Re: CHANGES IN QUANTITIES - INTERPRETATION

**RJM** Thu May 28, 2015 2:39 pm

Eng Mathias,

It is good now that we are in the same page on what we want tackle. For sure analysis is on the way but with fee (light touch). As start point, in order to move forward you need to have or gather the following information from your contract.

1. Rate build-up/breakdown of costs of the item from the contractor.
2. From the rate build -up you need to identify what are the "Fixed and Variable Cost" in executing the item.
3. Quantities in the BoQ.
4. Final Actual Measured Quantities.

Eng Mathias come back when you are ready.

Eng. Mathias Galibona Thu May 28, 2015 3:01 am

Dear Uwezo and RJM,

I do appreciate your comment. It seems that RJM has understood my concern hence I await you detailed analysis.

**RJM** Wed May 27, 2015 8:23 pm

Uwezo,

I doubt if the case under discussion is about "additional quantities of the same items" but rather "Changes in the Quantities" which could be "increase or decrease". If the situation at hand was "additional quantities of the same items" executed as "variation/change order" then, the regulation you have cited could have come into play.

Basis of the clause under discussion is as quoted by Eng Mathias and re-quoted below.

Section 1208 (b) of SSRW 2000 "The quantities set out in the Bill of Quantities are estimated quantities and are used for the comparison of bids and for awarding the Contract. It must be clearly understood that ONLY THE ACTUAL QUANTITIES of work done will be measured for payment and that the scheduled quantities may be increased or decreased as provided for in the Conditions of Contract."

Welcome!

uwezo Wed May 27, 2015 12:28 am

Dear Mathias. G, GWK & RJM,
Get your solution under Reg.61 (3) of PPR 2013 which stipulates that, a contract amendment for additional quantities of the same items shall use the same or lower unit prices as the original contract. In virtual of this regulation be well informed that the adjusted rate shall apply only to additional quantities and not to all quantities in the bill. I hope is understood between us

**RJM** Tue May 26, 2015 2:28 am

Eng Mathias,

To answer your question in brief, the adjusted new rate will apply for quantities executed. In principle, when final quanties are more than original quanties the adjusted new rate tends to be lower than the original rate in the BoQ and vice versa.

That's it for now.

Eng. Mathias Galibona Tue May 26, 2015 2:03 am

Dear GWK,

Assume all the methodology of adjusting the rate have been done in accordance to the Contract requirements then will the adjusted rate be used for additional quantities only or revised quantities in determining payments to the Contractor.

GWK Mon May 25, 2015 6:17 pm

Eng. Matias Galibona,

I’ve no answer. That is why I proposed a revision of the section 40.1 & 40.2 of LWK – GCC with intention of removing ambiguities on how the project manager will make the adjustment of the RATES as well as making sure the Client is full informed on the changes. Many other provision of the PPRA standard documents does not allow for rate adjustment. (my understand is that adjustment = alter, modify, vary, correct, amend etc)

I think the sections under discussion would be implementable if condition/specification provide how to do the adjustment as was provided in one of the conditions/specification which was in use some years back (90ties). The provision enabled adjustment of the rate depending on the quantities decrease/increase as follows;
If the item quantities were more than 20% then rate was to be decreased by 15percent???
If the item quantities were in the range of +/-20% of the original BoQ, the bid rate was applicable
and if the item quantities were less than 20% the rate was increased by 15percent????

Eng. Mathias Galibona Sun May 24, 2015 9:27 pm

Dear GWK,

I have gone through your reply and appreciate your comments and citations. It seems that you have the answer of the question but you hesitate to say so.

"Clause 16 of LWk-GCC: The Contractor shall construct and install the Works in accordance with the Specifications and Drawings". The revised quantities were obtained from the revised drawings. The drawings were revised by the Project Manager in order to accommodate the changes initiated by the Employer.

For the Project Manager to adjust the rate he has to undergo all the processes you have mentioned including consultation with the Employer (Client). After all has been done and the criteria have been met, it is obvious the Project Manager will CONTRACTUALLY have to adjust the rate.

Therefore, the question comes; will the adjusted rate be used for the revised quantities or will only be applicable for the increased quantities?

GWK Sat May 23, 2015 7:40 pm

Dear Eng. Mathias & RJM,

Section 1209 (a) of SSRW, 2000 continue to clarify application of bid rates; in computing the final Contract amount, payment shall be based on the actual quantity of authorized work done in accordance with the specifications and drawings. The bid rates shall apply, subject to the provisions of the Conditions of Contract, irrespective of whether the actual quantities are more or less than the scheduled quantities.

We should know the condition of contract between the Client and the Consultant as well. Because, I’m of opinion that, Clients engage Consultants to supervise the works and administer the contracts as their representatives and therefore, consultants are required to report to their Employer on every sensitive issue during implementation of contract including early warnings on circumstances that may increase the Contract price. LWK – GCC 34.1; The Contractor shall warn the Project Manager at the earliest opportunity of specific likely future events or circumstances that may adversely affect the quality of the work, increase the Contract Price or delay the execution of the Works. The Project Manager may require the Contractor to provide an estimate of the expected effect of the future event or circumstance on the Contract Price and Completion Date. The estimate shall be provided by the Contractor as soon as reasonably possible.

Clause 14.1 of PPRA GCC – Simple time based Contracts (Consultancy contracts), stipulates that; “The Services shall be performed at such locations as are specified in Appendix 1, to the Contract and, where the location of a particular task is not so specified, at such locations as the Client may approveEither the Project Manager or the Contractor may require the other to attend a management meeting. The business of a management meeting shall be to review the plans for remaining work and to deal with matters raised in accordance with the early warning procedure”. An advice to Clients is to make sure they prepare elaborate terms of Reference, setting deliverables which includes the consultants to prepare and submit to the accounting officer performance report on monthly basis or within any other period. PPR 2013, R 255.

Coming to LWK – GCC, section 40.1 & 40.2 of GCC LW, I propose to be revised with intention of removing ambiguity and making the Clients full informed on possible increase of the contract prices for budgetary reasons.

The ambiguity in question; what rate changes are meant here; 0 – 25 – No change! Initial contract price 0 – 1 – No change as well! (Does it mean the quantities increase of more than 1% to until contract is in 15% increase; the consultant can make changes without informing the client?)

Eng. Mathias Galibona Sat May 23, 2015 3:02 am

Hi RJM,

For extra information, the Standard Specifications for Roadworks 2000 (SSRW 2000) was part of the Contract Documents.

Section 1208 (b) of SSRW 2000 "The quantities set out in the Bill of Quantities are estimated quantities and are used for the comparison of bids and for awarding the Contract. It must be clearly understood that ONLY THE ACTUAL QUANTITIES of work done will be measured for payment and that the scheduled quantities may be increased or decreased as provided for in the Conditions of Contract."

I hope it will assist you in elaborating the above scenario.

Eng. Mathias Galibona Sat May 23, 2015 2:44 am

Hi RJM,

Thanks for your response. It is very unfortunate that you misunderstood the question. Let me explain it in detail using the following example;

The Bill of Quantities had Bill Item No. 64.01 (b) Cast in Situ Concrete Class 30/20 for structural members whose quantity was 400 cu.m. The FINAL QUANTITY was 652 cu.m implying that there was an increment of 252 cu.m. The percentage increase is 63%. The rate for this particular item was TZS 250,000 hence the amount increased was TZS 63,000,000. The Initial Contract Amount was 5,000,000,000. Percentage change of the amount is 1.26.

Therefore, in accordance to Sub-Clause 40.1, the final quantity of WORK DONE differs from the quantities in the BOQ for this particular item (Bill 64.01 (b) 63% which is greater than 25% and the change exceeds the Initial Contract Price by 1.26 which is also greater than 1%. This implies that the Project Manager shall SHALL ADJUST THE RATE to allow the change.

The QUESTION is; HOW WILL THE CONTRACTOR BE PAID? Will the adjusted rate be multiplied by final quantity (652 cu.m) or it will ONLY be multiplied by the increased quantity (252 cu.m) and the original rate shall be multiplied by the initial quantity (400 cu.m) in determination of the amount the Contractor is entitled.

I hope now it's clear RJM.

YOUR RESPONSE IS AWAITED.

**RJM** Fri May 22, 2015 11:51 pm

Eng Mathias,

The QUESTION: Is the adjusted rate applicable to the Revised Quantities of the particular Bill Item? OR is the adjusted rate applicable ONLY on the additional quantities.

1. It is unclear to me what "Revised Quantities of the particular Bill item" implies. What kind of revision are you referring to? Is it variation?

For the second part of your question, in case of additional quantities (variation order) the following rules will apply;

Rule 1: The rates in the contract [bill of quantities or schedule of rates] shall determine the valuation work of similar character and executed under similar condition as work priced in the contract.

This is to say for example if the rate for 0.1 m concrete bed in the contact (BoQ or schedule of rates) is say TZS 100,000 per square metre, the rate for similar work in variation order i.e. 0.1 m concrete bed is also TZS 100,000 per square metre. This is because the item in variation is similar in character and in working condition as that in the contract.

Rule 2: The said rates, where work not of a similar character or not executed under similar conditions shall be valued using the rates and prices in the Bill of Quantities as the basis for valuation so far as may be reasonable.

To quote the above example, if the work under variation would be 0.15 m thick concrete bed, the rate of TZS 100,000 per square metre for 0.1 m thick will serve as a basis. The method of get the price for 0.15 m thick is to build up from the first principle basing on the principle of six pillars of pricing with TZS 100,000 per square metre for 0.1 m thick concrete serving as a reference point.

Rule 3: If the work under variation is totally different from that in the contract, the rate shall mutually agreed or fair valuation.

Rate should basically base on the six pillars of pricing through the process of negotiation. It must be noted that an agreed rate method is not based on bargaing, haggling or horse trading but rather mainly based on the six pillars of pricing through established method of negotiation or bargaining. Sometimes known as agreed or negotiated rates.

Rule 1 and 2 adhere strictly to the rates in the BQ. Rates must apply even to work where dissimilar, subject to “reasonableness.” Rule 3 is a complete departure from the BQ rates as they are deemed "unreasonable". No indication as to how a rate should then be derived, except by agreement.

Eng Mathias while digest the above, I am reproducing the referred clauses and please take not of the underlined words.

If the final quantity of the work done differs from the quantity in the Bill of Quantities for the particular item by more than 25 percent, provided the change exceeds 1 percent of the Initial Contract Price, the Project Manager shall adjust the rate to allow for the change.

The Project Manager shall not adjust rates from changes in quantities if thereby the Initial Contract Price is exceeded by more than 15 percent, except with the prior approval of the Employer.

If requested by the Project Manager, the Contractor shall provide the Project Manager with a detailed cost breakdown of any rate in the Bill of Quantities.

That's it for now.

Eng. Mathias Galibona Thu May 21, 2015 2:42 am

During execution of a Project, the Contractor encountered a situation whereby the executed quantities of a particular Bill Item exceeded the quantities indicated in the Priced BOQ. The relevant Sub-Clause 40.1 of the LWK-GCC was used to determine whether the Project Manager was entitled to adjust the rate. Both criteria in the relevant Sub-Clause were met, hence the Project Manager adjusted the rate.

The QUESTION: Is the adjusted rate applicable to the Revised Quantities of the particular Bill Item? OR is the adjusted rate applicable ONLY on the additional quantities.

Immediate response will highly be appreciated.

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