Page 18 - Civil Engineering Project Management, Fourth Edition

The development of construction procedures
3
The great majority of all civil engineering projects undertaken by British
engineers in the UK and elsewhere have been, and still are, constructed
satisfactorily under the ICE or FIDIC Conditions. However, other methods
are also commonly used to meet special requirements as shown below, and
the ICE and FIDIC have developed other standard forms for such purposes
(see Chapter 4).
1.3 Other long-standing procedures

Lump sum construction contracts

Under the standard ICE or FIDIC Conditions, the financial outcome of a pro-
ject is not absolutely fixed, because the promoter has to pay for any extra work
caused by conditions ‘which an experienced contractor could not have fore-
seen’. This does not suit some promoters who wish to be certain what an
intended project will cost, so ‘fixed price’ contracts came into use, often for
a lump sum. Under them the construction contractor has to take all risks, such
as meeting unexpected ground conditions. Such fixed price contracts can be
satisfactory for both promoter and contractor for relatively simple, easily
defined works involving little below-ground work.
Naturally a contractor’s price for undertaking a contract for a fixed sum is
higher than for a bill-of-quantities contract for the same work under which he
is paid by measure of the work he is required to do. But this can suit a pro-
moter who prefers to be certain about his financial commitment and where
the works he requires can be well defined in advance. However, if the pos-
sible risks on the contractor appear high due to many imponderables – such as
the works being large or complicated, or ground conditions being uncertain –
then the extra charge made by the contractor for shouldering the risks may be
high. Should the promoter require amendments as construction proceeds,
then these will also prove expensive.

Cost reimbursement contracts

These contracts have been in use for many years on projects which involve
unforeseeable amounts or kinds of work – such as the repair of a dam or col-
lapsed tunnel, or repair of sea defences. Payment to the contractor is usually on
the basis of: (i) direct costs of materials, labour and plant used on the site; plus
(ii) a percentage addition for overhead costs; plus (iii) a fixed fee, or further
percentage on for profit. Often a cost reimbursement contract for specialist
work is negotiated with a suitably experienced contractor. If competitive bid-
ding is required this would be based on comparison of contractors’ quotations
for overheads and profit. The advantage is that the promoter’s engineer in