Page 224 - Civil Engineering Project Management, Fourth Edition

Civil Engineering Project Management
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Some items of cost may be pre-agreed in the contract, or agreed subse-
quently as applicable to the whole contract, such as any fee, staff salaries,
insurance, head office costs and use of contractor’s own plant. The coverage
of any such items must be clear to avoid possible duplication. Other costs will
need to be checked in detail to ensure they were expended for the works and
were reasonable in extent. Labour must be checked against wage sheets and
the labour records held by the engineer’s site staff. Hired plant can be checked
against invoices, but the charge for contractor-owned plant, if not agreed in
advance, may need checking by a specialist who has to allow for depreciation,
maintenance and other costs and avoid any duplication of profit. Materials
invoices must relate to actual materials used and discounts must be allowed
for. Sub-contractors’ quotations may need to be agreed in advance of the
award of contract, to satisfy the employer that the prices are competitive and
the terms acceptable.
Where a target cost has been set, it is necessary to keep a rolling check of costs
incurred against the proportion of the target work done, so as to identify any
significant differences and thus allow steps to be taken to investigate cost
increases and look for means of reducing any over-run.

16.10 Retention and other matters

The retention money as stated in the contract (usually 5 per cent in the UK but
subject to some maximum value), must be deducted from the total amount
calculated as due to the contractor in interim certificates for work done. When a
substantial completion certificate is issued, the retention held is halved for that
portion or whole of the works to which the certificate applies, the amount so
released being paid to the contractor. During the defects correction period
(often termed the maintenance period) which is stipulated in the contract, the
contractor undertakes to correct all matters listed by the engineer as needing
remedial action. At the end of this period the remainder of the retention is
to be released although a portion may be held back sufficient to cover any out-
standing defects.
The performance bond which may have been provided by the contractor
is normally not released until all defects have been dealt with, so the employer
has some protection against default of a contractor in this respect. It is
sometimes accepted that, after completion, any retention can be released by
substitution of a retention bond.
The contractor’s insurances will normally lapse once work, including remed-
ial work, has ended. It should be remembered, however, that after substantial
completion the normal contractor’s insurance cover does not cover the works
themselves since these have become the employer’s responsibility.
The resident engineer must forewarn the engineer when substantial com-
pletion of part or all of the works is likely. If this is later than the contract
period, or any extended period, liquidated damages may apply, as set out in