.1.3), the selection of the most
appropriate procurement route (3.1.4), and the implementation process
(3.1.5).
3.1.1 informs clients as to their involvement and the functions of their

appointed consultants and advisers. It also stresses the importance of
appropriateprofessional advice.
In 3.1.2—4, the key issues are addressedtogether with the characteristicsof

a variety of procurement strategies: the aim is to match client needs, the
particular project's criteriaandthe chosen strategy.
The implementation of strategies is consideredin 3.1.5 where reference is

also made to standard contracts for the designer, consultantor constructor
appointment.
The Surveyors' Construction Handbook Part 3, Section 1(4/98) Effectivefrom1/6/98 Page 1 )

PART 3, SECTION 1
This Section is not intended to be definitive and a Further Reading list of

informativepublicationsis provided. Extensivereference has been madeto
publications prepared for public clients by the Central Unit for
Procurement, ElM Treasury, andthese are recommendedfor those involved
in publicprocurement.
The reconmiended Further Reading categorises clients in various ways.

This may be helpful in the early stages of developingprocurementstrategy.
However,each client is unique and may be more or less experiencedin the
process of building procurementdepending on the size and stage of each
company's deyelopment.
It is importantto considerthose factors which will affect client satisfaction,

as well as the level ofknowledgeand experienceof the client in the process
of building procurement. Such factors should have a major influence on
procurementstrategy and whetherthe client should take an active role in
the procurementprocess.
This Section addresses these issues and provides, through the form of a
checklist,a process to aid selection.
3.1.1 The Client
(It is recommended that thisbe read in conjunctionwith Part 1, Section 1)

3.1.1.1 A building project represents a discrete piece of construction with clear
start and finish dates, providing specified benefits at accepted cost. It is
unlike any othermanufacturedproductbecauseit has:
• a unique demand — the client'sspecificneedfor accommodation (but

future adaptabilityandpossible disposalmust not be ignored);
o a unique location— thesiteavailable forthe building;
• uniqueconstraints— the cost and time parametersfor the project; and
• a unique end product — thefinishedbuilding.
3.1.1.2 It has three otherparticular characteristics:
• the final product, although itself unique, is built up of many standard

parts assembled in accordance with a series of standard rules and
practices;
• its constructioninvolves major expenditureover a comparativelyshort
period oftime; and
• the construction of a new building requires a large team of individuals
and firms with particular expertise to work together to complete the
project satisfactorily. This team will normally only be formed for this
unique project and then be disassembled.It is unlikely that the same
'
Page 2 Part3, Section 1 (4/98) Effectivefrom 1/8/98 The Surveyors' Construction Handbook
16t
PART 3, SECTION 1
team will work together again, and if it does, the project is likely to be
different. Bach project is, therefore,a prototypeandinvolves a learning
curve. Project testing is rare.
3.1.1.3 DEVELOPMENTOF PROCUREMENTSTRATEGY

The client, on the advice of the principal adviser (see 1.1.2), is responsible
for selecting the procurement strategy most suited to the project and
deciding how it is to be administered.This is a three-stage process which
contributes to project success:
•
selecting the strategy;
•
implementing the strategy; and
•
planningthe administrationofthe contracts necessaryto implement the
strategy.
The processes of selection and implementation are dealt with in 3.1.2 and
3.1.5.
3.1.1.4 (a) Strategiesmay include:

• traditional — design by consultants completed before lump sum
tendersare obtained;
• design and build — detaileddesign and constructionby the contractor
for lump sum; design and construction may overlap. Where a con-
cept design is produced by the consultants before the contractor is
appointed,the strategy is called develop and construct;
• management contract— design by consultants; managementcontractor
appointed early and work package contracts let progressively in the
contractor's name; design and constructionoverlap;
• design and manage — outline design by the consultants; as 'manage-
ment contract' but detailed design by the management contractor;
design and constructionoverlap; and
• construction management — design by consultants; construction
manager appointed early to produce and manage trade package
contracts made directly with the client; design and construction
overlap.
(b) The number and style of contract documents will depend on the
contract strategyselected.
3.1.1.5 (a) Where direct consultant appointments are made, each will be the sub-
ject of a separate contractagreement, but where a design andbuild route is
selected, the designers may be appointedby the contractor. In the case of
construction management, the client will be required to enter into many
individual trade contracts.
(b) Contractimplementationcan be complex and may encompass the addi-

tional appointment of consultants or the novation of designers from the
client to the contractor. In addition, forms of warranty or collateral
EL
PART 3, SECTION 1
contracts may be involved. The principal advisercan assist the client in the
selectionof suitable contracts and the associateddocumentation.
(c) The responsibilityfor contract administration will dependupon the pro-

curement method selected, and may fall to the design team, the project
manager, a contract administrator, or the client himself. The client should
seek the advice of the principal adviser to ensure that the administrative
process is properlyplanned and delegated.
3.1.1.6 APPOINTMENT OF CONSTRUCTORS
(a) The timing of the need to appoint constructors (whethercontractors or

trade contractors) will be dependent upon the procurement strategy which
is selected, but the client will have a formal role in this process. The
client's role will include selecting those constructors with whom he will
negotiate or who will be invitedto tender.In the case of the latter, it will be
the client who formally selects the constructor(s) to carry out the work and
who then entersinto contract with them.
(b) Assistance with the selection, documentation for tender, and advice in
relationto contractissues can be obtainedby the client from his professional
advisers and particularly the principal adviser. There are a numberof codes
of procedure to assist in this process and these are further listed and
referred to in 3.1.5 (Implementation). In broad terms, the factors which
affect the selectionof design and costconsultants shown above (capability,
competence, staffing and cost) will affect the choice of constructors, but the
documents on which selection is made (particularlyfor cost) can be exten-
sive and very complex.
(c) As with the selection of design and cost consultants, value for money,
ratherthan lowest price should be the aim in the selection of constructors.
Where clients regularly build, there may be a case for considering a special
arrangementwith a construction firm. This is increasingly referred to as
'partnering' and is one of the approaches referred to in The Lathani
Report1. Partnering enables both parties to seek 'win-win' solutions by
facilitating long-termrelationships to the mutualbenefit of both2.
3.1.1.7 DESIGN OVERVIEW
(a) While responsibility for achieving a successful design solution to the

client's requirements lies chiefly with the designer, the responsibility also
rests with the client both for ensuring that his own needs are met and for
the impact of the development on the local environment.The blame for a
poorbuildingis likely to be ascribed to the client as well as to the designer.
1 Latham, M., Sir,

(1994), Constructing the Team: Joint Review of Procurement and Contractual
Arrangements in the United KingdomConstructionIndustry:Final Report,HMSO,London
2Cffi, (1996), Partnering in the Team, Thomas TelfordPublishing, London
Page4 Part 3, Section 1(4/98) Effectivefrom 1/6/98 TheSurveyors'Construction Handbook

PART 3, SECTION 1
Equally, a well-designed buiiding reflects credit on those who conmiis-

sioned it as well as on the designers who conceivedit.
(b) Design is an important factor in ensuring good working conditions for

staff and convenience for members of the public who need to visit the
building.A well-designed building is a good investment. Good design can
contributeto economy and efficiency— by efficientlayout and economical
use of space, by energy efficiency(e.g. in heating, insulation, and mechani-
cal services) by low maintenance costs, and by ensuring flexibility to meet
changingrequirements.
(c) No one person has all the design skills for any but the very simplest
project and, therefore, the collaborationof many designers will be neces-
sary. This is particularly the case in specialist buildingsor buildings which
have sophisticatedmechanical and/orelectricalinstallations.
(d) The formulation of an accurate design brief and the development of

design in strict accordance with that brief are key processesfor the client
(or his project manager) to oversee. In practical terms, the client will
require:
• close collaboration between users and the design team in the devel-
opment ofthe design;
• formal checking that the developed design meets, but does not
exceed, the requirements ofthe designbrief; and
• formal presentation of developed designs to the users and formal
sign-off by them.
(e) It will also prove valuable for the client to indicate clearly his inten-
tions in respect of the programme and for the design team to respond in
terms of their strategy for meeting this programme. Methods for updating
progressshould also be sought by the client.
(f) As the majority of users, and indeed the client, are likely to find the
readingandinterpretation of design drawingsa difficulttask, it is important
to ensure that the design team present their proposalsin a form that can be
readily understood. (Computer aided design [CAD] may enable three
dimensionalpresentation.) The setting of the design andnot justthe design
in isolation should be taken into account. The client should feel able to
expect alternatives to be offered withinthe fee.
3.1.1.8 COST CONTROL OVERVIEW

(It is recommendedthat this be read in conjunctionwith Part 2, Section
1.)
(a) It is essential that the client understandthe difference between:

• estimating — theprovisionof an informedopinionat a particulartime
of what the final cost of the project is likely to be; and
• cost control — themanagement ofthe consequences ofthe design and
1L
PART 3, SECTION 1
constructionprocessesso as to achieve value for money and ensure

that the final cost does not exceed the budget.
Estimates cannot be expectedto be proved accurateunless cost control is

exercised.
(b) The techniques used to produce estimates vary according to the type
and level of data available at the time of preparation.The general level of
estimating accuracy improves as the design of a project develops.
Notwithstandingthis progressiveimprovement in accuracy, provided that
cost control is being exercised,the generallevel of accuracyofearly estim-
ates can be stated with sufficient precision for them to be valid parameters
for decision makingand for the managementof the project.
(c) For estimatesto be effective,the client should requirethat all estimates

are supported by:
• a risk analysis— an assessment ofthe potentialrisks, their probability
andthe associatedtime and cost consequencesif they should occur;
and
• a sensitivity analysis — a statement of the comparativeeffects on the
total estimate of changes to principal data and assumptions on which
the estimateis based.
(d) The amount included in estimates to cover the uncertain cost of risks
based on the analysesdescribed above is known as the contingency. It is
importantthat contingencies are sufficient to coverrisks and are not eroded
to facilitate anylack of cost control.
(e) A primary concern may be the cost of running and maintaining the
building.The term 'cost-in-use' is used to describe how these costs can be
estimated,enabling the client to takethese matters into account when con-
sidering total project costs and building design. Higher initial costs may
result in lower runningor maintenancecosts during the life ofthe building.
(f) The earlier cost control procedures are instituted, the more effective
they will be. By way ofsimplisticillustration:
• cost varieswith (but not in direct proportionto) size: once the size of
a building is fixed, so is the generallevel of cost;
• the selectionof the most economical design for basic elements such
as foundations,structural frame, external cladding and roofing, is of
far greater costsignificance than the types of finishings; and
• the overall cost of mechanical and electrical systems and the effec-
tiveness of the cost control procedures which can be applied to them
is largely governedby early decisions as to thetype of systemselected.
(g) The methods used for cost control differ radically between the pre-
construction and construction stages of a project. Cost control during the
former depends partiy on the procurement strategy but more on control of
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PART 3, SEcTIoN 1
the designprocess within that strategy; during the latter, it depends on

avoidanceof change after commitmentand the result of effective manage-
ment.
(h) Pre-construction cost control, in simple terms, comprises:

• preparing a cost plan — an allocation of the controlbudget into cost
centres which match readily identifiable elements of expenditure,
with allowances for contingencies,reserves for changes in market
prices and the like; and
• costchecking each element as it is designed againstits allowancein
the costplan.
If the cost of an element as designedexceedsits allowance in the cost plan,

the excess can only be correctedby:
• redesigning the elementto reduce its cost; or
• transferring money into that element from contingencies or from
anotherelement yet to be designed.
If neither is done, the control budget will be exceeded.
(i) Successfulcost control during the constructionstage depends on:

• design work being completed and fully co-ordinated before a
commitment to construct is made (this applies in a progressive way
when design andconstructionoverlap);
• the contract being administered efficiently and promptly in accor-
dance with its terms andconditions; and
• changes to the design being minimised, for any reason, after
construction has started.
(j) Regular cost reports can be producedthroughoutthe construction stage

from which potential overspending can be identified before it occurs.
Corrective action should thus be possible. The client should, however,
recognisethat suchcorrective action is not alwaysbeneficial, since:
• cost savings can be made only by reductions in standards or by
omissions of part of the work remainingto be finalised, that is largely
in the visible finishings and fittings. The resultant possibility is that
the requirements ofthe brief will not be met; and
• late cost savings are inefficientas any amountsaved will be reduced
or may be negated by the costs of disruption inherentin making the
changes neededto generate the savings.
(k) All estimates and cost control proceduresshould take account of infla-
tion (i.e. the increase in constructioncost from the date when the estimate
was prepared to the date when the work is carried out). It is essential for
effectivecost control that:
• allowances be made for inflationin all estimates andthat the assump-
tions onwhich suchallowancé'ere calculated be stated;
• such allowances for inflationbe clearly identified within the estim-
ates and notbe usedto correct other overspending;
The Surveyors' Construction Handbook Part 3, Section 1(4/98) Effectivefrom 1/6/98 Page7 j
PART 3, SECTION 1
• the assumptions on which inflation allowances are calculated be

reviewed regularly and as each new estimate is prepared the
allowances adjustedin accordance with such reviews; and
• a clear policy and method for drawing down inflation reserves be
establishedand applied.
(I) The client should distinguish between inflation and the effect on con-
structionprices of market conditions at the time of tender. In simple terms,
contractorsadjust their tender prices by reducing or increasing their target
profit marginsin accordancewith commercialfactors. It is unwise to base
early estimates on any assumptions as to market conditions at the time of
tender as the constructionindustry is subject to wide, comparativelyswift,
changesin workloadin accordancewith economicconditions.
(m) Things will go wrong on a project. The unexpectedwill happen. Such

unforeseen happenings are covered in the cost control system by contin-
gency sums. The client should have a policy forthe management of contin-
gency funds to ensure that, at all times in the project, the remaining
contingencies match the remaining risks. The client may also establish and
control a client reserve, not disclosed to the consultantsor the contractors,
to cover, for example, late changes in user requirementsor unforeseeable
third partyevents.
<> 3.1.1.9 TIME CONTROL OVERVIEW
(a) The overall programme of activities which will constitutethe project

should be developed at a very early stage in the procurementcycle. This
programmewill form the time framework within which the designers and
the constructors should complete their activities, and within which other
key stages, such as land purchase, funding andplanningpermissionshould
be completed.
(b) The programme of activities should be feasible and realistic.

Insufficient design time will have an effect upon client risks, as will insuffi-
cient time allowedfor construction.
(c) The clientshould be aware of those tasks which are vital to completion
on time andthose tasks where some flexibility may be available. Time for
the approvalprocesses should be included as specific activities in the time
plan for the project. These are invariably vital as the need to obtain
approval is likely to be a prerequisite to further work proceeding on the
project.
(d) The process of time control is in many ways analogous to that of cost
control. Thus, a time control system can embrace:
• time budget — the overall project duration as fixedeither by specific
constraints or by the selected procurement strategy; the period which,
oncefixed, becomes a keyparameterfor management of the project;
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PART 3, SECTION 1
time plan — the division of total time into inter-linked time

allowances for readily identifiable activities with definable start and
finishpoints;the overall projectprogramme;and
time checking — monitoring closely the actual time spent on each
activity against its allowance in the time plan; reporting divergence
as soon as it is identified.
(e) If the time taken for an activity exceeds its time allowance there are
essentially only two forms of corrective action available:
• the resequencing of later activities, which may involve abandoning
low priority restraints and/or phased transitions from earlier
activities to later activitieslogicallyfollowingthem; or
• shortening the time allowance for future activities by increasing the
resources to be made availablefor them.
If neitheris done, the overall time budget is likely to be exceeded and the
projectwill finish late.
(f) It should be noted that sometimes certain events are likely to delay the
overall completionof a project. In such cases, provision should be made,
taking cognisanceof the contractualconditions,for the effects to be taken
into account. Other measuresmay be considered,shouldthe clientso wish,
in mitigationof serious delays and associatedcosts.
(g) Theclient should takeaccount at all times offundamentalrelationships

betweentime, quality andcost such as:
• any extension of the overall timescalefor a project always generates
additionalcosts to either constructoror client; every project contains
time-related costs whether these are openly stated or not. The
decision as to who carries such additional costs depends on the
detailed contractualarrangements betweenthe parties; it is likely that
some of them will be borne by the client; and
• making up lost time by resequencing later activities may be achiev-
able but often only at the risk of compromising quality or cost
control.
(h) The client should recognisethat time control is as important during the
design stages of the project as the construction stage. Designers should
work to a series of deadlines at which different elements of the design
should be agreed (i.e. frozen) in order that costs andthe overall programme
be keptunder control.
(i) The client should consider developing (with the help of the project
manager if appointed) a time contingency (reserve), with strict procedures
for allocating the reserve to specific events. This concept is essential on
projects which are subject to externaltime constraints, for example, where
a building has to be available for occupationbefore the lease on another
building expires.
The Surveyors'ConstructionHandbook Part3, Section 1 (4/98) Effectivefrom 1/6/98 Page 9 TT

PART 3, SECTION 1
3.1.1.10 LIFE-CYCLECOSTS
(a) In addition to considering project costpurely in terms of initial capital

costs the client may wish to consider costs over the projected life of the
building. Such considerationsmay review higherinitial costs againstlower
running costs or longer life to replacement or maintenance.This principle
may be of particular impact which shorter-life inherent assets, such as
mechanical or electrical equipment, or where planned maintenance or
energyconsumption,are beingconsidered. This wasparticularlyreferredto
in the LathamReport'.
(b) The techniques associated with life-cycle costing are often complex
andpredictive.The principal adviser will be able to advise the clientofthe
availability of their application in eachcase.
<> 3.1.1.11 VALUE MANAGEMENT
(a) Value management is usually reserved for large, relatively complex

projects where value for money is important and concerned with defining
what 'value' meansto the clientin meeting particularneeds. In general, any
project should satisfy the differing requirements of several parties. Value
managementprovides a structured framework for the examinationand dis-
cussionof theserequirements so as to reach a consensus beforethe project
briefis finalised. It is usedto ensure that the need for andscope of anycon-
structionis thoroughlyanalysed before commitmentto proceed anyfurther
is made. The aim is to establish a clear statement of a project's objectives
matchedto their relative values.
(b) Value managementis usually carried out at the concept and feasibility
stages of a project with the objectof ensuring that:
• aproject is commissionedin response to a careful analysisto balance
needs;
• a wide range of options and alternatives to meet those needs is con-
sidered;and
• the project objectives are made explicit and are commonly under-
stood by all parties.
(c) The client may wish to appoint a professional adviser experienced in

these techniques who will provide support in writing the objectives and
subsequentbrief.
3.1.1.12 VALUE ENGINEERENG
(a) This occurs later in the development of the project and is concerned
with how value is achieved rather than what the relative values are as
definedin the project brief and objectives.
Latham, M., Sir, (1994), Constructing the Team: Joint Review of Procurementand Contractual
Arrangements in the UnitedKingdom Constructionindustry: FinalReport,HMSO,London
Page 10 J Part 3, Section 1(4/98) Effectivefrom1/6/98 TheSurveyors'Construction Handbook

PART 3, SECTION 1
(b) Value enginering studies are planned, formal reviews of the design
philosophy and the detailed design solutions at one or more stages of the
design development.They are sometimes carried out by firms or individuals
not connected with or employed on the project and are short exercises
intended to review the detailed design solutions against the objectives and
to establishwhether they can be achieved in a more costeffectivemanner.
3.1.1.13 QUALITY CONTROL OVERVIEW
(a) The final quality of the project is governed, progressively, by:

the project brief — a clear statement of the standards of quality
required. Great care is needed to ensure this standard is
unambiguous: such phrases as 'the highest quality attainablewithin
the control budget' are to be avoided;
• the original design — the adequacy ofthe components selectedfor the
building; the interface betweenrelated components andsystems; the
integration of mechanical and electrical systems into the overall
design;the completeness of designbefore construction starts;
•
specification— the conversionof the quality standarddemanded by
the project brief into precise requirementsfor both the supplyandthe
installation of materials, components and systems; the setting out of
criteria against which the standard of the finished work will be
judged, e.g. by reference to standards, codes of practiceorthe like;
•
quality control — setting up control mechanismsto apply to the exe-
cution of the work on site; the detailed on-going supervision by the
contractor; the programmes for testing; the procedures for rectifying
any defective work; and
• inspection — the independentinspectionand verification of the con-
tractor's work by the design team; procedures for witnessing tests,
for commissioning plant and systems, for pre-completioninspection
for defects lists and defect rectification and for final hand-over.
(b) The client may choose to appoint a clerk of works whosefunction is to

act as an inspector of work done to obtain quality, but who should recog-
nise that inspection and verification is the last line of defence. The key to
quality control on site is to specify clearly, andto monitorclosely the quality
control activities carried out by the contractorwhile work is being done.
(c) Many construction companies and firms of consultants within the

building industry have adopted, or are in the process of adopting, formal
quality assurance systems for their own work or services in accordance
with BS 5750, ISO 9000 series or equivalent standard.
<j> 3.1.1.14 CHANGE CONTROL OVERVIEW
(a) Clients should aim to makeno changes once a particulardesign feature

has been decided because these are one of the significant causes of extra
costs and delays in construction projects. The avoidanceof change should
TheSurveyors'Construction Flandbook Part 3, Section 1(4/98) Effectivefrom1/6/98 Page 11 1

PART 3, SECTION 1
be a prime objective of the project strategy. If changes are unavoidable,

they should be dealt with as describedin the paragraphsbelow.
(b) Client changes (as distinct from design development) are changes
which are made either by:
• the design team, with the approval of the client, to a design feature
which, it has been decided, should be frozen, or 'improved', or
altered to overcomedesign errors andinconsistencies; or
• the client after the design briefhas been agreed. The most significant
of these are changes to the scope of the works.
(c) Client changes can be relatively minor, such as adding a few extra
power points, or can have major cost implications,such as the addition of
an extrastorey.
(d) The cost of client changes depends largely on when they are made, for
example:
• before the construction contract has been let, the cost can be con-
tained to that of the changedfeature itself, and perhaps some nugatory
resourcecost; and
• after the construction contract has been let, the cost will be dispro-
portionate to the value of the change, it can disrupt the contractor's
work and invariably gives rise to a higher cost thanifthe change had
been included in the contract as let. Many minor changescan have a
cumulative and serious effect: disruption claims caused by a large
number of small changes are common.
(e) Some client changes areunavoidable.Examplesofsuch changes are:

• compliancewith changes in legislation;
• requirementsofthe health andsafety or firepreventionauthorities;
• those requiredby unforeseen ground conditions;and
• previouslyunforeseen users' requirements.
(f) The contingency in the project budget should be sufficient to take

accountof the likelihoodof such changesbased on risk assessments.
(g) Changes proposed prior to construction may either be unavoidableor

optional. If they are unavoidable, the client, if satisfiedthat they are, should
authorise a transfer from the contingency in the budget to cover them. If
they are optional, they should be approved if it can be demonstratedthat
they offer good value for money (or a saving) and that there are sufficient
funds available to payforthem.
(h) Changes proposedafterthe constructioncontract has been let can have

majortime andcostimplications andshouldbe avoidedif at all possible. If
they are not essential, they should be deferreduntilthe project is complete
and then reviewedto see ifthey are necessaryand economically justified.
Page 12 Part3, Section 1(4/98) Effectivefrom 1/6/98 TheSurveyors'Construction Handbook

PART 3, SECTION 1
(i) Theneedfor changes shouldbe minimisedby:

•
ensuring, with the assistance of an experienced project team and
designers, that the project brief is as comprehensive as possible and
the usershave signed it off;
• takinginto account anyproposednew legislation;
• having earlydiscussionswith outside authorities so as to identify the
requirements;
• undertaking adequate site investigation or condition surveys1
ifexisting buildingsare to be renovated;
• ensuring that designs are fully developed and co-ordinated before
construction contracts are committed;and
• imposing discipline on users to finalise and sign off their require-
ments in strict accordancewith the project programme.
(j) When changes do occur, the client shouldcallfor:

• the reasons for the change;
• the source ofthe change;
• the full cost and time consequence of the change;
• proposals for avoiding or mitigatingtime overrun;and
• source of funding of any cost overrun, e.g. contingencies, client cost
reserves, and/or compensatingsavings elsewhere.
3.1.1.15 C0MMIssI0NmTG
(a) Once the building work is complete, the systems which will support
comfortmust be commissionedto ensure they are working effectively and
reliably.
(b) In relatively simple buildings,the clientcan insist that this is a function

which the contractor must perform. Where buildings have sophisticated
systems controlling the internal environmentor facilitatingstaff movement
or safety, commissioning can be established as an independent activity
carried out by specialists.
(c) Howevercommissioningis facilitated, it must be achievedbefore any

building can functioneffectively.
3.1.1.16 OCCUPATIONAND TAKE-OVER
(a) The client is responsible for addressing the issues of occupation,

staffing and subsequent operation and maintenanceof the building. This
activity is separate from the design and constructionprocess, although it
will affect it, and will have its own time, resource and cost implications
which shouldbe incorporatedinto the overall project plan.
'StockCondition Surveys,RICSBooks, 1997
TheSurveyors' Construction Handbook Part 3, Sectioril(4/98) Effectivefrom1/6/98 Page 13 J

PART 3, SEcTIoN 1
(b) For large projects, the client may wish to arrange for the nominationof
a member of the departmentto act as occupation managerto manage this
activity or may appoint a facilities manager. Occupationplans should be
establishedduring the design stages of the project and should cover:
• the operation ofthe building on a regular on-going basis;
• the hand-over andacceptanceofthe building from the contractor(s);
• the progressivefinal fitting-out(if any); and
• the physical occupationof the building with minimum disruptionto
the client's operations.
3.1.2 Procurement Strategy
3.1.2.1 Designing and constructing a new building is rarely straightforward. It is

subject to a series of risks and uncertainties and involves a number of
organisations especially assembled for the project. The way in which the
client andthe various designers, contractors and suppliers work together as
a team is determinedby the procurement strategy and forms of contract
entered into between the project participants and the client. The procure-
ment strategy should be consistent with the objectives of the project and
should enablethe risks to be controlledto achieve a successful outcome.
43> 3.1.2.2 Procurement strategy is the outcome of a series of decisions which are
made during the early stages of a project. It is one of the most important
decisionsfacing the client. The chosen strategy influences the allocationof
risk, the design strategy and the employment of consultants and
contractors. Risks are also allocated by means of the associated legal
contracts. Procurement strategy has a major impact on the timescale and
ultimate cost of the project.
43> 3.1.2.3 Generally,clients can choose from several different strategies. A successful
strategy is one which leads to a completed building which meets the
client's objectives. The preferred aim is for contributingparties to work
together for a qualityresultrather than competing againsteach other.
43> 3.1.2.4 Where the developmentof design does not maintain the pace anticipated,
or the programme is otherwise affected by unexpected occurrences, the
selected strategymust be reviewed. It is most importantthat the strategyis
reconsidered at key times in the progress of the project such as when
planning approval is given, before the contract strategy has been finally
decided and beforethe constructioncontract(s) has (have) been let.
43> 3.1.2.5 DEFJMTION OF TERMS

Different procurementstrategies provide different ways of allocating risk
andresponsibilityto the organisationscontributing to the project.The main
types of procurementstrategy are summarised below (they are covered in
more detailin43 3.1.2.10).
Page 14 Part 3, Section 1(4/98) Effectivefrom1/6/98 The Surveyors' ConstructionHandbook

193
PART 3, SECTION 1
• traditional: desIgn by consultants is completed before contractors

tenderfor, then carry out, construction;
• construction management: design by the client's consultants and
constructionoverlap. A fee-earning construction manager defines and
manages the work packages. All contracts are between the client and
the trade contractors. The final costoftheprojectmay only be accurately
forecastwhen all packages have been let;
•
management contracting: design by the client's consultant and con-
struction overlap. A management contractor is appointed early to let
elements of work progressively by trade or package contracts (called
'works packages'). The contracts are between the management
contractor and the works contractors. As with construction manage-
ment, the final cost can only be accurately forecast when the last
packagehas been let;
•
design and manage: similarto the managementcontract, with the con-
tractor also being responsible either for detailed design or formanaging
the detailed design process; and
•
design and build: detailed design and construction are both undertaken
by a single contractorin return for a lump sum price. Where a concept
design is prepared before the contractor is appointed, the strategy is
calleddevelop and construct.
3.1.2.6 On some projects it may be necessary to use more than one strategy to meet
the project's objectives. For example, a traditional approach may be used
for completing the building structurally with main services installed. This
is known as a shell and core contract. Aseparate strategy, for example, con-
struction management, may be used to fit out the building with ceilings,
raised floors, carpets, partitions and electrical fittings. The use of two
strategies allowsthe client more time to finalisethe user's detailedrequire-
ments, withoutdelaying the start of construction.
3.1.2.7 When the choice of procurement strategy has been made, the resultant
contractstrategy and form of contract must be chosen (i.e. the terms and
conditions of the contract). To avoid the need for fresh legal drafting each
time, various standardforms of contract are available. Most ofthe standard
forms of contract are published by professionalbodies in the construction
industry and have been developed largely for private sector clients. The
rangeofcontractsavailable is referred to in 3.1.5 (Implementation).
4) 3.1.2.8 PROJECT OBJECTIVES
(a) Construction (and refurbishment) projects are often complex with

potentialfor costandtime overruns and/or the finished buildingperforming
less well than planned. To minimise such risks the client should select the
procurementstrategy which matches the objectives of the project. These
must be clearly established and prioritised before any design or other work
begins.
The Surveyors' Construction Handbook Part 3, Section 1 (4/98) Effectivefrom 1/6/98 Page 15
194
PART 3, SECTION 1
(b) The clientmust decide the relative importance of the three main types
of criteria—time, cost and performance:
o time: earlier completion can be achieved if construction is started
before design is finished. The greater the overlap between the two,
the less time will be requiredto complete the project;
o cost: with the exception of simple 'standard' buildings and certain
'design andbuild' strategies, a final constructioncontractsumcannot
usuallybe establisheduntil the design is complete. Overlap between
design and constructionmeans that constructioncan start before the
cost is fixed: this increases the importance of accurate cost
forecasting;and
performance (design): the quality and performance characteristics
required from the completed building determine both the project
time and cost. Some strategies reduce the client's ability to control
and make changes to the detailed building specification after the
contracts have been let.
(c) Performance includes the function of the building, its quality and
appearanceand other factors such as durability, cost in use and flexibility.
The relative importanceof each objectivemust be given careful considera-
tion because decisions throughout the project will be based on balances
between the other objectives (see the figure illustrating the relationship
between primary criteria).
FIGURE ILLUSTRATINGTHE RELATIONSHIPBETWEEN

PRIMARY CRITERIA [referred to in 3.1.28(c)]
Time (Speed to completion or

certaintyof completion date)
S
Project objectives— as the emphasis S
S
on any one criterion is increased
the othercriteriaare affected I
S
S
S
S
S
S
S
S
S
. S
S S
S
S S
S
S S
S S
••
I..1.
IS
S
•\.'
Cost Performance
(priceor cost certainty) (design,quality)
Page 16 Part 3, Section 1(4/98) Effectivefrom1/6/98 The Surveyors' Construction Handbook

PART 3, SECTION 1
In any project these three criteria will be interdependent and decisions

affecting one will affect one or both of the other criteria. The appropriate
procurementstrategy will recognise this interrelationship and reflectclient
needsandproject characteristics.
The strategy should also reflect the client's technical ability and resources
and the amount of control over the process which he wishes to exert directly
or through his projectmanager(if appointed).
3.1.2.9 RISKAND RESPONSIBILITY

4j>
(a) There is a finite amount of risk and responsibilityassociated with any
project.Time, cost andperformance are three ofthe main risks that are pre-
sent in every project. Risks are usually considered as uncertain future
events,which mayhave significant effects, e.g. extra cost, delay or damage
to the performanceof the finishedproject. Having set the priorities for the
project's objectives, the clientshould considerthe effect ofthose objectives
not being met and the resultingrisks to which he could be exposed.
Although the project is subject to a wide variety of risks, it is importantto

note that only a few have a major effect. This is a powerful argument for
concentrating attention during cost estimating and managementdecision-
making on the few largest sources of uncertainty and risk and for
developing strategies for managing out risk and for setting up contracts in
such a way that the allocationofthe majorrisks is clear.
(b) Risks which are consideredto have potentiallythe greatest impact on

construction projects include:
• a project which will not function in accordance with the client's
needs;
• a project whichis ofinadequatequality;
• a project whichis completedlater than required deadlines; and
• a project whichcosts more than the client's budget or abilityto pay.
In each case, the strategy can be to transfer the whole risk to another
throughthe medium of contract.This is possible but will attract high price
premiums or will exposethe transferee to risks which they may not be able
to 'own' or insure and therefore the party transferringthe risk will remain
exposed.
Risk may alternatively be retained in part by the client, or reduced by

adequate pre-designor pre-priceinvestigation.
(c) As has been already suggested, an adequatebrief will ensure function-

ality and quality standards. Equally, adequacy of programme will reduce
the risk of overrunandadequacy of cost estimates shouldensure a resultant
cost which is within budget. Both constructiontime and constructioncost
estimates depend upon sufficient design development, which itself will
depend upon an adequate brief and parallelinvestigation ofground conditions
TheSurveyors' ConstructionHandbook Part 3, Section 1(4/98) Effectivefrom1/6/98 Page 17 j

PART 3, SECTION 1
and the particular requirements of statutory controls. In ensuring that the

brief is adequate,and that design is appropriately developed, the clientcan
successfullyreduce some risk in a way that will notresult in high pricepre-
miums.
(d) Ideally, risk and responsibility should go together, so that the party
responsiblefor performing a task is accountable. Each risk shouldbe allo-
cated to the party with the greatest ability to own the risk andto manageits
effects. If, for example, the client considers it critical that the price for the
building is fixed before construction commences, the risk of meeting that
objective could be passed to contractors, making them contractually
responsiblefor completionto an agreed design and specificationfor a lump
sum price.
(e) Responsibilityfor risk andthe ability to control a project interact. The

more the client chooses to allocate risk to other parties, the less control the
client has over the way in which the project is executed. In the example
above, if the contractor has to meet the agreed specification within the
budget and time, the client has little influence over the way in which these
objectivesare met. In practice,risk allocation is determined by the chosen
strategy and allocatedby means of contracts between the client and those
responsiblefor managing, designingor constructing the project. Theway in
which risk andresponsibility are allocated by different contractstrategies is
indicatedbelow and shownin 3.1.3.
(f) In all cases whererisks are transferredin contractual terms, it is neces-

sary to ensure the ability of the transferee to own the risk. In the case of
design failure, for example, this is usually passed to the design team
including the architect and engineeringconsultants. Because of the nature
of their professionsthey should have insurances of sufficient capacity to
meet the maximumpossiblecostofcorrecting the design failure. The client
should ensure that such insurances are in place, adequate and paid for;
where a project manager or principal adviser has been appointed,this is a
role that may be performedby him.
(g) Some design work may be carried out by subcontractors who may or
may not continue to pay design liability insurance premiums and usually
will have limitedliability status. Liabilityfor their design work is commonly
passed by warrantiesbut these are less secure.
Equally, where time risks are passed to a contractor his attempt to transfer
themto small subcontractors may fail where the capacity to own or accept
the risk is limited.
In situationssuch as these it may be possible to pass risks contractually but

the lackof security associatedwith the transfermay resultin the risk being
borne by the party attemptingto pass it. It is difficult to allocate blame in
team situations. The client should be aware of this weakness in terms of
risk allocation.
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Effective from TheSurveyors' Construction Handbook
PART 3, SECTION 1
(h) On manyprojects,somerIsks can be reduced at relatively little cost.

For example,the design of ordinarybuildings is often carriedout with little
attentionto minimisingconstructionrisks.A specification which requires a
large number of different trades or the use of non-standardcomponents
with a wide variety of sizes often results in high-risk construction. Lower
risk construction results if a conscious effort is made during design to
adopt a specification which minimises the number of separate operations
and which standardises and reduces the variety ofcomponents.
(i) Whilst the transfer of risk provides an incentive for the receivingparty
to minimiseits impact, the client should avoid transferringrisks when the
receiving party has no control over them or no capacity to absorb them.
Generally, the more the risk of cost and time slippage is allocated to other
parties, the higher the tendered cost. In pricing the project, tenderers may
over-estimate the size ofthe risk or add a high safety margin to an accurate
estimate and thereby increasethe project's costs unnecessarily.
(j) Risks are inherent in the data usedby the client in the preparationof the
brief; they are inherent in the characteristics of the project; and they are
inherent in the procurementstrategy which is selected.
The identification of primary risks and an analysis of the client's ability to

be a risk taker, or need to be risk averse, should affect procurement
strategy.
With thisinformationin mind steps should be taken:
• to informthe client ofthe risks involved; and

• to prepare a strategyfor managing risk.
Since the latter will have a cost the client should also be advised of the
expenseof managingrisk.
(k) The characteristics of each procurement strategy indicate the levels of

risk associatedwith time, cost and performance (see 3.1.3) in eachcase on
the assumptionthat the procurementstrategy is properly utilised and in no
way abused. (Thus, for example,in relationto the traditional system it has
been assumed that design completion is achieved before measurementand
documentationis carried out.)
Theseprimaryrisks are summarisedby example on the chartin this Section

by procurementmethodin the categories time, costandperformance.
Where design is by the client's consultant, design risk is placed by the

appointment agreement. Where design is by the contractor, design risk is
placed by the building contractagreement.
Where lump sum price is fixed by the contractthe responsibility rests with
The Surveyors' Construction Nandbook Part 3, Section_1(4/98) Effective from1/6/98 Page 19

PART 3, SECTION 1
Time
•
FIGURE SUMMARISING THE PRIMARY RISKS, BY EXAMPLE
[referred to in
Cost
3.1.2.9(k)]
Performance
Traditional Fixedbutextensions Fixed but subjectto Designedbyclient's

oftime possible due changewhere consultant.Quality
toclient and design changesare set by contract
designer initiated made, whereinflation documents
changes occurs orwhere

contractorhas grounds
foradditional loss
and/or expense
Designand Build Astraditional Astraditional Design bycontractor

Contractor butwithvarying
levels of input by
client-quality set in
sameway
Separate Timenotfixed by Cost notfixed before Astraditional
management contract commencement
function
the contractor. Where a contract sets standards of specification, meeting

these standards is the contractor's responsibility (risk).
Thus by contractual agreement primary risks can be distributed between

client, designer and constructor. It is impossible to dispose of all risk
inherent in construction projects and some will inevitably remain with the
client. For example, the risks listed heretend to be client risks and although
they may be of varyinglikelihoodthey shouldbe understood.
(1)This short list segregates residual risk by procurement method. The

extentto which risk remains with the clientcan be establishedby a detailed
analysis of contractual agreements.
• Traditional
building suitability
risk of contractor insolvency
risk of delayby consultantor the causes allowed by contract
• DesignandBuild
building suitability
design functionality andusability
design insurance if contractor moves away from this type of
business,goes out ofbusiness or fails to pay premium
• ManagementContracting/Construction Management
as traditionalprocurementplus:
Page 20 Part 3, Section 1(4/98) Effectivefrom 1/6/98 The Surveyors'ConstructionHandbook

PART 3, SECTION 1
risk ofcost overrun

risk of time overrun
Summary (Risk)
(m) Risk can be transferred or distributed. To enable this to be successfully

carried out the risk-taker, must have the capacity to take the full extent of
the risk or the risk-placer will have failed. Where there are so many rela-
tively small firms, as in the UK construction industry, this can be problem-
atic because many contracts place risks with risk-takers without sufficient
capacity. They may be limited liability companies or may be unable or
unwillingto insure.
Thus, for example, attemptingto enforce large scale liquidateddamagesfor

late completionon a small-sizeddomestic subcontractor may fail for lack
of financialcapacitywithin the small company.
Procurement strategy must therefore reflect the ability to place risk, and
where possible risk shouldbe managed out.
<> 3.1.2.10 PROCUREMENTSTRATEGYAND THE PROJECT CYCLE
The developmentof procurementstrategy follows the stages in the life of a

project. Initially, a preliminary strategy is determined. It is based on a
broad definition of objectives and is an essential step in establishing the
way forward for the project. It encourages the client to consider strategy
early.The preliminaryprocurementstrategy is usuallydevelopedwith help
from the principaladviser and possibly other consultants.
Procurementstrategy developmenthas three components:
• analysis — assessing and setting the priorities of the project objectives

andrequirements;
• choice — considering possible options, evaluating them and selecting
the most appropriate; and
• implementation—putting the chosenstrategy into effect.
During strategy preparation,it may be necessary to seek specialistadvice

from other consultants, for example, in relation to expected costs for the
project. The principal adviser should advise the client on this. Specialist
advice must be soughtwhen developing the strategy for novelor especially
difficultprojects.
Until construction contracts are let, the client, with help from his principal
adviser, must systematically ensure that the strategy is on course to meet
the project's objectives. This is important because objectives sometimes
change.
The Surveyors'ConstructionHandbook Part 3,Section 1(4/98) Effectivefrom1/6/98 Page 21 "T,
ZoO
PART 3, SECTION 1
3.1.2.11 IMPORTANTCONSIDERATIONS
(a) The factors listed below should be considered in analysing project

objectives, requirements and their relative priorities (each is then
consideredin detail):
• factors outsidethe control ofthe project team;

• client resources;
• project characteristics;
• ability to make changes;
• risk management;
• costissues;
• timing; and
•
quality andperformance.
Inevitably, some of these requirements will be in conflict and priorities

need to be decided. The choice of strategy should ensure that control is
maintained over those factors which are of most importance to the client.
The way in which this choice can be made is covered below and in 3.1.3.
(b) Factors Outside the Controlofthe Project Team
Considerationmust be given to economic, technological, social, political

and legal factors which influence the clientandthe project team or are likely
to do so during the lifetime of the project. These may include forecast and
actual:
• interest rates;
• inflation;
• changes in output of constructionindustry affecting tender price levels;
and
• legislation.
(c) Client Resources
The client's knowledge and experienceof the company's organisation and

the environmentin which it operates are vital in assessing the appropriate
procurement strategy. Project objectives are influenced by the nature and
culture of the company, external influences and the expectations of
individuals affected by the project. The extent to which the client is pre-
pared to take a full andactiverole is a major consideration.
(d) Project Characteristics
The size, complexity and location of the project should be carefully

considered and particular attentiongiven to projects with novel elements.
For example,if the buildingis especiallylarge or complex there may be a
bigger risk of cost or time overrun. Novel projects present special risks.

PART 3, SEcTION 1
The novelty potential factor means that estimates of time, cost and perfor-
mance are all subject to the possibility of greater error with an increased
probabilityof one or moreofthe project's objectives failing.
(e) Ability to Make Changes
It is preferable to identify the total needs of the project during the early
stages but this is not always possible. Rapidly changing technology often
means latechanges.Changes in the scope of the project very oftenresult in
increased costs, especiallyif they arise during construction. Changes intro-
duced after the design is well advanced or construction has commenced
often have a disproportionateeffect on the project, in terms of cost, delay
and disruption, compared with the change itself. The design process goes
through a progressiveseries of 'freezes' as it develops but the client should
set a final design freeze date after which no significant changesto require-
ments or design are allowed.
Some procurementstrategies such as construction management are better

than others at handling the introductionof changes later in the project and
reducingthe possibilityofhaving to pay some form of specific premium.
(f) Cost Issues

• Price certainty — influences the project timing and the procurement
strategy to be used. Generally, design should be complete if price
certaintyis required beforeconstruction commences.
• Cost of changes — if cost certainty is to be maintained during the
course of construction, changes should be avoided. Changes often
have cost and time implicationson the project well in excess of the
changeitself. It is therefore important for the client to fix a date after
which no significant changesshould be introduced.
(g) Timing
• The programme of the project is influenced by many of the above
factors. A particularly large and/or complex project is likely to
require more time for design, specification and construction than
would a simple smallbuilding.
• It is ofvital importanceto allow for adequate design time in terms of
the total project. This is particularly the case if design is requiredto
be complete before construction commences (where perhaps cost
certaintyis required).
• In the process of the
appointment of the design team assurances
should be obtained about resource levels and the ability to meet key
dates orprogrammes.It is not usual to impose contractualdatesupon
designers, althoughtheirprogress is probably the key to the overall
completiondate.
• Decisionsto progresswith a project may be influencedby the gaining
of planning approval, by the successful operation of compulsory
purchaseorder, by land purchase or by some other non-specific but
The Surveyors' Construction Handbook Part 3, Section 1(4/98) Effective from1/6/98 Page 23 J
PART 3, SEcTIoN 1
critical factor (such as obtaining funding approval). Depending on

whether these factors occur earlieror later, they may be an influence
uponthe planned or desiredtime available for design.
• Procurement strategies such as management contracting, construc-
tion management, and design andbuild providean overlap between
the design and construction stages, so constructioncan start earlier
than sequentialstrategies and offerthe potentialfor earlier completion.
• It may be necessary to review planned procurementstrategy in the
light of design progressat the point where restraintsto constructions
are removed, bearing in mind the stage of design and the conse-
quence in terms ofrisk.
(h) Construction Times

• Total construction time is a consequence of design. More complex
structures will almost certainly take longer given the same cost or
size, and may require moreresources.Althoughit is possible to work
on site for extensive hours or increase resources, it is not always
possible to achieve directlyresultingproductivity. The lawof dimin-
ishing returnswill have an influencebecauseof the limited spaceand
the nature of traditional construction methods (such as concreting
andbricklaying).
• Indications of 'average' and 'good' construction times are shown on
the Time Cost models in this Section. The data on which these are
based was available only for commercialandindustrialprojects.This
data was used to confirm, enhance and update that published by
NEDO (1988), Faster Buildingfor Commerce. Other projects are
likely, in most cases, to be more complex and may therefore take
longer. (See the charts illustrating constructiontimes for retail and
office facilities.)
(i) Pei'formance
• The required performanceof the project measuredboth in terms of
its response to the needs of the client and the quality of individual
elements should be clearly identified. Ifperformance is over-specified,
a premium will be paid for exceeding actual requirements, thereby
affecting the costobjective. Over-specification will also leadto time
overruns. Conversely, failure to recognise the true performance
objective leads to an unsatisfactory product.
• If quality and performance are particularlyimportantthe client will
probably want to keep direct control over the development of the
design. This can be achievedby employingthe design team directly.
3.1.3 Procurement Options
3.1.3.1 When all the factors influencing the project have been identified and the
project requirements analysed, the final strategy for the project must be
developed.
Page24 Part 3, Section 1(4/98) Effective from1/6/98 TheSurveyors' ConstructionHandbook

PART 3, SECTION 1
CHARTS ILLUSTRATING CONSTRUCTION TIMES

FOR RETAIL AND OFFICE FACILITIES
[referred to in $
3.1.2.11(h)]
Average
80 ConstructionTime
'
a)
ci)
70
60
50
Good
ConstructionTime
ci)
E 40
F-
C
0 30
C.,
20
U,
00 10
0
0 5 10 15 20 25 30
(
-
ConstructionCost Millions)
New SpeculativeRetail Facilities

100 Average
In
90
80 — —
— —— — ——
ConstructionTime
Good
ConstructionTime
70 -.-
ci) 60
E
I-
0 40
C.,
= 30
U)
20
00 10
0
0 5 10 15 20 25 30
Construction Cost ( Millions)
(Continued)
It is likely that there will be more than one way to achievethe requirements
ofthe project. It is importantto consider carefully each option,as each will
address the various influencing factors to a different extent. In developing
strategies,a potentialdanger is that only the most obvious course of action
maybe considered— this is not necessarily the bestin the longerterm.
3.1.3.2 Common strategies differ from eachotherin relation to:
• the financialrisk that the client is exposed to;

• the degree of control that the client has over the design and
constructionprocesses;
TheSurveyors' Construction Handbook Part3, Section 1 (4/98) Effective from1/6/98 Page25 j

2oL
PART 3, SECTION 1.
CHARTS ILLUSTRATING CONSTRUCTION TIMES

FOR RETAIL AND OFFICE FACILITIES
(continued)
OfficeFacilities
120 ________ New_Purpose_Built
100
—— — Average
________ ________ ConstructionTime
Good
U)
ConstructionTime
80
a)
E 60
/—
V
I—
40 _____ _____ ____ _____ _____ _____
20
0
0 5 10 15 20 25 30
ConstructionCost ( Millions)
Average
Construction Time
U)
Good
Construction Time
a)
E
I-
C
0
0
U)
C
0
C.)
0 5 10 15 20 25 30
ConstructionCost ( Millions)
• the informationrequiredat the time construction contracts are let;

• the extent of involvement of the contractor in the design stage when the
contractor may be able to influencethe 'buildability'ofthe project;
• the organisational arrangements which distribute responsibility and
accountability; and
• the sequentialnature ofthe process.
3.1.3.3 In 3.1.3.4— each of the most commonly used procurement

>3.1.3.9
strategies is describedand is also illustratedby diagram. Each diagram has
a consistent formatto indicate:
Page 26 Part 3, Section 1(4/98)
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PART 3, SECTION 1
• thecontractual relationships;
• the advantagesanddisadvantages;
• the sequential nature ofthe process; and
• the dominantrisks categorisedbroadly(as high, medium or low).
3.1.3.4 TRADITIoNAL (SEQUENTIAL)
(a) Under a traditional procurementstrategy, design should be completed

before tenders are invited and the main construction contract is let. As a
result, and assuming no changes are introduced, constructioncosts can be
determinedwith reasonablecertaintybefore constructionstarts.
(b) The contractor assumes responsibility and financial risks for the
building works whilst the client takes the responsibility andrisk for design
team performance.Therefore, if the contractor's works are delayed by the
failure of the designteam to meet their obligations,the contractormay seek
recompensefrom the client for additional costs and/ortime to completethe
project. In turn, the client couldseek to recover thesecosts from the design
team membersresponsible,ifnegligence could be proved.
(c) Clients are ableto influencethe developmentof the design to meet their
requirements because they have direct contractual relationships with the
design team. Whenconstructionbegins, they usually have a singlecontrac-
tual relationshipwith a main contractor and, therefore, are able to influence
(butnot control) the constructionprocess through a singlepoint ofcontact.
(d) The strategy may fail to some degree if any attempt is made to let the
work before the design is complete. Such action will probably result in
many post-contractchanges which could delay the progress of the works
and increase the costs. Where a traditionalstrategy is chosenbecause of its
particular advantages, the temptationto let the work before the design is
complete shouldbe strongly resisted.
(e) It is possible to have an accelerated traditional procurement strategy

where some designoverlaps construction. This can be achievedby letting a
separate, advance works contract, for example, by allowingground works
(site clearance, piling and foundations) to proceed to construction whilst
the design for the rest of the building is completed, and the construction
tendered separately. This reduces the total time to complete the project at
the risk of losing certainty of cost before construction starts. More impor-
tantly, a substantial risk is created in that the contractor who builds the
superstructurehas no responsibility for the foundation works carried out by
another contractor.
(f) Another alternative is to let the work by a two-stage process or by

negotiationthus reducingthe pre-construction time involved.
(g) The organisationalstructure of a traditional strategy is shown in the

relevant Figure. Standardforms ofcontractare available.
TheSurveyors'ConstructionHandbook Part 3, Section 1(4/98) Effectivefrom 1/6/98 Page 27 j

2ob
PART 3, SECTION 1
FIGURE ILLUSTRATING THE ORGANISATIONAL

STRUCTURE OF A TRADITIONAL PROCUREMENT
STRATEGY [referred to in 3.1.34(g)J
CONTRACTUAL RELATIONSHIP
CLIENT
CONSULTANTS
(fee
contracts)
MAIN CONTRACTOR
lumpsum contract)
(standard
SUPPLIERS
(variouscontracts)
SUBCONTRACTORS
(standard lump sum)
ADVANTAGES DISADVANTAGES
pre-constructiontime savingpotential open to abuse (resulting in less certainty)

competitivefairness slow to start on site (no parallel working)
satisfactorypublic accountability contractor not involved in design or planning
procedureswell known (no buildability)
reasonably easily arranged adversarialpotential
and valued
SEQUENCE
brief design competition construction
RISK
LOWCOST RISK
MEDIUM TIME RISK
LOWQUALITY/DESIGN RISK
(h) The mainadvantages of a traditionalcontract strategy are:

• competitivefairness;
• design-led,facilitatinghigh level of quality in design;
• reasonable price certainty at contract award based upon market
forces;
• the strategyis satisfactoryin tenns ofpublic accountability;
a theprocedure is well known;and
a changes are reasonablyeasy to arrangeand value.
(i) The main disadvantagesare:

a the strategy is open to abuse, resulting in less certainty;
• the overall programme may be longer than for other strategies as
thereis no parallelworking;
Page 28 Part 3, Section 1(4/98) Effective from 1/6/98 The Surveyors' ConstructionHandbook
207
PART 3, SECTION 1
• no 'buildability' inputby contractor;and

• the strategycan result in adversarial relationships developing.
<> 3.1.3.5 MEASUREMENT CONTRACTS
(a) A measurementcontract is when the contract sum is only established

with certainty on completion of construction,when re-measurement of the
quantitiesof work actually carried out takes place and is then valued on an
agreed basis. Measurement contracts are sometimes referred to as re-
measurementcontracts and are based uponthe prices tendered by the con-
tractor: They are used when the work required cannot be accurately
measuredfor the tender bill of quantities. The most effective use of a mea-
surement contract is where the work has been substantially designed but
final detail has not been completed. Here, a tenderbased on drawingsand a
bill of approximatequantities will be satisfactory. Measurement contracts
allow a client to shorten the overall programme for design, tendering and
construction but usually with the result of some lack of price certaintyat
contract stage because the approximatequantities reflect the lack of infor-
mation on exactlywhat is to be built at tenderstage. The scope of the work,
the approximateprice and a programmeshould be clear at contract stage.
Measurementcontracts provide more risk than lump sum contracts for the
client but probably with programmeadvantages.
(b) The organisational structure of a measurement contract strategy is

shown in the relevant Figure. Standardforms of contract are availablefor
this strategy.
(c) The main advantagesof the measurementcontract strategy include:

• pre-constructiontime-saving potential;
• competitiveprices;
• averagepublic accountability;
• the procedureis well known;
• the strategyenables changes to be made easily; and
• there is some parallel workingpossible.
(d) The main disadvantagesof the strategy are:

• the strategyoffers poor certaintyof price;
• there is no contractorinvolvement in the planning or design stage;
and
• there is a potentialfor adversarial relationships to develop.
<> 3.1.3.6 CONSTRUCTIONMANAGEMENT
(a) Under a constructionmanagement strategy,the client does not allocate

risk and responsibility to a single main contractor. Instead, the client
employsthe design team and a construction manager is engaged as a fee-
earning professional to programme and co-ordinate the design and con-
struction activities and to improve the buildability of the design. Construction
The Surveyors' Construction I-Iandbook Part 3, Section 1 (4/98) Effectivefrom1/6/98 Page 29 J
2c2
PART 3, SECTION 1

STRUCTURE OF A MEASUREMENT CONTRACT
STRATEGY [referred to in 3.1.3.5(b)]
CONTRACTUAL ARRANGEMENT
__ CLIENT
1
CONSULTANTS
(fee contracts)
MAIN CONTRACTOR
(standard measurement contract)
SUPPLIERS
[ (various contracts)
SUBCONTRACTORS
(standard contracts)
pre-construction time saving potential low certainty of price potential

competitive prices no contractor involvementin planning
average public accountability ordesign
procedureswell known potentially adversarial
easyto arrange changes
some parallel working
SEQUENCE
brief design
competition construction
RISK
MEDIUM COST RISK
MEDIUM TIME RISK
MEDIUM QUALITY/DESIGN RISK
work is carried out by trade contractors through direct contracts with the
clientfor distinct trade or workpackages. The construction manager super-
vises the construction process and co-ordinates the design team. The
construction manager, whohas no contractual links with the design team or
the trade contractors, provides professional construction expertise without
assuming financial risk, and is liable only for negligence by failing to per-
form the role with reasonable skill andcare, unless some greater liability is
incorporated in the contract.
(b) On appointment, the construction manager will take over any prelimin-
ary scheduling and costing information already prepared and draw up a
Page 30 Part 3, Section 1(4/98) Effective from1/6/98 The Surveyors' ConstructionHandbook
9
PART 3, SEcTIoN 1
detailed programme of pre-constructionactivities. Key dates are normally

inserted at which client decisions will be required. In adopting the con-
struction management system, the client will be closely involved in each
stage of design and construction. The client must have administrativeor
projectmanagement staff with the time and ability to assess the recommen-
dations of the construction manager and take the necessary action. The
client needs to maintain a strong presence through a project management
team that is technicallyand commerciallyastute. This strategyis not, there-
fore, suitable for the inexpertor inexperienced client.
(c) Withthis contract strategy, design and construction can overlap.As this
speeds up the project, constructionmanagement is known as a 'fast track'
strategy. Although the time for completioncanbe reduced, price certainty
is not achieved until the design and construction have advanced to the
extent that all the constructionwork (trade) packages have been let. Also,
design developmentof later packages can affectconstruction work aheady
completed. The constructionmanager should, therefore, have a good track
record in cost forecasting and costmanagement. A package is made up of
work for which one of thetradecontractorsis responsible,e.g. foundations,
concrete, electrical installationor decorating. These packages are tendered
individually, for a lump sum price, usually on the basis of drawings and
specification.
(d) The Latham Review1 has recognisedthat constructionmanagementhas

been used predominantlyfor large and/or complex projects, but suggests
that there is no intrinsic reason for this. Indeed, it is particularly recom-
mended for projects where there is a high degree of design innovation,
where the client wants 'hands on' involvement.
(e) There is currently no standard form of constructionmanagementcon-

tract. Companies who act as construction managers normally use forms
they have developed themselves.
(f) The organisational structure of a construction management strategy is

shown in the relevant Figure.
(g) The mainadvantagesof a constructionmanagement strategyare:

• the strategy offers time saving potentialfor overall project time due
to the overlappingofprocedures;
• buildability potentialis inherent;
• the breakdown oftraditional adversarial barriers;
• parallel workingis an inherent feature;
• clarity of roles, risks, andrelationships for all participants;
• changes in design can be accommodated later than some other
strategies, without paying a premium, provided the relevant trade
1 Latham,M., Sir, (1994), Constructing the Team: Joint Review of Procurement and Contractual
Arrangementsin the UnitedKingdom Construction Industry:Final Report, HMSO, London
TheSurveyors'ConstructionHandbook Part 3, Secbon 1(4/98) Effective from 1/6/98 Page 31 J

PART 3, SEcTION 1

STRUCTURE OF A MANAGEMENT STRATEGY
[referred to in 3.L36(f)]
CLIENT
Fee contracts
(no standard formfor CM)
CONSULTANTS
including
CONSTRUCTION MANAGER
Lump sum contracts
(non-standard)
WORK orTRADE
CONTRACTORS
time saving potentialfor overall projecttime no cost certainty atoutset
trade packages let competitively needs informed client, able to take an
buildability potential active part

breaksdowntraditional adversarialbarriers needs agood quality brief -
parallelworking inherent relies on a good quality team

clarity of roles, risks and relationshipsfor needs timeand information control
all participants
late changes easily accommodated
SEQUENCE
brief design
construction
RISK
MEDIUM COST RISK
MEDIUM TIME RISK
packageshave not been let and earlier awardedpackages are not too
adversely affected; and
the client has direct contracts with trade contractors and pays them
directly. (There is some evidence that this results in lower prices
because of improvedcash flow certainty.)
(h) The disadvantagesare:

• price certaintyis not achieveduntil the last trade packages have been
let;
• an informed, pro-activeclient is required in order to operate such a
strategy;
Page 32 Part 3, Section 1(4/98) Effectivefrom1/6/98 The Surveyors'ConstructionHandbook

PART 3, SECTION 1
• the client must provide a goodquality brief;

• the strategyrelies upon the client having a good quality team; and
• time andinformationcontrolis required.
3.1.3.7 MANAGEMENTCONTRACTING
(a) With this contractstrategy,a management contractor is engaged by the

client to manage the building process and is paid a fee. The management
contractoris responsiblefor all the constructionworks andhas direct con-
tractual links with all the works contractors. The management contractor,
therefore, bears the responsibility for. the construction works without
actually carrying out any of that work. The management contractor may
provide some of the commonserviceson site, such as office accommodation,
towercranes,hoists andsecurity, which are sharedby the works contractors.
The client employs the design team and, therefore, bears the risk of the
designteam delaying constructionfor reasons other than negligence.
(b) Management contractingis a 'fast track' strategy.All design work will

not be complete before the first works contractors start work although the
design necessary for those packagesmust be complete. As design is com-
pleted, subsequentpackages of work are tendered andlet. Cost certainty is,
thus, not achieved until all works contractors have been appointed. A high
level ofcostmanagementis, therefore,required.
(c) With the agreement of the client, the management contractor selects
works contractors by competitive tender to undertake sections of the
construction work. The client reimburses the cost of these work packages
to the managementcontractorwho,in turn, pays the works contractors. The
management contractor co-ordinates the release of information from the
designteam to the works contractors.
(d) Where the managementconstruction team is not ofthe highest quality,

or where this fee is inadequate,the management contractorcan be less than
pro-active and the system can become a reactive 'postbox'approach. It is,
therefore, vital to select the management contractorcarefully andto ensure
that his fee is appropriatebearing in mind market conditions. Similarly,
resistance to works contractors'claims can be affected by the samecircum-
stances.
(e) A standardform of contractis available for this strategy.
(f) The organisationalstructureof a managementcontract is shown in the

relevantFigure.
(g) The mainadvantagesofa management contractingstrategy are:

• time-savingpotential for overallproject time;
• buildabilitypotential;
• breaks down traditionaladversarial barriers;
212
PART 3, SECTION 1

STRUCTURE OF A MANAGEMENT CONTRACT
[referred to in 3.1.3.7(f)}
CLIENT
MAIN CONTRACTOR
•
(fee contract)
CONSULTANTS
(fee contracts)
'V
WORKS CONTRACTORS
(standard lump sum contracts)
time savingpotential for overall project time need forgoodqualitybrief
buildability potential poorcertainty of price

breaksdown traditional adversarial barriers relieson a good quality team
parallel working inherent maybecomeno more than a post-box
late changeseasily accommodated systemin certain circumstances
work packages let competitively removes resistanceto works contractors'
claims
SEQUENCE
brief design
construction
RISK
MEDIUM COST RISK
MEDIUM TIME RISK
parallel working is inherent;

changes can be accommodatedprovided packages affected have not
been let andthereis little or no impacton those already let; and
works packages are let competitively.
(h) The disadvantages are:

• need for a good quality brief;
• poor certainty ofprice is offered;
• relies on a goodquality team;
213
Page 34 Part 3, Section 1(4/98) Effective from1/6/98 The Surveyors'Construction Handbook
PART 3, SEcTION 1
• it may become no more than a 'post box' systemin certain circum-

stances; and
• reduces resistance to works contractors' claims.
3.1.3.8 DESIGNANDMANAGE
(a) A design and manage strategy is similar to management contracting.

Under a design and manage contract, the contractoris paid a fee to manage
and assume responsibility, not only for the works contractors, but also for
the design team.
(b) The main advantages of a designandmanage strategy are:

•
early completion is possiblebecause of overlapping activities;
• the client deals with one firm
only;
• it can be applied to a complex building; and
• the contractor assumesthe risk andresponsibility for the
integration
ofthe designwith construction.
(c) The disadvantages are:

•
price certainty is not achieved until the last workpackage has been
let;
• the client loses direct controlover the designquality; and
• the client has no direct contractual
relationship with the works con-
tractors or the design team and it is, therefore, difficult for the client
to recover costs ifthey fail to meet their obligations.
3.1.3.9 DESIGNANDBUILD
(a) Under a design and build strategy,a singlecontractor assumes the risk
and responsibility for designing and building the project, in return for a
fixed-price lump sum.
(b) A variant, known as 'develop and construct', describes the strategy

when the clientappoints designers to prepare the concept design before the
contractor assumes responsibility for completing the detailed design and
constructingthe works.
(c) Design and build is a fast-track strategy. Construction can start before
all the detailed designis completed, but at the contractor'srisk.
(d) As explained in 3.1.1, by transferring risk to the contractor, the client

loses some control over the project. Any client requirement which is not
directly specified in the tender documentswill constitute a change or varia-
tion to the contract. Changes are usually more expensive to introduce after
the contract has been let, comparedwith othertypes of strategy.
(e) It is very important, therefore, that the brief and performance/quality

specifications for important requirements in the project are fully and
The Surveyors' Construction Handbook Part 3, Section 1(4/98) Effective from 1/6/98 Page 35 J
PART 3, SECTION 1
unambiguouslydefinedbefore enteringinto this type of contract. If require-

ments are not specific, the client should provide contractors with a perfor-
mance specification at tende stage.
(f) The contractor develops the design from the specification submitting
detailed proposalsto the client to establishthat they are in accordancewith
the requirements of the specification. Clients are, therefore, in a strong
position to ensure that theirinterpretationof the specification takes prefer-
ence over the contractor's.
(g) Specification is a risky area for inexperiencedclients: over-specification

can cut out usefulspecialist experience;under-specificationcan be exploited.
(h) The client will oftenemploy a design team to carry out some prelimin-
ary design and prepare the project brief and other tender documents.
Sometimes, the successful contractor will assume responsibility for this
design team and use them to producethe detailed design. If a design and
build strategy is identifiedas a possibility at an early stage, then the basis
of the appointment of the design team should reflect this possibility. If it
does not, the client may have to pay a termination fee to the design team.
The client may wishto retain the independentservicesof a costconsultant
throughout the contract for early cost advice involvement in the bidding
process and costreportingduring construction.
(i) Considerationmay need to be givento the inclusionof a special clause

in design, or design and build type,contractsto ensurethat the responsibility
for design performanceis properly shared. Such a clause should identify
specificobligationsthat are absolute,that do not require the designer to be
an expert in the client's business and, as a consequence, are reasonably
insurable.
(J) Current forms of contract for design and build vary their treatment of
design liability. UnderJCTCD 81 with Contractor's Design,the contractor
undertakes to design to the same standard 'as would an architect if the
employer had engaged one direct'. So the client gets the same 'skill and
care' liability for design as would normally be available under traditional
andmanagementstrategies when employingthe architectdirect.
(k) To be effective,the client's requirementswill need to be stated clearly

andaccuratelyanddeliveredon time.
(1)The imposition on contractors of fitness for purpose in design is a

matter ofjudgementfor clients and their professionaladvisers,even though
tenderers in recessionary markets are likely to agree to undertake such
risks.
(m) Non-availabilityof insurance to cover a higher than normal risk

should be weighed against the financial ability of contractors to meet
Page 36 T Part 3, Section 1(4/98) Effective from 1/6/98 The Surveyors' ConstructionHandbook
PART 3, SECTION 1
design default claims. It will noimally be preferable and represent better

value for money to impose a lesser, yet insurable, liability, which will be
the subjectof an insurancepayout in the eventof a designfault, ratherthan
an insurance fitness for purpose requirement on a contractor of limited
financial assets.
(n) Increasingly, collateral warranties are being used to place additional

responsibility on designers or subcontractors. In addition, the client may
take out BUILDinsuranceto cover post-construction liability, but this will
be at a cost. This is a matter for specialistadvice andsuch advice should be
soughtfromthe principaladviser.
(o) A range of options is available as illustrated in the relevant Figure.

These range from a package deal or turnkey where the client has little
involvement in the design developmentor building procurement process
(effectively, a complete hands off approach), to develop and construct
where the clientappointsdesigners to develop his brief to a level of sophis-
tication which will leave the design and build contractorto develop detail
or specialistdesign elements.
FIGURE ILLUSTRATING THE RANGE OF OPTIONS

AVAILABLE FOR DESIGN AND BUILD
[referred to in '313.9(o)]
Some optionsavailable, showingproportional involvementin the design processby client and

contractor between package deal, and developand construct.
Turnkey I I I I I I I I I I I I ii
Package deal
Designarid bI_Jild ___________________________

(competitive)
Designand build ii I I III I I I I ii
(negotiated)
Develop and construct
The range of options enablesthe procurement arrangementto be used for a wide range of
client types, and for clients to be involved to a greater or lesser extent.
Client involvement
Contractor involvement ii I I I I I II I I I II
TheSurveyors' Construction Handbook Part 3, Section 1(4/98) Effectivefrom1/6/98 Page 37 J

PART 3, SECTION 1
(p) The project organisationstructure for design and build is shown in the
relevantFigure. Contractors may use their own firms' resources for under-
taking the design (in-house design and build), or may subcontractthese to
one or more professionalfirms whilst retaining control.
(q) A standardform of design and build contractis available.
(r) The main advantages of a design and build strategy are:

• the clienthas only to deal with one firm;
• inherentbuildability is achieved;
• price certainty is obtained before construction starts provided the
FIGURE ILLUSTRATING THE PROJECT ORGANISATION

STRUCTURE FOR DESIGN AND BUILD
[referred to in 3.1.3.9(p)]
CLIENT
. I__
DESIGN AND BUILD CONTRACTOR
(standardlump sum contract)
SUPPLIERS
(various contracts)
SUBCONTRACTORS
(standard lump sum contracts)
single point contact and responsibility relatively fewer firms (less real competition)
inherent buildability clientneedsto commit himself before design
early firm price possible is complete
reducedtotal project time in-house design and buildfirm is an entity
(compensationfor weak parts not possible)
no design overviewunlessconsultants appointed
difficultfor clients to prepareadequate brief
bids difficultto compare
design liabilitylimited by standardcontract
clientdriven changescan be expensive
SEQUENCE
brief competition design
construction
RISK
LOWCOST RISK
LOWTIME RISK
HIGH DESIGN/QUALITY RISK
2rj
PART 3, SECTION 1
client's requirements are adequately specified and changes are not

introduced;and
• reduced total project time due to early completion is possible
becauseof overlapping activities.
(s) The disadvantagesare:

• relatively fewer firms offer the design and build service so there is
less real competition;
• the client is required to commit himself before the detailed designs
are completed;
• in-house design and build firms are an entity so compensation for
weak parts of the firm is not possible;
• there is no design overview unless separate consultants are appointed
by the client for this purpose;
• difficulties can be experienced by clients in preparing an adequate
brief;
• bids are difficult to compare since each design, programme andcost
will vary;
• design liability is limited by the standardcontract (see 3.1.3.9);
and
• client changesto project scope can be expensive.
3.1.4 Selection of Most Appropriate ProcurementStrategy
3.1.4.1 The ultimateresponsibilityfor selectionof appropriate procurement strategy

will rest with the client, based upon advice from the project team and prin-
cipal adviser.
The selectedstrategy should be:
• suitable in the light of the client's needs, the project type and the
client's exposure to risk; and
• feasible in the light of the client's expertise, internal management
structure,resource andfunding facility.
Professional judgement is a reliable way of selecting an appropriate

procurement strategy although some strategies can be inappropriately
adoptedbecause of individual preference.
There are a number of manual and computer-basedsystems available to

assist in the selection process and these are referred to in the publications
listedin the Further Reading provided.
A procurementselection checklist is providedhere to assist the client and

his principaladviser in the identificationof an appropriatestrategy.
The Surveyors' ConstructionHandbook Part3, Section 1 (4/98) Effectivefrom1/6/98 Page 39
218
PART 3, SECTION 1
<j> 3.1.4.2 PROCUREMENTSELECTION CHECKLIST
This process has been designed to establish a range of informationabout

clientneedsand about the particular project beingconsidered, and to develop
this information in parallel with the characteristics of procurement
strategies andassociatedrisk.
It is intendedto informjudgement,notto replacejudgement.
The relativeimportanceof time, costandperformance(design) forms a key

criterion in the selection mechanism as does inherent risk and its
apportionment.
3.1.4.3(a) METHOD
Checklists 1, 2 and 3 should be carefully completed in consultationwith

the client.
The resultant informationshould then be transferred to Checklist 4 which

will enable the informationto be analysed and evaluated.The analysiscan
then be compared with the characteristics of each procurementmethod, and
the associatedrisk so that an informeddecisioncan finally be made.
CHECKLIST 1: TIME
The followingshould be considered:
1.1 Is completionneededby a specific date?

1.2 Is completionneededin the shortestpossible time?
1.3 Is the clientpreparedto pay more for earlier completion?
2. Does the answer to question1.1 suggest a faster than 'normal' total pro-
jecttime in the judgementof the adviser?
3. How long is it in months from the date of completionof this protocol
untilthe desired 'move in' date?
4. Define the reason for the identifiedcompletionor 'move in' date:

4.1 end of lease
4.2 sale of premises
4.3 new business opportunities
4.4 unsuitabilityof presentpremises
4.5 companyrestructuring
4.6 other
5.1 Is the need for completion by a specific date or within a specific time
more importantthan certaintyofconstructioncostbefore work starts?
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2t9
PART 3, SECTION 1
5.2Is the need for completion by a specific date or within a specific time
more important than spending an extendedtime on design?
6. What is the approximate value, in sterling, to the client of the building

or facility in terms of contribution, rental or cost savings per month?
7. If the building is completed later than the specified or desired time will
the client:
7.1 stay in his existing premises?
7.2 find temporary accommodation?
7.3 close down?
7.4 adopt some other course.
Upon the completion of this part, the following informationshould have

been established and should be transferredto Checklist4:
(a) specified completion time;

(b) reason for completion time;
(c) whether required completiontime is relativelyfast;
(d) whether time is seen as the predominantclientneed;
(e) the potential financial implication of earlier or later completion; and
(f) what action the client maytake if the dates are not achieved.
CHEcKLIST 2: DESIGN/PERFORMANCE
1. Has the client clear ideas about building functionality and its desired
design?
2. Does the site (if selected) pose any particular problems for the designer
in respect of:
2.1 shape or topography?
2.2 access?
2.3 storage space?
3. Does the building type suggest relative design complexity?
4. Does the building type suggest emphasisupon functionality?
5. Does the building type suggest highlycomplex mechanical, electricalor

engineeringinstallations?
6. Is it anticipated that extensive changesto designmay be required during

the construction phase?
7. Does the client wish to emphasise low running costs?
8. Does the client wish to emphasise low maintenancecosts?
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22o
PART 3, SECTION 1
9. Does the client wish to emphasise product quality at a higher potential

cost?
Upon the completion of thispart of the process, the followinginformation

should have been established andshould be transferredto Checklist4:
(a) whetherthe clienthas clear ideas about his needs;

(b) whetherthe site poses complex designproblems;
(c) whetherthe building design is complex;
(d) whetherfunctionality is particularly important; and
(e) whetherthe clienthas a long-term view aboutthe costof the building.
CHECKLIsT 3: COST
1. Whatis the client's maximumbudget?
2. Can the budgetbe allocated as below?

2.1 land purchase and fees
2.2 construction, including fees
2.3 fittings and plant
2.4 contingencies
2.5 other (define)
3. Will the client need to have a fixed contractprice for the construction
element of his budgetor will a reasonablyaccuratebudgetbe adequate?
Upon the completion of this part of the process, the followinginformation

should havebeen establishedandshouldbe transferredto Checklist4:
(a) total maximum spendingcapacity;

(b) total construction spending capacity; and
(c) need for pre-construction cost certainty.
CHECKUST 4: ANALYsIs
As an overview, is the project feasible in terms of time and viable in

terms of cost on thebasis ofthe information in la, 2a, 2b, 2c, 3a, 3b, 3c?
If yes, proceed.
Ifno, adviseclientand seek other solutions.
• Is the reason given as to why it should be completedby the specified
date vital to the project's success in terms of client needs, or can
slippagebe copedwith if cost is considered?
See ib, id, 2a, 2b, 2c, 3c.
If vital, the project has to be carefully planned from a reasonably
advanced design. Design and constructionmust be planned. Where
design is completed, the completiondate can be contractuallyfixed.
Where design cannot be completed, fast-track systems can achieve
relative speedby overlappingdesign andconstruction.
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221
PART 3, SEcTIoN 1
• Ifrelativespeed is required, canthe clientaccept less cost certainty?

See ic, 3c.
Ifyes, this may mean thatfast-track approaches may be suitable.
Ifno, a method of achievingcost certaintyrelatively quickly may be
through negotiation.
• Does the information provided indicate that the project is complex in
termsofdesign or in terms ofsite-relatedproblems?
See 2b, 2c, 2d.
If so, adequatetime must be allowed for a design process to occur
whichwill provide the client with an acceptable design solution.
Some fast-track solutions will enable the design process to be
extended into the construction phase where pre-constructiontime is
notavailable. This will reducecostcertainty.
• Is the need to ensure that the
project can be built within a budget a
priority?
See 3c.
In this event, design should be complete before construction is
commenced or a sufficiently large contingency
should be allowed.
The latter will not give cost certainty and may result in a less
balanced project in financialterms.
3.1.4.3(b) CHECKUST SUMMARY
Having established whether the project is both feasible and viable, the
importance oftime, cost anddesignhas now been reviewed.
There is always an interrelationshipbetween these three primary criteria

and procurement systems selectedshould reflectthis.
Projects can probably be broadly categorised into those which will be

design-led and those which will be production-led. Design-led projects
usually reflect the characteristics of procurementsystems where the client
appoints his own design team; whereas production-led projects enable the
constructor to take on some or all of the design function.
Design-led projects have the greater capacity for cost and time overrun,
whereas the potential capacity for design shortcomings may rest with
product-ledsystems.
System selection shouldconsiderwhether the projectis designor product-led

but should also considerthe client's need to manage and/ordistribute risk.
3.1.5 Implementation
3.1.5.1 Having selected a procurementstrategy for a project, the strategy should be

successfully implemented. The client should implementthe strategy but he
may do this with the advice of his principal adviser. In many cases the
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222
PART 3, SEcTIoN 1
principal adviser will carry out most or all of the necessary functions in
achievingimplementationand the client's role will be to formally approve
the principal adviser's actions.
Notwithstanding the role of the principal adviser, the client should ensure
that he puts in place the necessary resources, organisational structure,
contractual arrangements, systems and controls necessary for a successful
project outcome.
3.1.5.2 IMPLEMENTATION POLICY
Implementationof procurement strategy is a key role for the team and

warrants sufficient thought and review. The policy developed to ensure
appropriateimplementationshould be clearly communicated to all the key
players. By ensuring that implementation policy is maintained,the client
has a greater chance of obtaining the right project at the right time at the
right cost with the minimum of conflict.
3.1.5.3 FINANCIAL RESOURCES
(a) In this Section, the funding function has been regarded as a matter for
the client. It is a vital function and by the time the procurementstrategyis
set, sufficient funding should be available at appropriatetimes in the pre-
constructionandconstructionprocess.
(b) Funding requirementsare usually a consequenceof contractual agree-

ments, whether they be agreements to purchase land, to design or to con-
struct. It is possible to take account of each contractual agreement and to
pian expenditurein the form of a cash flow. Useful advice in this context
can be providedby the principal adviserwith supportfrom the project cost
consultant. Both these team members should be in place at an appropriate
time to ensurethat funding arrangements are appropriate.
3.1.5.4 HuMAN RESOURCES
In terms of client organisation, the client should be prepared to allocate

appropriate in-house personnel to the project or should be prepared to
appoint consultants for this purpose. In most cases,consultants are appointed
to design and cost a project, but a client will have his own staff member
who will provide liaison and a focus for decisions. Where this is not
possible the appointment of a projectmanager is desirable.
<> 3.1.5.5 PHYSICAL RESOURCES
(a) Wherephysical resources such as land, plantandmachineryhave to be

providedby the client, it is self-evident that the client should ensure their
availabilityin a suitable form at the right time. Where alternativeaccom-
modation is required, or where specific arrangements for decanting are
necessary, this is amatter for the client and/or his organisation.
223
PART 3, SEcTIoN 1
(b) Design and construction resources must also be appropriately selected

and in place at the right time.
(c) The criteria for the selection of the design team have been outlined in
Part 1, Section 1 of this Handbook based upon the factors of capability,
competence, staff and cost, with value for money, rather than cost being the
major influence in selection.
(d) The criteriafor the selection of contractors have also been referred to in
Part 1, Section 1 of this Handbook and are broadlythe same, but tend to be
a much more complex process and are dependent upon the procurement
strategy selected.
(e) The basis for selection of constructorscan be competition, basedupon

a fixed design and specification or can, in the case of design and build
options, be based upon competition for design solutions too. Selection can
also be by negotiation with one or two constructors, or can be based upon a
two-stageprocess. Suitable documentation for the selectionprocess must
be prepared and the client should seek the advice of the principal adviser
who may also be required to manage the process.
(f) A numberof Codes of Procedure for the selectionprocess is available

and they are referred to in the references at the end of this Section. These
form the basis of best practice in constructor selection, but, as in the caseof
the selection of the design team, the primary criteria should be value for
money and performance, whilst emphasising the particular need for the
clientto prioritise time, quality or cost.
3.1.5.6 ORGANISATIONALSTRUCTURE
(a) The client has a dual management role, part of which is to manage the
client input; to co-ordinate functional and administrative needs; to resolve
conflicts; as well as to act as the formal pointof contact for the project.
(b) This will require the creation of an organisational structurefor the life
of the project to enable communicationto occur and to facilitate effective
decision-making.
(c) The organisationalstructure createdmay be headedby a keymember of

the client organisation or may be headed by an imported project manager.
Whichever choice is made, the designatedmember must have sole authority
to communicate decisions to the project designand/or construction team. If
more than one individual is empowered to instruct, or to require changes,
extremeconfusioncan take place.
(d) Building users, specialists, facilities managers, maintenance staff,

finance and accounts personnel, legal advisers and security personnel can
all have input to the project through the createdorganisationalstructure by
The Surveyors'Construction Handbook Part 3, Section 1(4/98) Effective from1/6/98 Page 45
22L.
PART 3, SECTION 1
invitation, or right, and, as appropriate, can meet with designers or

constructors to ensure effective communication; but decisions should be
exclusively reserved to the in-house executiveor the project manager.
3.1.5.7 CONTRACTUALARRANGEMENTS
(a) Having selectedan appropriate procurementstrategy,this strategy must

be implementedby a range of contractualarrangements.
Many of these arrangements will be based upon standard forms of agree-

ment in common use in the constructionindustry.
Adviceupon the selection of the appropriatecontracts and agreementscan

be sought through the principal adviser and there are some publications
available to assist this selection process.
The implications of these contracts and agreements can be broadly

explained by the principal adviser but, in each case, there are appropriate
publications giving varying levels of detailed explanation.
(b) A schedule of contract documents, agreements and advisory publica-

tions is providedin the FurtherReadingto this Section.
4) 3.1.5.8 SYSTEMSAND CONTROLS
(a) Once resources, organisational structure and contractual arrangements

are in place, the client should see that systems are put in place to ensure
that the procurementprocess canbe implementedin fact.
(b) These systems should include:

• financial systems to ensure that payments are made in accordance
with contract agreements;
• decisionsystems to ensure that decisionsmade are communicated at
the appropriatetime andwith appropriateauthority;
• design change systems to implement and monitor change as it
becomesnecessary; and
• cost and time monitoring systems to inform the client of the current
positionat any pointin time.
This may mean delegating elements of the process to the project manager
(if appointed) or ensuring that existing company systems are specifically
adapted.
(c) Controls are also important to ensure that cost is controlled within
budget, pace is controlledwithin programme, quality is controlled within
standards set, and systems are properly employed.
(d) Cost control can be achieved by ensuring appropriatepre-construction
Page 46 T Part3, Section 1(4/98) Effectivefrom 1/6/98 The Surveyors'Construction Handbook
225
PART 3, SECTION 1
cost planning and an adequate system of regular cost reporting. These

servicescan be provided by the costconsultant.
(e) Pace can be monitored against a programmeor time plan and can be
controlled by the imposition of contract completion dates. Programming
can be provided by a project manager or developedwith the advice of the
principal adviser.
(I) Quality can be controlled through the provision of a sound contractual

specification. It may be appropriate to appoint a clerk of works to inspect
the works during progress and to ensure that work is satisfactory and
matches the specification.
(g) Controlling the client systems to ensure that they are appropriately
applied and not abused is a matter for the client's management team —
perhaps this is the keymanagementinput from the client.
The Surveyors' ConstructionHandbook Part 3, Section 1(4/98)
22
Effectivefrom1/6/98 Page 47 j
PART 3, SECTIoN 1, APPENDIX A
Appendix A: Contract Documentation, Practice Notes and Codes of

Practice
The Joint Contracts Tribunal produces a range of standard forms of contract for use
betweenclient and contractor or contractor and subcontractor.A number of Practice
Notes are also availableto assist in the selection of the appropriateform of contract
andits usage.
For the purposes of this document the standard contracts are not listed but the
sourcesof advice are.
The RIBA, RICS and ACE have their own standard conditions appropriatefor the
appointment of an architect, surveyoror cdnsulting engineer.
Codes of Practice prepared by the NJCC are available to assist in the process of
tenderingfor constructionwork.
JCT SIMPLE GUIDE AND FLOW CHART FOR SELECTING TIlE APPROPRiATE FORM OF JCT
CONTRACT.
JCT PracticeNote 20
R1BA ArchitectsAppointment RoyalInstitute of
BritishArchitects
RICS Appointment ofa Quantity Surveyor Royalinstitution of

CharteredSurveyors
ACE Conditions ofAppointment Associationof

Consulting Engineers
NJCC Code ofProcedurefor Single Stage Selective Tendering
Code ofProcedurefor Two Stage Selective Tendering
Codes of Procedure for SelectiveTenderingfor Design and Build Projects
The Surveyors' Construction Handbook Part 3,Section 1, Effectivefrom1/6/98 Page 1

AppendixA(419$)
Appendix B: FurtherReading
Baum, A. andCrosby, N. Property Investment Appraisal, Routledge,London, 1988
Bennett, J., and Grice, A. ProcurementSystemsfor Building,QuantitySurveying

Techniques,NewDirections (ed. P.S. Brandon),BSP ProfessionalBooks, Oxford,
1990
Building EconomicDevelopmentCommittee. Faster Buildingfor Commerce,

NEDO, London, 1988
Centre for StrategicStudies in Construction. ConstructionManagementForum:

Report and Guidance, CSSC, University ofReading, 1991
Centre for StrategicStudies in Construction. Design andBuildinga World-Class
Industry, CSSC, Universityof Reading, 1996
Centre for StrategicStudies in Construction. TheSuccessful ManagementofDesign:

A Handbook ofBuildingDesign Management, CSSC, University ofReading, 1994
Centre for StrategicStudies in Construction. Trustingthe Team: TheBest Practice

Guide to Partnering, CSSC, University ofReading, 1995
Chappell, D. Which FormofBuildingContract,ArchitecturalDesign and

Technology Press, London, 1991
Chartered Institute of Building.Building for Industry and Commerce: Clients Guide,

ClUB, Ascot, 1980
Clamp, H. and Cox, S. Which Contract: Choosingthe AppropriateBuilding

Contract, RIBA, London, 1989
ConstructionIndustryBoard. "Briefing the Team",ThomasTelford Publishing,

London, 1997
ConstructionIndustryBoard. "CodeofPracticefor the SelectionofSubcontractors",

Thomas Telford Publishing,London, 1997
ConstructionIndustryBoard. "Constructing a Better Image",ThomasTelford

ConstructionIndustryBoard. "Constructing Success",ThomasTelford Publishing,

London, 1997
ConstructionIndustryBoard. "Educating the ProfessionalTeam",ThomasTelford

ConstructionIndustryBoard. "Framework for a NationalRegisterofConsultants",

Thomas Telford Publishing,London, 1997
The Surveyors' Construction Handbook Part 3, Section 1, Effective from1/6/98 Pag

Appendix B (4/98)
2.23
ConstructionIndustry Board. "Frameworkfor a National Register for Contractors",

Thomas TelfordPublishing,London, 1997
ConstructionIndustryBoard. "LiabilityLaw and LatentDefects Insurance", Thomas

Telford Publishing,London, 1997
ConstructionIndustry Board. "Partneringin the Team", Thomas Telford Publishing,

London, 1997
ConstructionIndustry Board. "Selecting Consultantsfor the Team: Balancing

Quality andPrice", Thomas Telford Publishing,London, 1997
ConstructionIndustry Board. "Tomorrow's Team: Women andMen in

Construction", Thomas TelfordPublishing, London, 1997
ConstructionIndustry Board. "Towards a 30% Productivity Improvement in

Construction",ThomasTelfordPublishing, London, 1997
ConstructionIndustry Board. "Trainingthe Team", Thomas Telford Publishing,

London, 1997
ConstructionRound Table. Thinking aboutBuilding,The Business Round Table

Ltd., London, 1995
Comes, D.L. Design Liability in the ConstructionIndustry, 4th Edition, Blackwell

Scientific Publications,Oxford, 1994
Cornick, T. Quality Managenzent for BuildingDesign, Butterworth, London, 1991
Dearle and Henderson.ManagementContracting:A Practice Manual,E & FN

Spon, London, 1988
Economic Development(Office) Committee. FasterBuildingfor Industry, NEDO,

London, 1983
Ferry, Douglas J., andBrandon,Peter S. Cost Planning ofBuildings,

BSP Professional, Oxford, 1991
Flanagan, R. etal. Life Cycle Costing Theory andPractice,BSP Professional,

Oxford, 1989
Flanagan, R. and Norman, G. RiskManagementand Construction, Blackwell

Scientific Publications,Oxford, 1993
Franks,J. BuildingProcurementSystems: A Guide to Building ProjectManagement,

CIOB, Ascot, 1990
Green, S.D., andPopper, P.A. Value Engineering:The Search for Unnecessary Cost,
CIOB, Ascot, 1990
Page2 L Part 3, Section 1, Effectivefrom1/6/98 TheSurveyors' ConstructionHandbook

Appendix B (4/98)
22
HMSO. The White Paper "COmpetitiveness: Helping Business to win ", HMSO,
London, 1994
HMTreasury. GuidanceNote No. 33: Project Sponsorship, CentralUnit on

Purchasing,HMTreasury, London, 1993
HM Treasury. GuidanceNote No. 36: Contract Strategy SelectionforMajor

Projects, CentralUnit on Purchasing, HM Treasury,London, 1992
Hibberd, P., Merrifield, A. and Taylor, R.G. KeyFactors in Contractual

Relationships,RICS, London, 1990
Janssens, DavidE.L. Design-BuildExplained, MacmillanEducation, Basingstoke, 1991
Kelly, J., MacPhersonand Male, S. The BriefingProcess: A Reviewand Critique,

RICS, DepartmentofBuildingEngineeringandSurveying, HeriotWatt University,
1992. This documentis out ofprint.
Kelly, J. andMale, S. A Study ofValue Management and QuantitySurveying

Practice, Surveyors Publications, London, 1988
Latham,M., Sir. ConstructingThe Team: Joint ReviewofProcurementand

ContractualArrangementsin the UnitedKingdom Construction Industry: Final
Report, HMSO,London, 1994
Lock, D. Project Management, 5th Edition, Gower,Aldershot, 1992
Lumby,S. Investment Appraisal and Financing Decisions, 5th Edition, Chapman

andHall, London, 1994
Masterman,J.W.E.An Introductionto BuildingProcurement Systems, E & FN Spon,

London, 1992
McGowan,Paul H., Malcolm, R., Homer,W., and Jones, D. Allocationand

Evaluation ofRiskin ConstructionContracts, CIOB, Ascot, 1992
National EconomicDevelopment Office. Before YouBuild: Whatthe ClientNeeds to

Know about the ConstructionIndustry,HMSO, London, 1974
Patterson,F. Collateral Warranties Explained, RIBA, London, 1991
Powell-Smith,V., and Sims, J. TheJCTManagement Contract: A Practical Guide,

Kiuwer,Brentford, 1988
Royal InstituteofBritishArchitects.Plan ofWorkforDesign Team Operations,

RIBA, London, 1973
RICS. A Client'c Guideto Successful Building: The Role ofthe Chartered Quantity
Surveyor, RICS,London, 1990
The Surveyors' Construction Handbook Part 3, Section 1, Effective from 1/6/98 Page 3
Appendix B(4/98)
23Ci
RICS. Construction Management andthe Chartered QuantitySurveyor, Surveyors

Publications,London, 1986
RICS.ProjectManagement Agreement and Conditions ofEngagement,RICS

Books,London, 1992
Salisbury,F. Architects Handbookfor ClientBriefing, ButterworthArchitecture,

London, 1990
Sharif,A., and Morledge, R. TheFunctionalApproachto ProcurementSystems,

CSM, 1994
Turner,A. Building Procurement,MacmillanEducation, London, 1990
Turner,D.F. Building Contracts: APractical Guide, 5th Edition,Longman Scientific

& Technical, Harlow, 1994
Walker, A. Project Management in Construction,2nd Edition, RIBA, London, 1989
WinwardFearon & Co. Collateral Warranties: A Practical Guidefor the

ConstructionIndustry, BlackwellScientificPublications, Oxford, 1990
Page4 Part 3, Section 1, Effective from 1/6/98

-
TheSurveyors' ConstructionHandbook
AppendixB (4/98)
2.3
PART 4, SECTION 1
PART FOUR: CONSTRUCTION ADMINISTRATION

AND MANAGEMENT
SECTION 1: THE PROBLEMS OF PRACTICAL

COMPLETION
Introduction
The law and practices in relation to the completionof building andengin-

eeriiTg projects are complex issues that often give rise to conflict. Whilst
the title of this Sectionrefers to practical completionthe subjecthas been
approached at a more generic level. Thus, for example, the concepts of
'substantial completion' and 'taking over' have been included and
commented upon, and standard forms other than JCT variants have been
considered.
The following relatedandsubsidiarytopics are, however, notaddressed:

• the acceptance of defective work either before or after practical
completion;
• wider consideration of the matter of adjudication upon practical
completion;
• the law concerning latent defects and its inter-relationship with
contractualdefectsliability provisionsgenerally;
• closer examination of the issues surrounding early completion
(although analysis of the general scheme of the subject under JCT
forms is included);
• the changing lawconcerning finalcertificates;
• the operation of fluctuationprovisions afterpractical completion;
• the significance of practical completion in relation to performance
bonds; and
• the concept oftemporary disconformity in building contracts.
4.1.1 What Happens In Practice
4.1.1.1 There is a considerablenumber of approaches adoptedfor the certification

of completionin standard forms of contractused in the UK construction
industry (see 4.1.2). Similarly, there is a variety ofmethodsby which some
of the problems couldbe dealt with (see 4.1.3).
4.1.1.2 Surprisingly, however, there is an almost universally accepted procedure
adopted for both building and civil engineeringwith regard to the actual
practice carriedout on site.
4.1.1.3 This may be describedas follows:
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PART 4, SECTION 1
(a) Contractor 'Offering Up'

The contractor writes to the employer's representative/contract
administrator suggesting that works will be (or are now) ready for
handover by a particulardate.
• This may be accompanied by the contractor's own list ofuncompleted
works, especially,for example, where outstandinginformation, statu-
tory authorities, or employer's direct works may be preventing
completionof a specific element ofthe contractor's work.
(b) SnaggingList
• Either in advance of the contractor's notice mentioned above, or
prompted by it, the architect, engineeror contract administrator will
prepare a list of defects and outstanding works which will be issued
to the contractor.
• Often, but not always, this list is prepared during a joint inspection
with the contractor.
(c) Clearing the SnaggingList

• The contractor will endeavour to reduce the length of the snag list,
but here is where the disputes will start. Many points will be argued
by the contractor to be unreasonable quality demands, or work
constitutinga variation.
• The management of this process is often poor, with the architect or
engineer producing a new list each time he revisits the site.
Confusion anddistrust is often generated.
(d) Certification
• Eventually a point will be reached where completion can be certified
in the opinion of the architect, engineer or contract administrator.
Although not defined as such in the majority of standard forms (see
4.1.2), the most commonly held belief is that this should occurwhen
the employer can enjoy beneficialoccupationand use ofthe building
or facility, and that the making good of any remaining works or
removal of snags will notunduly impede that occupation.
• Such an approachis supportedby caselaw (see4.1.5).
(e) Influencesupon Certfication

• Inevitably, the client often strongly influences the certification pro-
cess, despite the contract demanding otherwise. The strength of this
influencemay be dependentupon the demandsor otherwisefor use or
transferofthebuilding or facility, orthe commencement offit-outworks.
• The process is also influenced by the relationships which exist
between the client, the professionalteam, and the contractor, and
indeed the pressuresbroughtby the contractor, perhaps motivated by
substantial levels ofliquidateddamages.
(f) Snagging after Completion

• Accordingly, it is quite common that completion is certified at a
point where considerable snagging remains outstanding. This is
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233
PART 4, SEcTIoN 1
where many of the standard forms, strictly speaking, fail the industry,
since they do not cater for such 'qualified' practical or substantial
completion (seecomments on JCT 80 in4.1.2.1).
Nonetheless,the industry at large takes a fairly cavalier approachto
this, issuing completion certificates endorsed or annotated with
reference to outstanding defects. Equally often, the certificate will
make no reference to outstanding works even though a lengthy snag
list may remain outstanding.
In the main, rectification of the defects or outstandingworks after the
certificate of completion is done on 'trust'. Rarely is a separate
agreement entered into at this point identifying the outstanding
works and the manner and timing within which they are to be corrected.
4.1.2 Standard Form Approaches
<> 4.1.2.1 JCT 80 'PRACTICAL COMPLETION':
(a) JCT 80 does not define practical completion. At clause 1.3

(Interpretation, Definitions, etc.)the following unhelpfulentry is made:
"PracticalCompletion: see clause 17.1"
Clause 17.1 provides the following:
"When in the opinion of the Architect Practical Completionof the

Works is achieved and, if relevant, the Contractor has compliedwith
clause 5.9 (supply of as-built drawings etc. — Performance Specified
Work)1, he shall forthwith issue a certificate to that effect and
Practical Completion of the Works shall be deemed for all the
purposes of this Contract to have taken place on the day named in
suchcertificate."
(b) Clause 17.1 is inextricably bound with the provisions relating to

defects, shrinkages or other faults appearing within the defects liability
period, or frost damage. Clause 17.2 is reproduced here for information:
(Clauses 17.2to 17.5).
"Any defects, shrinkages or otherfaults which shall appear within

the defectsliability period
These provisions have often been used to support the argument that
practical completion cannot be certified under JCT 80 unless all known
(patent) defects have been resolved.This is becausethe duty of the contractor
to rectify defects during the defects liability period is limited to those
defects appearing afterpractical completion.
1 Includes
provisionsintroducedby Amendment 12: 1993
234
PART 4, SECTION 1
Thus, a defect which was apparent at practical completion cannot be a

defect for the purposesof clause 17.2 and, strictly speaking, the architect
cannot require the contractorto make good such items of work.
This somewhatpedantic distinctionis generally ignoredby architects and

contract administrators.
<> 4.1.2.2 NOMINATED SUB-CONTRACT NSC/C

Underclause 35.16 of JCT 80, the architect must issue separate certificates
of practical complet'ion for each nominated sub-contractor when, in
his opinion, the nominated sub-contract works have reached practical
completion.
Clauses 2.10 and 2.11 of NSC/Cstate the following:
"2.10 If the Sub-Contractornotifies the Contractor in writing of the

date when in the opinion of the Sub-Contractor the
Sub-ContractWorks will have reached practical completion,
the Contractor shall immediately pass to the Architect any
such notification together with any observations thereon by
the Contractor. A copy of any such observations must
immediately be sentby the Contractor to the Sub-Contractor.
2.11 Practical Completion of the Sub-Contract Works shall be

deemedto have taken place on the day named in the certificate
of practical completion of the Sub-Contract Works issued by
the Architect under clause 35.16 of the Main Contract
Conditions, or where clause 18 of the Main Contract
Conditions applies, as provided in clause 18.1.11 of the Main
ContractConditions."
4 4.1.2.3 DOMESTIC SUB-CONTRACT DOM/1
(a) The architect will not issue any certificate to confirm separate
completionof domestic sub-contractworks. However, it is quite instructive
to appreciatethe procedureswhich have been established under DOM/1 to
identify dates for completionby domestic sub-contractors.
(b) Clause 14 requires the sub-contractorto notify the main contractor of

the date on which the sub-contractor considers that the domestic sub-
contractworks have reached practical completion.
(c) If the main contractordoes not dissent from that date within 14 days of
receiving the sub-contractor's notice, practical completion is deemed to
have occurredon the date notifiedby the sub-contractor.
PartialPossession
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235
PART 4, SECTION 1
(d) If the main contractordoes dissent, the date must either be established
by agreement, or referred to arbitration. Otherwise, the sub-contract works
will be deemed to have reached practical completion at the same time as
the main contractworks.
(e) Sub-ContractDOM/2, for use with the With Contractor's DesignForm,

together with Named Sub-Contract NAM/SC and Domestic Sub-Contract
IN/SC used with the Intermediate Form, all follow the mechanisms
describedabovefor DOM/l.
4.1.2.4 JCT INTERMEDIATEFORM (IFC 84)
(a) The Intermediate Formclosely follows that describedaboveforJCT 80.
(b) Clause2.9 provides:
"When in the opinion of the Architect/the Contract Administrator

Practical Completion of the Works is achieved he shall forthwith
issue a certificateto that effect. Practical Completion of the Works
shall be deemed for all the purposes of this Contract to have taken
place on the daynamed in such certificate."
(c) Though in its basic form the IFC 84 contract does not provide for
partial possession,the JCTpublish an additional clause 2.11 and practice
note IN/i which caters for this. The effect is similar to the partial posses-
sionprovisionsofJCT80 (see 4.1.6.5).
4.1.2.5 JCT81: WITH CONTRACTOR'S DESIGN
(a) Under this form there is no architect to enable a certificateof practical

completion to be issued. Accordingly, the responsibility passes to the
employer who is given an express requirement (perhaps unnecessarily)to
act reasonably.
(b) Clause 16.1 provides:
"When the Works have reached Practical Completionthe Employer

shall give the Contractor a written statement to that effect, which
statementshallnot be unreasonablydelayed or withheld,and Practical
Completionof the Works shall be deemed for all purposes of this
Contractto have taken place on the day named in such statement."
(c) Any dispute as to the issuing or withholding of a practical completion

certificate must be referred to arbitration. Note that with the optional
supplementary provisions, an adjudicatornamed under clause Si will not
be empoweredto dealwith disputesconcerning practical completion, since
clause Si is operableprior to practical completion only.
The Surveyors' Construction Handbook Part 4, Section 1(4/98) Effective from1/6/98 Page 5
PART 4, SECTION 1
"S1.1 If a disputeor differencehas arisenbetweenthe Employerand

Contractor prior to Practical Completion or alleged Practical
CompletionoftheWorks ...."
4.1.2.6 JCTMINoR WORKS:MW8O
(a) The JCTMinor Works form provides a crisp, clear statementwhich has
the same effect as the provisionsfor the main JCT forms.
(b) Clause2.4 provides:
"TheArchitect/theContractAdministratorshallcertify the date when

in his opinionthe Works have reached practical completion."
(c) It should be noted, however, that whereasthe mechanismfor certifying

practical completion is the same as JCT 80, the provisions for defects
liabilitydiffer.
(d) It has been held' that the MW8O form:

• does not require a written schedule of defects and, therefore, oral
notification is sufficient;
• in clause 2.5 the words "any defects, excessive shrinkages or other
faults which appear within three months of the date of practical
completion ...." extend to defects which appear before practical
completion;
• the words "defects, excessive shrinkages, or other faults" are not
qualified by any reference to the 'works' and so would, therefore,
extend to an existing structure.
Note: JCT 80 clause 17.2 refers to 'shrinkages', whereas MW8O refers to

'excessive shrinkages'.
4) 4.1.2.7 JCTPlUME COST CONTRACT 1992EDITION

The Prime CostContract uses the same wordingas the IntermediateForm.
See4)4.1.2.4.
4) 4.1.2.8 JCTMANAGEMENT CONTRACT 1987EDm0N
The Management Contract also uses similar wording to the Intermediate

Form. See4)4.1.2.4.
4) 4.1.2.9 JCTWoRKs C0NTRAcT/2
(a) Under clause 2.14 of the WC/2, the management contractor is required
to issue separate certificates of practical completion for each works
contract. The management contractor is, however, obliged to obtain the
1 William Tomkinson& Sons Ltd v. The Parochial Church Council ofSt Michael and Others (1990)
8-CLD-08-O1
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PART 4, SECTION 1
architect's consent under clause 8.3.4of the ManagementContract, signify-

ing that the relevant works have, in the architect's opinion, reached
practical completion.
(b) Therefore, these provisions more closely resemble the nominated

sub-contract provisions of the JCT main forms (see 4.1.2.2) than the
procedures found in the domestic sub-contract DOM/1.
4) 4.1.2.10 THE ACA FORMOF BUILDING AGREEMENT (1990 REvISION)
(a) The ACA form is probably the standard form which most closely
follows that which generallyhappens in practice.
(b) The contractornotifies the architect, in advanceof completion, of when

the works will be fit and ready for taking over. This may be accompanied
by a list of outstanding works. This is followed by a checking process
whereby the architect verifies the satisfactory completion of outstanding
works or defects. The 'Taking Over' certificate is issued at the discretionof
the architect and may embrace an undertaking by the contractor to
complete remainingworks after that date.
(c) Clause 12.1 deals with thisas follows:
"When, in the opinion of the Contractor, the Works are, or will be,
subject to the completionof any outstanding items of work, fit and
ready for Taking-Over by the Employer, he shall so notify the
Architect. Such notificationshall, if appropriate,be accompanied by
a list (referredto as 'the Contractor'sList') of any outstandingitems
of work requiredto render the Works fit and ready for Taking-Over
by the Employer. The Architectwithin ten working days of receiptof
suchnotificationmay then (subject always to the first proviso to this
Clause 12.1) either:
(a) issue a
certificate that the Works are fit and ready for
Taking-Over by the Employer. Such certificate is referred to in
thisAgreementas a 'Taking-Over Certificate'; or
(b) notify the Contractor of any items of work which are in the
Architect's reasonable opinion required to render the Works fit
and ready for Taking-Overby the Employer (referred to as the
'Architect'sList');
(c) approvethe Contractor's List; and/or
(d) at any time before issuing a Taking-Over Certificate add to the

Contractor'sList any items of work which are in the Architect's
reasonableopinion requiredto render the Works fit andreadyfor
Taking-Over by the Employer.
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PART 4, SECTION 1
If any items of work are required under paragraphs (b), (c) and (d)
above, the Architectshall forthwith issue a Taking-Over Certificate
when the Contractor shall have completedthe same. 'Taking-Over'
of the Works shall be deemed to have occurredon the date stated in
the Taking-OverCertificate.
Provided that the Architect may in his absolute discretion issue a

Taking-Over Certificate if the Contractor gives to the Architect a
written undertaking addressedto the Employer to complete with all
duediligence any items ofwork containedin the Contractor's List or
Architect's List immediatelyupon the issueof such certificate."
4.1.2.11 PSA/l (Ju 1994)

(a) PSAI1 is in all respects the same as GC/Works/l, Edition 3, in respect
of practicalcompletion(see 1.2.19).
(b) Importantly, however, there is no provision for referring disputes

concerning completionto the employer in similar fashion to GC/Works/1,
Edition3, where such decisions are heldto be final andconclusive.
4) 4.1.2.12 ICE 6TH EDITIoN: 'SUBSTANTIALCOMPLETION'
(a) Though not as fuiiy developed as the ACA form (see

may well be said that the ICE 6th edition provides a
4
4.1.2.10) it
framework for
completion which reflects better than the JCT forms what actually happens
in practice.In this form, the contractor 'offers up' the works, and a process
is providedfor dealing with outstanding works anddefects.
(b) Clause 48 provides:
1 When the Contractorconsiders that:
(a) the whole of the Worksor
(b) any Section in respect of which a separate time for

completionis providedin the Appendixto the Form ofTender
has been substantially completed and has satisfactorily passed

any final test that may be prescribedby the Contract he may give
notice in writingto that effect to the Engineer or to the Engineer's
Representative. Such notice shall be accompanied by an under-
taking to finish any outstanding work in accordance with the
provisions of Clause49(1).
2 The Engineer shall within 21 days of the date of delivery of such

notice either:
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PART 4, SECTION 1
(a) issue to the Contractor (with a copy to the Employer) a

Certificate of Substantial Completion stating the date on
which in his opinionthe Works were or the section was sub-
stantially completed in accordancewith the Contract or
(b) give instructions in writing to the Contractor specifying all

the work which in the Engineer's opinion requiresto be done
by the Contractorbefore the issue of such certificate.
If the Engineer gives such instructions the Contractor shall be

entitled to receive a Certificate of Substantial Completion within
21 days of completionto the satisfaction of the Engineer of the
workspecifiedin the said instructions.
Note: It is the engineer, not his representative,who is authorised to issue

the certificate.
(c) Clause49(1) deals with outstandingwork and defects as follows:
The undertakingto be givenunder Clause 48(1) may after agreement

between the Engineer and the Contractor specify a time or times
within which the outstanding work shall be completed. If no such
times are specified any outstanding work shall be completed as soon
as practicable during the defectscorrectionperiod.
The difficulty of this provision, notwithstanding that it reflects common

practice, is that there is often a dispute as to the extent of outstanding
works permitted. This will be of considerable importance when large
liquidateddamagesare potentiallyclaimable.
The clause gives the engineer a discretion and, as in other forms, his
decisionmay be reviewedby an arbitrator.
It should also be noted that the ICE 6th edition form caters expressly for
the circumstances where the employeruses or occupies the works or part of
the works prior to a 48(2) certificate being issued.
(d) Clause 48(3) provides:
"If any substantialpart of the Works has been occupied or used by

the Employer other than as providedin the Contract the Contractor
may request in writing and the Engineer shall issue a Certificate of
SubstantialCompletionin respect thereof. Such certificate shall take
effect from the date of delivery of the Contractor's request and upon
the issue of such certificate the Contractor shall be deemed to have
undertaken to complete any outstanding work in that part of the
Works during the Defects CorrectionPeriod."

PART 4, SECTION 1
Note: The ICE Design and Construct Clause 48(3) provisions in respect of
operation andmaintenance instructionsare not presentin the 6th edition.
4.1.2.13 ICE5TH EDITIoN: 'COMPLETIONCERTIFICATE'

The 5th edition of the ICE form is essentiallythe same as the 6th edition
(see 4j 4.1.2.12). Although the certificateto be issued by the engineer is
not described as a 'certificate of substantial completion', in effect this is
thoughtto makeno real difference since the wording in clause 48(1) of the
5th edition requires the engineer to issue his 'certificate of completion'
when "in his opinionthe works were substantiallycompleted".
Clause 49(2) ofthe 5th edition also allows a mechanismfor the finishingof
works outstanding at the date of completion.
<> 4.1.2.14 ICEDESIGNAND CONSTRUCT Foiss
(a) These provisions are identicallyworded to the corresponding clauses of

the ICE 6th edition, except that reference to the engineer or engineer's
representativeis replacedby the 'Employer's Representative'.
(b) It is to be noted, however, that there is an express requirement under

clause 48(3) for the contractor to provide operation and maintenance
instructionsprior to the issueof any certificateofsubstantialcompletion.
4.1.2.15 ICE MINORWORKS
(a) The ICE Minor Works is unique amongst standard forms in that it
defines completion against the readiness of the works to be used by the
employer.
(b) Clause 4.5 states as follows:
4.5 (1) Practical completion of the whole of the Works shall occur
when the Works reach a state when notwithstanding any
defect or outstandingitems therein they are fit to be taken
into use of possessionby the Employer.
(2) Similarly practical completion of part of the Works may

also occur but only if it is fit for such part to be taken into
use or possession independentlyofthe remainder.
(3) The Engineer shall upon the Contractor's request promptly

certify in writing the date uponwhich the Works or anypart
thereof has reached practical completion or otherwise
advise the Contractor in writing of the work necessary to
achievesuchcompletion.
(c) Clause 4.7 deals with the completion of outstanding works or defects
afterpractical completion has occurred.
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PART 4, SECTION 1
4.1.2.16 FCEC 'BLUE FORM' OF SUB-CONTRACT
The FCEC sub-contract form approaches completion of the sub-contract

works quite differently from completion under the building sub-contracts.
Under this form, the sub-contractormust complete within the period for
completion specified in the Third Schedule (clause 6.1). Irrespective of
when this occurs, sub-contractcompletionis not effectivelyacknowledged
(unless by agreement between the parties) until substantial completion of
the main contract works. Furthermore,the sub-contractor must maintainits
works until that date [clause 13(1)].
4.1.2.17 Ti-rn NEW ENGINEERING CONTRACT (NEC)
(a) The NEC eschews the system set out in the ICE forms which reflects
currentpractice,namely the contractor offering up the works and completion!
handover occurring together with clear provisions for dealing with
outstanding works anddefects.
(b) Instead it may be thought that the NEC is in some respects closer to
JCT: completion takes place when the project manager decides so. As if
completion was not vexed enough already, the NEC gives the project
manager three terms to deal with: 'Completion', 'taking over' and
'termination'.
(c) The NECprovisions are found in the core clausesas follows:

• Part 1 — General — Clause 11.2 (identified and defined terms) (13)
states:
Completion is the date, decided by the Project Manager, when the

Contractor has done all the work which theWorks Information states
he is to do by the CompletionDate and has correctednotifiedDefects
which would have preventedthe Employerusing the Works.
• Part 2 — Time — Clause 35 (Taking over) states:
35.1 Possession of each part of the Site returns to the Employer

when he takes over the part of the works which occupies it.
Possession of the whole Site returns to the Employer when the
Project Managercertifies termination.
35.2 The Employer need not take over the Works before the
Completion Date if it is stated in the Contract Data that he is
not willing to do so. Otherwise the Employer takes over the
Works not more than two weeks after Completion.
35.3 The Employer may use any part of the Works before
Completion has been certified. If he does so, he takes over the
part of the Works when he beginsto use it.
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242
PART 4, SECTION 1
35.4 The Project Manager certifies the date upon which the
Employertakes over any part ofthe Works within one week of
the date.
4) 4.1.2.18 GOVERNMENTCONTRACTS — GC/W0RKs/1IEDm0N 2
(a) GC/Works/1 Edition 2 provides that the works are to be completed to

the 'satisfaction' of the Supervising Officer, who is required to certify
completion. In addition, the Authority may choose to take partial posses-
sion of apart of the works.
(b) The provisionsfor completionare to be found in condition 28(1):
"28 (1) The works shall be carried on andcompletedto the satisfac-

tion of the SO ["the person designated as the Superintending
Officerin the Abstract of Particulars"] and all unused things
for incorporation and all things not for incorporation, the
removal of which is ordered by the SO, shall be removed
andthe Site and the Works cleared of rubbish and delivered
up to his satisfactionon or beforethe date for completion".
(c) Requirements for a completioncertificateare to be found in clause 42:
"42 (1) The SO shall from time to time certify the sums to which the
Contractor is entitled under Conditions 40 and 41. The SO
shall also certify the date on which the Works are completed
to his satisfaction and after the end of the said maintenance
period he shall issue a certificate when the Works are in a
satisfactorystate."
(d) Clause28(A) deals with partialpossessionbefore completion:
"The Authority may, before the completion of the Works, take

possessionof anypart of the Works(in this Conditionreferred to as a
'completed part') which is certified by the SO as having been
completed to his satisfactionandis either:
(a) a section specifiedin the AbstractofParticulars;or
(b) a part of the works (including a part of a section) in respect of

which the parties agree, or the SO has given an instruction, that
possession shall be givenbefore the completionof the Works;
and suchcompletedpart, on and after the date on whichthe certificate

is given, shall no longer be deemed to form part of the Works for the
purposesofConditions3 [vesting]and 26 [damage to works]."
2L
PART 4, SECTION 1
4.1.2.19 GOVERNMENTCONTRACTS: GC/WbRKs/1IEDITI0N 3
(a) Edition 3 of the GCJWorks/1 follows a similar pattern to edition 2 in

respectof completion.
(b) Condition34(2) (commencementand completion) states the following:
"The contractor shall, at all times, keep the Site tidy and free from
debris, litter and rubbish and shall not later than Completion of the
Works, remove from the Site all Things for incorporation in the
Works or any relevant Section which are unused, together with all
Things not for incorporation.The Contractor shall by the due date
clear andremoveall rubbish anddeliver up the Site and the Works in
all respects to the satisfactionof the PM ["the Project Manager, who
is the official of the Authority"]. The Contractorshall comply at his
own cost with any Instructionsrelatingto the removal of any Things
and rubbish."
(c) Similar provisions to edition 2 also exist for early possession under
condition 37 of edition 3. Here again, the project manager is required to
certify completionof the works to his satisfaction.
(d) Condition39 deals with the project manager's certificateof completion

of the whole of the works, with the addition unique to government forms
that any dispute will be referred to the Authority (employer), whose
decisionmay not be questionedin arbitrationor litigation.
<> 4.1.2.20 INSTITUTE OF CHEMICAL ENGINEERS Fo1Ms: CHM B I

(a) 'Red Book' for lump sum contracts. 'Green Book' for reimbursable
contracts.
(b) The I Chem E forms recognise that on large process plant projects or
similar,the concepts of completionandtaking over have distinctly separate
ramifications, from both contractual and safety points of view. These are
reflectedin the contractualproceduresprovidedin the I Chem E forms. The
procedures, therefore, are closer to a true contractual definition of
completionthan can be found in any other standardform. There are three
aspects of significance which are considered:
• compliance with the specification
with the descriptionof works
• time finishing tasks according to
programme or with reference to
financialincentives
• transferofresponsibility.
(c) Five points in the completionprocess are thus recognised.

• Clause 33.1 (Red Book), clause 32.1 (Green Book) requires the
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244
PART 4, SECTION 1
contractorto notify the engineer by means of a construction

completion report when he is of the opinion that the plant is
substantiallycomplete.
When the planthas satisfactorily completedtests set out in the speci-
fication and the contractor has adequately demonstratedcompletion
in accordancewith the specification,the engineer and contractor sign
the construction completion report. There may, of course, be a
numberofthesereports relatedto differentelementsof the plant.
Ifthe engineer is not satisfied he may endorsethe reportaccordingly
and the contractor must repeat the procedure described in clause
33.1.
• Once all the construction completion reports have been signedby the
engineer, and where the contract includesa "schedule of completion
dates", the engineer (projectmanager underthe Green Book)issues a
certificateofcompletion ofconstruction,under clause 33.4.
• The
purchaser normally takes over reponsibility for the plant just
before any raw materials are to be fed into the plant to undergo the
designedprocess change.
The contractor may, therefore, take no responsibilityfor the process
start-up unless specific guarantees are being provided, and thus the
contractprovides for a separate taking over certificate signedby the
engineer andpurchaser, under 34.9.
• The contract may prescribe performancetests embodiedby specific
guarantees ofthe contractor. The I ChemB formsprovidefor accep-
tance certificates in respect of the satisfactory operationof the plant
in accordancewith thesetests (clauses35 and37).
• Finally, the I Chem E forms lay down procedures for the certification
of the correction of defects at the end of the defects liability period
where the engineer must issue to the purchaserand contractor afinal
certificate (clause 38).
4.1.3 Effects of PracticalCompletion

4.1.3.1 The various standard forms differin theirtreatment of the transfer of rights
and obligationsbetween the parties at completion.
The followingissues are universally acknowledgedhowever:
(a) liability to pay damages for delay ceases (whether liquidated and
pre-ascertained,or unliquidated);
(b) possession of the site returns to the employer and the risk of security
and damage to the works and third party liability transfers back to the
employer(butnot damage to the works causedby the contractorduring the
defects liability period under JCT 80, clause 20.3);
(c) commencementofthe defects liability period;
(d) payment to the contractor of one half ofthe retention fund;
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PART 4, SECTION 1
(e) arbitrationmay be commiicedupon anyissue; and
(f) no further instructionsmay be issuedfor variation works or the rectifica-

tion of works otherthan those appearingduring the defects liabilityperiod.
4.1.3.2 Dependentupon the form of contract, certain other factors are conditional
upon the certificate of completion.For example,under JCT 80:
(a) the employer may assign the right to bring proceedings in his name
(clause 19.1.2);
(b) the commencementofthe period of the final adjustment of the contract

sum (clause 30.6);
(c) liability for frost damage is transferred from the contractor to the
employer (clauses 17.2, 17.3 and 17.5); and
(d) the period for finalreview of extensions of time expires12 weeks from
this date (clause 25.3.3).
4.1.3.3 These factors also impact upon sub-contractors. For example, the sub-
contractors'protection under the main contractall-risks'policyends.
4.1.4 Nlethodsfor Dealing with Practical Completion
4.1.4.1 There are a numberof principalmethodswhich mightbe used to reduce the

problems associated with practical completion. The following are seen as
the main options available:
(a) The Contract Administrator's Opinion
Under this method there is no contractual definition of practical

completion, this being left entirely to the architect/engineer or contract
administrator's opinion to certify when practical completion has been
achieved.
The remedy available to the employeror contractorin the event they con-
sider the certificate has been wronglyissued or withheldis to arbitrate.This
option is used in the traditional JCT contract.
(b) Adjudication
Whether or not a contract containsa contractualdefinition, there is much to

commend provisions whereby either party may invoke adjudication in the
event of a dispute.
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24-b
PART 4, SECTION 1
(c) Contractor 's Initiative
The contractor notifies its own completion which becomes contractually

bindingunless dissented from by the recipientwithin a set numberof days.
This is the model used in DOM/l, further developed to deal with the
'dissent' of the recipient under a main contractor and sub-contractor
relationship.
(d) DefinitionofStandards
Inclusion withinthe contractof a definitionof the tests or standards which

the contractor will berequiredto meetin orderto achieve practical completion.
(e) It is possible that this could be dealt with as a 'code of practice' bound
within the contract documentandexpressly referredto in the conditions,in
similar fashion to the code of practice for opening up and testing under
clause 8.4.4of JCT 80.
(f) The I Chem B forms come closest to this option, by prescribing tests
and standards to be achievedby the installedplant prior to completion. It is
suggested, however, that to define completion similarly for universal
application in building or civil engineeringprojects would be extremely
difficult. The primary area of difficulty lies in aspects of subjective
evaluation such as finishes, and it is doubtful whetherthis would be less-
ened by a definition which called for "100% fault free works" (see
4.1.4.3) since there will always be disputeson quality issues.
(g) Appendix A offers a number of practical tests for judging the state of
completion.
<> 4.1.4.2 READINESS FOR OCCUPATION
(a) Many commentators have agreed that practical completion should be

defined in the contract as that point when beneficial occupation may be
obtained by the employer. The decided cases have tended towards a
preferencefor this approach in any event, andthe ICE MinorWorks form is
an exampleof appropriate wording.
(b) Nonetheless, it is difficult to see how this reduces the incidence of

disputes: it is merely shifting the point at which arguments will be made.
Employershave argued that this represents a weakening of their position.
The building may be capableof being occupied, yet the standards required
by the employermay not have been met.
(c) As a qualification to this approach, an option is to add a rider to the

effect that the rectification of outstandingworks and defects are capableof
being carried out in such a manner and within such a time that the
employer's beneficialoccupationwill not be impeded.
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PART 4, SECTION 1
<) 4.1.4.3 PERFECT COMPLETION
(a) Here completion would not be granted until all outstandingworks are
completedand defects rectified.
(b) This is not a favoured option in the UK, and the Courts have given
credence to the view that it is a difficult, if not impossible, yardstick to
apply. Nonetheless, it is closer to the model applied in other European
countries,andthe increase in the use of latent defects or 'build' insurance
(such as the mandatory decennial type liability in France) may bring a
movetowards 'fault free' buildingsat completion.
(c) This, however, will have to be accompanied by a change in the UK

culture of 'expecting a Rolls Royce, when contracting to buy a Ford'.
Similarly, one cannot expect to levy substantialliquidateddamages for the
want of a brassscrew, or the smallesttouch ofpaint.
4) 4.1.4.4 TWO-STAGE COMPLETION
(a) Various models have been suggested for a two-stage process for the
certification of completion.
(b) Clearly, the intent is to divide into two the numerous benefits and
obligationswhich fall uponthe contractorandemployerat completion (see
4.1.3).
(c) The first stagemay be denoted by the issue of a 'provisionalcertificate'

and, by example, may be due when beneficial occupation is achieved or
achievable.
(d) At this point, the employer would re-take possession and insurance
risks aretransferred.
(e) The second stage would be perfect completion of the works. Only at
thispoint wouldthe contractor be released from liability for liquidated and
ascertained damages. This would also mark the commencement of the
defects liability period.It is thoughtthat the first release of retention would
alsonotoccuruntil thispoint.
4.1.5 Definitions
4.1.5.1 Generally, as can be seen in 4.1.2, the standard forms of contract do not
provide definitions of what constitutes practical completion, although the
ICE Minor Works form contains a useful development of the term by
stating it is contingent upon the works being "fit to be taken into use or
possession".
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PART 4, SECTION 1
(a) FAULTFREE COMPLETION
Various definitionsare available from decided cases andthe principal text-

books on constructionlaw. Some definitions leantowards perfect, fault free
completion:
One would normally say that a task was practicallycompletedwhen

it was almost, but not entirely finished; but Practical Completion
suggests that is not the intended meaning and what is meant is the
completionofall the construction work that has to be done.'
And in the same case:
•..Thedefects liability period is provided in order to enable objects

not apparent at the date of practical completion to be remedied.If
they hadbeen apparent, no such certificate wouldhave been issued.2
(b) COMPLETIONFOR ALL PRACTICAL PURPOSES
The above quotations need to be compared with the opinionexpressed by

Salmon U when the same case had earlier been heard by the Court of
Appeal:
The obligation on the contractors under clause 21 to complete the

works by the date fixedfor completion must, in my view, be an obli-
gation to complete the works in the sense in which the words
'practically completed' and 'practicalcompletion'are usedin clause
15 and clause 16 of the contract. I take these wordsto meancomple-
tion for all practical purposes, i.e. for the purpose of allowing the
council to take possession of the works and use them as intended. If
completionin clause 21 meant completion down to the last detail,
however trivial and unimportant, then clause 22 would be a penalty
clause and as such unenforceable.3
(c) THE DE MINIMIsRULE
This idea of practical completion being permitted despite the existence of

minor defects has been expressed elsewhere:
I think the word practically ... gave the architect a discretion to

certify that [the contractor] had fulfilled its obligationunder clause
21(1) (of JCT 63) where very minor de minimis work had not been
carried out, but that if there were any patent defects in what [the
contractor] had done the architect could not have given a certificate
of practical completion.4
City ofWestminster v. Jjarvis& Sons Ltd [1970] HL, 7 BLR 64

2lbid, atpage75
Thid, CA[1969] 1WLR 1448, atpage 1458
4HWNeville (Sunblest) Ltdv. WilliamPress& SonsLtd (1982)20BLR 78
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ZL.9
PART 4, SECTION 1
(d) IMPOSSIBILITYOF PERFECTiON

The development of this argument has involved contrasting the
constructionindustry with otherforms of manufacture:
Probably the most importantbackgroundfact which I should keep

in mind is that building construction is not like the manufacture of
goods in a factory. The size of the project, site conditions, use of
many materials and employment of various types of operatives
make it virtuallyimpossibleto achievethe same degree of perfec-
tion as can a manufacturer. It must be a rare new building in which
every screw and everybrush of paint is absolutely correct.1
• And in the samecase, Judge John Newey said:
In my opinion there is no room for 'completion' as distinct from
'practical completion'. Because a building can seldom if ever be
built precisely as requiredby drawingsand specification,the con-
tract realisticallyrefers to 'practical completion', andnot 'comple-
tion' but they mean the same. If, contraryto my view, completion
is something which occurs only after all defects, shrinkages and
other faults have been remediedin accordance with clauses 17.2
and 17.3 and a certificateto that effect has been given under clause
17.4, it would make the liquidateddamagesprovision in clause 24
unworkable and in practice would require the defects liability
periodto be addedto the time initially negotiatedby the parties for
the carryingout of the works. The constructionindustry recognises
a differencebetweenthe carryingout ofnewworks and 'snagging'
that is to say dealing with minor defectsin them.2
(e) SUBSTANTIALPERFORMANCE
• These arguments applied to practical completion have been used in
explaining the doctrine of substantialperformance. This doctrine is
concernedwith establishingwhen payment will be due of an amount
payable under an 'entire'contract:
In considering whethertherewas substantial performance I am of

the opinion that it is relevant to take into account both the nature
of the defects and the proportion between the cost of rectifying
them and the contract price. It would be wrong to say that the
Contractoris only entitled to payment if the defects are so trifling
as to be coveredby the 'de minimis' rule.3
• In the same case, the key element for defining a failure to achieve
substantialperformancewas emphasisedto be:
the general ineffectiveness of (the work) for its primary

purpose ..
1 Emson EasternLtdv. EMEDevelopments Ltd (1991) QBD, 55 BLR 114
2lbid,atpage122
3Boltonv.Madheva(1972) 1 WLR 1009, at page1013
4lbid,atpage 1015
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PART 4, SEcTION 1
Substantial performance has been held to have occurred even though

the works were in part defective. The defendants were held liablefor
the sum claimed less a deduction based upon the cost of making
good the defects:
The questionhere is whether in a contractfor work andlabourfor

a lump sum payable on completion the defendant can repudiate
liability under the contract on the ground that the work though
'finished' or 'done' is in some respects not in accordance with the
I
contract... think on the facts ofthiscase the work wasfinishedin
the ordinary sense, though in part defective..
• It has recently been held by the Court of Appeal in Hong Kong that
practical completion should be interpretedin a similar mannerto the
doctrine of substantial performance.
We return to the issue of practical completion which we cannot

distinguishfrom substantial performance.2
The judge reached his conclusion that practical completionhad not

been achieved in circumstances where, by reason of the failure to
modify the sprinkler system, the work contracted for was, in the
words of Somervell U in Hoenig v. Isaacs, neither 'finished' nor
'done'in the ordinary sense.3
• The direct connection between cases dealing with substantialperfor-

mance and the definition of practical completionis, however, to be
treated cautiously.
It may be doubted whether cases concerned with substantial

performance are relevant to the determination of practical
completion as the term is used in the standard form contracts
where the event is not directlyrelatedto payment obligation (as in
the contract considered by the Hong Kong court) but rather with
consequences such as liability for liquidated damages,re-possession
and the release ofretention.4
(f) SUBSTANTIALCOMPLETION
• Definitionsof the term 'substantial completion'appearingin the ICE
forms havebeen similarto those appliedto practical completion.
This term (or equivalent words) used in clause 48(1) of the ICE
6th Edition form" ... substantially completed ..." now appears
Hoenigv.Isaacs (1952) 2All ER 176, atpage179

Island Contracting (HK) Ltd v. SkinkLtd (1990) CAofHongKong, 52 BLR 110
Ibid, atpage 115
4Cornmentary by EditorofBuildingLaw Reports, 52BLR, atpage 112
Page20 Part 4, Section1 (4/98) Effectivefrom 1/6/98 TheSurveyors'Construction Handbook
25
PART 4, SECTION 1
consistently throughout the Conditions, inter alia, in clauses 43

and 47. The term is not defined, but the expressed reference to
'outstanding work' to be completed within the DefectsCorrection
Period indicates a state plainly falling short of literal completion.
Neither is there any definition of 'outstanding work'. There is no
reason to limit it to work that has not been carried out. It may
include work which is defective, but is to be re-executed or
remedied in accordance with the Contract.1
The Concise Oxford Dictionaryequates 'substantial'with 'virtual'

which is defined as 'thatis such for practical purposes though not
in name or according to strict definition'. It is at least clear on the
one hand that the fact that the works are or are capable of being
used by the employer does not automaticallymean that they are
substantially complete ('any substantial part of the Works which
has both been completed ... and occupied or used') and on the
other hand that the engineermaynot postponehis certificate under
this clause until the works are absolutely completed and free from
all defects. The many reportedcases on the question of 'substantial'
completion in relation to payment under an entire contract, a
different legal problem, are of doubtfulrelevance.Obviously both
the nature and extent of the uncompleted work or defects are
relevant, and to say that substantialcompletion allows for minor
deficienciesthat can be readily remedied and which do not impair
the structure as a whole is probably an accuratesummary of what is
a question of fact in each case.1
4.1.5.2 KEATING' S ANALYSIS
Practical Completion is perhaps easier to recognisethan to define.

No clear answer emerges from the authorities as to the meaning of
the term. It is submitted that the followingis the correct analysis:
(1) The Works can be practically complete notwithstanding that

there are latent defects;
(2) A Certificate of Practical Completionmay not be issued if there

are patent defects. The Defects Liability Period is provided in
order to enable defects not apparent at the date of Practical
Completion to be remedied;
(3) Practical Completion means the completion of all the

construction workthat has to be done;
1
EngineeringLaw and the ICE Conditions,Fourth Edition, MaxWAbraliamson, at page160
TheSurveyors'Construction Handbook Part4, Section 1(4/98) Effectivefrom 1/6/98 Page 21
5i
PART 4, SECTION 1
(4) However,theArchitectis given a discretionunder clause 17.1 to

certifyPracticalCompletionwhere there are very minoritems of
work left incomplete, on 'de minimis' principles.1
4.1.5.3 HUDSON'S APPROACH

Finally, it is
desirable to be clear as to the precise meaning of
'completion' a time obligation.There is surprisingly little English
in
authority on the point, but it is clear that the requirement will be less
rigorous than in other contractualcontexts.Usuallyit will meanbona
fide completion free of known or patent defects so as to enable the
owner to enter into occupation.The words 'practical' or 'substantial'
in the Englishstandardforms probably do no morethan indicatethat
trivial defects not affecting beneficial occupancy will not prevent
completion (the more so, of course, if the contract provides for a
maintenanceor defects liability period).2
In the last resort the degree of required completion needed to

discharge the contractor's obligation to completeto time will be a
matter of interpretation, but can be expected to differ from other
aspects of the contractor's obligations to complete. In English stan-
dard forms of contract employing liquidated damages clauses for
delay, this is often expressly described as 'practical' or 'substantial'
completion, but there is no reason to suppose that these expressions
mean anythingvery different from the word 'completion' simpliciter
when used or implied in the context of completion to time. It is
submitted that this will, in the absence of contraryindication, mean
when the work reaches a state of readiness for use or occupationby
the owner, andfree from any known omissions or defects which are
not merelytrivial.3
4.1.5.4 REMEDYINGDEFECTS
Finally, another ingredient which it is suggested affects practical
completionis the extent of disruptionan employerwould incur in allowing
access to a contractor to remedy defects or complete works outstanding
afterthe issueof a practicalcompletion certificate.
Furthermore,an employermust wish to reduce to the very minimum

the disruption that is caused by the presence of workers going
through a snagging list and an architect should not issue a certificate
of practical completion until all such work has been completed —
unless the employer waives the right to insist upon it being done, and
the contractor is willing to continueto workin an unoccupied building
andsuitable arrangements have been made for the insurance.4
1
Keating'sBuilding Contracts,5thedition, atpage 528
2Hudson'sBuilding andEngineeringContracts, eleventheditionatpage 1109
Ibjd, atpage 1130
4Commentaryby editorsofBuilding LawReports,52BLR atpage 111.
Page 22 Part,4, Section 1(4/98) Effective from 1/6/98 TheSurveyors'ConstructionHandbook
253
PART 4, SECTION 1
4.1.6 Subsidiary Issues
4) 4.1.6.1 DETERMINATIONAFTER PRACTICAL COMPLETION
(a) The case ofEmsonEastern Ltd v. EME Developments Ltd (1991)1 con-
sidered the situation where a main contractor goes into administrative
receivership after practical completion, leaving both a claim for unpaid
sums due under the contract, and a substantial counterclaimfor defective
works.
(b) The contractor's employmentunder JCT 80 hadbecome automatically

determinedupon the receivership (clause 27) and the employerwas forced
to employ othersto rectify the defects.
(c) The employer contended that the contractor had no entitlement to

payment due to the wordingof clause 27.4.4 which states:
Until after completionof the works under clause 27.4.1 the employer
shall not be bound by any provision of this contract to make any
furtherpaymentto the contractor
(d) The employer was, thus, arguing that 'completion' had not occurred
until all known defects had been corrected and the obligations during the
defects liabilityperiodbrought to an end.
(e) The Court had to decide whether 'completion' in clause 27.4.4 meant
the same as 'practicalcompletion' (which hadalready occurred)or whether
it meant completion of all the continuing obligations as contended by the
employer.
(f) The conclusion of the Court was that there was no room under JCT 80
for 'completionas distinct from practical completion'.
(g) This meant, under the scheme of clause 27, that if after practical
completionthe contractis determined:
Since the works will be deemedto have been completed, the employer
cannot rely upon clauses 27.4.1 and 27.4.4 to enable him to employ
other contractors and claim the cost of employing them from the
contractor, nor can he claim exemptions from making payments to
the contractor for works carried outbefore practical completion.1
(h) Thus, any rights which the employerhas against the contractorwill not
derive from the termsof the contractbut will be under commonlaw.
(i) This places the employer at a distinct disadvantage since he cannot

1Emson Eastern Ltdv. EMEDevelopments Ltd(1991),QBD 55 BLR 114
2
PART 4, SECTION 1
apply a set-off or abatementagainst the contractor's claims,but insteadwill

have to proceed with a separate claimfor the damagessuffered once these
have been incurredandfinally quantified.
4.1.6.2 FiNANCING CHARGES AFTER PRACTICAL COMPLETION
(a) A specificquestionwas raised in the Rees & Kirbycase1 as to whether

financing charges incurred by a contractor upon primary elements of loss
and expensewould cut off at the certificate ofpractical completion.
(b) The defendant argued that financing charges, which were to be

considered as a component part of the loss and expense claimed by the
contractor as a result of events occurring during the construction of
the works, could not be recoverable after practical completion, since the
causativeeventscomplainedofmust, by that stage, have come to an end.
(c) This contentionwas rejected by the Court.
As I read the clauses, given that (on the clauses in the form which
they take in the contract now before us) successive applicationsare
made at reasonableintervals. I can see no reason why the financing
charges should not continue to constitute direct loss or expense in
which the contractor is involved by reason of, for example, a
variation, until the date of the last application made before the last
issue of the certificate issued in respect of the primary loss or
expenseincurredby reasonofthe relevantvariation.
At the date of issue of the certificate, the right to receivepayment in

respect of the primary loss or expense merges in the right to receive
payment under the certificate within the time specified in the
contract,so that from the date of the certificatethe contractor is out
of his money by reason either (1) that the contractpermits time to
elapsebetweenthe issueof the certificate and its payment, or (2) that
the certificate has not been honoured on the duedate.
But I can for my part see no good reason for holding that the
contractorshould cease to be involved in loss or expensein the form
of financing charges simply because the date of practical completion
has passed.
4.1.6.3 INSTRUCTIONSISSUED AFFER PRACTICAL COMPLETION
(a) Often practical completion is certified in an extremelyhurried manner

to allowthe employeroccupation,for example, to commence fit-outworks.
Where substantial outstanding works remain, this causes considerable
1Rees &KirbyLtdv. Swansea City Council (1985),CA30BLR
Page 24 Part 4, Section 1 (4/98) Effective from1/6/98 The Surveyors' ConstructionHandbook

PART 4, SECTION 1
difficulty to architects or contract administratorswho find they must issue

instructions after practical completion, in order to enable the contractor to
effectively finish the works.
(b) This brings about the absurd situation of contractors' claims for
extensionof time after practical completion, or arguments that time is 'at
large' in order to defeat the imposition of earlier delaydamages.
(c) The Practice and Management Committee of the RICS published an

answerto thisquestionin 19901 as follows:
Q Under JCT 80, is the architect empoweredto issue instructions,

other than for rectifying defects, after the issue of the certificate
of practical completion. If the answer is yes, under which
clauses of the contractis this power given.
A The Architect is not so empowered. However, as a matter of

convenience, the parties may agree that further work is to be
carried out and paid for through the machinery of the contract
(Ref. Q1891136).
(d) It is considered that whether or not payment is made through the

machinery of the contract, the additional work will, in effect, become the
subjectofa supplementalcontract.
4.1.6.4 OCCUPATIONBYEMPLOYER PRIORTO PRACTICAL COMPLETION
(a) A question often raised is whether occupationby the employer will be

deemed to constitute practical completion.
(b) Certain standard forms of contract contain clauses that expressly state
this to be the case.
(c) ICE 6th edition, clause48(3), is an example,although it is qualified by

'substantialpart':
If any substantialpart of the works has been occupied or used by the

Employerother than as provided in the Contract, the Contractormay
request in writing, and the Engineer shall issue a Certificate of
SubstantialCompletion in respect thereof
(d) The NewEngineeringContract (NEC) is also clear on this point, clause

35.3:
The Employer may use any part of the works before Completionhas
been certified. If he does so, he takes over the part of the workswhen
he begins to use it.
1 Chartered
QuantitySurveyor June 1990(RefQ/89/136)
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PART 4, SECTION 1
(e) It has been argued that since some standard forms expressly deal with
this subject as above, then those forms of contract which do not include
similar express provisions should be interpreted to the effect that no
assumptionof deemed practicalcompletionmay be made upon occupation
or use ofpart or all of the works. In other words, the express requirements
of the contractshould be considered to be exhaustiveof the circumstances
wherebypractical completion canbe established.
(f) The JCT forms of contract, including JCT 80, do not expressly provide
for 'automatic' practicalcompletion upon use or occupation by the employer
of a part or whole of the works. On the contrary, clause 23.3.2 of JCT 80
provides for use or occupation in circumstanceswherepractical completion
or partial possessionwill notoccur(see4.1.6.5(a)).
(g) A number of cases have looked at this question. In Big Island

Contractingv. Skink1 , althoughthe owner's occupation of the building was
not argued as key to the determination of the issues, the Court held that it
could not distinguishpractical completionfrom 'substantial performance'.
On the facts of this case, the Court held that practical completion had not
been achieved, despite the fact that the defendantshadbeen in occupation
of the building.
(h) A somewhat different view was held in Hoenig v. Isaacs2, where Lord
Denning said:
It is always open to aparty to waive a conditionwhich is insertedfor

his benefit.
There, by entering into possession and using the fitted furniture, the
employer was held to have waiveda condition precedentof entire perfor-
mance andcouldno longer rely on it.
(i) In English Industrial Estates v. George Wimpey3, the Court held that
occupationdid not amount to completion.
(1) In spite of the employer's tenant installing and using machinery and
storing large quantities of paper in parts of the works, the court of first
instance and the Court of Appeal found that partial possession had not
occurred and held the contractorand his insurers liable for damage caused
by a fire occurringduringthe employer'soccupation.
(k) In anAustraliancase4,the contractallowed the employerto have access

before practical completionfor the purpose of fitting out the building.The
1
Big island Contracting(HK)Ltdv. SkinkLtd(1990), CAIlK 52BLR 110
2Hoenig v. isaacs(1952) 2AllER 176
English Industrial EstatesCorporationv. GeorgeWimpey & Co Ltd (1973) CA7 BLR 122
4Mtltiplex ConstructionPlyLtdv.AbgarusPlyLtd (1992)APCLR
Page 26 Part4, Section 1(4/98) Effectivefrom 1/6/98 The Surveyors' Construction Handbook
PART 4, SECTION 1
contractorargued that as the liquidated and ascertaineddamagesprovision

gave no credit for this benefit, it could not be a genuine pre-estimate of
loss, andwould fail as being an unenforceablepenalty.
(1)The Court summarily rejected this argument. The contract contem-

plated staged completion, and any occupation of the premises prior to
practical completion for fitting-out was a contractual right and not a
'benefit'conferredon the employerby delayed completion.
<> 4.1.6.5 PARTIALPossEssIoN/SEcTIoNtCOMPLETION

Under JCT 80 it may be seen that there are four levels of 'occupation'
which can be attainedby the employer.
(a) The firstlevel is use or occupationof the site or a part thereof generally
for storageor fit-out.
Clause 23.3.2 states:
Notwithstanding the provisions of clause 23.3.1 the Employer may,

with the consent in writing of the Contractor, use or occupy the site
or the Works or part thereof whetherfor the purposes of storage of
his goods or otherwise before the date of issue of the certificateof
Practical Completionby the Architect. Before the Contractor shall
give his consent to such use or occupation the Contractor or the
Employershall notifythe insurers under clause 22Aor clause 22B or
clause 22C.2 or .4 whichever may be applicable and obtain
confirmation that such use or occupation will not prejudice the
insurance.Subjectto such confirmationthe consentof the Contractor
shall not be unreasonablywithheld.
It can be seen that such a mechanismis consensual and that the insurers
also must confirm theirconsent to the occupation. Clause 23.3.3 provides
that any increase in the insurancepremium which results must be added to
the contractsum.
(b) The secondlevel is partial possession. Again,thismust be by the consent

ofboth parties, which the contractormust notunreasonablywithhold.
Clause 18.1 provides:
If at anytime or timesbefore the date of issue by the Architectof the

certificate of Practical Completion the Employer wishes to take
possession of any part or parts of the Works and the consent of the
Contractor (which consent shall not be unreasonablywithheld) has
been obtained, then notwithstanding anything expressed or implied
elsewhere in this Contract, the Employermay take possessionthereof.
The Architectshall thereuponissue to the Contractoron behalf of the
253
PART 4, SEcTIoN 1
Employer a written statement identifying the part or parts of the

Works taken into possessionand giving the date when the Employer
took possession.
The effect of partial possessionunder clause 18 is quite differentfrom use

or occupation described under clause 23.3.2 above. With partial possession,
practical completionis deemed to have occurred in respect of that part with
all the consequencesof a practicalcompletion under clause 17 (see 4.1.4).
The architect's written statement is used to compilethe value of the part

taken into possession, such that retention (clause 30.4.1.2) and liquidated
damages (clause24) will be reducedpro rata to the contract sum.
Reference is also made to insurancewhich must be dealt with in the event

of anypartialpossession(clause 18.1.3).
(c) The 'third level' is sectionalcompletion.
The contract documents may prescribe pre-determined sections of the

works, with separate datesfor completionfor each.
This again is differentfrom partial possession, since it is not consensual in

nature. The contractoris under an obligation to complete the works under
each section on or before the datesset down in the contract appendix.
Thus, the architect or contract administrator must administer the project

having regard to these dates, including allocating separate extensions of
time where these apply, and separate practical completion certificates
(sectional completion) in respect of each part. The contract will also state
the separateamountsofliquidateddamages which are to be appliedto each
section in respect of any separate delays, whetheror not the whole of the
works is deliveredup by the overall datefor completion.
(d) Finally, there is practical completion.
The architect or contract administrator must certify completion of the

whole ofthe works according to clause 17 (see4.1.2.l).
Page28 Part 4, Section 1(4/98) Effectivefrom1/6/98 The Surveyors' Construction Handbook
2s°i
Appendix A: General Objectives to be Achieved at Practical Completion

for Small to Medium-sized Building Projects
The following are a number of practical tests by which it is considered an architect

or contract administratorcan judge whether or not practical completion has been
achieved.
Al Ti-rn CONTRACT DOCUMENTS

Al.l The works should have been undertaken as intended by the specification
and drawings, etc.
A2 COMPLIANCEWITH STATUTORYREQUTREMENTS
A2.1 All relevant statutory requirements should have been complied with,
including all appropriaterequirements for health, safety, means of escape
and the requirements ofthe statutory suppliers, including confirmationthat
all planning conditions and building control matters have been satisfac-
torily resolved.
A2.2 Certificates confirming safety of the various installations should be provided.

Electrical test certificates and confirmation of compliance with relevant
statutoryrequirements for fire alarm or smoke-detectorinstallationsshould
be available. In addition, test certificates for pressure vessels as well as for
hoists (whetherthey be for equipment or people) shouldbe produced.
A2.3 Where appropriate (e.g. under design and build arrangements) the
contractorshall have satisfied all local authority requirements with regard
to, for example, refuse collection andpostaladdress confirmation.
A3 THE SITE
A3.l External works should be substantially complete so that the occupier has
unfettered access. Normally, all building impediments such as skips and
site huts should have been removed from the site, such that no potential
safety hazardremains present. (Note: Particular attention shouldbe paid to
this when considering sectionalcompletion for anypart ofthe works.)
A4 ENTRANCES
A4.1 It is normally expected that the entrance to the premises and access way
would be clear and complete, sufficient for the client to operate for all
intents andpurposesin a normal fashion.
A5 STRUCTURE
A5.l Structuralworks shouldbe complete and no part of the structureshould be
unsafe.
A6 CLADDING
A6.l The building should be wind and watertight and the cladding should be
properly secured. Under normal circumstances, roofs andcladdings would
be tested by the elements.If, for some reason this has not taken place, then
The Surveyors' Construction Handbook Part 4, Section 1, Effective from1/6/98 Page 1

AppendixA(4/98)—====
zbo
the specificationshould include for water testing or, alternatively, an

instruction shouldbe givento so test these elements.
A7 FINTSHES
A7 1 This is the area of works where most reasons for delay in the issue of a
certificate of practical completiontendto arise.
A7.2 As suggested above, either a detailed view needs to be taken or potentially

amore lenient stance adopted.
A7.3 All the decoration works should be complete. For example, the reception
area and staircases should be finished, as should in general terms, the
internal areas. However, decorations incomplete to a store room in the
• depths ofthe basement would not necessarily be consideredas important.
A7.4 External works should be complete,including car-park lining, signage and

the like.
A8 PLANTING
A8.•1 If, in the specification, externalplanting is included andit is acknowledged
that practical completion may takeplace during a period when undertaking
planting may be impractical, then the documentationshould state this to
enable such worksto be undertakenwithoutdetrimentto the parties.
A9 MECHANTCAL ELECTRICALSERVICES
A9.l The origins of all the appropriate commissioning and test certificates
should be issued to the architect or contract administrator. For such
elements as air conditioning, a definition which allows for balancing to
take place following occupationshouldbe considered.
AlO MANUALS
AlO.1 The requirement for the provision of operating and maintenancemanuals
and as-installed drawings should be considered closely. Manufacturers'
warranties may well be nullified if mechanical plant is not maintained in
accordance with their instructions during the warranty period. Particular
attention will be requiredto be paid to the CDM regulations which callfor
the 'Safety File' to be producedprior to practicalcompletion.
Page2 Part4 Section 1, Effective from1/6/98 The Surveyors'Construction Handbook

AppendixA (4/98)
Appendix B: Table of Cases
1. BigIslandv. Skink(1990)
Occupation did not mean practical completion.
2. Bolton v. Mahdeva (1972)

Substantial performance—it would be wrong to saythatthe contractoris only entitled
to paymentif thedefects are so trifling as to be coveredby the de mininiis rule.
3. CityofGlasgow District Council v. ExcessInsurance Co (Scotland) (1988)

Performancebondsurvivespractical completion.
4. Emson Eastern v. EMEDevelopments (1991)

Abuilding can seldombe built precisely.
No set-off for remedial works after practical completion where main contractor
insolvent— common law claim.
Completionin determination provisions is equalto practicalcompletion.
5. EnglishIndustrialEstates v. George Wimpey (1973)

Fireis the contractor'srisk afterpossession if clause 16 of JCT 63 is notobserved.
Occupation before practical completion without certificate does not amount to
partial possession.
6. Hoenig v. Isaacs (1952)

Substantialperformance was heldto have occurredeventhoughthe works were in
part defective.
7. Jarvis & Sons Ltdv. CityofWestminster(1970)
What is meant by completionis the completion of all the construction work that
has to be done.
If (defects)hadbeen apparent (at practical completion) no such certificate would
have been issued.
8. London MerchantSecuritiesv. London Borough ofIslington(1986)

The architect's certificate was not conclusive (for rating purposes) — substantial
completionbeing a broad questionof fact.
9. MultiplexConstruction Pty v. Abgarus(1992)

Occupationprior to practicalcompletion is a right not a benefit.
10. HWNeville v. WilliamPress (1982)

The word 'practically' gave the architect a discretion to certify ... where very
minor de minimis workhad notbeen carried out.
11. Rees & Kirbyv. Swansea City Council (1985)

Financingcharges continue afterpractical completion.
12. University ofGlasgow v. William Whilfield& JohnLaing (1988)

Continuingduty ofarchitectfor negligent designafter practical completion.
The Surveyors' Construction Handbook Part 4, Section 1, EffectiveFrom 1/6/98 Page 1

AppendixB(4/98) --
Appendix C: FurtherReading
BOOKS
EngineeringLaw and the ICEConditions, (4th Edition), Max Abrahamson, Applied

Science Publishers, 1979
Hudson'sBuildingandEngineeringContracts,(11th Edition),I N Duncan-Wallace,

Sweet & Maxwell, 1995
Keating'sBuilding Contracts, (5th Edition), Sir AnthonyMay, Sweet & Maxwell,

1995
ARTICLES
"Architects Instructions After Completion". Chartered QuantitySurveyor, March 1980
Building Law Reports
"CompleteOpento Interpretation", AlastairMcLean.Building29 October1993
Construction Law Reports
"Deciding Whatthe Words ReallyMean",Vincent Powell-Smith.ContractJournal,

26 September1991 (Abstract 5204)
"Instructions After PracticalCompletion: QuestionsandAnswers".The QS Bulletin,

October 1991
"LAD ClausesAre Here to StayAfterAustralianCase", Vincent Powell-Smith.

ContractJournal, 7 October1993 (Abstract 49418)
"The Need for Definition", RogerKnowles. Chartered QuantitySurveyor, October

1991
The Surveyors' Construction Handbook Part 4, Section 1, Effective from1/6/98 Page 1

AppendixC(4i'98)
2b
PART FOUR: CONSTRUCTION ADMINISTRATION AND
MANAGEM ENT
SECTION 2: ASCERTAININGTHE AMOUNT OF LOSS

AND EXPENSE INCURRED IN BUILDING PROJECTS
Introduction
The purpose ofthis Section is to provide practical advice to those who are
required to ascertain the amounts due in reimbursement of direct loss
and/orexpenseincurredin building projects.
Surveyors are particularly reminded that their role in these matters is set
out in their building contract and is normally limited to determining
quantum; it does not usually extend to determiningliability.
Reference has been made to the contract administrator throughout this

document. This reference includes architects where that function exists
under the contract.
It cannot be emphasisedtoo strongly that the ascertainmentof loss and/or

expenseis an exercise in calculating as precisely as possible that which is
incurredby the contractordirectlyand solelydue to the matters listed in the
contract. It is not an attempt to impose a penalty on an employer or design
team for failing to live up to obligations or expectations.
Equally, it is not the quantity surveyor's role (to whom the task of ascer-
tainmentis usually given)to seek to get away with as little a payment as he
can. The contractor, for his part, may understandably press hard for a
significant figure and on occasions overstate his case either in words or
money or both. Too often the quantity surveyor is seen, or even sees him-
self, as being at the opposite end of a tug-of-war rope to the contractor.
This is incorrect.Whilst the quantity surveyor is perfectlyentitled to probe
such submissionsby weighingall the contrary evidence, his ultimate taskis
to determine a proper ascertainment in accordance with the conditions of
contractandthe circumstancesthat have prevailed.
4.2.1 General Principles
4.2.1.1 Under commonlaw, if oneparty to a contract is in breach then that party is

liable to the other for damages. The level of such damageshas been estab-
lished by a numberof Court cases.
4.2.1.2 However,the level of damages payable at common law has neverintended

to act as a penalty or deterrent but simply to ensure that, in respect of the
2
aggrievedparty, "he is, so far as money can do it, to be placed in the same
situation with regardto damages,as ifthe contracthad been performed".1
<j> 4.2.1.3 Nor are such damages intended to recompense the aggrievedparty for all
losses whatever their nature. In the case of Hadley v. Baxendale2 it was
established that damages ought to be of a kind which "shouldbe such as
may fairly and reasonably be considered either arising naturally, that is,
according to the usual course of things, from such a breach of contract
itself, or such as may reasonablybe supposedto have been in the contem-
plation of both parties, at the time they made the contract, as the probable
result of the breach of it".
4.2.1.4 Where building contracts contain clauses dealing with the entitlement of
the contractorto recover direct loss and/or expensefor any delayor disrup-
tion to the regular progress of the Works caused by the clientor his team or
other designated causes, such clauses have been developed against this
general background.
4.2.1.5 There are important distinctions to be drawn between the express provi-
sions in a form of contract on the recoveryof direct loss and/or expense,
and recovery of damages at common law. In the case of the former the
requirementslaid down in the contractmust be rigidly adhered to; if they
are, then reimbursement is a contractual entitlement and does not require
judgement of the Court or an arbitrator.
4.2.1.6 The provisions of the loss and/or expense clauses are generally without
prejudice to any other rights and remedies which the contractor may
possess, and which he may wish to pursue through arbitration or the
Courts. This considerationis, however, outsidethe scope of this Section of
the Handbook.
<i)> 4.2.1.7 To determine the contractor's entitlement one must calculatethe difference
between the costs arising from the application of the following two
questions:
(a) What is the reasonable cost of carrying out the particular element of
work in the delayed or disruptedcircumstances that were created directly
as aresult ofthe matterunder consideration (for examplelate instructions)?
(b) If that delay or disruption had not been so caused what would those
costs have been?
4.2.1.8 An element of judgement and even conjectureis almost always inevitable

in answering the second question; and judgementmay indeed be involved
in answering the first question,for even if there are verified cost records of
'Robinsonv. Harman (1848) 1 Ex. 850

2Hadleyv. Baxendale(1854) 9 Ex. 341
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the work that was carried outitoes notfollow necessarily that all such
costs were properlyincurred.
4.2.1.9 Thus, even if the form of contract refers to 'ascertaining' the loss — as does
the JCT form (see 4.2.1.13)— complete proof in the way of invoices or
verified cost records is unlikely to be available. Indeed, as outlined else-
where in this Section, the surveyor is not required to establish 'complete
proof' but is instead required to use professional judgement. This should
not, however, detract from the critical importance of ensuring that proper
and reasonable records are maintained by the contractor and contract
administrator.
4.2.1.10 The primary purpose of this guidance is not to provide a legal treatise on
the matter of claims but to providepractical comment on how to go about
determining, as reliably as possible,the contractor's monetary entitlement.
4.2.1.11 The correct ascertainment of the amount of any direct loss and/or expense
to be reimbursed to the contractor requires sound knowledge and
experience of building practice, careful study of the conditions of the
relevant contractand an understandingof their legal application, together
with knowledge of the relevant and up-to-date case law. In addition, the
person undertakingthe evaluation requires access to the best records and
otherinformationthat is available on that particular contract.
4.2.1.12 The principlesreferred to are generallyapplicable to all cases where a con-

tractor is entitled, by the conditions of contract, to reimbursement of his
direct loss andlorexpense.This entitlementis provided in most, but not all,
forms of building contract, even where the expression 'direct loss and/or
expense'may not be used.
4.2.1.13 This guidance is based predominantlyupon the provisions of the 1980 edi-
tion of the Standard Form of Building Contract, published by the Joint
ContractsTribunal — referred to as JCT 80. The wording used in the form is
either identical, or very similar, to that adopted in many of the other forms
published by the JCT, for examplethe Works Contracts used in association
with the JCT Standard Form of Management Contract and the JCT
StandardForm of BuildingContractwith Contractor Design.
<3> 4.2.1.14 It should be noted that in thistext extracts from printed forms are frequently
paraphrased. Readers therefore should in all cases check the precise
wording used in the particular form with which they are involved in
practice, particularly where the form is not one of those promulgatedby the
JCT. It may even be that, although a JCT Standard Form has been used,
particularclauseshavebeen amended.
4.2.1.15 Followingthe terminology used in the JCT forms, an event or failure which
gives the contractor grounds for seeking reimbursement of any resultant
loss and/or expenseis referred to as a 'matter'; whereas an event or failure
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which gives the contractor groundsfor seeking an extensionof time for the
•
completionof the works is referredto in this Section as an 'event' (also see
4.2.3.2).
4.2.2 Definitions
4.2.2.1 Loss AND/OR EXPENSE

Any monies which a contractor has a proper expectation of receivingbut
has not received and/or monies properly expended or to be expended by
him.
4.2.2.2 DIRECT
"The direct consequence of the act giving rise to the claim",1 or "that
which flows naturally from the breach, without other interveningcause".2
Clearly this word 'direct', when used in conjunctionwith the words 'loss
and/or expense', is a very restricting one and disqualifies all costs and/or
expenses that do not arise as a direct result of the matter under complaint.
Thus, any costs due, for example, to mismanagement,to other causes not
recognisedas matters by the wording ofthe contract or to other concurrent
delays should be excluded from those reimbursable to the contractor as
they are not the direct result of the matter under consideration.
4.2.2.3 ASCERTAINMENT
<j>
The definition of this word should be seen in the context of the subject of
the ascertainment. Given that judgement is a]most always called for (see
<> 4.2.1.5 and<.4.2.1.6) it follows that 'to ascertain' can rarely mean to
prove comprehensivelywith invoices andrecords but ratherto establishby
the use of such facts as are available andby the use of expertjudgement.
4.2.3 Entitlement
4.2.3.1 LIMITATIONS
AppendixD provides a checklistof items on which entitlement is allowed
under JCT80.
The contractor's entitlement to reimbursement under the terms of the

contract should be determinedas set out below:
(a) The loss and/or expense must arise directly as a result of one of the
matters referred to under the terms of the contract. Such matters do not
usually extend to the contractorunderpricing the rates to be used in valuing
variations.Thus, losses arising from any suchunderpricingare not usually
reimbursable.
1A &B TaxisLtdv. TheSecretaryofStateforAir (1922)2KB 328

2 LineLtd v. RichardsonsWestgarth& Co (1940) 25 BLR 140refers to the case onlyinpassing
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-
(b) Indirect costs, i.e. costs not arisingdirectly as a result of the matter
under consideration — should be exclided. In this respect the link between
cause andeffect is a vital factor.
(c) Costs incurred in respect of which the contractorhas not compliedwith

the conditions laid down in the contract in relation thereto cannot be dealt
with under the terms of the contract (but see 4.2.1.6).For example, JCT
80 requiresthe contractorto make an application in writingto the contract
administratoras soon as it is reasonably apparentthat disruption will occur
as a result of a matter referred to in clause 26 of that contract (or under
clause 34 in the case of loss and/or expense arising from the discovery of
antiquities). For the contractor to be able to obtain reimbursement in
accordance with the contract he must first have complied with that
provision (seeK4.2.3.3for more detailed advice on the validityof written
applications).
(d) Reimbursement is restricted to loss and/or expense which the

contractor is not entitled to recover under any other provision of the
contract. For example, the payments made to the contractor may include
allowancesfor working under changed conditions,fluctuations in prices,or
preliminaries associated with variations. None of these costs should there-
forebe duplicated in an ascertainmentof loss and/or expenseunder clause
26.
(e) It is important to consider the mitigation of loss and/orexpense.To the

extent that any part of the loss and/or expense incurred could reasonably
have been avoided by the contractortaking reasonable steps, that amount
would not be reimbursable. This requirement to mitigate requiresthe con-
tractor to act reasonably in all the circumstances.It may be reasonable, for
example, for a contractor to bring additional plant or labour to a site in
order to reduce the overall effect of a matter on the project as a whole.
Even where such an act was not entirely successfulthe contractor wouldbe
entitled to the reimbursementof the costs incurred providedthat he acted
reasonably in so doing. It is important, therefore, that in reviewing with
hindsightwhat was reasonable,the quantity surveyormay have goodcause
to reject certain costs put forward by the contractor. The contractor has to
make day-to-day decisions in developing situationsthat may, in retrospect,
be shown to be wrong.The test must be: "Was the actionreasonablein the
circumstancesprevailing at the time?"
(f) On the other hand, a contractor who through good management is

destinedto increase the profit he anticipatedmaking at tender stage cannot
be denied this prospect by the incidence of a matter giving rise to a loss
and/or expense claim. For example, at tender stage the contractor might
have anticipated removing some element of plant by, say, the twentieth
week. In the event he may be beating this target and be destinedto be able
to remove it by, say, the fifteenthweek. If a delay causedby a matterrecog-
nised by the contract occurs which requires that plant to be retainedfor a
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further four weeks, i.e. until the nineteenth week, he is entitled to addi-
tional reimbursementfor those four weeks.
4.2.3.2 EXTENSIONS OF TIME

Under JCT 80 and other forms of contract in the same series, the expres-
sion 'extension of time' is replacedby the words 'fixing a new completion
date' but the more traditional 'extension of time' is used in this Section.
Extension of time does not necessarily mean that the contractor has an
entitlement to reimbursement of loss and/or expense. On the other hand,
the contractor may have an entitlement to such reimbursementeven when
thereis no extension of time. Each matter needs to be treated on its merits
whether or not an extensionof time is due or granted. Nevertheless,under
JCT 80 there is a requirementthat the contract administratordeclares the
amount of any extensionof time granted for any event which also consti-
tutes a matter under clause 26 where such a declarationis necessaryfor the
ascertainmentof loss and/or expense. Thus, in ascertaining the contractor's
entitlement to reimbursement of loss and/or expense, the existence and
amount of any attendantextensionof time must be revealed where this is
relevant to that ascertainment.
4.2.3.3 WRITTENAPPLICATION
Before the contractoris entitled to any reimbursementin respect of loss
and/or expensehe should first have made an application,at the appropriate
time, to the appropriateparty namedin the conditions of contract.The pur-
pose of this written applicationis to enable the contract administratorto
form his opinion on whetheror not there has been, or will be, loss and/or
expense incurredwhich wouldnot be reimbursedunder any otherprovision
in the conditionsof the contract.In addition, it should be noted that, with
reference to the matterof applications:
(a) Applications must be made by the contractoras soon as it reasonably

becomes apparentto him that the regularprogressof the Works is likely to
be materiallyaffectedby anyofthe relevantmatters listed in the conditions
of contract.
(b) Applicationsto the quantity surveyor, in contrast to those made to the

contract administrator, are not valid unless specific authority has been
given by the employer.1
(c) References to loss and/or expense in site meetings or the like, or

references to 'delays' which do not mention loss and/or expense, do not
constitutevalid writtenapplications to recoverloss and/or expense.
<j> 4.2.3.4 ADEQUACY OF THE DETAILS

JCT 80 requires that the contractor provides the contract administrator(or
if so instructed,the quantitysurveyor)with all the documentsnecessaryfor
JohnLaing Construction Ltdv. County and DistrictPropertiesLtd(1982) 23 BLR 1
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2
adjusting the contractsum. Thiwi1Liric1ude documents in support of
ascertainments of the contractor's entitlement to reimbursement of loss
and/or expense (see clause 30.6.1.1). Moreover, clause 26.1.3 requires the
contractor to supply to the contract administrator or quantity surveyor,
upon request, such details as are reasonably necessary for the ascertain-
ment of any reimbursableloss and/or expense. But note that these details
have to be requestedandclearly, for suchdetails to be of maximumuse, the
request for them should be madeat the earliest opportunity.
4.2.3.5 In practice, what is going to be adequate data will depend upon the nature
of the disruptionor delay. Thus, the request for the contractorto keep such
details shouldnot only be timely but should alsobe as specific as possible
as to the data required.
4.2.3.6 NOMINATED SUB-CONTRACTORS

In general the same principles apply to ascertainingthe loss and/orexpense
to be reimbursed to a nominated sub-contractor as apply to the main
contractor. It must be recognised, however,that a nominated sub-contractor
may have an entitlementunder the terms of the sub-contractto reimburse-
mentby the main contractor (due, for example,to the latter's mismanage-
ment) which should not be passed on to the employer.
4.2.4 Ascertainment
4.2.4.1 RESPONSIBILITYFORASCERTAINMENT
Under JCT 80 the responsibility for ascertaining the amount due is the
contractadministrator's,unless he instructs the quantity surveyorto under-
take this task. Where the contract administrator so instructs the quantity
surveyor this instruction should be in writing, to be copied to the
contractor, and be specific as to the matters which are covered in such an
instruction. However, the contract administrator cannot delegate to the
quantity surveyor, or anyone else, the task of forming an opinion on
whether or not there is a case in principle for loss and/or expenseto be
ascertained. A checklist of steps required under JCT 80 is included at
Appendix E.
4.2.4.2 The quantity surveyorshould be careful to ensure that the contractadminis-

trator undertakes this task of forming an opinion before embarking upon
any ascertainment. The quantity surveyor should also ask the contract
administratorfor all the datahe has upon which he formedthat opinion; for
the quantity surveyor's task is always one of determining quantum in
respect of the items which in the opinion of the contract administrator are
admissiblein principle. It is not for the quantity surveyor to usurp the role
of the contract administrator in matters which the contract conditions
specificallyreservefor him.1
1 JohnLaing Construction Ltdv. County andDistrict PropertiesLtd (1982) 23 BLR 1
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4j 4.2.4.3 However, once the quantity surveyor has been properly instructed to
ascertain the amount due he shouldproceed with this taskwithout delay. It
is for the contract administratoror quantity surveyor, as the case may be, to
ascertain the amount and not to await a detailed submission from the
contractor.
4.2.4.4 In general the surveyor should ensure that the basis, calculations and
evidential records used in the ascertainment are recorded in writing. This
may be a mandatory requirementon public sectorcontracts.
4.2.4.5 USE OF JUDGEMENT IN MAKINGANASCERTAINMENT

An element of professional judgementis often inevitable in ascertaining
the contractor's entitlementto reimbursement of loss and/orexpense. This
is because what the contractor's cost would have been had the relevant
delay or disruption not taken place has to be estimated(see
$ $
4.2.1.6 and
4.2.1.7). However, in forming that judgement the best evidence
available should always be used in reference. For example,where there is
contiguous work that has not been affected by delay or disruption this
might well provide goodevidenceof the progressthat the contractorcould
have been expected to havemade generally.
4.2.4.6 Clause 26.1 of JCT 80 requires that ascertainment is made from time to
time. This means that ascertainment should be an ongoing process where
the facts are sufficientlyestablishedto make a proper andfinite calculation.
Moreover, clause 30.2.2.2 of JCT 80 states that any amount ascertained
under clause 26 should be includedin interimcertificates.
4.2.4.7 Thus, wherever ascertainmentcan properly be made part of a contractor's

entitlement it is important that this is done and the relevant amounts be
certified for payment. If part of a contractor's entitlementcan be wholly
ascertained then it should be, but there is no provision in this form of
contract forprovisional assessments to be made.
4.2.4.8 COSTSVERSUS PRICES

When ascertaining a contractor's entitlement it is the actual loss or actual
expense which is relevant. The prices in the contract bills or schedule of
rates should not be used as the actual costs may be more or less than these.
Additionally,the general rule on damages is that the type or kind of loss
payable is that "as may reasonablybe supposed to havebeen in the contem-
plation of both parties, at the time they made the contract,as the probable
$'
resultof the breach of it" (see 4.2.1.3).
43> 4.2.4.9 GLOBAL OR INDIVIDUAL ASCERTAINMENT

In recent years there has been much discussion on whether claims should
properly be considered on a global basis or whethereach item should be
considered in isolation. In this respect the quantity surveyorneed only be
concernedwith the points in4.2.4.10 below.
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<> 4.2.4.10 It is importantthat ädontracirrnàkesproper applicationon each and every
occasionthat an entitlement to make a claimarises.
(a) It is necessary that each application conforms fully with the rules
written into the contractaboutthem (for exampletiming, in writing, sent to
the contract administrator).
(b) The contractormust keep such records as are necessary for the ascer-
tainment ofthe amountdue.
(c) Only where the effect of a series of matters (for examplethe lateissue
of a number of instructions or the instructingof a numberof variations) is
such as to create extra costs which by their nature are indistinguishable
from one another can an application on a global basis be entertained.
Simply because there is, for example, a series of variation instructions
which create overlapping or contiguous disturbance, it does not follow that
all other matters on that project can be addedin to make a global claim. A
global approach to ascertainment should be restricted solely to events
which create indistinguishable effects. Thus, no contractor should be
penalised by being deniedreimbursement simplybecause extra costs were
incurred which could not by their nature be particularised. On the other
hand, the facility of global ascertainment shouldnot be used to mask facts
and figures that couldproperlyhavebeen particularised and presented.
4.2.5 Admissible Items
4.2.5.1 GENERAL
A list of possible items admissible as part of an ascertaimnentof loss
and/or expense (which is to be read as includingthose attributableto sub-
contractors)is as follows:
• extended and/or increased use of 'preliminaries', for example more
supervision,moreplant etc.;
• reduced labour outputs;
• extra waste or abortive purchaseofmaterials;
• increasein the price of resources,i.e. inflation;
• increasedcostof head officeoverheads;
• loss ofprofit; and
• financecharges.
More often than not the dominant items will be the first two from the above
list.
4.2.5.2 PRELIMINARIES
A representativelist of the items normally comprisingthe preliminariesis
given atAppendixA.
272
4.2.5.3 When ascertaining the extra costof 'preliminary' items (but see4.2.4.8)
it is importantto break each item down into the following components:
(a) Setting-up costs would be admissible whereadditional plant is properly

brought onto the site. If plant is already on site, setting-up costs would
rarely be admissibleunless setting up has been delayed by a relevantmatter
andinflationhas occurred which is not reimbursable under the fluctuations
clauses.
(b) Removal costs are admissibleinthe same wayas setting-up costs.
(c) Extra hire charges would be reimbursable if the particular item is

requiredto be kept on site longer than otherwise would have been the case
due to a relevant matter. The comparison is between the period that the
item would have been on site had the matter not occurred and the period
that it was reasonableto have been on site giventhat the matter did occur
$
(see 4.2.1.7). Wherethe plantin question is ownedby the contractorthe
measure of his loss is the amount (if any) that he could have earned by
using the plant elsewherehad it not been tied up on the site for longer than
wouldhave been the case ifthe matter in question hadnot occurred.
(d) Extra running charges would be reimbursable if, due to a relevant

matter, the particular item is required for a longer period than otherwise
wouldhave been the case. Again the comparison is between the periodthat
the item wouldhave been in use had the matternot occurred andthe period
that it was reasonableto have been in use given that the matter did occur
(see
4.2.5.4 DIsRuPTIoN OF LABOUR

The ascertainment of the cost of disruption to labour is invariably a
difficultprocess. It is impossibleto give precise and definitiveadvice as all
will dependupon the circumstancesin each case. However, the following
generalpointersshould be ofsome assistance:
(a) In all circumstances avoid the application of an overall percentage to

global labour costs; rarely if ever are the whole labour costs on a project
disrupted.
(b) Wherever possible request that contemporary records be kept, noting

the output achieved in practice by the particular workmen who are
disrupted.Clerk of works' records and diaries can be invaluable evidence
ofthis.
(c) Have regardto whether anydelay comprises a series of small recurrent

delays or one large one. In the former case the proportionalloss of output
can be very high, whereas in the latter case the loss can be mitigated by
redeployingresources elsewhere.
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273
(d) Recognisethat.there is a learning curve in all activities. The advantage of
this can be lostif a new gang of men is brought in to undertake work which
has become familiarto others; the resultant extracost will be reimbursable.
Moreover, if additionallabour has to be recruited at short notice it may be
necessary to pay premiumrates which wouldin principle be reimbursable.
(e) Whatever the level of variation orders, lateinstructionsand so on, much

ofthe work oflabourwill notactually be significantly affected. For example,
bricklayingor fixing pipeworkonce under way may suffer little or no delay.
The delay may be associatedwith becoming familiar with an unexpectedor
unplanned task. The 'coalface' operation may not be affected at all.
(f) Recognise that great economies can flow from a repetitive task, for
examplefixingpartitions in a series ofidentical dwellings,the interruption
ofwhich can result in far-reachinglosses.
4.2.5.5 A list of items relevant to the calculation of reimbursable extra costs of
disruptionis given at AppendixB.
4.2.5.6 EXTRA WASTEAND/OR ABORTEVEPURCHASE OF MATERIALS

These may not be significant elements in an ascertainment but it may be
that the constant moving of materials, stores or compounds following a
relevant matter will result in extra waste. As long as this has not resulted
from a lack of proper managementthis cost will properly form part of any
ascertainment. Alternatively, it may be that materials purchased for the
works have been omitted by a subsequent variation order. Provided that
such materials were not purchased prematurely the cost would again
properlyform part of anyascertainment.
4.2.5.7 INFLATION
If work is executed later than otherwise would have been possible as a
result of a relevant matter and if inflation has caused the costto rise then,
providedthat such costs are not reimbursableunder the fluctuationsclause,
they will form part of the ascertainment.Even where the contract contains
a fluctuationsclause, if it contains a non-adjustableelement, a delay in the
execution ofwork might well increasethe non-recoverableelement, which
wouldbe reimbursable.
4.2.5.8 INCREASED COST OF HEAD OFFICEOVERHEADS

Loss in the recovery of head office overheads is an admissible item but the
amount of such loss may be difficult to substantiate. Overall percentages,
notrelated to the particularcircumstances,cannot be used.1
4.2.5.9 Whereverpossible, proof should be sought of such items as extrasite visits

by head office staff or the greater involvement of head office staff in
1 Tate & Food and DistributionCo. Ltd & Another v. Greater London Council & Another (1982)
Lyle
1WLR 149
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L
managing the project as a result of the matters giving rise to a claim.
Appendix C gives further guidance on the components and methodsof such
an ascertainment.
4.2.5.10 Account should also be takenof the extent to which extra costs are already
being reimbursed through the pricing ofthe variationaccount.
4.2.5.11 Where therehas been a delay as a result of a relevantmatter but no conse-

quent increase in value (thereby excludingsome contribution to extrahead
office costs) some extrarecovery is an entitlement provided that this does
not extend to include costs that should have been mitigated. It should also
be shown that, butfor this delay and the consequent tying-upof head office
resources for a longer period than would otherwise have been the case,
those resources could have been productively used elsewhere. The Courts
have increasinglyrecognised that, providing all the pre-conditionsare met,
a formula approachto calculatingthis element may be perniissible.1
4.2.5.12 As with the recovery of loss of profit, however, it is importantthat over-
riding considerationbe given to the level ofrecoverythat wouldhave been
possible on alternative work had the contractor been free to do so (see
$'
4.2.5.13).
4.2.5.13 Loss OF PROFIT

If, as a direct result of a matter referredto in the conditions of contract, loss
of profit is suffered which could have been earned in the normal course of
business elsewhere,thereis an entitlementto reimbursementof that profit.2
This amount should be calculatedby referenceto the level of profit to have
been made by the use of the resources on other projects during the period
of retention on site as a direct result of the cause of delay. The level should
be that prevailing in the market during the period immediately following
the original date for completion.It might,therefore,be higher orlower than
that contemplated in the contract sum. Moreover, where loss of profit is
being calculatedas a resultof a delay caused by the executionof variations
it is important that a deduction be made for any other profit reimbursed to
the contractorfor those variationspriced at contractrates.
<3> 4.2.5.14 FINANCE CHARGES

There is no basic right to interest on a debt, for exampledue to late pay-
ment of a certified sum, unless the contract specifically provides for it.
However,financecharges are not an intereston a debt, but a debt whichhas
interest charges as one of its componentparts which have been paid by a
contractor on money which was borrowed (or interest that could not be
earned on capital) in order to finance the prime cost of the loss and/or
expense. Such finance charges are reimbursable.3
1 StModwen
Developments Ltdv. Bowmer& KirklandLtd(1996) 1996CILL1203
2 Construction Ltdv. FoundationsLtd(1970) 1 BLR 114
(Liverpool) McKinney
GMinter Ltdv. Welsh HealthTechnical ServicesOrganisation (1980) 13 BLR 1
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275
4.2.5.15 Finance charges are recoverable from the date that the primary loss and/or
expense was incurred up to the time that the certificate, which included the
payment of that loss and/or expense, was issued, provided, as always, that
the conditions in the contractin that respect have been met (see 4.2.3.3
(c)).
4.2.5.16 The rates and manner of interest jayable should be those actually incurred
(or being earned on capital).
4.2.6 Inadmissible Items
4.2.6.1 GENERALLY
It is not possible to list all the items which are inadmissible.However, it
might be helpful to comment upon certain items which are occasionally
claimed as being reimbursable when they are not. Among these the most
usual are:
(a) The costs of acceleration,unless specifically approvedby the employer

beforehand(see 4.2.6.2).
(b) The cost of preparing a submission for the reimbursement of loss

and/or expense.
4.2.6.2 THE COST OF ACCELERATION

In commonwith most lump sum contracts JCT 80 does not contain provi-
sions for instructions to be given to accelerate the works. If accelerationis
requiredit shouldbe achievedby means of a separate agreement.
4.2.6.3 However, the contractor's obligation whenever he is, or is likely to be,

delayed is to "use constantlyhis best endeavours ... to prevent the comple-
tion of the Works being delayed". It is generally thought that the use of
'best endeavours'is likely to be limited to the rescheduling of resources
and the taking of such measures as may be appropriateto allow the works
to proceedwithoutincurring (significant) costs.
<j> 4.2.6.4 THE COST OF PREPARING A SUBMISSION FOR REIMBURSEMENT OF Loss

AND/OR EXPENSE
There is no contractual requirement for a contractor to prepare details of
the amount of loss and/or expense and thus there is no entitlement to any
reimbursement for so doing.
4.2.6.5 Where, however, he provides the data which might be required by the
quantity surveyor under clause 26.1.3 the cost of so doing may be
reimbursable.
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Appendix A: Ascertainingthe Cost of Runninga Site
The items given below are intended oniy as a guide; the listis not comprehensive.
Al STAFFAM) ADMINISTRATION
Note: This includes security and welfare personnel and the supervisory
time of trades foreman andthe like.
Consider:
• staff salaries (including subsistence,guaranteed bonusesand allowances

where paid);
• travel costs, including cars andfuel;
• nationalinsurance, pensions etc. — employer'scontributions;
• private health insurance— employer'scontributions;
• employer's liability insurance, thirdparty insurance;
• training levy;
• redundancyfund, holidays with pay, superannuation; and
•
agency staff where applicable.
A2 TEMPORARY ACCOMMODATION
Consider:
• temporary offices — rental/repairsandmaintenance;

• stores — rental/repairsand maintenance;
• canteen— rental/repairsandmaintenance;
• canteen equipment;
• canteen consumables;
• canteen subsidy;
• signs, boards andnotices;
• fire-fightingequipment;
• first-aid equipment;
• nurse/first-aider;
• site welfare and safety;
• gas and electricity;
• rates on temporary buildings;
• telephone/facsimilelines/systemrental;
• telephone/facsimilecalls;
• mobile phone calls;
• officefurniture;
• computers,including servers anddata lines;
• photocopiers— equipmentandconsumables;
• office consumablesandstationary;
• drawing andcopying;
• postage/frankingmachine;
• officecleaning;
• sanitary accommodationand welfare facilities;
• general cleaning anddisposal;
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Append4/99L
• generalsite wear; and
• progressphotographs.
A3 PLANT
This covers plant owned by the contractor or hired from a subsidiary or
specialist company. It is advised that the conditions of hire are examined.
There is often a guaranteedminimum period of hire which would have
been paid for in any case. When long delays have occurred, loss must be
mitigated by use elsewhere or the terminationof the hire contract.
Consider:
• tower cranes;
• mobilecranes;
• banksmen and slingers;
• weighbridge;
• wheelwashingfacilities;
• compressors;
• mixers;
• pumps;
• hoists;
• site surveyingequipment;
• site/craneradio system;
• concretetesting;
• general site equipment;
• small plant and tools; and
• rubbishremoval(skips).
A4 TEMPORARYWORKS/ACCESS
Consider:
• temporaryroads — maintenance; and

• clean access and site roads.
A5 FENCINGAI'D SECURITY
Consider:
• site boundary fencing/hoarding;

• site compound fencing;
• site security(includingguards if appropriate); and
• temporaryweatherproofing.
A6 DISTRIBUTION
Consider:
• service gang — cleaning,attendanceand distribution;

• forkliftsand drivers;
• dumpersanddrivers;
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Appendix A(4/99)
21?i
• telescopic hoists, including driver;,
• internal site transport; and
• hoist drivers.
A7 SCAFFOLDING
Consider:
• extrahire;
• adaptations; and
• additional work — for example safetyrails where scaffolding removed.
A8 TEMPORARY ELECTRECS
Consider:
• equipment — generators, transformersetc.;

• fuel consumption;
• consumables; and
• maintenance.
A9 TEMPORARY WATER
Consider:
• waterand sewerage— rates/metered consumption; and

• maintenance.
AlO INSURANCE
Consider:
• contractor's all risk;

• public liability;
• professional indemnity; and
• performance bond.
All HEAD OFFICE STAFF COSTS

Consider:
• that proportion of time spent on project which is only applicableif not

booked directly to the project. See general comments at
4.2.5.8 to4.2.5.l2 andAppendixC.
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AppendiLA(AZ99i
Appendix B: Disruption
Bi Tiii EFFECTS OF DISRUPTION

Bl.1 Labour
Factors to be taken into accountinclude:
• loss ofproductivity(labour resources must have been available and able
to have been used profitably elsewhere had the loss of productivitynot
occurred);
• standingtime;
• overtime;and
• changesin labourstrength on the site andin gangs;
Bl.2 Plant
Refer to invoicesto indicate additionalcostsdueto:
• relocationofplant, on or off site;
• additionalplant;
• additionaltools;
• alterationsor additionsto scaffolding;and
• standingtime.
Bl.3 Materials
Extra costs can be incurred due to the:
• double handlingof materials;
• waste anddamageofmaterials;
• return ofmaterialsto the store or supplier; and
• substitutionof materials.
B2 INFORMATION AVAILABLE TO THE CONTRACT ADMINISTRATOR/QUANTITY

SURVEYOR
B2. 1 Apart from issued drawings, written instructions and correspondence,other
informationthat shouldbe referred to includes:
• contractor's programmeand amendments;
• site reports;
• site measures;
• clerk of works' reports;
• dayworkrecords;
• photographs;and
• minutes ofmeetings.
B2.2 This informationcan assist in the ascertainmentof the effects of instruc-

tions upon progress.
B3 QUANTITY SURVEYOR'S CONSIDERATIONS

B3.1 It is important to receive from the contractor proper, detailed records of
delayswhich disruptprogress. Ideally, this informationneeds to be in diary
form and should indicate:
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Appendix B (4/99)
280
• the immediateeffect upon workingtrades;
• the knock-on effectupon succeedingtrades, particularlysub-contractors;
• the effect upon allied tradesworkingin the vicinity;
• the inability to divert labour elsewhere (i) on the site, and (ii) to other
contracts;
• evidence of efforts made to divert labour to other contracts, or to other-
wisemitigate the costs of construction and effectsofdisruption;and
• the relationship with nominatedfirms and sub-contractors and records
from themto substantiatethe claimof disruption.
B3.2 There may be further items not covered above which the contractorcould
bring to the notice of the quantity surveyor. In making an assessment of
disruption,the quantity surveyormayrequire the tender progressintentions
of the contractor, and to examine data on which projections of progress
were based in order to indicate the effect that changeshave had upon the
planning. The information may include critical path analyses and similar
information.
B3.3 The quantity surveyor shouldgive careful consideration to all this informa-
tion andjudge its relevance to the particularmatters being examined (but
see 4.2.4.2).
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AppendixB (4/99)
Appendix C: Ascertainingthe Cost of Head Office Overheads
Cl HEAD OFFICE OVERHEADS
A contractor seeking direct loss and/or expensein relation to head office
overheadswill probably include some or all of the following:
• company offices, rents and rates;

• plantyards;
• running costs/maintenancecosts ofthese units;
• directors' and staff's salaries, emoluments and allowances (estimating
and sales staff should notbe included);
• expenses, including officeequipment,postage,telephones etc.;
• costs oftravelling, including allowances for company'smotor cars etc.;
• professionallegal and/or accountancy fees; and
• depreciation.
C2 ESSENTIAL BACKGROUND INFORMATION

C2.l Consider the method adopted by the contractoras policy in incorporating
these costs in his tenders:
• percentage;
• lump sum(s) (specify how compiled); and
• spread in rates ofall items.
C3 ASCERTAINMENTOFTHESE COSTS
C3.l Check:
• time records or diaries which may indicate additional time spent with
consequentialfinancial disbursements (this should be time arising from
relevant events over and above that which would have been spent on
ordinary administrationof the contract);
• proofofpayment made on all admissible items; and
• details showingbuild-up of generalhead office costs at the relevanttime
or throughoutany relevantperiod.
C3.2 For a contractorto succeed,it is recommendedthat the quantity surveyoris
reasonably satisfiedthat:
• time expendedwas additional to thatreasonably to havebeenexpected;
• the extra costs have not been recoupedin other ways (for examplefrom
set-off or other arrangementswith sub-contractors);
• any loss and/or expense sought has not been avoided by re-deployment
of resources on other contracts;
• additional costs have not been recovered through rates for measured
works;
• additionalcosts have not beenrecoveredin dayworks; and
• head office staff costs have notbeen recoveredelsewhere.
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Appendbe(4/99)
282
C4 FURTHER CoNsIDERATIoNs FOR THE QUANTITY SURVEYOR
C4.1 At what stage in the contractdid delays occur and what was the impact on
head office costs? (The costs are unlikely to have been incurred until the
end of originalcontractperiod.)
C4.2 What were the relevantevents givingrise to delays under the conditions of
contract?Were head office costs applicableto those events?
C4.3 To what extent was the head office involved in, for example, site visits,
meetings etc.?
C4.4 Was there a need to employ additional head office staff whether or not a
delayhadoccurred?
C4.5 How effectivelydid the firm employ staff on this contract as against other
contracts that they were undertaking?
C4.6 What was the size of the contract in relation to the size of the firm and,
therefore,the impact ofthe delay to progresson the business of the firm?
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AppendixC(4/99)
283
Appendix D: Checklist of Items for which Loss and/orExpense are
Allowed
The contract clause numbers referred to in this form are from JCT 80.
Contract
clause
number Item Tick
26.2.1 The contractornot having received in due time necessary:

instructions
drawings, details; and
levels
for which he specifically applied in writing providedthe date of
applicationwas neither unreasonably close to nor distant from
the date the contractorneeded them bearing in mind the date
of completion
26.2.2 Inspection — tests under clause 8.3:
opening up for inspection any workcovered up and making good
testingof any executedwork and making goodunless inspection
reveals items not in accordance withthe contract
26.2.3 Discrepancy or divergencebetween the contract drawingsand/or

the contract bills
26.2.4 Execution of work (not forming partof the contract) by the
employer or by persons engaged by him;failureby these
parties to execute suchwork
26.2.5 Postponement by the architectof any workto be executed under
the contract
26.2.6 After receiptof any notice the contractoris requiredto give,
failure by the employer to give ingress or egress in due time to
the contractorfrom the site of the works or any part thereof in
the possession and control of the employer, in accordancewith
the contractbills/contract drawings:
throughor over land, buildings, wayor passage adjoining
or connected with the site
throughor over land etc. as last item as otherwise agreed
between architect and contractor
26.2.7 Instructions issued regarding expenditure of provisionalsums

except work beingcarried out as a PC sum by the contractor after
submission of a tenderfor it, but excluding variations for which
a clause 13A quotationhas been accepted
26.2.8 Execution of approximate quantityworkwhere bills are not a

reasonably accurate forecast
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AppendixD(4/99)______
Appendix E: Checklistof Steps Requiredwhen Considering Submissions
by Contractor
The contractclause numbers referredto in this form are from JCT 80.
Contract
clause Comments from the
number Item quantity surveyor Tick
26.1 The contractor has applied in writingstating:
he has incurred/is likelyto incur direct
loss and/orexpensenot reimbursed by
any other contract provision
progress has been/is likely to be
materially affected by the items listed in
clause 26.2
26.1.1 The contractor has made application as soon
as it was reasonablyapparent that:
the regular progress of the works/orpart
of the works has been/is likelyto be
affected
the contract administrator has requested

supporting details to enable an opinion to
be formed
26.1.2 The contractor has upon request:
supported the application with

information to enable an opinion to be
formed
26.1.3 The contractor has upon request:
provided details of loss and/or expense to

assist ascertainment
The architect has:
requestedinformation from the contractor
(26.1.2,26.1.3)to form an opinion
has ascertained/requested the quantity
surveyorto ascertain the amount of
loss and expense
The architect has stated in writing:
the extension of time granted (if any)
from timeto time during the contract
the relevant events(s)for which it is given
(clause 25) and more particularlydefined
in clause 26.3
25.3.4 A new completion date; not later than 12
weeks afterreceipt of this notice, sufficient
particulars and estimate (where completion
is less than 2 weeks distant, set a date not
later than completion date)
TheSurveyors' Construction Handbook Part 4, Section2, Effectivefrom1/6/99 Page 1

Appendix E (4/99)
25
Appendix F: Further Reading
BOOKS
Chappell, David. Powell-SmithandSims' Building Contract Claims, 3rd Edition,

BlackwellScience Ltd, 1998
I N. Hudsons Buildingand Engineering Contracts, 11th Edition,

Duncan-Wallace,
Keating,Donald and May, AnthonySir. Keating onBuilding Contracts,6th Edition,

Parris, John. The StandardForm ofBuilding Contract JCT80, 2nd Edition, Collins,
1985
Powell-Smith,Vincent and Furmston,Michael.A Building Contract Casebook, 2nd

Edition, BSP Professional Books, 1990
Trickey, G G. The Presentation and SettlementofContractors' Claims, E & FN

Spon, 1983
LAw REPORT SERIES
BuildingLaw Reports
ConstructionIndustry Law Letters
Court of Exchequer
InternationalWeekly Law Reports
King's Bench
The Surveyors' Construction Handbook Part 4, Section 2, Effectivefrom 1/6/99 Page 1

AppendixF
PART 4, SECTION 3
PART FOUR: CONSTRUCTION ADMINISTRATION AND

MANAGEMENT
SECTION 3: THE MANAGEMENT OF RISK
Introduction
Risk is present in all projects and surveyors are routinelyinvolvedin making

decisions which have a major impact on risk. Risk management is concerned
with establishing a set of procedures by which risk is managed, rather than
beingdealtwith by default. Major clients, such as RailtrackandBAA, already
have formal procedures in place for managingrisk. Other clientsare likelyto
seek guidancefrom their professional advisers, which includessurveyors, on
how best to dealwith risk.
The effectivemanagement ofrisk can only be achievedby the actions ofthe

whole project team, including the client. The role of a risk manager is to
facilitate input into the project management process such that risk is
effectively dealt with. With further training surveyors are well placed to
undertakethe role ofrisk manager. The role can be either full- or part-time,
combinedwith otherresponsibilities on the project.
The risk management process outlinedin this section can be appliedto any
procurement route and to new build or refurbishment-based projects,
regardless of cost or technical complexity.
Risk management fonnalises the intuitive approach to risk which project

teams often undertake. By utilisinga formal approach, risk may be managed
in a more proactive manner. Essentially, there are three steps to perform:
• identification— collect the informationavailable which might affect
the achievement of an objective;
• analysis— assess to what extent these aspects might affect the
objective;and
• response— review what can be done to limit this effect.
In addition, there needs to be an overall management strategy such that this

three-stepprocess is implemented in a co-ordinated fashion. This section of
thehandbookprovidesan overview ofthe principalsofriskmanagement. The
procedures outlined should produce a framework that can be utilised on the
majority of construction projects. Surveyors who want to specialise in the
application ofrisk management are advised to undertake further training in
this area with a recognisedtrainingprovider.
287
PART 4, SECTION 3
4.3.1 Definitions
In thecontextofthis section ofthe handbook, risk management is considered

tobe aprocess for identif'ing,assessing and responding to risksassociatedwith
delivering an objective, for example, a construction project, andthe focus is on
commercial typerisks. Healthand safety related risks are likelyto need separate
consideration and the Health and Safety Executive (HSE) provide specialist
guidance inthisarea.Definitions for key terms used in this section are:
4.3.1.1 Risk: An uncertain event which, should it occur, will have an effect on the
achievement of the project's objectives. A risk can be measuredin terms of
likelihood (probability) andconsequence (impact).
4.3.1.2 Risk management: A structured and auditableprocess for the benefit of all
members of the project team which is dedicated to the sole purpose of
controlling andmitigatinguncertainty in a project.
4.3.1.3 Risk identification: The utilisation of methods assessed as effective and

appropriate (desk-top studies, interviews, brainstorming, etc.) to collate all
the potentialuncertainties in delivering an objective.
4.3.1.4 Risk analysis: An adequateand effectiveassessment of the individual and

combinedeffect ofidentifiedriskson the successfuldelivery ofthe objective.
4.3.1.5 Riskresponse: An actionto reduceeither theprobability ofrisk arisingor the

significance ofits detrimental impact ifit shouldarise.
4.3.1.6 Risk management plan: An auditable documentwhich describes the risk

management approach(identification, analysis and response) to be adopted
for a specific project or objective delivery and which states who should
undertakeit and when.
4.3.1.7 Risk register: A document listing all the risks identified for the project,
explaining the nature of each risk and recording information relevant to its
assessmentandmanagement.
4 4.3.2 The Rationale for Risk Management in the Construction Process
be called upon to advise clients as to whetherthey

Surveyors will invariably
should undertakerisk management on their project. Whilethe benefitsofrisk
management may not be immediately apparentto clients, the direct costs of
undertaking the process will be.
4.3.2.1 In appreciating the benefits ofrisk management, certainprinciplesshouldbe

adhered to:
• risk
management is an awarenessofuncertainty;
• awareness of
uncertainty can lead to positive attributes ifrecognised
early enough;
288
PART 4, SECTION 3
• risk management will add both directandsecondary benefitsto the

delivery ofany objective;
• the management ofrisk must notremove incentive;
• allocationofrisk is to be gaugedby the various parties' abilities to
bear and control that risk;
• complete transfer ofrisk is rarely whollyeffective;
• information aboutandperception ofa risk are fundamental to its
assessment and acceptance; and
• all risks change with time andany action (or inaction) taken(or not
taken) upon them.
4.3.2.2 The demandsofdelivering a construction project are extremelyonerous. The

desire to deliver projects cheaper and faster, while moving closer to the
boundaries of innovative design, all increase the risk profile of a project. In
this respect risk is good, without it there would be no opportunity. It is the
very presence ofrisk that representsthe opportunity for a building projectto
go ahead in the first place.
4.3.2.3 THE RECOGNITIONOF UNCERTAINTY
By undertaking risk management, it is possible to ensure that clients

appreciatejust how sensitive their projects are to changing circumstances.
This leadsto:
• increased confidence in achieving the project objectives andtherefore
improved chances ofsuccess;
•
'surprises' beingreduced, suchas cost and/or time overruns and/or forced
compromises ofperformance objectives.These surprises usuallyresult in
'fire fighting' andthe ineffectiveapplicationofurgent remedial measures;
• identification of opportunities as risks are diminished, perhaps by
relaxing overcautious practices such as duplicating insurances or
seekingperformance bonds unnecessarily;
• all
rangesofparameters whichmight affectthe project being
incorporated,rather than a single-point estimate (for example, the cost for
brickscanbe between £200and £300per 1000 rather than£225); and
• allowingthe team to recogniseand understandthe composition of
contingencies, thus avoiding duplicating any allowance already made.
4.3.2.4 JUSTIFIABLEDECISION MAKING
Risk management allows decisionmaking to be based on an assessment of

knownvariables. Judgementcan become far more objective andjustification
for action (or inaction) demonstrable both at the time and at a later date,
should it be questioned. There are a wide range of techniques which can be
utilised to facilitateeffectivedecision making. The use of risk management
provides an audit trail which can be used shouldproblemsoccur duringlater
stages ofthe project.
289
PART 4, SECTION 3
4.3.2.5 TEAM DEVELOPMENT
During riskmanagement workshops a 'snapshot' ofwhat might happento the

delivery of a project is taken. During the workshops the project team
discusses its concerns andagrees a commonway forward.As with other types
of facilitated workshops, such as value management, this benefit alone can
justify undertaking risk management. The advantages are:
• it facilitates team development;
• it is a communication tool;
• it opensup discussion on what couldgo wrongwithoutfear ofpenalty;
• it acknowledges but transcends contractual restrictions;
• it challenges preconceptions; and
• it affirms the project procedures.
4.3.2.6 Riskmanagement is not apanaceaand there arelikelyto be timeswhen it may

not be effective to practice all its facets. However, the delivery ofany objective
canbe mademore effective ifthe risks areflilly appreciated. Thereis a needfor
appreciation of risk not just its analysis. The extent of analysis necessary is
related to the extent to whichthe cumulative effects ofrisks can be appreciated.
4.3.2.7 Risk management, together with other services provided, should be flexible,
adapting to the circumstances ofthe client'sneedsandthe project. Someclients
require a snapshotofthe risks at the outset ofthe project, with an initial risk
assessment, the provision of a one-offrisk register and a quick estimate ofthe
combined effect. Other projects may require a full risk management service
with risk being continually addressed throughout the project.
4.3.2.8 A concern often voiced by clients is how to quantify the benefits of risk
management. Since risk management has a major emphasis on reducing
potentially detrimentaleffects, itis notusually politic to demonstrate its effective
application as having minimised the impact ofcost overrun to, say, 15 per cent.
4.3.2.9 Furthermore, the actual impact of risk is unique to a project even though its
presencemay be commonplace. The risk management process may not be at
faultjust because risks were realised. Indeed, if no risks were realised, the
effectiveness of risk assessment would be questionedbecause without risk
there wouldbe no opportunity.
4 4.3.3 The Risk Management Process
There are three basic steps to the risk management process; identification,
analysis and response.
RiskIdentification - Risk Analysis Risk

ResPonse]
290
PART 4, SECTION 3
4.3.3.1 A risk cannot be managed effectiv1yunless it is identified. The earlierarisk

is identified, the more time is available for analysisandthe development ofa
suitableresponse. Theprocessis a linear one and is designed to be proactive.
Unfortunately, most risk is still dealt with in a reactive manner where a
responsehas to be devisedand implemented as soon as the risk arises. This
reactive responsedoes not allow any time for identification andanalysisand
the right responsemay not always be implemented.
4.3.3.2 The risk management process also needs to be integrated into the project
management process. Since any risk management workshopor assessment is
a snapshot in time, the process has to be undertaken on a repetitive basis.
Essentially, the risk management process should be commenced as early as
possible in a project life cycle and each of the three stages repeated as
necessary to effectively managethe risks associatedwith that project. At the
commencement ofthe process a risk management plan shouldbe developed.
The risk management plan is similar in nature to the project execution plan
and may form part ofthat document.
4.3.3.3 RISK IDENTIFICATION
The identification stage shouldcommence as early as possible, preferablyas

part of any feasibility study for the project. One ofthe key principals is that
the identification ofrisks shouldbe undertaken at variousstagesofthe project
life cycle. Identification is notjust undertakenat the start ofthe project and
then simply monitoredduring construction. The construction phase itselfwill
generatenew risks and the project team is expandedby new members in the
form of trade contractors who can bring additional information to the risk
identification process.
(a) Methodology
(i) Structuredident!Icationofall sourcesofrisk to theproject

Therisk management process is basedon the conceptofproviding a structured
approachto dealing with risk.It may seem obvious that ground conditions are
one source of risk, but how would this impact on other risks that might be
identified on the project?It is this inter-relationshipbetweenrisksthat can only
be drawn out through the use of a structured workshop and identification
methods wherethe wholeprojectteam have the ability to contribute.
(ii) Preliminaryanalysis toestablishprobablemajorrisksforfurther investigation

The identification stageis designed to promptteam thinking and to bring out
all possiblerisks that mightimpact on the project. Several hundredrisks could
be identified and the team may not have time to analyse and develop
s
responses to them all. It normal during the identification stage to begin by
sifting and removing those risks which the team feel are not worth
investigating further.
291
PART 4, SEcTIoN 3
(b) Techniques
(i) Research
While exactlythe same projectwill nothave beenexecutedbefore,something
similar will have been. Investigationinto projects on neighbouring sites or
projectspreviously undertakenby the client shouldbe instigated.
(ii) Structuredinterviews/questionnaires
Interviews with key members of the project team (including client and
suppliers) will elicitthe greatestinsight into risks to the project and how they
areperceived by individuals. Interviews allowa greaterdepth ofunderstanding
to be achievedthan group discussions butdo take up a lot oftime.
(iii) Checklists/promptlists
A simple and effective way to stimulate the team into thinking about risk is to
use achecldist.An easy way to starta checklist is for eachteam member to write
down allthe variation orders ontheir lastproject, withthe reasons fortheirissue.
(iv) Brainstormingin a workshopenvironment

Bringing the team togetherin a focusedworkshopis a powerful environment
in which to discussrisk. The team can have a better understanding of how
each member perceives risk differently. One important aspect of such
workshops is that lateral thinking is encouraged. The workshop gives the
team an opportunity to experiment with different viewpoints which
individuals mightnormally reject out ofhand ifworkingalone.
(v) Risk register

A risk register is probably the most useful tool in the risk management
process. It enables risks to be logged and trackedthroughthe life ofaproject.
Whilea risk register can be maintainedby hand, it is muchmoreusefulto use
a computer spreadsheet package. This allowsthe informationto be sortedinto
different categories. Specialist risk management software is also available
which integrates the risk registerwith risk analysistools.
An example of a risk register is shown in figure 1. The example is very

generic in nature and additional informationmay be shown, such as who is
responsible for undertaking actions in responseto the risk and by when.
Once a risk is identifiedit is placed into a suitable category, for example,

'client control'. Infigure1 six categories are shown, but these can be altered
to suitthe circumstances of each project. The risk registerallows risks to be
loggedbut can also displayadditional information.
The status ofthe risk can be shown as:

• done — the risk has arisen and been dealt with;
• active — the risk is
currently being managed; and
• monitor — the riskhas been identified but no
analysisor responsehas
yet been developed for it.
292
PART 4, SEcTION 3
The probability andimpact of the risk cthi also be shown; the importanceof
these factors is discussed in Section4.3.3.4(a).Finallythe responsetothe risk
canbe shown.
The risk register is a very useful format for showing a wide range of
information in the risk management process. If the register is placed on a
computer spreadsheet it is easy to sort the risks in a variety of ways, for
instance by category or magnitude ofprobability.
(vi) Database ofhistoricrisks

Experience is a 'great teacher' and the provision of a risk register allows
information to be stored in a convenient format ready for use on the next
project. The benefit of historical risk registers is that you know if a risk
actually occurred and whether the appropriateresponsewas set in place. The
historic database should be used as a starting point in the risk management
process, but althoughit may save some time in the identification stage, this
stagecannotbe completely omitted.
4.3.3.4 RiSK ANALYSIS
The analysis stageis concerned with tryingto achievea better understanding

ofthe nature ofthe risks identifiedduring the previous stage.
(a) Methodology
(i) Analysisofrisks to assess the severity ofimpact and the probabilityof

occurrence
Risks have two dimensions:
• probability — thisis the likelihood ofthe risk occurring and is
generally expressedas a percentage; and
if
• impact— the risk didoccurwhat impactwould it have on meeting
the project's objectives.
Foreach ofthe risksidentified, its probability and impactneedto be assessed,

normally in a workshop environmentwith key stakeholders present. Once
assessed, plotting risks on to a matrix, as shown infigure 2, indicates very
quickly thoserisks whichrequiredetailed consideration andthose which only
need a cursory glance. So, a risk with a high probability of occurring, which
does occur, wouldhave a very high impacton the project and wouldrequire
detailed consideration. This allowsthe right amount ofresourceto be usedin
managingrisk.
293
PART 4, SECTION 3
bE
bE
294
PART 4, SECTION 3
Figure 2: MatrixofProbability versusImpact
IMPACT
Veryhigh High Medium Low Very low
Veryhigh
High
Medium
Low
Very low
The Probability/Impact matrix (infigure 2) allows a risk profile for a project

to be developed. For instance, ifmost of the risks are plotted in the top left
section ofthe matrix it indicates a high-risk project. The risk management
strategy is to manage these risks proactively through the project life cycle.
During later risk assessment exercises, the profile should show risks plotted
more in the bottom right section ofthe matrix.
Before the risks can be plotted on to the matrix, a scale has to be set for the
probabilityandimpact dimensions.Settingacommon scalewillensureaconsistent
approachtoplacingnewly-identifiedrisksonthe matrixatalater stageintheproject
life cycle.An indicative layout fordefining scales is showninfigure 3.
Figure3: IndicativeScoringofProbability versus Impact Scales
PROBABILITY IMPACT
Cost Time
Veryhigh 70%-95% >4months >150k

High 50% - 70% 3 -4months 100- 150k
Medium 30% - 50% 2-3 months 50- 100k
Low -
10% 30% 1 -2months 10- 50k
Verylow 5%- 10% <1 months <10k
Whilethe probability scale shown infigure 3 may be utilisedfor any project,

theimpact scale needstobe set for eachproject. Although time and cost impacts
have been shown separately it is possible to combine them, or to use other
criteria such as performance. Again, the scale has to be set according to the
needsofa project. Once set the scales should not be changed during the life of
a project. This allows risks to be compared on a common scale throughout a
project and for the risk profile of a projectto be accurately monitored.
A higherlevel ofsophistication can be appliedto the rankingof the risks on

the Probability/Impact matrix. By assigning generic units to a matrix, the
relative importance ofeach cellcan be seen, as showninfigure 4.
295
PART 4, SECTION 3
Figure4: Completed MatrixofProbability versus Impact
>0.20 Review riskin greatdetail.Amend project strategytoreduce
Rk 0 08— 020 Developcontingencyplans Monitor riskdevelopment

Low Risk <0.08 Maintainrecord ofrisk.Considercontingencymeasures inoutline
The method ofhavingthe probability scale linear andthe impact scale non-
linear emphasisesthe significance oflow probability/high impact risks. The
matrix allows each risk to be ranked and comparedon an even basis. Where
resources are scarceit also allows attention to be focusedon those risks which
sit in the high-riskcategory ofthe matrix.
(ii) Synthesis ofall riskstopredictthe most likelyprojectoutcome

Risk tends to have a 'knock-on' effect and so it is importantto considernot
only the effect ofindividual risks but their cumulative effect as well.
(iii) Investigation ofalternativecourse ofactions

Analysis allows for different scenarios to be developed to provide a high
degree of confidence that the appropriate course of action has been chosen.
The alternative courses of action may be plotted on the Probability/Impact
matrix to obtain a clearer understandingoftheir relative merits in relationto
the risk profile.
(b) Tools and Techniques
The Probability/Impact matrix is the easiest technique to use and allows all
projectteam membersto participate inthe process via a risk workshop. More
sophisticated tools and techniques may be applied to provide a better
understanding ofthe identifiedrisks. Thereare a wide range ofsuch tools and
techniques available, many of which are supported by computer software
packages:
• Monte Carlo simulation modelling of cost andtime risks;
-
• cost movementforecast;
• decisiontrees;
• sensitivityanalysis;
• hard/sofimoneyanalysis;
• 'what if?' analysis;
296
PART 4, SECTION 3
• influefice dirms;
• simulation packages;
• multipleestimaterisk analysis(MERA);
•
spider diagrams;
• multi decisioncriteria analysis;
• linear regression;
•
spreadsheets; and
• flowcharts.
It is not possible to provide an explanation of all the tools and techniques

available. However, further information can be obtainedfrom one ofthe texts
in the furtherreadingsection(AppendixA).
4.3.3.5 RISKRESPONSE
The analysisstageprovidesthe team with a better understanding ofthe risks.

The next stage is to develop a responseto those risks.
(a) Methodology
(i) Choose the appropriatecourse ofaction

Theprincipleisto choose the rightresponsebased on available information. It
might be that the response changes with time as more information becomes
available. The responsewill generally fall intoone ofthe following categories:
• avoid;
• transfer;
• mitigate;and
• control.
An important point to consider when developing responses concerns the

generation of secondary risk. When a response is proposed, its full
implications have to be assessed to ascertain if a secondary risk arises out of
implementing the response.Ifthe sum ofthe secondary risk plus the reduced
risk (the original risk with the response in place) is greaterthan the original
risk, then an appropriate response has clearly not been identified and an
alternative shouldbe found.
(b) Tools and Techniques
The techniques available are primarily integrated with the project

management process, for example:
• contract
acquisition plan;
• contingency management; and
• project controls.
The tools available are not usually related purely to risk management. For
instance, most surveyors wouldrecommend to their clients that the contractor
has thirdparty insurance for the project. This is a risk management response
designed to reduce clients' exposure to claims for damages if a particular
2q7
PART 4, SECTION 3
incidentweretooccur. This is ariskmanagement tool, although most surveyors

wouldconsider it to be commonprojectprocedure. Typical tools available are:
•
insurances/bonds/warranties;
• contingency plans;
• forms of
contracts;
• contingency drawdown models;
•
specialcost scheduleallowance;
• earnedvalue analysis;
• resource levelling; and
• training.
4.3.4 Summary
In conclusion, the keycomponents ofa risk management strategy are:

• identifystaffand resourcesassignedto the risk management process;
• define linesofreportingandresponsibility for the risk management
process;
• link the risk management plan to otherproject tools such as safety
(includingCDM), quality and environmental management and
planningand reportingsystems;
• consolidateall risks identifiedinto an appropriateand digestible
responsestrategy in order that cumulative effects canbe perceived;
• state risk audit intervals and
keymilestones;
• include risk milestonesin projectplan;
• identify
possible responsestrategies andprogrammes for each risk
category including contingency plans andhow to handlenew or
unresolved risks;
• assess cost involved; and
o monitor successofresponses strategies and producefeedback for
reportinginto futureprojects.
Appendix A: Further Reading
Boothroyd,C., and Emmet, J. Risk Management: A Practical Guidefor Construction

Professionals, Witherby & Co Ltd, London, 1996
BS 6079 — Guide to Project Management— Section 4.6.3 Risk Management, British

Standards Institute, London, 1996
Chapman, C., and Ward, S. Project Risk Management: Processes, Techniques and
Insights, John Wiley andSons, Chichester, 1997
Edwards, L. Practical RiskManagementin the Construction Industry, ThomasTelford,

London, 1995
Flanagan, R., and Norman, 0. Risk Management and Construction, Blackwell

Scientific, Oxford, 1993
The Institution of Civil Engineers, Faculty of Acturies andThe Institute ofActuries.

RiskAnalysis and Management for Projects, ThomasTelford, London, 1998
AppendixA (12/99)
299
PART FIVE: ADDITIONAL GUIDANCE AND
INFORMATION
SECTION 1: SURVEYING SAFELY
Note: Section 5.1 reproduces exactly the material contained in the RECS
leaflet Surveying Safely.
300
NO COMPROMISE ON SAFYFY
A message from Sir Idris Pearce CBE

President, The Royal Institution of Chartered
Surveyors 1990-91
A major Swiss investorrecently pulled out of a City of London
building project. The third constructionworker hadjust been killed
on site. 'ifyou cannot buildwithout killing people', the investor
wrote, 'your product has a fundamental flaw'.
Three people are killed on our building sites each week. Twelve
others are injured every day. We havethe worst construction
accident rate in Europe— and it is increasing. This is intolerable. It
damages the reputation of Britain. It damagesthe reputation of
our entireindustry Worst of all, it ruins lives.
The Royal Institution of Chartered Surveyors has been the
leading professionalbodyin property and construction for over a
century. Thetime has come for us to takethe leadon safety Our
Members' responsibilities must now extendto the safety arid
welfare of all those who design, construct, inhabit or work in
buildings.
The best remedy is by example.
By conducting ourselves with care and dignityas advisors,
employers and employees, we can all save lives.
Ifwe take risksout ofexpediency, shyness, bravado or
ignorance, we stand to be accused of the most basic neglect.
As we prepare to enter the European Community it is essential
to demonstrate that our construction industry is efficient. Our
accident rate demonstratesthe opposite.
This booklet is the first step. It seeks to put ourown housein
order by making sure that we all understandour legal duties as
chartered surveyors. It gives practical adviceon ways to makesure
that as a professionwe set a good example.
As professionalmen and women, we all have to make
judgments. Sometimesclear decisionsare difficult. But I ask that in
spite of pressuresof work, in spite of pressures of economy, that
there be NO COMPROMISE ON SAFETY.
SIR IDRISPEARCE
301
A message from Dr John Cullen Chairman, Health
and Safety Commission
Members of professional institutionshave a specialplace in our

working life. Their influenceis widespreadand they occupy
positions of authority when carryingout their professionalduties
and as managers. Howevei the special place such professionals
occupy carries with it, legal and ethical duties.
Members ofThe Royal Institution of Chartered Surveyorsare
no exception, especially in view of the diversityof their activities.
Theyshould set a good example by demonstratingtheirregard for
healthand safety. Theyshouldnot condone badpractices, oi on
behalfof clients, take advantage of others who are prepared to cut
corners and put people at risk.
The Health& Safety Commissionlooks to the members of the
RICS to help create a healthy andsafer workingenvironment and
we commendto theirattentionthis valuablepublication.
Dt JOHN CULLEN
302
-
SAFETY YOUR LEGAL DUTIES The health and safety policy statement
The statement should clearly state what every
The HealthandSafety atWorkAct 1974 protects
employee 's responsibilities are and to whom
peopleat work. It requiresthat all chartered they are accountable: It should be signed and
surveyorsensure 'so far as is reasonably dated by a partner or director If it is revised,
practicable' the health and safety of both then all employees should be notified.
themselves and others.
You must ensure that all new employees get
a copy and that they have read and under-
Your main duties stood it.
Youmustunderthelawensurethat:
• the places in whichyou workare safe; If you need help, the Health and Safety
• safe Executive has produced a leaflet on how to
workingpractices must be clearlydefined,
prepare the statement. Ask your local
organised and followed;
• iirstaidequipment must always be availableboth Executive officerfor a copy of 'Writing your
in theoffice and for surveyorswho aretravelling; health and safelypolicy statement'.
• that you do not endangeryourself or others.
Whetheryou are a manager, employee, partner
or director, whetherornotyou are self-
employed, this is your legal duty. Youmayalsobe liablefor damages under
common law. For example, in Clay vAJ Crump
The people you must protect and Sons, the professionalin charge of a site was
As a chartered surveyor, thelawsays you must liablefor some of the damagespaid to an injured
protectthe safety of: labourer.
• anyonewho usesyour services; Finallyifyou employfiveor more people, you
• thepeople whoworkforyou. This includes must under the lawhave awritten healthand
casualandpart-timeworkers, trainees, and safety policy statement.
sub-contractors;
• anyone who may be affectedbyyour work. This
includesneighbours, passers-by andthe public; TAKING THE LEAD ON SAFETY
• visitors to your offices — they may also have Wehave aclear responsibilityunder the lawfor
redress in the case of an accident. the safety of ourselves, our clients, our colleagues
Ifit appearsthat theAct is notbeingfollowed, and the public.
in any aspect of yourworking life, then you How canchartered surveyors effectivelytake
should say so. Ifnecessary get advice from your the lead on improvingpracticewithinthe
local Health and Safety Executive (HSE) office, industry?
listedin the Phone Book.
A safe routine
Familiarity with otherregulations Safety should become a working routine.
You must also makeyourselffamiliarwith the Beforeworkbegins you should:
legislation that applies to specific kinds of
• identifythe likely hazardsassociated with the
premises. For example, you may need to be project;
familiar with the FactoriesAct 1961 or the • commission protectiveworks beforea survey
Offices, Shops and Railway PremisesAct 1963. ofespecially dangerous premises goes ahead.
Quarrying and agriculture also have specific Acts Clearrubbish,providetemporary props, struts
andregulationsthat set standards. andguardrails. Clean and disinfect if
necessary;
The penalties • ensure safe access andmeans of escape;
Ifyou have exposed peopleto avoidable danger, • inform everyone— colleagues,consultants,
criminal chargesincluding manslaughter may be contractors— of the hazards and of the means
broughtagainstyou. of escape.
303
Whencommissioningwork, you SUPERVISING OTHERS
should: Youhavea specialresponsibilityfor peoplein
• make the contractor's reputationfor safetyone your charge, particularlythose in trainingor who
of the criteria when assembling tenderlists; are inexperienced.
• ensurethat contract documents list items • Make sure that surveyorsin your chargetake
that are essential for health and safety and the right equipmentwiththemon visits. Check
encouragecontractors to price the appropriate thatthey know how to use it.
clauses; • Ensure that scrupulousrecords are kept of
• warn contractors ofdangerousworkbefore- surveyors' movements.
hand, suchas asbestos removal. • Keep availablerecords of hazardson
particularsites. Make sure that all relevant
Duringwork, you should: peopleare notified.
• useproper equipment, protectivegear and • Make sure that a supply ofthe right
clothing. Cameras orbinocularscan be usedto equipment is available. Helmets,steel capped
avoidclimbing onroofs for example; shoes, ear muffs, face masks, overalls,torches
• bring in specialist help.Steeplejacksand other andbatteries— all theseshould be in your
trained operators shouldbe brought in when office and in good condition.
needed; • Make sure that your offices are safe. Are there
• keep clientsinformed of hazardsand safety fireprecautionsandmeans of escape?Washing
issues; facilities? Is electrical equipmentup to date
• supervise professional work to a safe andsafe?Do you prepare and store food and
completion. drink safely?
• refuse to implement instructionsthat expose
you or anyone elseto danger. Finally, the best way to ensure safepractice by
people in your chargeis to set a good example.
Aftera survey,theproperty should be left
secureand hazardfree.You should makesure PROTECTING YOURSELF
at all timesthat someonein the officeor at Some ofus take better careofother peoplethan
homeknows where youwill be, especially we do ofourselves.
whenworking in remote places or empty Please don't over work. Don't squeeze in an
buildings by establishingan open diary extrajob at the end of the day. Don't take
regime. unnecessary risks on site. Trynot to drink
heavilyat lunchtime. Don't overworkin great
Protecting the public heat and keep warm in cold weather.
This is one of themostimportantaspectsofyour • Make sure that business vehicles are well
safetyroutine. maintained. Don't try to drive long distances
Youmayneedto informadjoining owners,ten- when you are tired. Keep a copy ofthe
ants inthe samebuilding, people working nearby HighwayCode in the office. Have you had
or even the general public about aspects ofyour anti-tetanus vaccinations?
work. The caseofSuzy Lamplugh brought homethe
• Make surethat signs are postedthat informof needtobe wary of escorting strangersaround
dangers, temporary diversions, hazardous oper- emptypremises. Carry personal alarms and
ations suchas asbestos removal, or anything telephones. Make sure people know where
that mightaffectgeneral safety. you are going andwith whom you are going.
• Make surethat therelevantpublicauthorities Workin pairs if visiting particularlydangerous
are informed. Sometimes the Health and Safety areas.
Executivemayneedto be told aboutparticular Surveying can be a dangerousbusiness and
operations. Ask their advice. members are asked to takeparticular carein
OL
mattersofpersonalsafety. A detailed checklistof • Floorboards, joists and buried timbers
potentialhazardsis included as an appendix and weakened by age, decayor attack
can be pinned to office or site noticeboards for • Projectingnails and screws. Broken glass
reference at all times. • Glazing in windows andpartitions may be
loose,hinges and sashcords weak or broken.
KEYPOINTS Glass panels in doors and winglights may be
You should: paintedover
• ensurethat you comply with the provisions of
the HealthandSafety atWork Act, including Roofs
• Fragileasbestoscementandplastic coverings
the productionoftherequiredPolicy Statement;
• comply with the office safetfpolicyandinpar- Fragilerooflights (oftenobscured by dirt or
ticularemployers shouldprovide equipment temporarycoverings)
• Low parapetsor unguarded roofedges. Loose
and establishsafe workingroutines;
• refuse to condone unsafeworking practicesby copings
• Rusted, rotten ormoss covered fire escapes,
othersand distribute informationon hazards;
• ensurethat your advice to clients will minimise access ladders and guardrails
the risk to the health and safety of others. • Rotten roofdecking andjoists
•
Slippery roofcoverings (slates, moss or algae
In other words, follow the dictates ofcommon covered slopes)
sense. • Broken accesshatches
• Mineral wool dust,mortardroppings and birds'
CHECKLIST nesting material and excrement in roofvoids.
Cornered birds and vermin
IDENTIFYINGPARTICULARHAZARDS • Insects, bugs andlice. Bee and wasp colonies
• Watercoolingplantmay harbour legionella
• Unguarded flat roofs
Representatives ofalltheRICS Divisionshave
contributed to the following checklist. Individual
• Broken, loose, rottenandslippery crawling
members will recognise the hazards they boards and escape ladders
encounterregularly, and most will benefit from • Weak flat roofs anddust covered rooflights
the advicegivenwhenworkingin unfamiliar • Slippery roof surfaces
• Highwindsduringroofinspection
surroundings. Itis the natureof safety matters
that no checklist like this canbe entirely • ill-secured or flimsy, collapsible, sectionalor
comprehensive. fixed loft ladders
• Concealed ceiling joists and low purlins
The following itemsmay create danger: • Ill-litroofvoids
WHEN SURVEYiNG BUTLDINGS Unsafe atmospheres

• Confined spaceswith insufficient oxygen
Structures including manholes, roofvoids,cellars, vaults,
The chanceofpartialor total collapse of: ducts and sealedrooms
• Chimneystacks,gable walls orparapets • Rotting vegetation whichmay consume
• Leaning, bulgedand unrestrainedwalls oxygen andgive offpoisonous fumes
• Accumulation ofpoisonous or flammablegases
(including boundary walls)
• Rottenor corrodedbeams andcolumns inbuildingson contaminated land
• Roofs and floors • Stores containing flammable materialssuch as
paint,adhesives, fuel and cleaning fluids
Timbers • Hazardoussubstances, including toxic
Rotten andbroken floors andstaircases. Flimsy insecticides and fungicides
cellarflaps and brokenpavementlights • Gasbuild-up in subfloorvoids
• Cranes and overhead hazards
Danger fromlive and unsecuredservices
• Electricity, gas, water andsteamsupplies • Uneven ground
• Awkward entrances into sub-stationsand fuel • Discarded materials, especiallythose with pro-
stores jecting nails
• Temporary lightinginstallations: mains • Electricity
connections and generators • Unsightedand reversing vehicles
• Buriedcables and pipes • Inspecting highways or vehicleaccess points
withoutilluminated clothing and hazardsigns
Hiddentraps, ducts and openings • Hot bitumen and asphalt
• Lift and services shafts, stairwellsandother • Wet surfaces
unguarded openings
• Manholes,including those obscuredby flimsy ONMININGAND SIMILAR SITES
coverings. Cesspools, wells and septictanks
Land and propertydamagedby mining
Intruders and others subsidence
• Physicaldangers from squatters and vagrants. • Unevenground surface andpavedareas
Guarddogs • Loose or structurally unsoundwalls,floors,
• Healthrisks (includingAIDS) from discarded
roofs, fixtures and fittings
syringesand condoms • Gas leaks
• Structures weakened by vandalism or arson • Fissuring
• Aggressive tenants andproperty owners
Mine Shafts andAdits and Shallow
Contamination Mine Workings
• Asbestos, leadandother substanceshazardous • Unstableground aroundthe shaft/adit
to health • Possibleexistence of nearbyshaftswith
• PCB andPCN chemicalsin electrical
disturbedcappings andfillingwhich may have
transformers and capacitors in fluorescent
a potentialfor collapse
lightingfittings • Toxic and explosive gases emanating from the
• Overheadelectricalcables
• Contaminated watersupplies shaft or adit
• Contaminatedair conditioningsystems • Pitfalls and crown holes associatedwith old
shallowunderground miningactivities
(legionella) • Dangerfrom the mining operationand
Vermin and birds machinery
• Rats and mice:Weil's andother diseases
• Bird droppings Quarries
• Lice maybe presentin bedding, soft furniture • Pitfalls and shallow mining
• Steep and/or unstable quarry faces and benches
andcarpets
• Unstableground atthe top of quarryfacesor
TRAVELLiNG TO AND FROM SITES benches
• Danger ofloose materialfalling from above
• Drivingtoofast, too long or whentired • Movingparts ofmachinery
• Use ofhand-heldcar telephones on the move • Unguardedelectrical and compressed air
equipment
WHENVISITINGBUILDING SITES • Blasting
• Mobileexcavations andlarge earthtransporters
• Slips, trips andfalls • Elevatedwalkways, stagings, platformsand
• Unsafe scaffolding andladders ladders
• Deep unsafe or unsupportedexcavations • Hot surfaces at coating plants, etc
306
• Slurryponds, lagoons,tanks and other filled Farm machinery
areas • Packingand gradingmachines
• Noisy and dusty conditions • Stones and debris thrown from swipes and
• Railways and internalhaulroads hedgecutters
• Dangerfrom the quarrying operation and • Cranesandthe lifting equipment
mobileplant
Livestock
Tips andLandReclamation Sites • Anyentire male animal: bulls, boars andrams
• Unstable slopesandground • Anyfemaleanimal with young — calf proud
• Waterlagoons, ponds and otherwaterfilled cowsandfarrowing sows
areas • Gameparks and wild animals
• Slurryand quicksandareas • Horses
• Burning areas wheretips are heatingor on fire • Dogs
• Hazardous or harmful chemicals, liquidmatters
andwastes, contaminated land Diseasesand pests
• Explosive andtoxic gases and vapours • Tetanus, Brucellosis
• Weil'sDisease (fromstagnantwater andponds,
Gas and Oil Wells haystoresetc)
• Pipes and othergroundlevelhazards
• Flare stacks
• Separating lagoons Sporting
• Firearms (mustbelicensed and properly stored
• Explosive atmospheres andused)
• Dangerfrom the drillingoperations
IN FORESTS
Exploration, Drilling and Gantry Sites
• Hot muds • Tree fellingwork eitherin thinningor clear
• Flyingrock, dustand debris
• Waterhazards felling operations
• Unsafeplant • Tree surgery work
• Dangerousand damaged trees, especiallyif
liableto shed limbs
ONFARMS • Any work in woodlands in high winds
• Hand tools, axes andswipes
Farm buildings and land •
• Grain storage andhandlinginstallations, Chain saws
• Sawmillingand cuttingequipmentin saw
particularly movingaugersand conveyors mills and woodyards
• Underground slurrystores, slurry lagoons, • Timber handlingequipment e.g. overhead
drains, deep ditches, wells,tower silos, sewage
tanks and silageclamps(note: risk oftoxic extraction lines
• Forklift vehicles and cranes
gases)
• Dusthazardsin grain, mill and mixand
intensive livestockbuildings OFFSHORE
• Overgrown areas: concealed manholes
• Poorlymaintained buildings — especially loft • Moving and often slippery decks of ships and
floors— and fittings oil rigs
• High voltage electric fencing • Poorlysecuredequipment, includingcoffee
• Stored hazardous chemicals cups andtools nearsensitivemachinery
• Rivers,lakes, reservoirs, dangerous bridges, • Firehazardsand flammable materials
• The hostiledeckenvironment
bogs, quicksands, unstablecliff edgesandthe
sea • Highpressure air gases and gas storagecylinders
• Chemicals, poisons • Hydraulicoil leakage
307
BIBLIOGRAPHY 16 Safety in working with power operated
mobile workplatforms.
1* Writing a Policy Statement: Advice to HSE Guidance Series HS(G)19:
Employers; HSE 1985; (HSC6 Rev). ISBN 0.11.993628.5.
2* Guidance on the Implementationof Safety 17 TowerScaffolds.
Policies; HSE 1987 (IAC/Li). HS42: ISBN 0.11.883941.1.
3 Writing Your Health and Safety Policy 18 Suspended AccessEquipment.
Statement: How to prepare a Safety Policy HSE GuidanceNote PM3O:
Statement For a Small Business; ISBN 0.11.883577.7.
ISBN 0.11.883882.2. 19 Deadly Maintenance: A Study of Fatal
4 Positive steps — help and advice for women Accidents at Work.
on personal safety. ISBN 0.11.883806.7.
20 Blackspot Construction: A Study of Five
MetropolitanPolice
5 Years Fatal Accidents in the Building and
Managing Health and Safety in
CivilEngineeringIndustries.
Construction;HSC Coniac Guidance:
ISBN 0.11.883992.6.
Principles and Application to Main
21 Avoiding Danger from Buried Electricity
Contractor/Sub-Contractor projects.
ISBN 0.11.883918.7 Cables.
GS33: ISBN0.11.883612.9.
ManagementContracting: 22 ProtectionAgainst Electric Shock.
ISBN 0.11.883989.6.
GS27: ISBN 0.11.883583.1.
6 Children on Construction Sites:
23 AsbestosandYou.
GS7 ISBN 0.11.883055.4.
7* ConstructionIndustrySummarySheets. IND(G) (18)(C). Availablefrom the Health
and Safety Executive.
8* ConstructionSite Safety Checklist.
24 FirstAid at Work.
9* Health HazardInformationSheets.
10* ConstructionList ofHSC/E References. (HS(R)11): ISBN 0.11.883446.0.
25 A Guide to the Safety Signs Regulations
11 ConstructionSafety Manual.
1980. ISBN 0.11.883415.0.
Published by BuildingAdvisory Service of 26 HSE Guidance on Construction
(Head
the BuildingEmployers Confederation.
Protection)Regulations 1989.
12 Entry into Confined Spaces. HSE Guidance ISBN 0.11.885503.4.
Note GS5; ISBN 0.11.883067.8. 27 CONIAC Guidance on The Control of
13 Safety in Roofwork. Substances Hazardous to Health in the
HSE Series Booklet MS(G)33: ConstructionIndustry.
ISBN 0.11.883922.5. ISBN 0.11.8855263.
14 General Access Scaffolds. HSE Guidance
Note GSI5; ISBN 0.11.88345.9.
15 Safe Use of Ladders, Step Ladders and
Trestles. HSE Guidance Note GS31: *All available free from HSE Offices and
ISBN 0.11.883594.7. LibraryServices.
3o
PART 5, SECTION 2
SECTION 52: CONSTRUCTION (DESIGN AND

MANAGEMENT) INFORMATION
Health and Safety, and CDM in particular,is a growth industry andis sup-
ported by a plethora of books, publications and other sources of reference.
The number of publications is daunting and the members of the RICS
working party on CDM are frequentlyasked for advicein thisrespect.
In response to this, guidance has been prepared which is based on the

personal experience of the working party members. The list is not
exhaustive and has been prepared impartially without inference or
preference or ranking and no doubt there are many other equally suitable
sources of informationnot included.
Other eminent organisations,not the least of which is the Library Service

of the Institution, produce reading lists which contain much more compre-
hensive information,ifthis is required.
This schedule attempts to meet the widest needs, rangingfrom introductory

background for the beginner to more detailed coverage on specific topics
for the more experienced reader. A variety of available media has been
included suchas videos andaudio tapes, as well as the written word.Where
possible, data has been collated on a functionalbasis under the heading of
the various representatives of the project team for whom it is felt that the
informationis most useful.
TBERTCS HEALTH n SAFETYIN CONSTRUCTION PRACTICE PANEL
TheSurveyors'Construction Handbook Part 5, Section 2(4/98) Effectivefrom1/6/98 Page 1

PART 5, SECTION 2
5.2.1. Schedule of Sources of Useful CDM Information
Regulations
The Construction(Design and Management)Regulations 1994, HMSO, 1994

[0110438450]
'ManagingConstructionfor Health and Safety' Construction(Design and

Management) Regulations1994. Approved Code of Practice, HSC, 1995
[0717607925]
The Construction(Health, Safetyand Welfare) Regulations 1996, FIMSO, 1996

[0110359046]
Accident Awareness/Statistics
'BlackspotConstruction'— Study of fatal accidentsin the buildingand civil

engineeringindustries 1981—1988 (out of print),FISE, 1988 [0118839926]
'NotJust anAccident.' Video, CIRIA, 1993 [Video SP100]
HealthandSafety Statistics ofHSE 1996/97, HSE, 1996/97 [0717614611]
Risk Assessment
5 Stepsto RiskAssessment, HSE, 1995 [IND(G)163L]
Clients
Engagiiigan Architect: Guidance for Clients on Health andSafety, RIBA, 1995

[1859460062]
The CDMRegulations:WhatClients Need to Do, APS, 1996
ConstructionSheetNo. 39 Construction(Design andManagement) Regulations

1994: The Role of the Client, HSE, 1995 [CIS 39]
Clerk of Works
The CDM Regulations:TheirImplicationsfor Practice.A GuidanceNote for Clerk

ofWorks, ICW
Page 2 Part 5, Section 2(4/98) Effective from1/6/98

- TheSurveyors'Construction Handbook
310
PART 5, SECTION 2
Forms of Appointment for Planning Supervisors
Planning SupervisorFormof Appointment, RIBA, 1996 [PS/95]
FormofAppointment for PlanningSupervisor, APS, 1997 [FOA 97]
Where a Consulting Engineeris Engagedto Act as Planning Supervisor, ACE, 1995

[AgreementF]
Designers
Designingfor Health and Safety in Construction (The GreenBook), CONTAC, 1995

[0717608077]
CDM Regulations Case Study Guidance for Designers: An Interim Report, CIRIA,
1995 [0860174212]
Informationon SiteSafety for Designersof SmallerBuildingProjects,by Sylvester

Bone, HSE, 1995 [0717607771]
A Safer Bet: An Introductionto the Principlesofthe CDMRegulations 1994,

CERCI, 1995 [Video 1898671044]
ConstructionSafety SheetNo. 41. Construction (Design and Management)

Regulations 1994: The Role of the Designer, HSE, 1995 [CIS 41]
Site SafetyHandbook, CIRIA, 1997 [Special Publication90 0860174557]
BuildingDesign: Easibrief. CDMPrimerby Henry Haverstock, Building Design, 1997
Planning Supervisor
ConstructionSheet No. 40. Construction(Design andManagement) Regulations

1994: The Role of thePlanning Supervisor, HSE, 1995 [CIS 40]
CDM Documents
(See also 'ComprehensiveGuidance')
ConstructionSheetNo. 42: CDM — The Pre-TenderStageHealth andSafety Plan,

HSE, 1995 [CIS 42]
ConstructionSheetNo. 43: The HealthandSafetyPlan During the Construction

Phase, HSE, 1995 [CIS 43]
The Surveyors' ConstructionHandbook Part5, Section 2(4/98) Effectivefrom1/6/98 Page 3
3u
PART 5, SECTION 2
ConstructionSheet No. 44: The Health andSafetyFile, HSE, 1995 [CIS 44]
The Building CentreMaintenanceManual& Health and Safety File, Building

Centre Trust, 1997 [0901919136]
Comprehensive Guidance
CDM Regulations: How Do RegulationsAffectYou? HSE, 1995 [PML54]
A Guide to ManagingHealth and Safety in Construction (TheBrownBook),HSC,

1995 [0717607550]
CDM Regulations Explainedby Raymond Joyce, ThomasTelford 1995

[07127720341]
Croner's Managementof ConstructionSafety (includes 2 updates and 10 newsletters

for firstyear), Croner, 1997 [1855243288]
CDM: The View from Here, CITB, 1995 [GCI]
Health and Safety in Construction,HSE, 1996 [HS G 150 0717611434]
Specific Hazards
Safetyin Excavations,HSE, 1997 [CIS 8 rev]
TowerScaffolds,HSE, 1997 [CIS 10 rev]
Inspectionsand Reports, HSE, 1997 [CIS 47]
GeneralAccess, ScaffoldsandLadders, HSE, 1997 [CIS 49]
Dust andNoise in the ConstructionProcess. Contract ResearchReport, HSE, 1995

[CRR73 0717607682]
ControlofSubstancesHazardousto Health in Constructionby HSC, HMSO, 1990

[M20 6/90]
PreventionofFalls to Window Cleaners: Guidance Note, HSE, 1991 [GS 25

0118856820]
Contractors
(See also 'ComprehensiveGuidance')
Page4 Part 5, Section2(4/98) Effectivefrom1/6/98 TheSurveyors'Construction Handbook
312
PART 5, SECTION 2
Health andSafetyfor Small Construction Sites, HSE, 1995 [0717608069]
Safety Policiesfor Construction— BEC Guide,BEC, 1997 [SPOL]
ConstructionSafetyManual (2 Volumes),BEC, 1997 [CHSMAN]
ConstructionSite Safety: Safety Notes CITB, CITB, 1996 [GE700]
Audio Tapes
CONDAM CDM Regulations RICS and Collegeof Estate Management, Owlion,

1995 [ASP 10100]
ConstructionRadio: Talking Point on the CDM Regulations, CITB, 1995 [AT 1]
Health and Safetyin Property RICS andCollege of Estate Management, Owlion,

1995 [ASP 17230]
Keyto References Used

Name Address Telephone
ACE (Association of Alliance House 0171 222 6557
Consulting Engineers) 12 Caxton Street
London SW1HOQL
APS (Associationof 15 Rutland Square 0131 221 9959

PlanningSupervisors) Edinburgh EH1 2BE
BuildingCentre Trust The Building Centre 0171 637 1022

26 Store Street
London WC1E 7BT
BEC (BuildingEmployers Federation House 0121 742 0824

Confederation) 2309 CoventryRoad
Sheldon
Birmingham B26 3PL
BuildingDesign Miller FreemanPlc 0181 855 7777

30 CalderwoodStreet
LondonSE18 6QH
CERCI (Centrefor 26 Store Street 0171 637 8692

EducationalResourcesfor London WC1E 7BT
the ConstructionIndustry
CIC (Construction 26 Store Street 0171 637 8692

IndustryCouncil) London WC1E7BT
The Surveyors'Construction Handbook Part5, Section 2 (4/98) Effective from1/6/98 Page 5
3j3
PART 5, SECTION 2
CIR]A (Construction Industry 6 Storey's Gate 0171 222 8891

Research and Information LondonSW1P 3AU
Association)
CITB (Construction Industry CITB Publications 01553 776677

Training Board) BirchamNewton
Kings Lynn
Norfolk PE31 6RH
CONIAC (Construction Health and Safety Executive 0171 556 2183

Industry AdvisoryCommittee) St Dunstans House
201—211Borough High Street
London SE1 1GZ
Croner Croner Publications Limited 0181 547 3333

CronerHouse
London Road
Kingston uponThames
Surrey KT2 6SR
HSEIHSC(Healthand Safety HSEBooks 01787 881165

Executive/Commission) P0 Box 1999 0151 951 3591
Sudbury (stats only)
Suffolk COlO 6FS
ICW (Institute of Clerks 41 TheMall 0181 579 2917

ofWorks) EalingW5 3JT
LPC (LossPrevention Meirose Avenue 0181 207 2345

Council) Borehamwood
Hertfordshire
WD6 2BJ
Owlion RICSBooksMail Order 0171 222 7000/

Surveyor Court 01203 694757
Westwood Business Park
Coventry CV4 81E
RIBA(Royal Institute 66 PortlandPlace 0171 580 5533

ofBritishArchitects) London WiN 4AD
The StationeryOffice 49 HighHolborn

(previouslyHMSO) London WC1V 6HE
Thomas Telford Publishing The InstitutionofCivil 0171 227 7722

Engineers
London SW1P3AA
Page6 Part 5, Section 2(4/98) Effectivefrom1/6/98 TheSurveyors'ConstructionHandbook

PART 5, SEcTIoN 3
SECTION 5.3: CONSTRUCTIONPRACTICE PANEL ROLES

INFORMATION
5.3.1 Practice panels of selected Members have the following roles in respect of
definedspheres of surveying services:
• to help members meet the market's requirementsfor their professional

services;
• initial investigation of possible breaches of PracticeStatements;
• to respond to consultation papers from other bodies on the content of
professional services andto developments in the market;
• to produce/contributeto responses to governmentconsultationpapers;
• to assistin answering querieson the content and qualityofprofessional
services (from members, lawyers, the public, the media, etc.);
• to make strategy recommendations for new marketing activity and to
assist in the implementationas appropriate;and
• to receive market briefings and advice on developments in the market
and to provide appropriatesupport to members.
Practice panels fulfil theseroles primarilyby providingthese types of out-

puts:
• Practice Statements, Guidance Notes, and Information Papers, after

consultation with members;
• information andarticles in CharteredSurveyorMonthly (CSM);
• model and standard conditions of engagement and standard services
e.g. Homebuyer Survey Valuation (HSV);
• seminars and conferences;
• representations to other bodies;
• advice to others on the contentof professionalservices; and
• proposals for marketing and policyinitiatives.
KI) 5.3.2 The practice panels principally responsiblefor producing material for this
Handbook andtheir respective spheres of activity are shownhere, with the
names ofthe supporting membersof staff shownnext to each.
Building Regulation and Control TPaton
Response to consultations on changes to the building regulations and

approved documents issued by the DETR and the dissemination of infor-
mation and advice to members and other construction-related panels.
Civil Engineering John Sparkes
All surveying services in the civil engineeringsphere, including geodetics,

butexcluding the preparation oflarge-scalesite plans.
The Surveyors'Construction Handbook Part 5, Section 3(4/98) Effectivefrom 1/6/98 Page 1
3LS
PART 5, SECTION 3
Construction Administration and ManagOment I Paton
Construction(i.e. new construction, conversion, refurbishment, extensions

and alterations to the form of buildings) management, including risk
management; construction administration,including constructionlaw and
measurementofworks.
Construction Design and Economics TPaton
Definition of objectives of clients for construction (i.e. new construction,

conversion,refurbishment, extensionsand alterations to the form of build-
ings) works, andensuring their achievement; all aspectsofpre-construction
design servicesand estimating (includinglife-cycle costing,the costlvalue
relationship,risk assessmentandaesthetics) andspecification.
Mechanical and Electrical Services Group (responsible to the

Construction Design and Economicspractice panel) John Sparkes
Selection, specification,life-cycle costing and procurementof mechanical

and electricalservices withinbuildings.
Construction Healthand Safety To beappointed
Pre- and post-contract health and safety matters in respect of construction

(i.e. new construction, conversion, refurbishment, extensions and
alterationsto the form ofbuildings,including services therein).
Construction Planning and Procurement T Paton
All aspectsofthe planning andprocurementof construction (i.e. new con-

struction,conversion, refurbishment,extensions and alterations to the form
of buildings) works, including design and build, partnerships,and tender
documentation.
These Professional Services Executiveswork in the Professional Services

Department at 12 Great George Street, Parliament Square, London SW1P
3AD; tel: 0171 222 7000; fax: 0171 334 3844. Their direct telephonelines
are:
To be appointed 0171 334 3716

TPatonARICS 0171 3343715
John SparkesBAMSc1UBAARJCS 0171 3343733
John Sparkesworks for the Institution Mondays, Wednesdays and Fridays.
Page 2 Part 5, Section 3(4/98) Effective from 1/6/98 TheSurveyors' ConstructionHandbook

PART 5, SECTION 3
Gwen Stanleyassists T Paton and John Sparkes. Her telephone number is

(0171) 222 7000, extension493.
Withinthe departmentthere is a TechnicalServicesUnit which provides a

free professionaland technical enquiry service. Constructionenquiries are
dealt with by two part-time Professional Information Executives: Mike
Grant FRICS MCIOB and Michael MatthewsFRICS. Their direct line is
(0171) 334 3766.
The Surveyors'Construction Handbook Part 5, Section 3 (4/98) Effective from1/6/98 Page3

PART 5, SECTION 4
SECTION 5A: BUILDING COST INFORMATION

SERVICE (BCIS)
5.4.1 Since the construction industry is notoriously volatile, it is absolutely

essential that decision-makers have access to the latest, most accurate
information.BCIS provides current, accuratebuilding costandtenderprice
information for the construction industry and the property market. It is
regarded as authoritative, reliable and useful by subscribers, who include
quantity surveyors, building surveyors, general practice surveyors, archi-
tects, engineers, building contractors, developers, financial analysts and
propertyownersin both public andprivate sectors.
5.4.2 BCIS collates and analyses unique data submitted by membersand incor-
porates material from all other relevant sources. The informationis inter-
preted by BCIS professional staff and presented to subscribers in two
accessibleandpractical formats: the comprehensive BCISBulletinService,
which provides hard copy data, and BCIS Online for those preferring to
receiveit electronically.
5.4.3 The publications listed below are available on separate subscription but
those marked (*) are all included in the BCIS Bulletin Service; those
marked (•) are alsoincluded in BCIS Online.
• 5.4.4 Indices and Forecasts(*)
Publishedquarterly, Indices and Forecasts includes the completeseries of

BCIS Indices. Thereis an Executive Summary anda thoroughly-researched
• commentaryon market conditions, with trends projected over the coming
24 month period. Amongst the material comprising this package are
individual indices for tender prices, regional prices, input costs and output
costs.
5.4.5 Surveys of Tender Prices (*)
Aquarterlypublication, the principal contentof which is a range ofcurrent

pricing studies, incorporating an update of the BCIS Tender Price Index.
The BCIS survey provides informationon average £/m2 buildingprices for
550 different building types: 370 new and 180 refurbishment. Functional
prices are shown for 190 building types. This publicationalso studies price
differentials by size of contract, location and type of work as well as the
results of surveysof the percentages addedfor preliminaries,dayworks and
subcontractwork.
The Surveyors'Construction Handbook Part5, Section4 (4/98) Effective from 1/6/98 Page 1
38
PART 5, SECTION 4
5.4.6 Elemental Analyses (*)

BCISElementalAnalyses, the key sourceofprice information from accepted
tenders, are published quarterly as loose-leaf data sheets classified for filing
by building type. There are two levels of analysis: Concise Analyses
containcosts for six group elements; DetailedAnalysesbreak down tender
prices into 34 elements. BCIS Online subscribers have access to all the
11,000 BCIS ElementalAnalysespublished over the years.
• 5.4.7 Labour, Hours and Wages and Dayworks(*)
BCIS publishes as loose-leafdata sheets, details of the principal wage rates

in the building and allied industries. The informationshows the rates and
operative dates for current and recent settlements. National Insurance
contributions and holidays-with-payand CITB Levy are also covered.Data
sheets summariseDayworkRates calculated by BCIS for each change in
wages and the other variables.
•K 5.4.8 News(*)
BCIS News accompanies each BCIS Bulletin. It takes the form of a
newsletter, highlighting items contained in the latest Bulletins. It also
summarises items of economic significance and reports on BCIS plans and
activities. BCIS Online has its own news pages.
K$ 5.4.9 Digests(*)
Digests give the source of publication and a brief summaryof articles on

construction economics to help subscribers keep abreast of current litera-
ture.Aphotocopying serviceis available to subscribers for personal research.
d 5.4.10 Guideto Daywork Rates and Updating Service
This annual Guide covers the daywork rates for 43 grades of operative.
Each rate (1,436 in total) is calculatedin accordancewith the BCIS inter-
pretation of the appropriate Definition of Prime Cost of Daywork. An
updating service is offered which enables subscribers to be certain they
alwayshave the latest information.
5 5.4.11 Quarterly Reviewof Building Prices
The BCIS QuarterlyReview containsa selection of BCIS data which gives

guidelines on the general level of building prices. It also carries a brief
Page 2 Part 5, Section 4(4/98) Effective from1/6/98 TheSurveyors'Construction Handbook

PART 5, SECTION 4
commentaryon market conditions and tender prices, location factors and

average £1m2 building prices.
K 5.4.12 Guide to House Rebuilding Costs and Index
This annual Guide is widely used by professionals when assessing

rebuilding costs for insurancevaluations.It contains sixteenmain tables of
costs for four regional groups, five house types, three sizes of house and
three quality specifications. A regional supplementgives tables of costs for
each 12 standard regions and location adjustment factors by local
authorities. The ABI/BCIS House Rebuilding Cost Index is available
monthly on subscription.
5.4.13 Annual subscription rates, further details, up-to-date prices, special prices
for extra copies and special offers to chartered surveyors and educational
institutions are available by contacting:
BCIS Ltd
London SW1P3AD
Tel: 0171 222 7000
Fax: 0171 695 1501
e-mail: bcis@bcis.co.uk
The Surveyors'
Construction Handbook Part 5, Section 4 (4/98) Effectivefrom1/6/98 Page 3
32o
PART 5, SEcTIoN 5
SECTION 5.5: BUILDING MAINTENANCE

INFORMATION (BMI)
5.5.1 BMI provides an independentcost information service for professionals in

facilities management, maintenance and refurbishment. Subscribers are
provided with information on current, historic and forecast costs of
building maintenanceand occupancy in a readily accessible form.
The BMI information will help in budgeting, forecasting, benchmarking,

cost control, contractadministration and life-cycle costing.
The publicationslisted below are included in the full BMI subscription

servicebut are also available separately.
5.5.2 BMI QuarterlyCost Briefing
The BMI QuarterlyCostBriefing provides information on current and fore-

cast trends in maintenancecosts making it an essential tool for the facilities
and maintenance manager. Cost indices track the general movement of
costs in differentindustry sectors allowing usersto monitortheirown costs
againstgeneral maintenancecost inflation.
Indicesare included for:

• redecoration;
• fabric maintenance;
• servicesmaintenance;
• cleaning(labourandmaterials);
• lift servicelabour; and
• energy (coal, gas, fuel, oil, electricity)
5.5.3 Building Maintenance Price Book
The BMI Building Maintenance Price Book is the only annual guide to
estimating and pricing exclusively for building maintenance and repairs.
The Price Book gives labour constants and measured rates for over 1,300
items as well as current wage rates and materials prices. It contains
guidance on letting maintenance work. It is a valuable working document
for all those involved in estimating, checking and negotiating rates for
maintenance and repair work. It is widely used as a Schedule of Rates to
ensure competitiveprices.
PART 5, SECTION 5
5.5.4 Special Reportsfor Benchmarking
BMI publishes reports on maintenanceand occupancy costs for individual

buildings, as well as studies giving averagesfor a range of building types.
Reports publishedhave included:
• Average Maintenance and Occupancy Costs Study giving annual costs
for Offices, Hospitals,Schools,Universities etc.;
• Energy Consumption Study giving annual costs and consumption
figures for Offices, Hospitals,HealthCentres etc.; and
• Rehabilitation Study giving average £1m2 costs of rehabilitating a
complete rangeofbuildingtypes.
4 5.5.5 News Digests and Reports
BMI also monitorschanges in the maintenanceand facilities management

industries and reports the findings to keep subscribers up to date. BMI
occasional reports include:
• The EconomicSignificanceof Maintenance;

• Guide to InformationSources for Facilities Management;and
• Guide to Computer Systems for Maintenance andFacilitiesManagement.
BMI News summarises the latest industry developments and contains

statistical and editorial articles designed for quick reading to keep
subscribers well informed.
BMI publishes digests of articles with a bearing on property occupancy

from a wide cross-section of the building maintenance and facilities
management press. This informationcan save subscribershours of reading
time andis backed up with a photocopying service.
5.5.6 Annual subscription rates, further details, a full list of BMI Special
Reports, up-to-date prices and special rates for chartered surveyors are
available by contacting:
BMI
12 GreatGeorgeStreet
London SW1P3AD
Tel: 01712227000
Fax: 0171 695 1501
e-mail: bmi@bcis.co.uk
Page2 Part 5, Section 5(4/98) Effectivefrom1/6/98 The Surveyors'Construction Handbook
322
UPDATE 1
(dated 4/99)
Please note:
• apages carry the same 'effective from' date (i.e. 1/6/99).
CONTENTS LIST
UPDATE 1(1/99)
Section Remove Pages Insert Pages
Titlepage existing Title page new Title page
Bulletin Update — 1 to 2
Contents 1 to 2 1 to 3
Section 2.2 — 1 to 60
Section 4.2 — ito 28
Index lto5 lto8
The Surveyors'Construction Handbook Update 1(4/99) Pane 1
3Z3
The
SURVEYORS'
CONSTRUCTION
HANDBOOK
Bulletin Update • April 1999
ELCOME TO THE FIRST SET 1 The main JCT contracts have been updated
OF UPDATES TO THE SURVEYORS'
I to incorporate the amendments that cover
the provisions of the 1998 Housing Grants,
CONSTRUCTION HANDBOOK. Construction and RegenerationAct. The new
contracts were published in late 1998 and are
knownas id 98, WCD98, IFC 98 and MW 98.
This update to the Handbookcomprises two
new sections: CIRIA is working with the Building Services
2 Research and Information Association
SECTION2.2: 'Life cycle costing'; and (BSRIA) and the Water Research Council (WRC)
on guidance on the use of rain water, grey
SECTION &2: 'Ascertaining the amount of water and combined
systems. Points include
loss and expense incurred in building projects'. how to select and install systems in different
types, maintenance,health and safety,
'Life cycle costing' is based upon the 1986 building
water quality, and economicand environmental
Guidance Note A Guide for Life Cyde Costing issues.
for Construction. It has been updated by the 1999 with Monitoring projectswill run until autumn
the final output expected in the
Construction Design and Economics Practice
year 2000.
Panel and includes new worked examples,
which were originally available in the accom- The Government consultation paper is out
panying document Life Cycle Costing: A 3 for comment to relevant bodies on the
Worked Example, published in 1987. Disability Discrimination Act 1995 and the
responsibilities off service providers and trade
'Ascertaining the amount of loss and expense organisations. The enforcement dates pro-
incurred in building projects' is a revision of
posed are October 1999 for reasonable
Contractor'sDirect Loss and/orExpense, pub-
adjustment and 200L for physical improve-
lished in 1987. It has been amended by the
ments to a building structure.
original author in conjunction with the
ConstructionAdministrationand Management The amended Building Regulations and
Panel. 4 related 'Approved Document Part M:
Access and Facilitiesfor Disabled was
It is hoped that subscribers will find this published on 3 November People' 1998. The
guidance, which has been the subject of Regulations amend the limits on application
numerous requests, a valuable tool, whether so that the
scope of Part M will extend to new
as an aide-mémoire or as a re-introduction to from 25 October 1999 (the 1992
dwellings
an area that has not been visited for some edition of the
Approved Document will be
time. withdrawn on the same day). It should be
noted that the Regulations include a new
requirement specifically related to sanitary
conveniencesin new dwellings and transitional 1 The Common Arrangement of Work
provisions. This is intended to complement the I 3 SectionsforBuildingWorks (CAWS) is now
provisions under the Disability Discrimination available from RICS Books.
Actand ensure betteraccess to newdwellings.
Appointing a Quantity Surveyor: A Guide
CIRIA is working on a project to minimise 14 I forClients andSurveyors,a Guidance Note
risk on contaminated land. It will cover which incorporates the provisions of the
aspects such as current UK practice on the Housing Grants Act, is now available from RICS
apportionment of financial risk between Books. Documentation for the appointmentof
involved parties, and assess the usefulness, a building surveyor, which is being updated to
efficiency and cost ofcollateral warranties and incorporate the provisions of the Act, is also in
other financial risk management products. In preparation.
addition it will provide guidance to clients,
The Building Regulation and Control,
engineers, contractors, professional advisors
and funders on the mediation or redevelop- 1S I Commercial Property, and Health and
ment of ground-fill sites. Safety Practice Panels are currently being
consulted on Government proposals to amend
The RICS has been consulted by the the Fire Regulationsunder the Fire Precautions
B Government on a draft discussion paper (Workplace) Regulations consultation docu-
prepared by Oscar Faber on the reduction of ment 1997. The consultation document gives
CO2 emissions from buildings. RICS members details of the Govemments proposals to amend
from the Building Regulation and Control the Are Precautions(Workplace) Regulations to
Practice Panel also took part in Live brain- comply with the EuropeanFramework Directive
storming workshops. Suggested ideas included 89-391-EEC. It also discusses the best way to
improvements to wall and window values and proceed to deal with the consultative and leg-
the introduction of performance-testing the islative overlap between the amended regula-
completion to check building performance tions and existing regulations, where steps
with design. should be taken to reduce this latest overlap,
and the operation and effectiveness of the
The Construction Act Working Party is enforcement regime set out in the Fire
7 continuing to provide articles in CSM on Regulations. The response to this draft docu-
various aspects of legislation related to the ment was sentto the Government in November
Construction Act. An Owlion tape is planned, 1998 and the amended regulations are expect-
as are seminars in London and Coventry. ed to be in place before the end of 1999.
The Healthand Safety PracticePanel will be The membership of the Government
8 holding a seminar in March 1999 at the 16
I working group on combating cowboy
RICS in London on changes to the Asbestos builders has been announced and includes
Prohibition Regulations 1992 and the members from the constructionindustry. This
approved Codes of Practice that support them. group will work with four sub-groups dealing
with proposals such as the introduction of a
The Civil Engineering Contractors' Association's
9 (CECA) Schedulesof Dayworks Carried Out badge of quality and the foundation of
incidentalto Contract Work is now available. approved builder lists. The membership of
For more informationphone 017133L1 3776. sub-groups will be mixed between those
standing members of the main working party
and additional external experts. It is expected
1 A The Dilapidations Practice Panel is plan-
I U fling to continue a series of Dilapidations that a draft scheme for consultationshould be
Seminars in 1999. available in the spring of this year.
A Guidance Note for chartered surveyors The Government announced in November

117
I I actingas advocates is expected to be pro- I I that over 80 demonstration
projects have
duced in 1999 by RICS Books. Phone 0171- been signed up which will put into practice the
33Lj 3776 for more information. recommendations of Sir John Egan's report on
'Re-thinking Construction'.John Prescott stated
1 Year 2000 Guidance will shortly be avail- that "these projects will act as pathfindersfor
I able from Standards and Practice. the whole of industry and its customers in
setting the pace for increased efficiency".
325
The
SURVEYORS'
CONSTRUCTION
HANDBOOK
Bulletin Update October 1999
WELCOME TO THE LATEST SET
OF UPDATES TO
THESURVEVORS' CONSTRUCTION HANDBOOK
Thisupdate to The Surveyors'ConstructionHandbookcomprises two new sections:
SECTION 2.3 Elementsfor Buildings
SECTION2.4 Design and Build - Guidance for Employer'sAgents.
Elementsfor Buildings looks at the. BuildingCost lnformationSeMce(BCIS) elements. 'It considers

some of the 'uses for elemental information, including elemental cost analysis, structUring employer's
requirements, evaluating tenderproposals and compilingactivityschedules. It also provides a
complete definition fOreach element.
-
Design and Build Guidance for Employer's Agents looks at some of the tasks and responsibilities
that surveyors maybe asked to undertake when appointedas an employer's agent on a design and
build contract, It also provides a useful checklist of matters which should be considered when
compilingemployer's requirements.
It is hoped that subscribers will find this guidance a valuable tool, whetheras an aide-memo/re or as a
re-introductionto an area that has not been visited for some time.
The nextupdate will be published in December 1999 and will includetwonew sections on risk
management and value engineering.
3l
NEWS
The Water Byelawswere replaced in England The BuildingSurvey and Maintenance

and Wales by the Water Supply(Water Practice Panel are producingan Owlion
Fittings)Regulations on 1 July 1999. These cassette on the maintenance of buildings.
regulationsgovern the preventionofwaste The cassette will be available in late autumn
contamination, misuse and undue 1999.
consumptionofpublic water supplies. TheAnnual Conservation Symposium of the
The Water Byelaws1999 for Scotland, at the RICS BuildingConservation Group-is' being
time ofwriting, are still beingdiscussed. held at RICS in GreatGeorge Street, London
on 11 November1999.Topics being
A new version of the DETR's explanatory
discussed includenon-destructive
booklet on the PartyWall Act etc. was
investigative techniques and mechanical and
publishedin May. The new edition has been electrical services in historic buildings. For
revised to take accountof the most
furtherdetails phone 0171 33L1 3876.
frequentlyasked questions on the Act. The
booklet can be obtained from DETR Free The Mechanical and Electrical Engineering
Literature, PC Box 236, Wetherby,L237NB Group are preparinga guidance note,
Building ServicesProcurementGuide. Thisis -
The Building Survey and Maintenance
Practice Panel has prepared a guidance note, being published by RICS Books and should
be available from January2000. Please
BuildingMaintenance:Strategy, Planning çontactRICS Books for moredetails.
andprocurement. Thisis being published by
RICS Booksand should be available from JCT Limited has invitedthe RlçSto providea
December. Please contact RICS Booksfor simple procedure for resolving disputes
more details. betweenbuildersand owner/occupiers.The
result is an adjudicationschemewhich will
The Building Regulation and ontrol,
be used by parties to a new consumer
ConstructionDesign and Economics and
contractwhich iCT expects to publish in
Building Survey and Maintenance Practice October.
Panels have been consulted on Government
proposalsfor new guidelinesfOr Schemes of The DETR announced in Julythat research
Insurance for ApprovedInspectors. had revealed that therewas no evidence of
corrosionof galvanised wall ties from urea
The 1999 edition of the code of practice for
formaldehydefoam cavity wallinsulation.
rights ofaccess; goods; facilities; services
and premises came into force from 1 CIRIA have publisheda report entitled
October. This requiresservice providers to • 'Environmental Issues in Construction: A
make reasonable adjustments' for disabled Strategic Review'. The report defines recent
people.The DisabilityDiscrimination Act industry progress and highlightsthe
Working Partyhas been providing.articles on remaininggaps in guidance relatingto key
this important legislationin SM. In strategicenvironmentalareas suchas
conjunctionwith the article in the sustainable development, energyuse and
July/Augustissu, a factsheet providing resource use and recycling.
informationon disabledaccess was
produced.A copyof this fact sheetcan be
obtained by sendinga self—addressed ALi
envelope marked'Access' to HowardFlight,
Professional Services Executive, RICS, 12
GreatGeorge Street, London,SW1 P 3AD (no
stamp required).
321
The
SUR V EV 0 R 5'
CONSTRUCTION
HAND BOOK
Bulletin Update • December 1999
WELCOME TO THE LATEST SET
OF UPDATES TO
THE SURVEYORS' CONSTRUCTION HANDBOOK
This update to The Surveyors'ConstructionHandbookcomprises two new sections;
SEC11ON1.2 Value Engineering
SECTION '.3 The Managementof Risk
Value Engineering looks at undertaking value engineering on a construction project. It considers the
benefits that can be gained from such an exercise, as well as when and howit should be carried out.
The various stages of a value engineering workshopare also examined. The aim of this section is to
assist surveyors both in advising clients on the use ofvalueengineering and takingpart in a value
engineering exercise as part of the design team.
The Managementof Risk examines howto deal effectively with the risks associated with construction
projects. It considers the reasons for establishing a risk management strategyand the benefits that
can be gained from such a strategy. It also looks at howto identify,analyse and respondto risk. It is
aimedat surveyors whoneed an overview of the principals of risk management.
It is hoped that subscribers will find this guidance a valuable tool, whether asan aide-mëmo!re or asa
re-introduction to an area that has not been visited for some time.
Thenext update will be publishedin April 2000.

NEWS -
The contractadministrationdocumentsand Several changes have taken placerecentlyto

standardforms for quantitysurveyors and AsbestosRegulations.
building surveyors for use with JCT forms of (i) From 1 August 1999 the Asbestos
contractare currently being updated.They
(Licensing) Regulations requireemployees to
are due to be published by RICS Booksin holda licence to carry out works with
early 2000. Please contact RICS Books for asbestosinsulatingboard.
moredetails. jC
(ii) From 1 August 1999 the control ofAsbestos
AppointingaBuildingSurveyor, the revised atWork (Amendment)Regulations 1998
Conditions ofEngagement for Building
A impose a dutyon employees who carry out
Surveying Services,is due to be publishedin airsamplingto complywith the European
early 2000 by RICS Books.Please contact StandardENLI5001.
RICS Books for moredetails.
The Centre forAccessible Environments has (iii)The Asbestos (Prohibition)1992 is to be

issued asAsbestos(Prohibition)
publishedan updatedversion of their access
audits packand designingforaccessibility. (Amendment)Regulations 1999.These
amendments aim to achieve a ban on the
These consist ofa guide and a checklist for
reuse ofchrysotile.However, the
appraisingthe accessibility of public amendmentsallowall white asbestos that is
buildings.
currentlyin use to continueto be in use until
The DilapidationsPractice Panel is planning the end ofits life.
to revise the guidance note Dilapidationsto
take intoaccountnew court procedures. A
revised Owlion cassette on dilapidationsis
also planned.
329

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161325

Please note:References to the masculine include, where appropriate, the feminine.

ExtractsfromParry's Valuation and Conversion Tables, AW Davidson (1989),

Published by RICS Business Services Limited

No responsibility for loss occasionedto any person actingor refraining from

ISBN 0 85406 865 1

© RICSApril 1998. Copyright in all or part ofthis publication rests withthe

Printed in GreatBritain by Quorn SelectiveReproLtd, Loughborough.

This document incorporates the following amendments

Update 1 including bulletin update Apr 99

Update 2 including bulletin update Oct 99

HOPED WILL BECOME THE HANDY FIRST POINT OF REFERENCE TO WHICH

SURVEYORS WILL TURN WHEN THEY WANT TO REFRESH THEIR MEMORIES

OR TACKLE A NEW CONSTRUCTION-RELATED PROBLEM.

j Guidance notes and It has been difficult to define the

The new handbook will make this Maintenance is outside these

Material in the pipeline and for inclusion as

Furtherconsultationon the proposed 'all A Bill is currently before Parliament

A thorough review of the British Board The Government's Scheme for

The Royal Institution of Chartered Surveyors

Tel +44 (0)171 222 7000

Knowledge is of two kinds: we know a subject ourselves, or we know

The RECS has publishedthis Surveyors'ConstructionHandbook to help sur-

We hope that this Handbook will become an invaluableaid to your day-to-

Trevor Mole, FRICS

Major D.R. Bassett,Royal Engineers, for his contributionto the research

Professor J.A.J. Moohan, BA MA Hon. Assoc. RICS, The Nottingham

Alan Turner,JP FRICS ACIArb, author of BuildingProcurement, for per-

Part 1: The Client 1

Section 1.1: The Client's Requirements and Roles 1

Section 1.2: Value Engineering

Appendix B: Typical Example of a Value Engineering Process 1

Appendix C: Further Reading 1

2.1.1 Pre-contract Cost Planningand Cost Management 2

Appendix B: Format of Budget and Cost Plans 1

Appendix C: Costs And Values 1

Appendix D: Glossary of Terms for Taxation 1

Appendix E: Examples of Items of Expenditure Likely to Attract

Appendix F: Further Reading 1

Section 2.3: Elements for Buildings 1

2.3.2 Elemental Cost Analysis 1

Section 2.4: Design and Build - Guidance for Employer's Agents 1

Appendix B: Employer's Requirements/Contractor'sProposal Checklist 1

Section 3.1: Developingan Appropriate BuildingProcurement Strate 1

Appendix B: Further Reading 1

Part 4: Construction Administration and Management 1

Section 4.1: The Problems of Practical Completion 1

4.1.2 Standard Form Approaches 3

Appendix B: Table of Cases 1

Appendix C: Further Reading 1

4.2.1 General Principles 1

AppendixC: Ascertainingthe Cost of Head Office Overheads 1

Appendix E: Checklist of Steps Required when Considering

Appendix F: Further Reading 1

Section 4.3: The Management of Risk 1

Section 5.1: Surveying Safety 1

Section 5.3: Construction PracticePanel Roles Information 1

Section 5.4: Building Cost InformationService 1

Section 5.5: Building Maintenance Information 1

ABE Association ofBuilding Engineers

balancingcharge Part 2 Section2: Appendix C6, D8

The Surveyors' ConstructionHandbook Index (12/99) Effective from 1/1/00 Page 1

Page 2 Index (12/99) Effective from 1/1/00 The Surveyors' ConstructionHandbook

The Surveyors' ConstructionHandbook Index (12/99) Effective from 1/1/00 Page 3

Surveyor's Construction Handbook

Surveyor's Construction Handbook