Page 49 - Civil Engineering Project Management, Fourth Edition

Civil Engineering Project Management
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for the employer since he can gain an income earlier from the project output.
Early completion also suits the contractor, since his overheads extend over
less time and his profit on the job thereby increases.
The problem with bonuses is that, if unforeseen conditions occur causing
the contractor a delay not of his own making, there may be a dispute about
how much extra time should be allowed to him. Bonuses should therefore be
a reasonable amount; not so large that they put the contractor on a win or lose
situation in respect of his whole profit.
(d) ‘Ex-contractual’ payments

These are payments made by an employer to a contractor which are not
authorized by the contract. They are occasionally paid when a contractor has
performed very much to the satisfaction of the employer but has shouldered
some extra cost clearly not attributable to his own actions, such as exception-
ally bad weather or some other misfortune outside his control. Only the
employer can decide to make an ex-contractual payment, not the engineer or
other person acting on his behalf; and the employer must himself have power
to make the payment. Hence a private person or company may be able to
make an ex-contractual payment; but a public authority will usually have no
such power.

(e) Pre-payments

An employer will rarely make an unconditional pre-payment, that is, a down
payment to a contractor at the start of the contract. He can, however, make early
payment to the contractor for provision of offices, laboratory, and transport for
the engineer’s staff on site, etc. (see Section 15.10). These matters by no means
cover the contractor’s outgoings for his initial set-up, especially when the pro-
ject is very large and overseas, so significant advance payments, secured by a
repayment bond, are often allowed.
On the Mangla Dam project in Pakistan the contractor needed to purchase
and bring a vast amount of constructional plant on site. To ease the financial
burden on the contractor, the employer (in effect the government) agreed to
purchase or pay for plant required by the contractor up to a value of 15 per
cent of the contractor’s tender price excluding contingencies. The employer
recovered this expenditure by deducting it in instalments over the first
30 months’ interim payments to the contractor under the contract. In this case
the employer could obtain further security for his down payment by retaining
ownership of the plant until he reimbursed his outlay on the plant.