Contract, Specification and QS Course Lecture Note

CEng 570: Contract Specification and Quantity Survey Lecture Notes: 2001 AY
CHAPETR I
PROCUREMENT AND CONTRACT
General Introduction
Construction Industry is an industry which is involved in the planning, execution and evaluation of
all types of civil works. Physical infrastructures such as Building, Communication and Energy
related construction works; Water supply and Sewerage civil works, etc are some of the major
projects / programs in the construction Industry.
The Construction Industry can be categorized into three major sectors; namely,
Transport and Communication (Road, Railway, Airway, and Telecommunication related physical
works); Water and Energy Works; and Buildings and Other Physical Infrastructures. Accordingly,
their capital budget requirements vary extensively depending on the focus the economical trend
requires for the nation development.
The main players in the construction industry are:

The Client: The client is the initiator and owner of the project
The Consultant: The consultant transfers the wish of the owner into realizable form and makes the
study, design and possibly the supervision.
The Contractor: The contractor is the one who performs the work.
Insurance Companies: A Contractor is required to provide bid bonds as a condition of being allowed
to bid, and then they must provide insurance for Performance bonds and payment bond prior to
award of the contract. Insurance companies provide bid bonds, performance and payment bonds,
and they also service the liability and property insurance needs of contractors.
Banks: Banks provide the working capital contractors need to build the project. Banks also provide
bonds for bid and performance.
Suppliers: The quality of a construction project is very dependent on the quality of the suppliers used
by individual contractors.
Permitting Agencies: represent the interests of public safety. They administer publicly funded
construction projects, and they ensure private construction projects comply with zoning laws and
building codes.
Public: The public is impacted by every construction activity. Impacts are both good and bad.
Resources for the Construction Industry
For most of the construction projects, the resources to look into are the following;
1. Human Resources / Labor or Workmen
2. Financial Resources / Fund
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AAU, FoT, Department of Civil Engineering Instructor: Abraham Assefa
3. Information Resources
4. Physical Resources such as Materials, Equipment and Other Assets
5. Services and Management.
From the above resources, physical and service resources require intensive procurement procedures and
thus are worth mentioning.
Physical Resources:
MATERIALS: The very large portion of a project cost is gone to material cost. As the material cost
component of the construction industry covers between 55-70% of the total construction cost.
EQUIPMENT: These days various plants, equipment, tools etc., are used very often in construction
activities. Depending on the types and nature of construction, machinery at site includes batching
plant, mixers, trucks, tractors, excavators, dampers, cranes, vibrators, pumps etc.
Services and Management:

SERVICES: Services such as acquisition of land, provisions of water supply, electric power,
communication systems, etc., are very much necessary in the construction industry. Without acquiring
such services, it is too hard to implement construction activities successfully. Therefore, well thought
and due consideration shall be given to services and shall be considered as one of the resources required
for civil works projects.
1.1. Stages in Construction
The following are the common formal stages for a construction project:
1.1.1 Inception and feasibility
At this stage the owner puts his visions and wishes and with this as the starting point, the various
groups (professionals) try to conceptualize the project and prepare a conceptual design. At this stage
the owner will heirs a consultant to formally design and develop the concept into a practicable
project.
1.1.2 Planning and Design stage

Planning is a function of devising the cause for future with a vision, formulated for the future state
of the organization or project. At this stage the consultant plans and designs the project based on the
owner’s requirement and the possible constraints.
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1.1.3 Tendering stage

At this stage contractors are invited to offer their best technical and financial offers as per the
conditions and specifications depicted in the contract documents. Usually a 2% of bid bond is
required so as not let him disappear.
1.1.4 Bid Evaluation / Evaluation of Tenders

The bids are evaluated based on:
• Compliance with the contractual terms and conditions,
• Correction of bid prices,
• Detailed analysis.
1.1.5 Award of Contract

After the negotiations have been successful, the contract will be awarded to the successful
contractor. The formal Steps might include:
• Write a letter of acceptance
• Write the letter to proceed with the works
• Performance bond: 10% a guarantee that he will do the job as per agreed
There are different methods & types of construction contracts. The owner generally makes the
selection. The type selected depends on the kind of work being performed and the conditions under
which it is being performed.
1.1.6 Construction Stage

Here is where the actual execution of the works takes place as per scheduled.
1.1.7 Commissioning and Acceptance

Commissioning is a process where by the contractor makes sure that all installed mechanical or
electrical parts are operational. During commissioning, therefore all such parts are run in the
presence of the client or his representative as per the conditions agreed. Acceptance has to stages:
a. Provisional acceptance:
In this acceptance, the client accepts the completed works on provisional basis for a period one year.
During this period all payments except the retention money are paid. The other option is to release
the retention money and require for a bank or insurance security.
b. Final acceptance:
At this stage the owner completely accepts the works executed and the retention money is released
to the contractor. But if the client found out some construction default during this period, he can
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oblige the contractor to work out that default or the client himself worked it out from the retention
money. The contractor is assumed to have completed his contractual obligation from this time on.
1.2 Introduction to Procurement
Construction Industry involves procurement and contract management systems in order to ensure
fair competition and distributions of obligations and rights among stakeholders. Competition helps:
• The Project Owners’ to acquire the five rights (Counterpart, Cost, Time, Quality and
Quantity) s/he is entitled to
• The Project Financiers’ and Regulators’ to value market principles and effective utilization
of finance such that lowest qualified bids takes the project , and
• The Project Providers’ to get impartial and neutral Opportunity for business.
Procurement is a process used to select the lowest competitive and qualified bidder for procuring
services or works or goods from potential competitors based on reasonable relevant criteria. It can also
be expressed as a method used to employ or buy services or works or goods for the value (in the form of
money) which includes reasonable profit. Essentially, a bid or te0nder is a binding offer or proposal to
furnish certain specified promises for the amount stated in the tender.
Physical infrastructures are cost extensive and appropriate savings obtained through competition are
the main factor behind the procurement process. An effective and efficient procurement method
ensures the following rights called the "Five Rights". These are The Right Quality, The Right
Quantity, The Right Cost / Price /, The Right Counterpart and The Right Time.
The Right Quality: It is indeed wasteful and not necessary to spend time, money and all the efforts for
procuring unqualified services or goods or works. Therefore, it is essential to ensure whether such
procurements are of the right quality. Right Quality is always based on two major factors. These are
the technical expectation and the economic consideration, i.e.; Price & Availability.
While the technical quality can be insured by the provisions of specifications and checking their
conformance reliability of the intended job; the economic consideration can be taken into account by
the competition initiated using procurement processes. This implies that a tender document should, as
much as possible, clearly specify the quality requirements and allow participation of qualified and
experienced firms for tendering.
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The Right Quantity: The quantity should be computed carefully and included in the BOQ correctly.
This is because it has an effect on the project cost and site organisation which is the bases for offering
the right price. If the quantity is found mistakenly small, it will have consequential effects such as:
• Project Budgeting will be affected due to excess quantities
• Construction planning will be affected and cause under stocking
• Tenderers can manipulate their offer due to it
• Overzealous contract administration is caused, and
• Contractor cash flow will be affected.
On the other hand if the quantity is mistakenly more, it will cause high stocking, more storing places
and risk of spoilage; unhealthy practices due to over budget provisions; and manipulation in tendering.
Therefore, provisions of the right quantity resolve the occurrences of the above stated effects. Two
major factors that can play important role in providing the right quality are Take-off-Sheet
Measurements and Resources Allocations.
The Right Cost / Price /: In strict terms the right cost usually relates itself very much to the quality
expected to accomplish the task. It is clear to say that it is difficult to get the right cost, however to
approach it, is a possibility. That is one of the causes for procurement to be processed. Tendering
together with negotiation and market intelligence techniques is the only way that ensures the right cost
and accomplishing the task successfully. Competition is the bases for determing the Right Cost or
Price.
The Right Counter Parts: This is to guarantee that the parties agreeing to accomplish the task shall be fit
to the job. That is, the Project Owner should know what his needs are as accurately as possible, be
competent to act as an Employer and should possess the finance. The Consultant shall exercise
reasonable skill, care and diligence in the performance of his obligations. If authorised to certify, decide
or exercise discretion, the Engineer do so fairly between the client and the third party not as an
arbitrator but as an independent professional acts by his skill and judgement. The contractor shall be
able to execute and maintain the task successfully with due care, diligence and provide all labours
including supervision thereof, materials, equipment, etc. Therefore, with the help of tendering, it is
possible to select the right counterparts.
The Right Time: The right time for the provision of resources and accomplishment of obligations of
each party shall be set and agreed. This usually relieves the extra cost incurred on the parties which will
make them to suffer. Besides if the project is not completed at the right time, its effects are devastating.
To insure prevention of such happenings scheduling with regard to right timing is essential.
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1.2.1 Type of Procurement
Procurement types can be classified based on the things to be procured and the way how they are
procured. There are six bases for classifying procurement methods. These are:
Things Bidders’ Geographical Procurement Procurement
Bases Procured Coverage Coverage Awareness Steps
Types Goods Competitive International General PN Single

Services Negotiated Regional Specific PN Two Staged
Works National Pre –
Local Qualification
Post -
Qualification
Table 1.1 – Types of Procurement

• Things to be Procured: Goods Vs Services Vs Works
Based on things to be procured, procurement types can be classified into three major categories;
namely, Procurement of Goods, Services and Works. Depending on the delivery system chosen
during the contract planning phase, mixed types of procurement types can be adopted.
Procurement of Goods: Physical resources used as components for undertaking consultancy services
and/or construction works such as Materials and Equipments are made available using Procurement
of Goods.
Procurement of Services: In the construction Industry procurement of services are often termed as
consultancy services procurement. These include services like pre-feasibility and feasibility studies,
design and contract administration of projects, Construction management consultancy services,
research or study based consultancy services, etc.
Procurement of Works: In the Construction Industry procurement of works mean the procurement of
contractors to carryout the actual physical infrastructures.
• Bidders’ Coverage: Competitive Vs Negotiated Tendering

Generally, procurement types can be classified into Competitive and Negotiated Tendering when
bidders’ coverage is taken as a basis for classification.
Competitive Tendering: The objective of competitive bidding is to acquire the goods, or works, or
services at the most economic cost to the project owner. This type of tendering is commonly used for
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the selection of better and capable winning bidder among the various eligible firms. Competitive
bidding can either be Open or Limited Competitive Bidding in the form their invitations.
As their name implies, while Open competitive bidding allows all eligible bidders to participate;
Limited competitive bidding allows a number of selected firms decided by the Project Owners in
consultation with concerned parties for qualification. The major difference between open and limited
competitive bidding is the addition of qualifying criteria beyond eligibility imposed on the procurement
type for limited competitive bidding.
Limited Competitive Bidding is often used when the nature and urgency of the work justifies to do so.
In this case limited numbers of eligible firms are invited to participate for the bid. Commonly short
listing is done based on the firms past performance, work load at present, presence of a firm in the
vicinity of the projects, knowledge of similar type of works before and financial and technical
capabilities of the firms. Besides, the listing shall take into account the renewal of licenses of the firm
and the specific requirements of the employer. These are some of the qualifying criteria used for
Limited Competitive Bidding. In such tendering, bidders can not be rejected as non-responsive for
being unqualified technically. Usually in such type of procurement, cost of projects might be higher
than expected. To minimise such effects, capable and competent professionals shall negotiate with the
winning firm.
Negotiated Tendering: Under certain circumstances, which shall be rare in practice, direct appointment
of an eligible firm can be exercised by Project Owners. The nomination of this direct invitation is
usually based on good performance, acquaintance with the Project Owner, for supplementary
agreements, etc. This kind of tendering is exceptionally exercised when the project under consideration
is very urgent or needs special skill whereby the required skill is rarely available. The main
disadvantage of this type of tendering is that the price offered can usually be higher than the
competitive bidding.
• Geographical Coverage: International Vs Regional Vs National Vs Local Tendering

Procurement can be made using any of the four methods based on geographical coverage: these are
International, Regional, National and Local Tendering. Such types of procurements are generally
caused by three major factors. These are Local Capacity, Financial Sources and Globalization.
When projects could not be carried out by local capacity, project owners are forced to make
tendering out of their localities. Policies of the financial sources dictate the type of tendering
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geographically. For instance, donor financed projects are often practicing International or Regional
Tendering. The World trend for Globalization and the principles of Free Trade and Trade
Liberalization also encourages international tendering. In practice, Preference Margins in the range
of 7% are applied to local, national or regional tenderers, which imply tender offers higher than 7 %
will be given preference to encourage local participation.
• Procurement Awareness: General and Specific Procurement Tendering

To enhance proof of competition and increase accessibility, projects are recommended to create
awareness starting from its initiation. Following this requirement, General Procurement Notice is
made during projects planning phase and it is only interests of the bidders are aroused because
sufficient tender documents are not available. This approach is used:
1. The Project Owners to
• identify interested bidders to issue Invitations by letters and save time;
• identify bidders relevant for the procurement required; and
• protect loss of cost in preparing lots of tender documents.
II. The Bidders to:
• give sufficient time to assess the cost of the project;
• protect loss of cost only to participate; and
• encourage competent bidders who wary about law-balling to participate.
General Procurement Notice (GPN) is of two types. These two types are based on their purpose
why and when they are notified. The first type is when the purpose is to create awareness and let
bidders’ prior information about upcoming projects such that they can follow up its development
and include them in their plan. This type of GPN is used for procurement of works and goods and
is often announced as soon as the design implementation service is started. The Second type is
when the purpose is to determine interested bidders who could be invited in the form of Limited
Competitive Tendering. This type of GPN is used for procurement of services and is often
announced after financial sources are determined. GPN covers the Employer and its financiers for
its project; Description of the project with its probable or planed implementation time; type of
procurement method and address where further information can be obtained.
Specific Procurement Notice (SPN) is an Invitation for Tender or a Request for Proposal when the
project is ready for implementation. SPN can be sent to those interested bidders identified
following GPN directly. Otherwise, it should be advertise on the bases of enlarging opportunities.
The contents of SPN are similar to The Form of Invitation to Tender is covered in section 1.6.
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• Procurement Steps: This includes Single Vs Two Staged; and Pre - Vs Post - Qualification
Tendering.
Single or Two Staged Tendering: Procurement can be made using a single or two staged tendering
process. They are related with whether tender packaging for submission separately and their
evaluations are staged for a single or two steps when invitations are made. Often two staged
biddings are made for the submission of technical and financial proposals separately and their
evaluations one after the other.
General Procurement Notice Further information can be obtained from:

The Gov. of Ethiopia has applied for / received a
from the for Euro which is used
(1)……………………………...
towards the ,
………………………………….
………………………………….
The project consists of the following components
planned to be completed over the 5 – Year period of
(2)……………………………….
…………………………………..
¾ …
…………………………………..
¾ …
¾ .,..
(3)……………………………….
¾ …
…………………………………..
¾ …
…………………………………..
Procurement for will be under ICB
and IFB will be advertised in local and selected
foreign newspapers. Procurement for Reference Number
will be under LCB advertised locally.
Figure 1.1: General Procurement Notice

Pre or Post Qualification Tendering: Procurement can also be based on Pre - or Post - Qualification
processes.
Prequalification is an internationally accepted practice in procurement management. It would normally

be required for civil works contract of which its nature and cost is large and complex. It is a procedure
in which eligible bidders are invited to provide evidence of their ability to perform the services required
by the employer. Prequalification is desirable because it enables the Employer to establish the
competence of companies subsequently evaluated. It is also in the interest of contractors since, if pre-
qualified, they will know that they are competing against a limited number of other firms, all of whom
possess the required competence and capability.
Pre - qualification can be of two types. The First is when companies are already considered qualified
during their licensing requirements which entitled them for a single stage tendering process. For
such types of tendering, the most important tender evaluation criteria become the low priced bid.
The Second is when two staged tendering is used to pre-qualify tenderers’ for their technical
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competency. Once bidders qualify for the tender, either the lowest priced bidder or the lowest
evaluated bidder based on the weighted average of the technical and financial scores will be
recommended for award.
The advantages of pre - qualification in procurement are:

To the Employer To the Bidder
Protect the employer against unqualified Saves bidders from the cost of preparing bids
bidders Assure pre-qualified bidders for their bid
Quicker Evaluation for only pre-qualified considerations
bidders Reduce low balling bidders from participation
Ensure award to least evaluated not lowest Make bidders to be better planned
bidder
Assess level of interest shown by bidders
Show competency & methods of
implementation
Pre - qualification should be based entirely on the ability of the bidder to carry out the required works
satisfactory. The following criteria are often used in determining this ability of the bidder;
¾ Experience and past performance,
¾ Health, Safety and Environment Records, if any,
¾ Capability in respect of personnel and equipment,
¾ Organizational arrangement and facilities,
¾ Financial Status, and
¾ Schedule of Commitments.
According FIDIC, 1994 recommended a procedural Flowchart for Procurement for Prequalification;
however, it is presented here with little modification to suit the current practices (Figure 1.2).
Post - qualification is a tendering type where Financial Evaluation is carried out first and rank bidders
on the basis of their offer for tender price. That is, Technical Evaluation will be done after the
Financial Evaluation. However, Technical Evaluation is performed step by step starting from the
lowest financially evaluated bidder until technically or cumulatively qualified bidder is determined.
The advantage of this approach is not to loose the lowest financially evaluated bidder and to save
time during technical evaluations. However, Post qualification approaches often cause to fix
evaluators on financial results and be locked and biased for successive technical evaluations.
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Procedure Employer / Consultant Contractors

Procurement and
Contract Strategy ¾ Delivery System
¾ Procurement Method Awareness on Future
Contract Planning ¾ Contract Type Business and Follow Up
¾ Action Plan
Phase
Pre-qualification
Documents ¾ Letter of Invitation
¾ Information about prequalification Collect information about
procedure the project and its location
Tender Document ¾ Project Information
Preparation ¾ Prequalification Application
Invitation To
Pre-qualify ¾ Advertisement
¾ Project Scope, Location, Source of ¾ Check Eligibility
finance ¾ Check Competitive
Tendering ¾ Issue, Submission and Opening Advantage
Phase dates of Tenders ¾ Collect Information
¾ Instructions to pre-qualify and ¾ Decide to participate
evaluation criteria
Issuance &
¾ Organization, Structure & Experience ¾ Request and Obtain Pre
Submission of Pre- ¾ Resources (Financial, Managerial, – Qualification docs.
qualification docs. Technical, Labor, Plant, Stock, etc) ¾ Request & Obtain
¾ Current Commitments Clarifications
Tendering ¾ Acknowledge Receipt ¾ Complete and Submit
Docs and Relevant Info
Phase
Opening & Analysis ¾ Open Tender in the presence of
of Pre – relevant attendee Attend Tender Opening
Qualification ¾ Evaluate for Eligibility, Technical, Ceremony
Organizational , Financial Capability
Tender Evaluation
Phase
Selection and
Notification of
¾ Pre-qualified tenderers are selected Acknowledge & Confirm
Tenders ¾ Winners are Notified Intention to participate in
succeeding tender
Tender Evaluation
Phase List of Tenderers
Figure 1.2: Procedural Flowchart for Pre-qualifying Bidders

1.3 Procurement and Contract Management
Procurement and Contract Management involves three major processes: Contract Planning,
Procurement Management and Contract Management (Figure 1.3).
1.3.1. Contract Planning

Construction projects are components of a certain business or development demands. That is, they
are formulated if and only if such businesses or development demands acknowledge their
contribution and it is a must to involve them. This requirement is dealt during the basic / strategic
planning phase of the over all business. This phase often pass through the identification, feasibility
and financing stages of Programs or Projects. Contract is a customary tool used to implement
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formulated programs or projects. As a result, contract planning becomes part of this basic / strategic
phase.
Delivery System Contract Formulation

Procurement Method Contract Administration
Contract Types Contract Closing
Contract Procurement Contract

Planning Management Management
Procurement Preparation
Tendering
Tender Evaluation & Notice of Acceptance
Figure 1.3: Procurement and Contract Management Processes
Contract planning includes decisions on proposed Delivery Systems, Procurement Methods and
Contract Types to be followed and used together with its provisions for alterations. This is because
such decisions are related to regulatory requirements such as:
• Ethical (Neutrality, Formality, and Impartiality);
• Economical: (Proof of Competition, Least Qualified and Evaluated Bidder);
• Accountable: (Obligations and Rights);
• HSE (Health, Safety and Environment); and
• Transparent: (Accessibility and Notice of Advertisement).
Procurement and Contract Management processes shall be based upon the approved contract
planning provisions; that is, the contract delivery system, the procurement method and contract
types decided upon. The approved contract provisions can only be changed following the change
process stated in the contract planning document and if and only if:
• the Environment and Context considered are not correctly analyzed or changed,
• their application can remarkably affect the objective of the project, and
• procurement management process justifies change of the Contract Types.
Once the validity of the contract provisions are checked once again and taken for granted or other
provisions are devised; Procurement Management followed by Contract Management can be
initiated, planned, implemented, monitored and closed.
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1.3.2. Procurement Management

Procurement Management is a process of selecting individuals or organizations to carry out the
intended services and / or works. Procurement Management is carried out based on the provisions
made during the contract planning phase of the Procurement and Contract Process. It involves the
preparation of procurement documents, their invitation and submission of tender proposals, and
Opening and Evaluation of tenders. On the bases of results from tender evaluations, the
procurement team will recommend the lowest responsive bidder for Contract Management Phase.
The following issues are necessary for a successful Procurement Management phase:
• knowing and ensuring the implementation of procurement related National and International
laws, rules and regulations,
• adherence to the provisions made during the contract planning phase including their change
processes that is; with respect to: Delivery Systems, Procurement Methods and Contract Types,
• establishment of a flexible procurement team, and
• adhering to the principles of Proof of competition, Impartiality, Neutrality, Accessibility and
Formality.
1.3.3. Contract Management

Contract Management is a process of reaching contractual agreement for implementation, its
administration and finally concluding the contract. Similar to the procurement management
process, it shall be based on the provisions decided during the contract planning phase. It involves
negotiation based on tender evaluation recommendations and signing of contractual agreement
followed by its administration for contractual implementation, progress tracking, and changes,
claim and disputes administrations.
The following issues are necessary for a successful Contract Management phase:
• knowing and ensuring the implementation of contract related National and International laws,
rules and regulations,
• adherence to the provisions made during the contract planning phase including their change
processes, that is; with respect to delivery Systems, Procurement Methods and Contract Types,
• identifying, recognizing and involving all potential or key stakeholders to form a contract team,
• understanding, mapping and monitoring all contract conditions agreed upon, and
• ability to administer changes, claims and disputes.
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1.5 Procurement and Contract Delivery Systems

Procurement and Contract Delivery system is the way Project Owners together with Project
Regulators and Financiers determine the assignment of responsibilities to Project Stakeholders
along the Construction Process. Procurement and Contract Delivery system is often determined
during the Basic Planning phase of Construction Project.
Generally, there are six types of Procurement and Contract Delivery systems. These are:
¾ Force Account,
¾ Design Bid Build (DBB),
¾ Design Build (DB) or Turnkey,
¾ Finance / Build Operate System (BOT),
¾ Construction/Facility Management Consultancy, &
¾ Alliances and Outsourcing.
Such Procurement and Contract delivery systems are developed overtime and are shown in Fig. 1.4
below. The development was based on problem solving for the previous type and the Development
of the Construction Industry technologically and management wise.
Force Account - Since development started
Design Bid Build (DBB) – 1950s / 1987
Design Build (DB) / Turnkey - 1970s Onwards / Mid 1990s
Finance / Design Build Operate - 1980s / ……
CM / Facility Management - Mid 1990s / 2000s
Alliances & Outsourcing – 2000s / 2000s
Figure 1.4: The different Procurement and Contract Delivery Systems and their development overtime
1.5.1 Force Account

When the Project Owners engage themselves to undertake the project, it is called a force account
delivery system. Often such a system is promoted if the Project Owners believe that there is a
comparative advantage in Cost, Time and Quality issues. Besides, when there is a lack of capacity from
the private sector to undertake very large and technologically new projects, public companies do
undertake such projects using Force account delivery systems.
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These days this type of delivery system is often used when projects are small and places are remote
such that reaching them is difficult and in general they are not attractive enough to call the attention of
Bidders. Besides when projects are spatially scattered and maintenance are to be done for schools,
colleges, health centres etc., such cases can be applied.
1.5.2 Design Bid Build (DBB)

This is the most practiced type of delivery system in the Construction Industry of Ethiopia since
the 1987. After project owners did prepare the Basic Planning that identifies construction project
programs, they call upon the participation of Design and / or Supervision Consultants either by
tender or by negotiated contracts. This consultant will carry out the design together with the
necessary tender documents which will be the bases for tendering to select contractors. These
process is called Design - Bid - Build and hence the name for such delivery system.
In this type of delivery system, projects are divided into different packages interfacing to each
other. Though the design and supervision consultant will be the prime professional on behalf of the
owner and largely the administrator of the construction contract; the employer takes the
responsibility of coordinating the various project packages and their respecting interfaces.
Besides, designers have not been required to guarantee results but rather methods. That is, they are
held accountable on the basis of their superior knowledge and sufficient competency and ability to
design with a reasonable degree of technical skills. As a result, contracts and courts focused on
professional duty of care, not results or project goals. Contractors are also responsible to construct
works with due care and diligence and complete them in accordance with the contract, but they are
not held responsible for design deficiencies.
Since the 1980s, this traditional approach becomes less popular due to the following factors:
¾ Severe Adversarial relations between the design and contract administration consultant and
the contractor
¾ Fragmented contract for the project owner
¾ Project owner responsibility for risks associated with the design and contract administration
¾ Non - Impartiality of the Design and Contract Administration services
¾ The inability of design and contract administration consultants to cope up with new
construction technologies and constructability issues of their designs
¾ Severe adversarial relationships between Urban Planners and Architects on the one hand;
and Architects and Engineers on the other hand on building projects
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¾ The indirect contractual obligation assigned for the Design and Contract Administration
consultants
¾ The incompatibility of consultancy fee to the desired activities they are required to provide,
etc.
¾ The following standard forms of DBB Conditions of Contract are known for use for such
delivery system:
¾ FIDIC White Book for Consultancy Services (Design and Supervision) and Red Book for
Construction Works
¾ Standard Conditions of Contract for Construction of Civil Works, 1994; MWUD
1.5.3 Design Build (DB) / Turnkey
Design Build or Turnkey Delivery system is a response to problems associated to the last two types
of delivery systems. These were promoting privatization and its business like approach to enhance
the Force Account System and reducing fragmentation, adversarial relations and Project Owners’
risk which are recurrent manifestations in the DBB delivery system.
Design Build or Turnkey by principle reduces numbers of procurement processes engaged in the
fragmented process and employ only one procurement process and a single contractor to provide the
entire Construction Implementation Process (Design and Construction Implementations). In the
1970s, large firms began to offer both design and construction services in order to provide project
owners with a single source for project delivery. At the beginning, this delivery system was limited
to complex projects such as industrial, big plants and big infrastructural constructions.
DB delivery system is common worldwide specifically for Private projects. This led lead
contracting firms to form a team or consortium of designers and specialty contractors who work
together to meet the entire demand. Such services are initiated after the Project Owner built the
project concept during the basic planning phase and brought to the DB Contracting Firms. The
project concept should clearly define the performance criteria such as output, input, waste and any
other performances the employer may desire. This makes an additional responsibility to the
contractor which is ¨fitness to purpose¨ according to the Orange Book of Fidic. Fitness to purpose is
beyond the professional duty of care and places liability on the contractor for any failure of the
design to perform the standards required.
Typical advantages of this system include:

¾ reducing fragmentation and adversarial relations between designers and constructors;
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¾ minimizing Project owners’ risk transferable due to Designers’ faults;

¾ accountability and entire responsibility for both design and construction which entitle the
employer to receive completed project is onto a single contractor;
¾ employers’ responsibility to co-ordinate interfaces between different project elements is
avoided;
¾ single point responsibility minimizes the opportunity to claims by the contractor due to design
related issues;
¾ coordination between design and construction processes will also be enhanced (both in
communication for constructability as well as in fast tracking); and
¾ the client budget or financial requirement is defined early enough in the development process.
¾ For this type of delivery systems, either joint ventures or firms with large design and
construction capabilities were able to participate.
The disadvantage of this delivery system is loss of control, cost of tender and cost of risks.
¾ Since limited supervisory role by the employer representative is practiced; which is relatively
flexible and makes the employer distanced from the whole process, the employer has little
chance to understand what is developed and entertain variations in requirements implying loss
of control.
¾ Contractors in order to provide reasonable offer, their tender cost is higher than in the case for
DBB delivery system. This is because they need to carryout acceptable design for project cost
offers. Though it was not practiced often, employers who shared costs related to tendering are
informed to get seriously considered offers. World Bank suggested a Two staged procurement
method based first on technical merit and followed by financial competition and not for more
than six bidders.
¾ The increase in risk transferred onto the contractor will be counterbalanced by the increase in
contract prices which can be taken to include these costs of risks.
Projects carried out using DB delivery system are often called Turnkey Projects because a single
contractor is responsible to hand over the completed facility and let the Project owner to turn the
key and gets in. Often Turnkey projects use Lump-Sum contract type which will be discussed in
section top follow.
1.5.4 Finance / Build Operate Transfer (BOT)
Build - Operate - Transfer is a form of procurement and contract delivery system that promotes
Public Private Partnership (PPP) in which a private company is contracted to finance, design,
___________________________________17____________________________________
construct, operate for a certain period (usually 10 years) and transfer. BOT contractors look to
project financiers for the realization of projects through equity contributions or credits. Such
provisions are different from budgetized finances such that they involve no or limited re – course
which means the project owner is not responsible for any liability other than force majeure and
agreed upon claim adjustments. This obliges that projects should first be viable for revenue
generation in order to payback its depts.
The Typical BOT contract is the process whereby a government grants a concession to a project
development company to develop and operate what would normally be a public sector project, for a
given period of time known as the concession period. BOT project involves a potentially complex
contractual structure. The Operation period between completion and transfer gives the contractor
an opportunity to verify the quality of the output of the services and works, and train the employer
personnel on how to manage the facility afterwards. In some BOT contracts, defect liability period
will be included in order to ensure the quality of the facility during transfer. This is because,
operators in an attempt to save costs, may decrease operating and maintenance expenditures
towards the end of the concession period.
This delivery system is advantageous because of three major factors:

¾ it minimizes owners’ scarcity of financial resources;
¾ It devoid of considerable risks from the project owners and lesson regulatory activities; and
¾ the facility is well operated and transferred with free of charge or minimum compensations to
project owners.
Such delivery system requires appropriate packaging of projects and their definition clearly. It is
advisable to start with small projects and tries to develop experience and expertise to make such
delivery system successful. Most BOT projects failed because of their built up and engagement in
very large projects which is an extremely risky business for contractors. Consortium of contractors
is used to carry out such projects. The increasing popularity of the BOT project is largely due to a
shortage of public funding and the opinion that the facility will be more efficiently managed by a
private entity.
The following standard forms of BOT Conditions of Contract are known for use for such delivery
systems: FIDIC Yellow Book
___________________________________18____________________________________
1.5.5 Construction / Facility Management Consultancy
Construction Management Consultancy Delivery System is a response to problems associated with

DB and BOT where the Project Owner was not well represented for its benefit and the problem of
fragmentation between Planning and Implementation. As a result, construction management
consultancy firm is used to coordinate all activities from concept inception through acceptance of
the facility. Facility management consultancy adds operation of facility during operation to
Construction Management Consultancy.
Construction Management service in such delivery system include the management activities
related to a construction program carried out during the Basic Planning, Design & Construction
Implementation and its completion process that contributes for the successful completion of
projects. The main difference of this delivery system is that, while all the others involve only
during the implementation phase after major decisions was made during the Basic planning phase of
the construction process, it is involved in the whole construction processes.
Construction Management Consultancy service are particularly attractive to organizations that

involve in construction physical infrastructures such as MoE, MoH, Real Estate Organizations,
MoWRs, MoT&C, etc. Construction Management Consultants then represents Project Owners to
carry out the following services:
¾ Feasibility studies of Construction related services
¾ Plan and Monitor the Triple Constraints of Project Performances
¾ Lead and Organize regulatory systems of the Construction Industry
¾ Valuation, Quantity Surveying and Procurement and Contract Management Services
1.5.6 Partnering, Alliances, Outsourcing (Running and Specialized Delivery System)
The need for constructing quicker, cheaper and to a higher quality of physical infrastructure by
clients and at the same time with very minimized or no dispute questioned fragmentation of
packaging, costs related to wastes and overheads, single staged procurement systems, involving in
less competitive and comparative advantage for services and works and existing stakeholders
relationships. As a result,
¾ running delivery system using Partnering and Alliances,
¾ specialized delivery system using Outsourcing,
___________________________________19____________________________________
¾ fast tracking, parallel and coordinated implementations using Concurrent Engineering and Just
in Time principles
And focuses most on management of relationships and value adding to ensure quicker, cheaper and
quality services and products with less disputes are recent developments. These systems require
overcoming cultural and behavioral barriers among interest groups and control motivated
performance based management. These types of delivery systems are often the bases behind DB,
BOT, FM\CM consultancy delivery systems but their at most and recent developments.
1.6 Procurement Management
Procurement Management process can be idealized into three major processes. These include
Preparation, Tendering, and Evaluation (including Award Recommendation) Processes (Figure 1.5).
Procurement Team Preliminary Evaluation

Tender Document Detail Evaluation
Approval of Tender Docs Award Recommendations
Procurement Tendering Tender

Preparation (Invitation - Opening) Evaluation
Invitation
Clarification
Submission and Opening
Figure 1.5: Procurement Management Process

Procurement Preparation phase is meant for the formation of a Procurement Team; the preparation
of Tender Documents and their approval for procurement implementations.
Procurement Team: Ethiopian Procurement Regulation states that a Procurement team consisting of a
minimum of five members shall be established. As Tender Evaluation is a joint technical and
commercial exercise, the project owner shall consider that the necessary experts shall be composed in
the procurement team.
Tender Documents are prepared to:

¾ Instruct bidders on the procedures for the preparation and submissions of bids,
¾ Inform prospective bidders about the nature of things to be procured,
¾ Inform bidders about the criteria for evaluation and selection of the successful bidder, and
___________________________________20____________________________________
¾ lay down the contract conditions, delivery system, procurement methods and contract types of
the project.
Tender documents include:

1. Form of Invitation to Tender or Request for Proposals (Box 1.1);
2. Instruction to Tenderers (Standard and / or Particular information – Box 1.2) or Terms
of References;
3. Prequalification Documents if necessary – Refer procurement methods based on stages
(Section 1.3);
4. Forms of Tender - Refer Contract Documents (Chapter 2);
5. Forms of Contract Agreement - Refer Contract Documents (Chapter 2);
6. General and Particular Conditions of Contract – Refer Contract Documents (Chapter
2);
7. Bill of Quantities and Drawings - Refer Contract Documents (Chapter 4);
8. Technical Specifications & Methods of Measurement – Refer Contract Document
(Chapter 3 & 4); and
9. Other Forms, Formats and Schedules – Refer Contract Document Parts (Chapter 2).
Approval of Tender Documents: Regulatory requirements enforced for:

¾ Budgeting, Credit, Assistance and Grant Policies;
¾ Health, Safety and Environmental Requirements; and
¾ Professional, Ethical and Legal Requirements
And demand checking, renewal and approvals of Tender Documents. Check list for review is the
best practice used for Tender Documents approval (Box 1.3).
Tendering Phase includes Invitation, Clarification, Submission and Opening of tenders. Normally
open tenders are floated for a period between 30 to 45 days. Limited and Negotiated tenders can be
invited between 7 to 15 days. Invitations shall widened opportunities to the project owner by
reaching all potential and eligible competitors. The invitation to tender shall clearly state:
¾ the owner and his desirous service or ¾ how long the tender will be floated,
works ¾ how should the tender offer be packed,
¾ eligibility requirements, and
¾ place to get further information, ¾ when and where submission and opening
¾ where to purchase & submit tender of tender will take place.
documents,
___________________________________21____________________________________
Contract Specification and Quantity Survey Lecture Notes: 2001 AY
Box 1.1: Form of Invitation to Tender
Form of Invitation for Tender (IFT) is a requisition for Wax sealed envelops containing offer for furnishing all
interested bidders to participate for the procurement of services / the necessary labor, equipment and material for
works / goods. They shall be: performing satisfactorily and completing of all works
as illustrated and described in the tender documents
9 in accordance with the approved provisions of the
shall be deposited in ……
contract planning phase and applicable laws
9 made public through the wide covering media, The envelope shall be submitted as follows
newsletter, notice boards, etc A separate wax sealed envelope and marked
“Tender Security” carrying contractor’s Tender
Usually Invitations for Tender include:
Security as and statement of qualification.
9 Name and address of Institutions issuing the invitation A second wax sealed envelope and marked
“Original Tender Document” carrying the original
and Clarification if requested,
Tender Offer.
9 Objective and Requirements of the Invitations, A third wax sealed envelope and marked “Copy
of Tender Document” carrying the copy of the
9 Stages and accordingly qualification terms
Tender Offer.
9 Brief descriptions of the project A fourth wax sealed envelope and marked
“Tender Offer” carrying all the above three
9 Sources of Fund and Eligibility requirements
envelope.
9 Completion time, if necessary All envelopes shall bear the following reference
________________________________________
9 Date, Place, Time and Conditions to obtain, submit and
________________________________________
open tender documents The Outer and Inner envelopes shall bear the full
address of the bidder. The outer envelope shall
Sample Form for Invitation to Tender for Construction
also bear the following statement:
Works “DO NOT OPEN BEFORE …… HRS ON …..
OF …., 20 ….
The ……. has received a loan / grant from …. in ….
The Original Tender Envelope shall be opened if
towards the cost of ….. and it is intended that part of the
and only if the Tender Security Envelope carrying
proceeds of this loan will be applied to eligible payments
the security & statement of qualification is valid.
under the contract for ….. This Tender is open to all
bidders from eligible source countries as defined in the …. Bids will be opened in public and read aloud in the
presence of Tenderers or their authorized representative
The ….. invites sealed bids from eligible bidders of
who choose to attend at …. On ….
Categories …. with renewed license and tax registration
for the year under tender and / or equivalent eligible The eligible bidder shall:
bidder for the construction and completion of …. Read the tender documents particularly the ITB and
Technical Specifications before rating BOQs,
The Project consists of the following …. together with ………
Visit and investigate the site of works (authorization
Item No. Description Area (m2) Remark shall be obtained from the Employer on receipt of
written request) before rating BOQs,
Be required to furnish, if found a successful winner,
a performance security from a surety approved by
the Employer, in the sum of a minimum of Ten
A complete set of bidding documents may be purchased Percent (10 %) of the total contract sum for the
by interested bidders on submission of a written faithful performance of the works in accordance with
application to …., and upon payment of a nonrefundable the contract documents.
fee of Birr …….. at or before …. on ….
The ……. Reserves the right to reject any or all bids, to
Interested eligible bidders may obtain further information waive informalities, to advertise for new bids or to
from, and acquire the bidding documents, at the office of proceed and do the work otherwise as may be deemed
the Employer at …. to be for its best interest without giving reasons for
All bids must be accompanied by a security of ….. of the doing so.
bid amount in Birr or an equivalent amount in a freely ___________________
convertible currency.
___________________________________22____________________________________
Box 1.2: Instruction to Bidders
Instruction to Bidder (ITB) is intended to acquaint potential competitors with the nature of the tender and shall provide all the
necessary information to enable bidders to prepare their offer in accordance with the requirements of the Project Owners. Whenever
necessary, it will be supplemented by particular information which cannot be standardized or generalized in the General ITB document.
The ITB document includes:
9 Introductory Parts covering sources of fund, description of the project, eligibility and qualification requirements, and necessary
obligations concerning the cost of tendering, site visits, etc.
9 Tender Document Parts eliciting the contents, clarification and amendment processes.
9 Tender Preparation Parts which states the language, documents comprising and their precedence, form of tender and
appendix thereto requirements, and alternative offer and formats and signing of bids requirements.
9 Tender Submission part stressing sealing and marking of bids, deadline for submission of tenders, and modification and
withdrawals.
9 Tender Opening and Evaluation Parts covering procedures and criteria for opening and evaluation of tenders, and preference
for domestic or regional preferences.
9 Tender Award Parts stating Award criteria and procedures, and Rejection Rights and Obligations
Samples can be:
9 Particular Instruction to Bidders, MWUD 1995
9 FIDIC White Book & Tendering Procedures
Box 1.3: Checklist Requirements for Tender Document Reviews
Prepare Checklist for

¾ Request For Proposal including Proposed Program and Terms of References
¾ Architectural, Structural, Electrical and Sanitary Preliminary and Final Designs
¾ Feasibility Studies for Big Projects
¾ Road and Bridge Designs
¾ Water Works Designs
¾ Contract Documents
¾ General Points
Clarifications can either be requested by interested bidder or carried out using a pre - tender
clarification meeting. In both cases, issues clarified shall be sent (written) to all bidders
participating for the intended services or works. The bidders shall submit their offer on or before
the submission date and time. Late bids are automatically rejected.
Tendering Phase includes Invitation, Clarification, Submission and Opening of tenders. Normally
open tenders are floated for a period between 30 to 45 days. Limited and Negotiated tenders can be
invited between 7 to 15 days. Invitations shall widened opportunities to the project owner by
reaching all potential and eligible competitors. The invitation to tender shall clearly state:
___________________________________23____________________________________
¾ the owner and his desirous service or

works
¾ eligibility requirements,
¾ place to get further information,
¾ where to purchase & submit tender
documents,
¾ how long the tender will be floated,
¾ how should the tender offer be packed,
and
¾ when and where submission and opening
of tender will take place.
___________________________________24____________________________________
CEng 570 – Contract Specification and Quantity Survey Lecture Notes: 2001 AY
Clarifications can either be requested by interested bidder or carried out using a pre - tender
clarification meeting. In both cases, issues clarified shall be sent (written) to all bidders participating
for the intended services or works. The bidders shall submit their offer on or before the submission date
and time. Late bids are automatically rejected.
Tender Opening: Bids shall be opened in public on the date, at the time and place mentioned in the
invitation to tender and stipulated in the tender documents. Ethiopian practice in tender opening for public
construction projects is that, two representatives from MWUD in addition to the Project Owner,
Consultant (if available), and Contractors (Who wish to attend) representatives shall attend during the
tender opening ceremony.
The following will be carried out during tender opening:-
¾ Tender Attendee members shall take their place and be registered,

¾ Tender box opened and checked for faulty things,
¾ Check the tender is the right one,
¾ Bids will be opened one after the other,
¾ All necessary data which deem useful such as Project Name, Name of bidder, Bid Bond Amount,
Tender Price, etc. will be read aloud and recorded at the opening of bids.
¾ Bidders representative shall sign a register to attest their presence during opening, and
¾ Tender committee members shall sign on the Tender documents.
Tender Evaluation Phase: is made to determine and make award recommendation for the least
evaluated bidder using preliminary and detail evaluations. The recommended winner may or may not
necessarily be the lowest bidder. Factors such as technical qualification, completion time, commercial
terms of the offer, etc are used in determining the least evaluated bidder.
Preliminary Evaluations are made for Eligibility and Arithmetic Review requirements. Before
commencing the actual evaluation, it is useful and recommended to complete a Basic Data Sheet for
each tender to record key information and enable coding.
Eligibility Requirements: Tenders are subjected to eligibility qualifications before they enter to bid and
their respective evaluations. Most often sited issues considered in eligibility requirements are:
_________________________________________________________________________
25
¾ Valid & Up to date Trade and Professional License,

¾ Valid & Up to date Membership to Financier Organizations,
¾ Valid provision of Bid Security or Bond,
¾ Completeness and submittals of all required documents,
¾ Turnover requirements fulfilled
¾ Power of Attorney, Signature & Sealing Requirements, and
¾ Appropriate Invitation, Packaging and Submission Requirements.
These eligibility requirements together with basic alterations of the conditions of the tender will be
considered for responsiveness or not. If the bidder offer provided weighs a major deviation from the
tender condition, the tender will be considered non - responsive and could not be further considered.
But if it is minor deviation, either the procurement team use their discretionary power to request
clarification or the case will be recorded and taken up during negotiation if the respective winner
become the least evaluated tender. When the first approach is chosen, the bidder is not allowed to
change any information that can substantially affect the tender evaluation. For guideline during tender
evaluation; table - outlined when a tender is considered major deviation or not.
Major Deviations Minor Deviations

Affecting the validity of the bid Do not affect the project triple constraints
Rejection or Disqualifying conditions stated Do not result in change of Bid Price
Substantial effect on the Bid Price Non conditional tenders
Arithmetic Review: Most tenders are often submitted hastily. As a result, tenders are not arithmetic
error free. If tenders are processed without arithmetic checks, on the first place tenders are not
evaluated on the bases of equal merits and if they become binding contracts being over-sighted, they
will be the cause for potential disputes. Therefore, it is a formal evaluation process to review
arithmetics before carrying out detail evaluations. Arithmetic review can be done if and only when
financial proposals are opened.
Detail Evaluations include Technical, Commercial and Financial Qualification requirements.

Evaluations at this stage should first and foremost critically see the technical and commercial offers and
establish system that can ensure common bases for comparison. Finally, the Financial offer will be
updated using Absolute Results from Commercial comparisons
_________________________________________________________________________
26
Technical Requirements: See Pre Qualification, Section 1.3.

Commercial Evaluation: This includes Benefit Forgone due to Completion Time; Additional Costs due
to differences in Foreign Currency Exchange and Advance Payment requirements; and Provisions of
Domestic or Regional Preference Margins.
¾ Benefit Forgone due to Completion Time

When tenders are offered with different completion times, comparisons are made to determine the
benefit forgone taking into account the least acceptable completion time as a basis for competitions.
The Benefit Forgone (BF) due to additional completion time can be computed using the following
expressions:
BF = (FV – TO) / (1 + i)n; FV = TO (1 + i)n
TO = Tender Offer after Arithmetic Check; n = Completion time in days
i = Discount Rate = 0.05 % per day = 1.5 % per month; FV = Future Value
¾ Additional cost due to

o Foreign Currency Exchange requirements
When tenders have provisions to quote different currencies, their comparison will be made based on
determining their effects due to the additional cost incurred fro variations in currency exchange
requirements. It is then recommended to convert all tender prices into one currency; often the
Financiers’ or other widely used and accepted Currency called Common Currency. For currency
conversion, selling rates of Bank published by an official source and applicable for transactions shall be
used.
Additional cost due to Foreign Currency Exchange requirements can then be determined using selling
rates at
o 15 days prior to tender submission date
o Tender Opening Date
o Decision for Award or Expiry of Tender Validity date
¾ Advance Payment
When different amounts of advance payment are requested as part of the tender offer, one could not
directly evaluate the tender price and determine the lowest evaluated bidder. This violates the principle
of competition on the same bases. Therefore, the evaluation should take minimum advance payment
_________________________________________________________________________
27
request as a basis and consider others for additional cost incurred due to different mobilization advance
requirements.
The Additional Cost due to differences in mobilization advance requirements can be computed from
the following expressions:
APAC = {(AP x TO) / 100} – PV; PV = A x PWF; A = {(AL%) x TO} / n; PWF = {(1 + i)n – 1} /
{i(1 + n)n}
AP = Advance Payment Requirement in %; TO = Tender Offer after Arithmetic Check;
i = Discount Rate = 0.04 % per day; n = Completion time in days
PWF = Present Worth Factor; PV = Present Value
¾ Domestic and / or Regional Preference
Domestic or regional preference margin is a provision to give preference to local companies even if
their bid offer is not over by a percentage often equals 7.5 - 10 % for construction works. This implies
that domestic or regional companies can be awarded the tender even if they are not lowest in tender
price of the evaluated bidders using all the other criteria.
A contractor can be eligible for such preference margin if and only if;
o Its legal constitution is in accordance with the Employers’ Country / Region
o It is registered according to rules and regulations of the Employers’ Country / Region
o It has proof that its majority of works are undertaken in the Employers’ Country / Region
o Its majority of capital shares are held by the Employers’ Country / Region nationals
o Its majority of the board of directors members are the Employers’ Country / Region nationals
o Its 50 % key personnel are nationals of the Employers’ Country / Region
o Its arrangement to execute the work should not involve major part of its work or net profit other
than the Employers’ Country / Region Nationals or Co - Companies
Financial Offer Comparison: After all commercial comparisons are considered on the same bases; the
Tender offer will be adjusted based on the Cost - Benefit principle which involves adding costs and
benefits foregone. Besides, the preference margin will also be deducted and Least evaluated Bidder is
Determined. That is:
_________________________________________________________________________
28
TO evaluated = (TO + BFCT + ACAP + ACFE + ACPM)

Besides, Financial offers per groups of trades of works are compared in order to evaluate whether
tenders are front loaded or not. Front loading often cause disruption of projects or overzealous
contractual negotiations.
Rejection of All Tenders though is solely the power of the employer to decide, for the sake of fairness it
is recommended that such rights shall be exercised in the following cases:
o All Tenders are found non – responsive during the Preliminary evaluations
o Evidences of lack of competitions such as collusion among bidders, monopoly, etc
o Lowest responsive offer is found unreasonably high.
Tender Evaluation Example

Given the following Bid Opening Data, Evaluate their offer; that is, determine the Least Evaluated
Tender for Award Recommendations and Write the Tender Evaluation Report.
Project: Fechfachit Campus Tender No.: 001 / 88 Engineer’s Estimate: Birr 20,877,188.00
Date of Invitation: Sept. 30, 1995 Procurement Method: ICB No. of Bid Sold: 8
No. of Bids Submitted: 6 Bid Submission Date: Nov. 15, 1996 Bid Validity Period: 45 Cal Days
Selling Ex. Rate 15 days before: 1 USD = Birr 6.30 Selling Ex. Rate for Evaluation: 1 USD = Birr 6.31
i = 0.05 % per day = 1.5 % per month for Completion Time; i = 0.04 % per day for Advance Payment computations
Domestic Preference Margin = 7.5 %n Completion Time: 645 cal. Days
Tender
Tender Security Perf. Adv Comp Foreign
No Bidders Cat. Offer(TS) Security Req’d Time Ex. Rebate
TO
Amount Type Req’d
1 DCM 1F 17,630,915.11
31,746 CPO 20 % 20 % 645 55 %
USD USD
2 CGTS 1 L 22,145,153.10 260,000 ‘’ 10 % 705
USD
3 CGCS 1 L 18,146,822.49 250,000 ‘’ 10 % 705 3%
USD
4 CECCS 1 F 21,236,399.00 40,000 ‘’ 20 % 705 50 %
USD USD
5 CGCA 1 L 24,110,160.00 300,000 ‘’ 10 % 20 % 705 15 %
USD USD
6 CBAS 1 L 22,766,237.75 250,000 ‘’ 10 % 20 % 705
USD
Required Minimum Tender Security = 1 % of TO; F = Foreign Company and L = Local Company
_________________________________________________________________________
29
Tender offer after Arithmetic Check was found as

Tenderers DCM CGTS CGCS CECCS CGCA CBAS
Tender 17,695,206.70 21,200,883.60 18,163,888.91 21,229,904.11 23,885.300.33 20,953,625.22
Offer
Turnover of Companies for the last Five Years
1991 361,275,260.40 --- --- 2,259,278,000.00 --- 4,571,118.00
1992 338,197,052.30 --- --- 1,663,141,000.00 --- 9,377,632.00
1993 432,790,201.30 343,796.00 --- 2,187,401,000.00 --- 12,680,696.00
1994 550,511,109.90 6,659,457.00 --- 2,416,035,000.00 --- 18,377,772.00
1995 --- 22,068,798.00 63,160,062.88 --- 54,145,000.00 18,099,520.00
Currency Egyptian Birr Birr USD Birr Birr
Pound
Ex. 1 USD = 2.21 6.25 6.25 1.00 6.25 6.25
Rate**
Required Turnover = 5 Mill. USD taking their maximum turnover over the five years.
** Exchange rate used is selling price at their maximum turnover within the last five years.
Tender Evaluation
Introduction
Tender No. 001 / 88 for the project Fechfachit Campus was floated by the …… of FDRE on the 5th of
Oct, 1995. Its invitation was made on widely covering News paper in Ethiopia and through Ethiopian
Embassies worldwide; namely, the Ethiopian Herald. As a result, eight bidders bought the tender
document and six of them submitted their offer. The Bid was opened on 1st of December, 1995 and basic
data (Table 1, Annex 1 – Basic Data Sheet) were recorded in the presence of the Employer tender
committee, Regulatory bodies representatives and bidders who choose to attend. Besides, Consecutive
Coding from R to W were assigned for each tenderers for evaluation purposes.
Preliminary Evaluation
Preliminary evaluation covered two major parts; Eligibility Responsiveness and Arithmetic Review.
For Eligibility Responsiveness, the six tender offers were critically examined and Table 1 below has
summarized the findings. Valid provision of Bid Security / Bond and Turnover Requirements are
separately computed and presented in Tables 2 & 3 – Annex 2. Accordingly, all bidders except S and W
were found responsive for eligibility requirements and considered for remaining evaluation processes.
Eligibility Requirements R S T U V W
Valid and Up to date Trade and Professional License R R R R R R
Valid and Up to date Membership to Financier R R R R R R
Organizations
Completeness and submittals of all required documents R R R R R R
Power of Attorney, Signature and Sealing R R R R R R
_________________________________________________________________________
30
Requirements
Appropriate Invitation, Packaging and Submission R R R R R R
Requirements
Valid provision of Bid Security or Bond ** R R R R R R
Turnover requirements fulfilled ** R NR R R R NR
** Table 2 & 3; Annex 2 showed their eligibility Responsiveness.
For Arithmetic Review, the tender offer of four responsive bidders is checked and their tender offer
after arithmetic check and any additions or reductions due to rebate and alternative offers are tabulated
in Table 2 Below.
Table 2: Valid Tender Offer
Tenderers R T U V
Tender 17,630,915.11 18,146,822.49 21,236,399.00 24,110,160.00
Offer
TO after
Arithm. 17,695,206.70 18,163,888.91 21,229,904.11 23,885.300.33
Check
% change 0.36 % 0.1 % 0.03 % 0.93 %
Rebate --- 3% --- ---
TO after
Rebate 17,695,206.70 17,618,972.24 21,229,904.11 23,885.300.33
Detail Evaluation
Detail evaluation covered two major parts; Commercial and Equivalent Financial Offer Comparisons.
For Commercial offer comparison, Benefit Forgone due to Completion Time; Additional Costs due to
differences in Foreign Currency Exchange and Advance Payment requirements; and Provisions of
Domestic Preference Margins. The additions due to commercial offer Comparison and their effects to
the Tender Offer for evaluation on equal bases is computed and summarized in Table 3 below. Detail
Computations for each of the commercial offer comparisons are shown in Table 4, 5 & 6 of Annex 3.
Table 3: Summary of Commercial Offer Comparisons
Tenderers R T U V
TO after Arithm. Check 17,695,206.70 18,163,888.91 21,229,904.11 23,885.300.33
BF due to Completion Time ---- 516,909.82 622,848.26 700,782.94
Variations
AC due to Advance Payment 452,668.15 --- --- 660,657.28
Variations
AC due to Foreign Exchange
Variations 77,858.91 --- 83,919.62 28,662.37
On Bid Closing Date 93,430.69 --- 101,903.54 34,394.85
On Date of Decision
Domestic Preference (7.5 %) 1,327,140.45 --- 1,592,242.81 ---
TO for Evaluation
On Bid Closing Date 19,552,874.21 23,528,914.80 25,275,402.92
On Date of Decision 19,568,445.99 18,680,798.73 23,546,898.72 25,281,135.4
_________________________________________________________________________
31
Financial Offer Comparisons

The summary in table 3 above considered impacts due to different commercial offers and determined
Tender Offer of each Bidder for evaluation purpose. Hence, this part checks whether front loading is
exercised by tenderers or not. Table 4 compares each tender value along acknowledged group of trades
of works with Engineers Estimates, Average Tender Offers and Adjusted Tender Offers. Similar table
can be used to compare each Tender offer by Blocks or Lots or Packages.
Award Recommendation
Based on Detail Evaluation result taking foreign exchange at date of decision, Ranking of tenderers is
shown in Table 5 Below. Accordingly, Tender Offer T is recommended for award negotiation.
Table 5: Ranking of Bidders for Award Recommendations

Tenderers R T U V
TO after Arithm. Check 17,695,206.70 18,163,888.91 21,229,904.11 23,885.300.33
TO for Evaluation On Date of 19,568,445.99 18,680,798.73 23,546,898.72 25,281,135.4
Decision
Ranking 2 1 3 4
Table 4: Comparison for Front Loading Identification by Group of Trades

EEs Bidder TOAVG TOADJ % difference R, T, U,
Tenderers R V
A % A % A % A % EEs TOAVG TOADJ
Sub Structure Works
Earth Works
Concrete Works
Masonry Works
Others
Super Structure Works
Concrete Works
Block Works
Roof Works
Carpentry Works
Joinery Works
Metal Works
Steel Structure
Finishing Works
Glazing Works
Others
Electrical & Sanitary Works
Electrical Installation
Sanitary Installation
External Works
Landscaping
External Electrical Installations
External Sanitary installations
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32
Annex – 1: Basic Data Sheet

Project: Fechfachit Campus Tender No.: 001 / 88 Engineer’s Estimate: Birr 20,877,188.00
Date of Invitation: Sept. 30, 1995 Procurement Method: ICB No. of Bid Sold: 8
No. of Bids Submitted: 6 Bid Submission Date: Nov. 15, 1996 Bid Validity Period: 45 Cal Days
Selling Ex. Rate 15 days before: 1 USD = Birr 6.30 Selling Ex. Rate for Evaluation: 1 USD = Birr 6.31
i = 0.05 % per day = 1.5 % per month for Completion Time; i = 0.04 % per day for Advance Payment computations
Domestic Preference Margin = 7.5 % Completion Time: 645 Cal. Days
Tender
Tender Security Perf. Adv Comp Foreign
No Bidders Cat. Offer(TS) Security Req’d Time Ex. Rebate
TO
Amount Type Req’d
1 DCM 1F 17,630,915.11
31,746 CPO 20 % 20 % 645 55 %
USD USD
2 CGTS 1 L 22,145,153.10 260,000 ‘’ 10 % 705
USD
3 CGCS 1 L 18,146,822.49 250,000 ‘’ 10 % 705 3%
USD
4 CECCS 1 F 21,236,399.00 40,000 ‘’ 20 % 705 50 %
USD USD
5 CGCA 1 L 24,110,160.00 300,000 ‘’ 10 % 20 % 705 15 %
USD USD
6 CBAS 1 L 22,766,237.75 250,000 ‘’ 10 % 20 % 705
USD
Required Minimum Tender Security = 1 % of TO; F = Foreign Company and L = Local Company
Tender offer after Arithmetic Check was found as

Tender 17,695,206.70 21,200,883.60 18,163,888.91 21,229,904.11 23,885.300.33 20,953,625.22
Offer
Turnover of Companies for the last Five Years

1991 361,275,260.40 --- --- 2,259,278,000.00 --- 4,571,118.00
1992 338,197,052.30 --- --- 1,663,141,000.00 --- 9,377,632.00
1993 432,790,201.30 343,796.00 --- 2,187,401,000.00 --- 12,680,696.00
1994 550,511,109.90 6,659,457.00 --- 2,416,035,000.00 --- 18,377,772.00
1995 --- 22,068,798.00 63,160,062.88 --- 54,145,000.00 18,099,520.00
Pound
Ex. 1 USD = 2.21 6.25 6.25 1.00 6.25 6.25
Rate**
** Exchange rate used is selling price at their maximum turnover within the last five years.
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33
Annex - 2: Preliminary Evaluation

Table 2: Tender Security Responsiveness
Tender Tender Security Selling % Type Responsive
No Bidders Cat. Offer (TS) Exchange TS of - ness
(TO) Amount Type Rate to TS
TO
1 R 1 17,630,915.11
31,746 CPO 1USD = Birr Valid 1.13 R
USD 6.25
2 S 1 22,145,153.10 260,000 UIC “ 1.17 “ R
USD
3 T 1 18,146,822.49 250,000 AIC “ 1.40 “ R
USD
4 U 1 21,236,399.00 40,000 CPO “ 1.17 “ R
USD
5 V 1 24,110,160.00 300,000 Cert. “ 1.24 “ R
USD heq
6 W 1 22,766,237.75 250,000 EIC “ 1.10 “ R
USD
All Tenderers are responsive for Tender Security Responsiveness
Table 3: Turnover Requirement Responsiveness
Tenderers R S T U V W
1991 361,275,260.40 --- --- 2,259,278,000.00 --- 4,571,118.00
1992 338,197,052.30 --- --- 1,663,141,000.00 --- 9,377,632.00
1993 432,790,201.30 343,796.00 --- 2,187,401,000.00 --- 12,680,696.00
1994 550,511,109.90 6,659,457.00 --- 2,416,035,000.00 --- 18,377,772.00
1995 --- 22,068,798.00 63,160,062.88 --- 54,145,000.00 18,099,520.00
Pound
Ex. Rate 1 USD = 2.21 6.25 6.25 1.00 6.25 6.25
USD Equiv. 249,100,049.70 3,531,007.68 10,105,610.06 2,416,035,000.00 8,663,200.00 2,895,923.20
Responsiveness R NR R R R NR
Annex - 3: Commercial Offer Comparisons
Table 4: Benefit forgone due to Completion Time
Rev. Completion (n) FV BF = (FV –
N Bidder Ca Tender Time Differences = TO (1 + i)n RTO) /
o s t. Offer Cal. Month in (1 + i)n
(RTO) days s Completion
Time
2 R 1 17,695,206.7 645 21.5 --- --- ---
0
3 T 1 18,151,505.68 705 23.5 2 18.151,505.68 516,909.82
4 U 1 21,871,577.9 705 23.5 2 21,871,577.96 622,848.26
6
5 V 1 23,885,300.3 705 23.5 2 24,609,233.53 700,782.94
3
i = 0.05 % per day = 1.5 % per month
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34
Table 5: Additional Cost due to Mobilization Advance Requirement

Rev. Ad Completion A= PWF= PV APAC = {(AP
N Bidd Tender v. Time {(AL%) {(1+i)n–1} / =A* x TO) / 100}
o ers Offer Lo Cal. Mon x TO} / {i(1+n)n} PWF – PV
(RTO) an day th n
2 R 17,695,20 20 645 21.5 164,606.5 18.75 3,086,373. 452,668.15
6.70 7 19
3 T 18,151,505. 705 23.5 --- --- --- ---
68
4 U 21,871,577 705 23.5 --- --- --- ---
.96
5 V 23,885,30 20 705 23.5 203,279.15 20.25 4,116,402. 660,657.28
0.33 79
Table 6: Additional Cost due to Foreign Exchange Requirement

Tenderers R T U V
Tender Offer (TO) 17,695,206.70 17,628,972.24 21,229,904.11 23,885.300.33
Foreign Currency Component 55 % 50 % 15 %
Foreign Exchange 15 days before TO 1 USD = Birr 6.25
USD Equivalent 1,557,178.19 ---- 1,698,392.33 573,247.21
Local Currency 15 days before TO 9,732,363.69 --- 10,614,952.06 3,582,795.05
Foreign Exchange on Bid Closing 1 USD = Birr 6.30
Local Currency on Bid Closing Date 9,810,222.60 --- 10,698,871.68 3,611,457.42
Foreign Exchange on date of decision 1 USD = Birr 6.31
Local Currency on date of decision 9,825,794.38 --- 10.716,855.60 3,617,189.90
Additional Cost due to Foreign
Exchange 77,858.91 --- 83,919.62 28,662.37
On Bid Closing Date 93,430.69 --- 101,903.54 34,394.85
On Date of Decision
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35
CHAPETR II
CONTRACT
2.1 Principles of Contract Law
Contract is a written agreement between or among two or more parties whereby each party promises to
do or not to do something and agrees to terms (conditions and Warranties) set out in the contract.
Conditions of Contract are terms in which parties in the contract are governed / administered with.
That is, it is an administrative law which is the legally binding part of the contract. These promises and
terms shall be enforceable by law and incorporates the rights, obligations and Remedial rights of each
contracting parties.
Legal Definition of Contract:
According to the Civil Code of Ethiopia, Art.1675:
A contract is an agreement whereby two or more persons as between themselves create, vary or
extinguish obligations of a proprietary nature.
In other words, a Contract is an Agreement between two or more parties to do or not to do something
for a certain consideration that fulfill the following seven requirements:
Parties are capable of contracting: Lawful and Capable
Consent of contracting parties is necessary: Intent
Object of the contract is sufficiently defined, possible and lawful: Legal and Distinct
Use of Contract form prescribed by law, if any: Standard
Payment for the Promise: Consideration
Constitute two parts: Offer and Acceptance
Parties enter into Agreement: Agreement
Lawful and Capable is to mean they are legally allowed to enter into contract and provides
statements of facts (statement of opinion + Knowledge) for their ability to perform their
obligations. Misrepresentations of facts both from Fraudulent or Innocence actions are liable for
damages and / or rescission.
Intent is willingness or consent by the contracting parties to create a legal contract.
Legal and Distinct is a description of both the promises and considerations (including rights and
obligations) clearly and distinctly stated and they should be practicable and legally binding.
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36
Standards can be conditions, forms, formats, schedules, instructions, etc which are created for use
as part of contracts.
Consideration can simply be interpreted as ‘price for the promise’ which involves a benefit accrued
from the offeree in exchange for the promise the offeror is bound by the contract.
An Offer is an indication that one party is willing to be bound by specific terms set out in the
contract. An offer can remain open unless conditioned for termination using the following ways:
¾ Refusal or Counter Offer
¾ Closure of the Offering organization
¾ Non – Acceptance with in the offer time
¾ Failure of the offer condition
An Acceptance is the key for the formation of a contract which must be absolute, indication of
consent,, and communicated to the offering entity by the offeree.
An Agreement though proves the existence of a contract; there are situations where it can be
considered as there isn’t. For instance, if contracts violate statutorily prohibited conditions such as
promoting gambling; and / or also violates unlawful conditions by the common law such as
agreements to commit civil wrongs, discrimination, against the benefit of the state, to promote
corruption, that devalue the value of one party, etc.
Following these characteristics; While the contract is understood as the sub - framework of the law
which can be understood as the private law, the law provides a framework within which the services
and works of the construction industry is governed with. Therefore, the significance of any contract is
that the promisee is obliged for their performances against a certain return and if failed to compensate
for non - performance and at the same be time legally enforceable.
On the other hand, A contract is a not a mental state but an act which is a matter of inference from
conduct. That is, the parties are judged not by what is in their minds, but by what they have said or
written or done. Essential Terms, Certainty, Agreements to Agree, Subsequent words or conducts,
Agreements after commencement, Agreement by conduct, Formalities are some issues to be clearly
understood when dealing with contractual matters.
The purposes of a contract are therefore:
To describe scope of work
To establish time frame
To establish cost & payment provisions
To Set forth obligations & relationships
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37
To Manage multiple risks

To Establish control mechanisms
To Minimize disputes
To Improve economic return on investment
2.2 Types of Construction Contract

Contracts for the execution of civil engineering works are of following type:
(a) Lump sum contract
(b) Unit rate contract
(c) Lump sum and schedule contract
(d) Cost plus fixed fee contract
(e) Cost plus percentage of cost contract
A. Lump Sum Contract
In this type of contract, the contractor offers to do the whole work as shown in drawings and described
by specifications, for a total stipulated sum of money. Lump sum contract are typically used for
buildings. The qualities of the materials required can be calculated with sufficient accuracy during the
bidding process to allow contractors to submit a single lump sum price for the work.
There are no individual rate quoted, thus it becomes difficult to make adjustments in the contract value
of any changes are to be made in the work later on.
A lump sum contract is more suitable for works for which contractors have prior construction
experience. The experience enables the contractors to submit a more realistic bid. This type of contract
is not suitable for difficult foundations, excavations of uncertain charter, and projects susceptible to
unpredictable hazard and variations.
B. Unit Price or Bill of Quantity
Also called a schedule contract, in this contractor undertakes the execution of work on an item rate
basis. The amount to be received by the contactor depends upon the quantities of various items of work
actually executed. The payment to the contractor is made on the basis of detailed measurements of
different items of work actually done by him.
Unit-price contracts are used for work where it is not possible to calculate the exact quantity of
materials that will be required. Unit-price contracts are commonly used for heavy/highway work.
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38
The designer may calculate that 1,000 m3 of earth needs to be moved, but the owner and contractors
know that after the work has been completed, the contractor may not move exactly 1,000 m3. The exact
quantity will usually vary.
Contractors submit a price for each item on a unit-price contract. Unit prices are multiplied by the
engineer’s estimated quantities and totaled. The low bidder is the bidder with the low total of the all
items. Items whose actual quantity varies from the estimated quantity by more than 15 or 20%, either
above or below the estimated quantity, are sometimes subject to renegotiation of the unit price.
Bill of Quantity
The unit price contracts are usually presented in the Bill of Quantity. A Bill of Quantity (BOQ) shows
the items present for the construction work with the associated specification and the estimated quantity
with the Unit price for each of the items. Refer to Figure 2.1.
The item rate contract is most commonly used for all type of engineering works financed by public or
government bodies. This type of contract is suitable for works which can be divided into various items
and quantities, under each item, can be estimated with accuracy.
Item
Description Unit Qty. Rate Amount
no
A-SUB STRUCTURE
1. EXCAVATION & EARTH WORK
1.01 Site clearing and removing of top 200mm thick soil m2
1.02 Bulk excavation in expansive soil to a depth not

m3
exceeding 1500 mm.
Total carried to Summary.....................................
Figure 2.1: Bill of Quantity: Building Project
C. Lump sum and scheduled contract
This is similar to the lump sum contract but schedule of rates is also included in the contract
agreement. In this type of contact, the contractor offers to do a particular work at a fixed sum within a
specified time as per plans and detailed specifications.
The schedule of rates for various items is provided which regulates the extra amount to be paid or
deduced for any additions or deletions made during the progress of work. Measurements of different
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39
items of original work are not required but extra items are required to be measured for payment. The
original work shall however be checked and compared with the drawings and specifications.
The type of contract is more suitable for construction works for which contractors have prior work
experience and can consequently estimate the project cost more realistically.
D. Cost plus
Cost plus (cost reimbursable) contracts are used in situations that make it difficult or impossible for
either the owner or the contractor to predict their costs during the negotiation, bid, and award process.
Factors that may make the calculation of costs impossible include unpredictable and extreme weather
conditions such as would be encountered in the Antarctic, known transportation requirements to
remote locations, combat or war, or contracts where the amount of effort that will be required depends
on another contractor’s work.
Cost plus contracts take many forms, the most common being cost plus fixed fee and cost plus a
percentage. Most owners prefer cost plus fixed fee because then the amount of profit the contractor will
earn cannot increase, thereby removing any incentive for the contractor to be anything less than
thrifty, or to produce poor-quality work.
Cost plus percent contracts may be fair in situations that are very difficult, or when the time to
complete the work is not known with any certainty, but some incentives to maintain productivity are
needed.
D.1. Cost plus Fixed Fee Contact
Cost plus fixed fee contract is desirable when the scope and nature of the work can at least be broadly
defined. The amount of fee is determined as a lump sum from a consideration of the scope of work, its
approximate cost, nature of work, estimated time of construction, manpower and equipment
requirements etc.
In order to negotiate such a type of contract, it is essential that the scope and some general details of the
work are defined.
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40
The contractor in this type of contract is selected on the basis of merit rather than the fee alone. In case
of cost plus percentage contract, the contractor has a tendency to increase his profit by increasing the
cost of work.
But this drawback is overcome in cost plus fixed fee contract because here the contractor’s fee is fixed
and does not fluctuate with actual cost of work. Once this fee is fixed, the contractor cannot increase
the cost of work.
D.2. Cost plus Percentage of Cost Contract
In this type of contract, instead of awarding the work on lump sum or item rate basis, it given on
certain percentage over the actual cost construction. The actual cost construction is reported by the
contractor and is paid to him by the owner together with a certain percentage as agreed earlier.
The contractor agrees to do the work in accordance with the drawings, specifications and other
conditions of contract. In this type of materials and labor are arranged between the client and the
contractor. The tendency of the contractor to increase the cost of work to earn more profit by way of
percentage of enhanced actual cost is the major demerit of this contract type.
2.3 Contract Documents
The main contract documents are Invitation to tender, Instruction to tender, Form of tender, The
Agreement, Condition of contract( General and Particular), Specification (General and Particular), Bill
of Quantities, Drawings, Addenda and Appendix to Tender.
2.3.1 Invitation to Tender: -

An initiation letter to the contractor to participate in the tender with an acknowledgment attached.
2.3.2 Instruction to Tenders: -
The contractor is given directive of what is required of tenders. It includes:

• Tendering procedures, bid bond, data, space, time
• Commercial requirements
• Information in what shall be submitted with the tender (alternative proposals etc)
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41
• Scope of work
• Tender basis
• Tender bond (possible)
2.3.3 Form of Tender
This is a document where the contractor:

• Confirms, that he has examined all the tender documents
• Confirms that he will perform the work
• Promises that the validity of the tender is open for a certain period
• Shows his understanding that the lowest bid or any after may be rejected
• States that part of the work may only be accepted
• Confirms that he will enter into an agreement if awarded
2.3.4 Agreement
The agreement is the document that represents and reflects the legal contract between the owner and
the contractor. Obviously there is also a contract between the owner and the designer, and between the
general contractor (GC) and the sub-contractors, or between the contractors and the suppliers for those
contracts. It is simply a letter that constitutes legal evidence that a contract exists, and forms the basis
for its enforcement.
2.3.5 Conditions of Contract
The condition of contract is a document that states the obligations and highs of the parties and detail
the conditions under which the contract is to be carried act. It states to what extent should be the
relation between the engineer, contractor and client. It includes General and Supplementary or
Special/Particular conditions of contract.
2.3.5.1 General Conditions
A document called the General Conditions is an essential part of the contract. It defines the
responsibilities of the parties involved in the contract- the owner and the general contractor. It
describes the guidelines that will be used in the administration of the contract
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42
• It is often referred to as boilerplate, implying that the same documents are standard to all
contracts. Contractors must know exactly what is contained in the boilerplate.
• Various standard forms of General Conditions have been development by different
organizations. These forms are familiar to all parties concerned, and the wording is not only
clearly understood, but has also been tested in the courts.
2.3.5.2 Supplementary Conditions
The Supplementary Conditions are sometimes known as Special Provisions or Special/Particular

Conditions. The purpose of the Supplementary Conditions is to provide an extension of the General
Provisions of the contract to fit the specific project at hand. They serve as amendments or
augmentation to the General Conditions. Items included in the Supplementary Conditions are entirely
subject to the discretion of the owner, and may include topics such as:
• The number of copies of contract documents to be received by the contractor

• Survey information to be provided by the owner
• Materials provided by the owner
• Changes in insurance requirements
• Phasing requirements
• Site visit
• Start date of the construction
• Requirements for security and temporary facilities
• Procedures for submittal and processing of shop drawings.
• Cost and schedule reporting requirements
• Traffic control and street cleaning requirements
• Responsibilities fir testing of materials
• Actions to be taken in the event of discovery of artifacts or items of historical value
2.3.6 Specifications
Specification may also be known as Technical provisions. They are written instruments to be used in
conjunction with the drawings, so together the drawings and the specifications fully describe and define
the requirements of the contract, to include the quality that is to be achieved.
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43
They supplement the drawings and provide information that cannot be shown in graphic form, or
information that is too lengthy to be placed within the drawings. They guide bidders in the preparation
of cost proposals as well as field execution of the work.
They also guide the contractor through the processes of ordering materials and construction and
installation of the facility.
2.3.7 Bill of Quantities
Describe the expected amount of work (measured) in works; it sets out the units of measurement, the
units of work, the unit price and the total cost of the works.
2.3.8 Drawings
Drawings are the means by which the designer conveys the physical, quantitative, and visual
description of the project to the contractor. The drawings are a two-dimensional representation of the
physical structure that meets the objectives of the owner. They are also known as plans or blueprints.
2.3.9 Addenda
Any change to the bid documents after they are released for bidding but before bids are actually
received requires the issuance of an addendum.
• This formal document changes the original bid documents and becomes a part of the bid
package.
• At the time of bid opening, bidders must in their bid documents, acknowledge all addenda.
• Technically addenda may be issued to change the bid opening date, to modify the original
design, to delete or add items, or to correct errors.
• Addenda may not be issued within about five days of bid opening unless the bid date is also
extended accordingly.
2.3.10 Appendix To Tender

A typical Appendix to the Construction Agreement is as shown in Table 2.1.
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44
Clauses
Maximum amount 10 10 percent of the contract price
Minimum amount of third party insurance 23 Birr 35,000.00 per occurrence with party
insurance number of occurrences, unlimited.
Time of commencement 41 15 calendar days from signing of the contract
agreement
Time of completion 43 90 calendar days
Amount of liquidated damages 47 1/1000 of the contract price per day
Limit of liquidated damages 49 20 percent of the contract price
Defects liability period 59 365 calendar days
Percentage of retention money 60(4) Zero percent
Minimum amount of interim certificate 60 10 percent of the interim payment certificate
amount
Advance payment 60(8) 20 percent of the contract price
Table 2.1: Appendix to Tender
2.3.11 Forms and Formats
Different forms, formats and schedules are also part of the contract document. Refer to Box 2.4 shown
below.
2.3.12 History of Conditions of Contracts

Conditions of contact for civil engineering works are commonly prepared by four bodies: Multi lateral
donors, Business Associations, Professional Associations and Public Authorities, as shown in Figure
2.2. Each of the bodies express there interest on the different conditions but the public conditions of
contracts are assumed to be the fairest of all.
Box 2.4 : The following Forms, Formats, Schedules and Breakdown Structures are used in Construction Contracts and
are tabulated bellow:
Forms Formats Schedules Breakdown Structures
Form of Contract Agreement Handing Over Site Formats Work Schedule Organization BS
Form of Tender Change Order Format Material Schedule Work BS
Form of Bid Security Progress Reporting Formats Equipment Schedule Material BS
Form of Performance Security Payment Certificate Format Labor Schedule Equipment BS
Form of Adv. Payment Guarantee Price Indices Format Cash flow Schedule Labor BS
Form of Maintenance Security Comp. Certificate Formats Payment Schedule Cost BS
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45
2.3.13 FIDIC Condition of Contract

FIDIC is the international federation of national associations of independent consulting engineers and
was founded in 1913 by the national associations of three European countries (France, Belgium and
Switzerland). FIDIC has now membership from over 74 countries, and members are generally national
associations with the Ethiopian Consulting Engineering and Architects Association being one. Over
the past years FIDIC has evolved into a leading body for development of model standard forms of
contract for use in the international construction industry.
Figure 2.2: Sources of Condition of Contracts
FIDIC conditions of contracts have two parts:

General Condition of Contract – where the overall clauses are stated
Particular Conditions of Contract – where modifications, changes and omissions to the
general condition of contract are stated.
FIDIC has published different conditions of contract over the years. The main conditions of contracts
published by FIDIC include:
o 1957 – RED BOOK
The very first edition – civil engineering
Contract type – Add Measurement Type
o 1963 – YELLOW BOOK
For mechanical and Electrical works
o 1987 – OLD FIDIC
Comprises the RED and YELLOW Books.
o 1995 – ORAGE BOOK
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46
For Design Build and Turnkey Projects

o 1999 – GREEN BOOK
For short period projects ( 6 months)
Low contract value ($ 500,000)
o 1999 – SILVER BOOK
For turnkey for power plants, factories and facilities
Multi lateral donors like World Bank have also published standard conditions of contracts based on the
FIDIC condition of contract. MBD – Harmonized Edition
2.3.14 Ethiopia Conditions of Contract

In the Ethiopia the first condition of contract was published in 1959 by the Ministry of Housing. 1987 –
Building and Transport Construction and Design Authority (BaTCoDA) published another condition
of contract which has been used during the Dereg’s Regime. However, 1994 – Ministry of Works and
Urban Development (MoWUD) developed a condition of contract based on FIDIC RED Book. This
condition essential changed a certain aspects of FIDIC to make it suitable for use in domestic projects.
Under this condition of contract claim and dispute management was carried out the Ministry itself and
thus making difficult to use for private contacts as the Ministry is that the only option.
The most comprehensive standard bid document was published by the Public Procurement Authority
of the Ministry of Finance and Development. This include standard bid document for both national
and international competitive biddings for procurement of Goods, Service and for the first time Works.
Though there are many changes from the MoWUD 1994 condition of contracts the following are worth
mentioning:
Dispute/Claim Management –
9 For the first time provision for an Adjudicator is provided
Price Escalation –
9 The MoWUD states that price escalation shall be made only when the price of the item
is changed by decree. This means that only fuel will be a cause of price escalation.
However the 2004 directive on the issue of price escalation included Cement,
Reinforcement and Bitumen to the list. This means that only Fuel, Cement,
Reinforcement and Bitumen were open for price escalation. The PPA conditions of
contract introduced the FIDIC price escalation formula. Though this formula seems to
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47
be adequate having the proper base and current price makes is virtually impossible for
use in Ethiopian Construction Industry.
Advance Payment -
9 The provision for advance payment has been placed in the Special Condition of
Contract making it possible to have different advance payments.
Duration - Special Condition of Contract
9 The provision for duration of contract has been placed in the Special Condition of
Contract making it possible to propose a completion date by the bidders.
Liquidated Damage –
9 The previous clause states that the liquidated damage is to be 1/1000 of Unjustified
Delay Amount, but the PPA clause states that the liquidated damage is to be 1/1000 on
basis of contract price, crippling the contractor from performing his tasks during a
delay.
2.4 Contract Management

Contract Management is the management of its Processes, Stakeholders and their Performances along
the Planning, Implementation and Monitoring + Evaluation Cycle of the functions of Management.
Contract Management process can be idealized into three major processes. These include Contract
Formulation, Contract Administration, and Closing of Contract Processes (Figure 2.3).
2.4.1 Contract Formulation

Contract Formulation involves two sub processes, namely; Negotiation and Signing of Contract
Agreement. Negotiation is a process by which Project Owners together with their professional
representatives’ deal with the recommended winner of the tender on the requirements of the tender
exclusively which will become the bases for contractual agreements.
Contract Agreement when signed forms the contract document which will be the bases for Contract
Administration. A Construction Contract Document includes:
Signed and Sealed Form of Contract Agreement,
General and Particular Conditions of Contract,
Technical Specification and Methods of Measurement,
Priced Bill of Quantities, Drawings and General Notes to drawings if necessary, and
Forms, Formats and Schedules.
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48
Negotiations Closing of Accounts

Contract Agreement Contract Evaluations
Contract Contract Contract

Formulation Administration Closing
Contract Implementation
Changes Management
Claims and Disputes Management
Figure 2.3: Contract Management Process
2.4.2 Contract Administration

Contract Administration is a process that ensures the successful completion of the project under
consideration with substantial compliance of the Terms of the Contract. As a result, the following
activities or tasks are included in Contract Administration services:
¾ Identifying contractual responsibilities of Stakeholders.

o Reviewing the Terms of Contract Documents
o Extract Monitoring Responsibilities
o Preparing Monitoring Responsibility Summary Sheets
Monitoring Responsibility Summary Sheet

Project: _____________________________
Owner: _____________________________
Contractor: _____________________________
Consultant: _____________________________
Contract Contract Condition: Owner Contractor Consultant Regulator Financier Overlap

Article Description Resp Resp. Resp. Resp. Resp. Resp
¾ Determining and understanding the construction components of the project.

o Reviewing the Contract Drawings and Technical Specifications
o Extract the Construction Methods and Sequences
o Prepare Construction Methods and Over all Sequences Sheets
¾ Review submitted (Integrated) Schedules and Breakdowns for operations such as
Organizational Breakdowns, Resources Breakdowns & Schedules and Time Schedules.
¾ Record, Monitor and Evaluate Progress of Mobilizations, Works and Completions.
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49
¾ Report Project Status daily and / or periodically and Completions.

¾ Certify qualities of materials, shop drawings, samples, workmanships and works.
¾ Measure Works, Record Site Potentials and Certify Payments and Completions
o Take off sheet and Bending Schedules are used for Measurement of Works
o Method of Measurement is according to standard practices
o Site Potentials such as material, equipment and Manpower on site together with
appropriate site organization is recorded
o Advance, Interim and Final Payments are certified
Page _______
Payment Certificate Sheet
Certificate of Payment No. : __________

Date: ____________
Project: _____________________________ Amount (Curr )

Contract No: _____________________________ Main Contract
Contract Date: _____________________________ Supp. Contract
Owner: _____________________________ Contract Change No. 1
Contract Change No.2
Contractor: _____________________________
Contract Change No.3
Location: _____________________________
Total Sum
As per attached measurements and priced bill of quantities, the value of works executed and / or material
supplied and net sum due to the contractor to date is:
Previous Payments Amount

PC. No. Date Amount Total Sum due to the Contractor
Advance Deductions
1 Previous Payments
2 Rebate ( … % )
3 Retention (5 % of exc.)
4 Penalty
5 Advance Repayment
6 Others
7 Total Deductions
8 Net Sum Due to the Contractor
9 15 % VAT
10 Net Sum including VAT
Total Exc. VAT
We Certify that the Contractor is now entitled to the sum of ______________________________________

_______________________________________________________________________________________
__________________ _____________________ ______________________

Certified Approved Seal
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Contract Changes Status Sheet

Project: __________________________________________
Contract No: __________________________________________
Owner: __________________________________________
Contractor: __________________________________________
Consultant: __________________________________________
Contract Changes No: __________________________________________
Contract Changes Description:

_______________________________________________________________________________________
_______________________________________________________________________________________
_______________________________________________________________________________________
Contract Changes Initiated by: ______________ Owners Consent on Advice Date: ___________
Contract Change Initiated Date: ______________ Contractor Consent on Advice Date: ___________
Consultant Advisory Date: ______________ Change Orders Date: ___________
¾ Mediate Disputes.
Such services are carried out to ensure projects are completed successfully and
¾ To Follow up and Evaluate Project Cost, Time and Quality.
¾ To Ensure Health, Safety and Environmental Requirements.
¾ To Ensure Project fitness for its purpose or intended objective.
The following Seven Points are worth noting as vital issues to consider during Contract
Administration Services.
1. The Contractor shares, in most cases, the Owner’s desire for a final product of high quality; however, a
contractor who becomes caught in an irreconcilable conflict between providing that level of quality and
realizing what he believes to be a reasonable profit will usually choose to pursue the profit.
2. Construction is recognized as much an art as a science and that the attainment of something less than
perfection is accepted by the Owner.
3. Contract Administrator is not a party to the contract between the Owner and the Contractor, but is a
participant in the construction process to promote the successful performance of projects in compliance
with the contract.
4. Successful contract administrators will know and admit the limits of their knowledge and will seek the
assistance of experts in the interpretation and, if necessary, the legal enforcement of the contract.
5. An overzealous contract administrator is a disservice to both the Owner and the Contractor and himself.
6. It is clearly in the financial interest of the contractor that interim payments be maximized, and It is
clearly in the interest of the owner that such payments not exceed the value of work completed; In this
situation, the contract administrator shall determine what is critical for the success of the project in the
interests of fairness to both the owner and contractor.
7. Contract Administrator’s difficult task is to represent the owner’s interests effectively by monitoring
and influencing the activities of the contractor without jeopardizing those interests by intruding upon
prerogatives to the contractor.
2.4.3 Closing of Contract

Closing of Contract looks into issues related to Maintenance Period and Remedial works, Dealing with
Left Over Claims and Disputes, if any, Closing of Accounts and Completion Certificates.
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Maintenance Period and Remedial Works: Construction works are subjected to Maintenance Periods
(Usually One Year) in order to reveal quality problems overseen by supervisors. The focus is not on
normal wear and tear but rather damages seen on the construction components which are solely under
the responsibility of the contractor. These often include Sanitary and roof leakages, Poor quality Door
and Window Handles and Locks, Electrical Fittings, Structural damages, Cracks, Pavement subsidence,
Settlement, etc.
Left Over Claims and Disputes: If claims and disputes are not settled before provisional certificate of
completion, they can be dealt during this phase.
Closing of Accounts: Final Accounts together with the release of remaining retention moneys and
performance securities are carried out in accordance with the current situation at the time of closing
and Final Payment Certificate is issued.
Completion Certificates: This is to entitle that the contractor is no longer responsible afterwards if
satisfactory performance is proved by Maintenance Period and its certification, Outstanding claims and
disputes are settled, and closing of accounts are made. Completion certificate is a certificate that
concludes the contractual agreement and will not be considered binding there after unless otherwise it
is proved illegal.
2.4.4 Dispute and Claim Management

2.4.4.1 Definition and Types of Claims
Dispute in simple terms is a difference in a line of thought. Claim is mostly concerned with
entitlements and liabilities arising under, or as a result of, a legally valid contract. A construction claim
is therefore can be a demand for payment of additional compensation, adjustment of the parties'
respective contractual obligations, Extension of Time or compensating delay damages, or any other
change with regard to the contractual conditions or terms. Claim in practice can also be understood in
different ways based on the perceptions held by contractual stakeholders. Some reflected these views in
three expressive definitions; namely
A claim is a disguised form of a blackmail,
A claim is the last chance to bail out of a losing job, and
A claim is an assertion to a contractual right.
Such a perception is one of the major motto behind all the process of Claim Administration and also a
motive for either making claims or not making claims. That is, claim is an emotive word that makes
contractual stakeholders to take sides and think the worst of each other. He further defined
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construction claim formally as a legitimate request for additional compensation (cost and / or time) on
account of a change in the terms of the contract.
The very bases of such interpretations of the word claim indicate that any claim is:
A willful act by the claimant when s/he believes that there is no other way than claiming to
compensate for the loss s/he suffered during relationships,
All of such willful act of the claimant should base on her/his right, entitlement and privilege
that can legally be supported,
All of such willful act by the claimant need to be articulated in such a way that it proved the
claim is properly presented and can be justified,
Whenever necessary, claim goes through different types of processes when they become
disputes among parties in a relationship, and negotiation can be considered one form of such a
process,
When claims reach its utmost and severe stage, its fate is totally geared to the formal litigation
process, and
When they are concluded, they are made for compensation for which the claimant intends to
retrieve an entitlement.
Claims can be associated with three major categories that can be understood as the different types of
claims. These are:
¾ Time Related Claims: Claims associated with delay or in time completion of projects where
either of the following six Entitlements or Penalties are subjected to:
o Time Extension only
o Liquidated Damages only
o Time Extension and Cost Compensation
o Concurrent Compensations
o Bonus
o Reliving of Obligation
¾ Cost Related Claims: Claims associated with monetary compensation where either of the
following entitlements or penalties are entertained:
o Additions requiring rate adjustments
o Price Changes
o Provisional sum adjustments
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¾ Default by Contracting Parties: Claims associated with non performances of contractual

obligations such as:
o Delay in Payment Certificates
o Suspensions and Terminations
2.4.4.2 Requirements for a Valid Claim
Following the above theoretical reviews, what is important to know for stakeholders in construction
business is that they are aware of the following two main requirements:
Know the different ways of how to deal with claims and disputes together with their merit and
demerits, and
Know required procedures and avail necessary documents to make a valid claim.
Following this two requirements, fair and valid claim administration process requires:
Conducive environment such as Policies, Codes, Standards, Rules and Regulations called
“Macro Environments”. These can be considered as Policy and Regulation related issues. These
include:
Lack of Clear Claim Administration and Dispute Resolution System
Institutional capacity and capability to act as a good link between Macro and Micro
Environments such that their requirements are aligned, developed and work for better
relationships called “Messo Environments”. These can be considered as stakeholders
relationships and capacity related issues. These include:
Weak Stakeholders Relationships
Weak Organizational Capacity
Company specific issues that considered internalizing factors with regard to claim making
called “Micro Environments”. These can be considered as weaknesses of construction
companies. These include:
Unhealthy Competition
Poor Information Management System
2.4.4.3 Claim Administration Processes

Claim administration process is understood as the process for the compensation of any damage, and/or
changes resulted during the implementation of Construction projects which are called entitlements
with quantum. This is because claims require establishing both the liabilities as well as the damages
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54
incurred in any construction contract. Construction contracts allow that all contracting parties will be
entitled to make claims.
The claim administration process is then understood as the process starting from a willful act of the
claimant through claim notification by either of the contracting parties up to and including claims
approval and acceptance by both the Contracting parties for agreed or enforced compensations or
otherwise called claim enforcement.
Either the Contractor or the Employer can initiate the claim administration process. And, in some
instances, the Engineer can also advice on a reasonable incorporation of claims, on behalf of both the
contracting parties, if the engineer believed that without the treatment of such claims, the successful
performance of the project will considerably be affected. This is an obligation in the case of the
Employer, but in no case, used to accrue advantages only to the contractor.
Following the above interpretations for the word claim, accepted national and international procedures,
and findings from a research conducted recently, claim administration process can generally fall into
three major functions (Figure 2.4). These included Claim Submittal, Claim Processing and Claim
Enforcement.
• Claim Notification
• Claim Preparation • Claim Enforcement
• Claim Submittal • Claim Closure
Claim Submittal Claim Processing Claim Enforcement
• Claim Handling
• Dispute Resolution
• Claim Approval
Figure 2.4: Claim Administration Process
Claim Submittal: This is a process by which the claimant is obliged to claim within a reasonable period
of time (28 – 30 days in most contracts) followed by her/his preparation for all substantial documents
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and legal aspects supporting hers/his entitlements for an official submittal. This constituted that a
claim has been filed for its consideration if all these three sub processes called Claim Notification, Claim
Preparation and Claim Submittal are fully undertaken by the claimant.
Claim Processing: This process initiates checking of the claim whether, it is legally or contractually
supported or not; documents provided are valid and reliable to substantiate the claim for consideration
or not; and overall procedural requirements have been followed or not. After verifying the validity of
the claim proper computations and evaluations will be carried out to present the proposed compensation
for the contractual parties the claim is applicable to. Generally the sub process that undertakes these
requirements is termed as Claim Handling.
The contractual parties will pass through different dispute resolution system depending on their
acceptance over the proposed compensation varying from the simplest mediation by the consulting
engineer to the final court ruling in the form of litigation. Basically, three types of dispute resolution
systems are well recognized. These included:
1. Preventive Dispute Resolution System including Partnering, Use of dispute resolution advisors
and Use of Facilitators for early neutral evaluation and advise to prevent the happening of
claims or their consequential disputes
2. Amicable Dispute Resolution System including Negotiation, Mediation, Conciliation and use
of Mini-Trials to administer the claim in a less formal, simple procedure, more flexible, less
adversarial and strictly confidential mode so as to avoid the time and cost implication of claim
processing.
3. Judgmental Dispute Resolution System including Adjucation or use of Dispute review board,
Arbitration and Litigation where the formal adjucatory or common law system is applicable to
bring the closure of claim processing.
This sub process where dispute was handled in any form of its resolution systems is termed as Dispute
Resolutions. Such dispute resolution systems require conducive Macro and Messo environments such us
legislations, policies, regulations, etc. above all other things. Once the contractual parties agree on the
final outcome of the claim process then they have reached into a stage where the claim is approved.
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Claim Enforcement: This is a stage where the approved claim is enforced and finally becomes a closure
therefore two sub processes are included. The claim enforcement process will entertain the inclusion of
the approved claim into payment certificates where their enforcement is due.
Once this compensation or entitlement is due in accordance to the approved claim and its enforcement
requirements, then it is concluded for its closure. In order to account for such an administration process
contracts provide claim clauses with in their provisions in their conditions of contract.
2.4.4.4 Contract Conditions related to Claims

Here claim clauses which are set out in the MoWUD's SCC for construction of civil work projects in
Ethiopia, 1994 are considered and given in Table 2.2. These claim clauses are largely similar to FIDIC's
SCC, 1996 except in the case of delegating Duties and Power of the Engineer by MoWUD. The duties
and power of the Engineer is limited such that it required special approvals of the MoWUD (ERA in
the case of Road projects) in connection with claim clauses causing:
• Repayment to contractors under clause 26.3,

• Cumulative Time Extension Exceeding 15% of the contract time under clause 44,
• Fixing rates under clause 52.2,
• variation exceeding 10% under clause 52.3,
• Increase or decrease of costs under clause 70, and
• Termination of contract under clauses 63 & 69.
From this summary of claim clauses one can generally classify claim entitlements and quanta into two
major types: Claim related to Variations in Time and Cost issues.
Table 2.2: Claim clauses in SCC for construction of civil work projects, MoWUD, 1994
Clause Description of claims Entitlement Due to
No.
5.2 Ambiguities or discrepancies among several Additional Cost The Contractor
documents forming the contract + Time
Extensions
6.4 Failure or inability to issue Engineering Additional Cost The Contractor
drawings with in reasonable time causing + Time
disruption of progress. Extensions
12 Physical conditions or artificial obstructions Additional Cost The Contractor
which can not be predictable + Time
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Extensions
18 Additional boreholes or exploratory excavation Additional Cost The Contractor
+ Profit
20.1 Repairs due to damages, loss or injury from any Additional Cost The Contractor
of the excepted risks + Profit
25 Contractor's failure to insure. Repayment The Employer
successively
26.3 Compliance with statutes, Regulations, etc. Additional Cost The Contractor
27 Obstructions such as archeological and Additional Cost The Contractor
geological interests or structures
30.2 & Protection or strengthening due to special loads Additional Cost The Contractor
30.4 to highways or bridges + Profit
30.3 & Damages due to extraordinary traffic claims Repayment The Employer
30.4 successively
31 Use of constructors belongings for other Additional Cost The Contractor
purposes by the Employer + Profit
36.4 Tests additional to provided in the contract Additional cost The Contractor
38.2 Uncovering and making openings to inspected Additional cost The Contractor
works
39.2 Removal of improper work & Material Repayment The Employer
successively
40.1 Extra cost due to suspension Additional Cost The Contractor
+ Time
extension
42.1 Failure on the part of the Employer for Additional Cost The Contractor
possession on time + Time
Extension
47.1 Delay in completion time Liquidated The Employer
damage
49.3 Cost due to remedy works other than Additional cost The contractor
contractors responsibility + Profit
49.4 Remedy on contractor's failure Repayment The Employer
50 Searching for defects, imperfections, or faults Additional cost
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+Profit
52.1 Valuation of variations +/- cost The contractor/
The Employer
63.1 & Costs incurred by the Employer due to default Repayment The Employer
63.3 by the contractor
64 Urgent remedial work made by the Employer Repayment The Employer
65.3 Damage due to special risks Additional cost The Contractor
+ profit
65.5 Increased costs due to special risks Additional cost
65.8 Payment after termination Additional cost The Contractor/
Repayment The Employer
69 Default by the Employer Additional cost The Contractor
+ Time
Extension
70.1 - 70.2 Changes in Cost & Legislation Additions / The contractor/
Omissions The Employer
2.4.4.5 Major Causes for Claims
[
Generally, deviations from performance requirements among contractual stakeholders whether it is

related to completion time, or construction cost, or the fulfillment of its quality and its intended
purpose, or safety, health and environmental consequences can trigger claims in construction contracts.
Levy, 2000 outlined 11 reasons why claims can be initiated. They are related to
poor or unclear tender and/or contract documents,
poor or inadequate administration of responsibilities by stakeholders, and
Unforeseen or uncertain situations during execution
Claim causes can be presented into three main categories:

Changed conditions
Additional works, and
Delay for cost overruns and time extension.
In both cases, they understood that, though complete and 100% clear tender and / or contract
documents can not be drafted due to uncertainties, it is possible to minimize their potentials for breeds
of contractual claims if proper and clear tender document is prepared. And they also recognize in most
contracts; errors, omissions and ambiguities are common places. These, whether caused by poor or
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unclear tender and/or contract documents; they can be good causes for changed conditions that incur
both more time and additional expenses.
Long and slow decision making process, Weak stakeholders’ relationships resulting from unhealthy
perceptions towards each other, Lack of conducive Macro and Messo environmental situations, and
Subordinating common interests to self-interest serving practices creates poor and inadequate
administration of responsibilities by stakeholders. Such situations are good grounds for adversarial
relationships that trigger claims and disputes.
Sub surface conditions that can not be reasonably revealed; and Unforeseen Political, Economical,
Societal and Technological uncertainties can also be one of the major factors causing claims. From
several experiences, it becomes a well known fact that construction contracts are susceptible to a variety
of factors that may result in time and/or cost variations where legitimate claims can be considered and
compensated. As a result, claims and disputes in construction contracts can not be totally avoided
which can call upon identifying requirements for making a valid claim.
2.4.5 Alternative Dispute Resolution System
2.4.5.1 Preventive Dispute Resolution System
Preventive Dispute Resolution System includes Partnering, Alliancing, Use of dispute resolution
advisors and Use of Facilitators for early neutral evaluation and advice to prevent the happening of
claims or their consequential disputes.
2.4.5.2 PARTNERING
There is some argument as to who was the first to introduce the concept of partnering. The important
thing is that someone did come up with the idea of trying to find a way to reduce the size and cost of
disputes in construction industry. Since then a number of alternative systems have been developed, all
with the idea of minimising (if not eliminating) two traits of disputes. The first is the cost and time
associated with the process, and the second is the long term damage that a major dispute can cause
between the parties: both in terms of collegial relationships and future opportunities for employment.
There are now two types of partnering. The first is project partnering, where the relationship is specific
to one project only and is set up as a one-on-one relationship. The second form is strategic partnering,
best suited for long term relationships and for more than one construction project, or for continuing
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construction activity such as ongoing maintenance work. Strategic partnering provides the full benefits
of partnering because it allows time for continuous improvement. The result is a substantial
productivity increase. A typical process for project partnering is shown in Figure 2.5.
Figure 2.5: Project Partnering Process
2.4.5.3 ALLIANCING
Alliancing is generally a tender arrangement where all the principal tenderers organise into groups with
common aims, prior to submitting the tender. While there is now a perception that partnering
represents a long-term relationship and alliances are focused on a single project, the reality appears to be
slightly different to that. Partnering, in its original concept, was post-contract. That is, the coming
together of the parties to produce a mutually focused group occurred once a tender was won and a
formal contract was entered into by the parties. In many cases, the parties to the partnering process
may never have met or may hardly know each other except through the written word, in the form of
the tender. The contractor may have been invited to tender by the architect, totally unknown to the
client, and possibly even the specialist professionals: engineers and quantity surveyors (cost engineers)
and so forth may be strangers to each other and especially to other parties within the successful
tenderers. Alliancing is the other extreme. In alliancing, a group will form to tender for a specific
project. One party — usually but not always the principal contractor — will select a number of other
partners from the various engineers and designers through to subcontractors and other relevant parties.
There is only one profit put on by all the tendering parties, as a group profit. This may be in the form
of an agreed amount that will be divided amongst the group in accordance with a preagreed formula. If
everything goes exactly according to plan, each party will receive the original agreed sum. If one or
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more parties have problems, such as delays of industrial disputes which would affect the whole project,
or even part of it, then they will be penalised, also according to a pre-agreed formula. Likewise,
exceeding agreed parameters might lead to a greater share of the profits. With the parties working
collaboratively together, they will use open-book techniques to eliminate duplication of costs, so
reducing overheads and contingencies. In addition, there is usually a contingency built into the final
price, which will form a buffer for the above distribution. Thus savings on the project through
collaboration, innovation, synergies between the parties to the alliance partners and risk avoidance, may
increase the amount available for the alliance partners. As costs go down, profits for the alliance
partners go up, whilst the opposite also applies.
2.4.5.4 STANDING NEUTRALS
In 1991 the Centre for Public Resources of Australia made several suggestions for the improvement of
dispute resolution, one of which was for a ‘standing neutral’. The concept of a standing neutral involves
an independent person, or persons, who is/are totally neutral to the project. Terms such as dispute
review boards (see section below) standing mediator, referee, standing arbitrator and adjudicator are
also used. At the inception of the construction phase of the project, the parties select one or more
independent construction industry experts to be available as a standing board, panel or single neutral
throughout the project. The neutral acts immediately to resolve any dispute which the parties cannot
resolve themselves. The most common form is that of dispute review boards.
2.4.5.4.1 DISPUTE REVIEW BOARDS
The earliest forms of dispute resolution were all bought into existence after the event. In recent years
there has been a growing awareness that the prevention of a dispute, or a very quick, short circuit of the
matter causing the dispute, would be a better solution: it would be quicker, cheaper and less disruptive
to the ongoing relationship of the contractual parties. The long-term nature and complexity of many
projects and the claim-prone nature of the industry means that a variety of both large and small claims
can be anticipated throughout the duration of the project.
The first project to be credited with the use of a dispute review board (DRB) was the second bore of the
Eisenhower Tunnel Project in Colorado in 1975. Between that year and 1990 there were in excess of one
hundred similar projects which used a DRB totaling approximately US$6.5 billion in construction costs.
Of these, close to one hundred were successfully resolved by a DRB. More recently, an organisation has
emerged to help spread the use of dispute board resolution. The Dispute Review Board Foundation is a
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non-profit organisation for professionals involved in the resolution of conflict through the use of
dispute review boards. The foundation’s website, at <www.drb.org> states that the DRB process has
proved itself beyond all expectations. In terms of dollar value, the growth of DRB use around the world
has been compounding at twenty per cent a year. The total value of completed, ongoing, and planned
projects with a DRB is now US$67 billion. In addition to the 480 completed projects, DRBs are
functioning on 277 ongoing projects and are planned for many others. A major DRB was established for
the Hong Kong Airport project.
The dispute review board commonly consists of three members: a representative from the owner, one
from the contractor and a third, selected by these two representatives. The third member chairs the
board. The members usually have experience in the kind of construction work being undertaken and
are also familiar and experienced in dispute resolution. It is important that all the board members are
independent of any of the contracting parties, although they are paid by them.
Eight elements of a dispute review board
According to the Construction Dispute Review Board Manual (Smith & Sperry 1996) there are eight
essential elements necessary for a DRB to be successful. If any of these elements are missing, success is
jeopardised. These requirements are that:
1. All three members of the DRB are neutral and subject to the approval of both parties
2. All members sign a Three-Party Agreement obligating them to serve both parties equally and
fairly
3. The fees and expenses of the DRB members are shared equally by the parties
4. The DRB is organised when work begins, before there are any disputes
5. The DRB keeps abreast of job developments by means of relevant documentation and regular
site visits
6. An informal but comprehensive hearing is convened promptly
7. The written recommendations of the DRB are not binding on either party but are admissible as
evidence, to the extent permitted by law, in case of later arbitration or litigation
8. The members are absolved from any personal or professional liability arising from their DRB
activities.
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2.4.6 Amicable Dispute Resolution System
Amicable Dispute Resolution System includes Negotiation, Mediation, Conciliation and use of Mini-
Trials to administer the claim in a less formal, simple procedure, more flexible, less adversarial and
strictly confidential mode so as to avoid the time and cost implication of claim processing.
2.4.6.1 NEGOTIATION
The Shorter Oxford Dictionary (1987) defines negotiation as the act of conferring with another ‘for the
purpose of arranging some matter by mutual agreement; to discuss a matter with a view to a settlement
or compromise’. The process of negotiation receives comment in most books on dispute resolution, but
assumes the reader already knows what it is. Negotiation is also the basis for most other dispute
resolution processes. Conferring may occur between the parties at any time during a court or arbitration
hearing; often it is between the legal representatives, or between the parties directly without their
representatives (although admittedly this is unusual if legal or other representatives are present). The
very basis of mediation is negotiation, but with the assistance of a third party who attempts to assist the
parties to reach a mutually agreeable arrangement.
WHAT IS NEGOTIATION?
The simplest form of negotiation is between two people who wish to come to an agreement, whether
this is a child after another biscuit from its mother just before dinner or an employee after a pay rise
from their boss. Fisher & Ury (1981) cite negotiation as: “a basic means of getting what you want from
others. It is a back and forth communication designed to reach an agreement when you and the other
side have some interests that are shared and others that are opposed”.
There is no formal negotiating system as there is for the courts or for arbitration, or even in mediation.
It involves no ‘third party neutral’ or any party present except those actually involved in the
negotiations. At the conclusion of the negotiations there is no solution imposed; the parties themselves
must reach it. It is not compulsory for the parties to produce a legally binding agreement at the end of
negotiations, but a binding contract may result from it. The parties are at liberty to draw up a formal
document including the resolutions that they have reached, or not, as they prefer. Whatever the
outcome, the terms are completely under the control of the disputing parties themselves.
IS NEGOTIATION AN ALTERNATIVE DISPUTE RESOLUTION METHOD?
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It can be argued that negotiation is not part of an ADR at all, largely because it is not a specific, detailed
system such as arbitration or even mediation. Some texts do not refer to the system of negotiation
when discussing alternatives to the court system (Jacob 1990). Others do refer specifically to
negotiation, but not as a method separate to arbitration and mediation (Fulton 1989), while Bevan
(1992), for example, relies on other scholars for comments on negotiation, but refrains from making
specific observations himself.
OUTCOMES OF NEGOTIATION
There are three outcomes that are not just applicable to single party-to-party negotiation, but apply
equally to neutral third party conferring (usually called mediation and covered in more detail in the
next chapter). Most writers on the subject usually refer to the three outcomes as:
9 Win/Win
9 Win/Lose
9 Lose/Lose.
THE FOUR MAIN CHARACTERISTICS OF NEGOTIATION
There are many ways of approaching a negotiation, but achieving success requires a well thought out
plan and a clear understanding of the various parts of the negotiating process. Simply put, it requires
good management. The four steps in a successful negotiation can be summarised as:
9 Preparation
9 Discussion
9 Proposing
9 Bargaining.
ALTERNATIVE NEGOTIATING SYSTEMS

Besides the negotiation process shown above, there are two further approaches that have been
developed based on the fundamentals of negotiation but with their own specific variations.
Independently assisted negotiation Tyrill (1992) suggests a slight variation to simple negotiation by
employing a ‘neutral third party’ who simply chairs the negotiations and attempts to keep them on
track. Independently assisted negotiations may also help in avoiding deadlocks by encouraging the
parties to stay with the process when it might otherwise fail. This should not be confused with
mediation. The role here is simply to act as the peace keeper, not the chair.
Step negotiations: the Centre for Public Resources (1991) suggests the step technique. If the
representatives of the parties who are most intimately involved in the disagreement are not able to
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resolve it at their level, their immediate superiors, who have not been closely identified with the
disagreement, are asked to confer and try and reach agreement. If this is not possible, the disagreement
will be passed on to higher management in both organisations. Because of an intermediate manager’s
interest in keeping messy problems from bothering higher management and to demonstrate his/her
ability to solve problems, there is sometimes a built-in incentive to resolve disputes before they have to
go to a higher level. It is interesting to note that this description could be applied with very few changes
to the concept of partnering discussed in the previous section.
2.4.6.2 MEDIATION
The National Alternative Dispute Resolution Advisory Council (NADRAC 1997) defines mediation
as: “a process in which the parties to a dispute, with the assistance of a neutral third party (the
mediator), identify the disputed issues, develop options, consider alternatives and endeavour to reach
an agreement. The mediator has no advisory or determinative role in regard to the content of the
dispute or the outcome of its resolution, but may advise on or determine the process of mediation
whereby resolution is attempted”.
Another definition of mediation describes the process as: “being where both parties come before an
independent mediator who plays an active role, essentially acts as chairman and leaves matters to the
parties, guiding them back to the point when they start to stray. He may adjourn the parties to
negotiate directly (Smart 1986)”.
The mediator is also referred to in various textbooks as the ‘neutral third party’ or (especially in
American texts) as the ‘third party neutral’.
WHY USE MEDIATION?

There are a number of good reasons for using assisted negotiation techniques, these being essentially to:
9 Save money
In most instances the parties will save on financial outlays because there are reduced legal costs and
the hearing times are usually limited — one day is common for an average hearing — although this
is not always so in complex commercial issues.
9 Preserve relationships
The parties improve their chances of preserving a satisfactory ongoing commercial or business
relationship, especially with a mediator who can control the hearing and allow the parties to really
say what they mean in an atmosphere of mutual respect. This is unlike a court or arbitration where
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the evidence may try to discredit the other side and thus lead to a serious breakdown in the
relationship between the parties.
9 Maintain confidentiality and privacy
In many respects, mediation is even more private than face-to-face negotiations. This is because the
parties can meet separately with the mediator and reveal facts that they may not want the other
side (either because revealing certain facts may affect their ability to negotiate or simply for
commercial considerations) to know. Essentially, the difference between negotiation and mediation
is that mediation is a process that involves the use of the neutral third party. This person will assist
the other parties to develop the best solution to the problem. There are now a number of sets of
guidelines for the running of mediations, published by various organisations including the Centre
for Dispute Resolution (London), The Chartered Institute of Arbitrators (United Kingdom) and
the American Arbitration Association (AAA). In 2001 the Institute of Arbitrators and Mediators
Australia (IAMA) also published a set of rules for mediation and conciliation
(http://www.iama.org.au/rulesmc.htm). An import source for Ethiopia is the independent
organization: Ethiopia Arbitration and Conciliation Center.
THE MEDIATOR
The role of the mediator is not to enforce a settlement on the parties as in arbitration. Nor is it to
simply participate in the direct negotiations. The role of the mediator can be related to an electrical
circuit breaker. He or she is there to act as a break between the parties when matters might otherwise
become overheated, and is there to assist the parties to arrive at a mutually acceptable solution to the
problem. In face-to-face negotiations, if one party or both cannot agree on a solution, the negotiation
will falter. This is especially true if personalities begin to interfere with rational thought. A neutral
party can step between the parties and help to reduce any personal animosity that may arise. They can
act, as has occurred in much international mediation, as a peacemaker. A good mediator, unlike an
arbitrator, need not be, and usually is not, an expert in the topic being mediated, especially in socially
related disputes. Many mediators are barristers or trained communicators, whilst others are trained
social workers or similar. It is their people skills that are important, especially their ability to listen to
each side and to be inventive or creative so as to be able to make suggestions to keep the discussions
moving forward. A good mediator will be able to assist the parties to explore new alternatives that they
may not have previously considered.
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THE MEDIATION PROCESS

Whilst there is no set way of running a mediation hearing, there are, as in the other resolution systems
(namely the courts and arbitration), some basic processes that most mediators follow. The standard
course of action is summarised in Figure 2.6.
Figure 2.6: Mediation Process
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2.4.6.3 CONCILIATION
NADRAC (1997) defines conciliation as: “a process in which the parties to a dispute, with the
assistance of a neutral third party (the conciliator) identify the disputed issues, develop options,
consider alternatives and endeavour to reach an agreement. The conciliator may have an advisory role
on the content of the dispute or the outcome of its resolution, but not a determinative role. The
conciliator may advise on or determine the process of conciliation whereby resolution is attempted, and
may make suggestions for terms of settlement, give expert advice on likely settlement terms, and may
actively encourage the participants to reach an agreement”.
Conciliation is in many respects similar to mediation. The conciliator is still an independent third party
but the difference is that the conciliator may make more specific suggestions to resolve the dispute. The
conciliator may also have a more forceful and powerful role in the various meetings.
United Nations Commission on International Trade Law – UNCITRAL
Unlike mediation, there is an international set of rules for conciliation published by the United Nations
for use in international trade and accepted by the General Assembly in 1980. Articles 5 and 7 of the 1980
‘United Nations Commission on International Trade Law (UNCITRAL) Conciliation Rules’ defines
the role of the conciliator. It provides the basis for the running of the conciliation itself. The following
is an extract from that document:
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2.4.7 Judiciary Dispute Resolution System
Judgmental Dispute Resolution System includes Adjucation or use of Dispute review board,
Arbitration and Litigation where the formal adjucatory or common law system is applicable to bring
the closure of claim processing. The Adjucation or dispute review board has been discussed in the above
section. Litigation means going to court and being judged by a public appointed jury. This process is
obvious quite expensive as the public judiciary system is less efficient and time taking. The most
common alternative to litigation is arbitration.
2.4.7.1 ARBITRATION
In Halsbury’s Law of England, ‘Arbitration’ has been defined as: “ is the reference of dispute or
difference between not less than two parties for determination, after hearing both sides in a judicial
manner, by a person or persons other than a court of competent jurisdiction”.
ARBITRATOR
An Arbitrator is neither more nor less than a private judge of a private court (called an arbitral tribunal)
who gives a private judgment (called an award). He is a judge in that a dispute is submitted to him: he
is not a mere investigator but a person before who, material is placed by the parties, being either or both
of evidence and submissions; he gives a decision in accordance with some recognized system of law and
rules of natural justice. He is private in so far as
1. He is chosen and paid by the disputants
2. He does not sit in public
3. He acts in accordance with privately chosen procedure so far as that is not repugnant to public
policy
4. So far as the law allows he is set up to the exclusion of the state courts
5. His authority and powers are only whatsoever he is given by the disputant’s agreement
6. The effectiveness of his powers derives wholly from the private law of contract and accordingly
the nature and exercise of these powers must not be contrary to the proper law of contract or
the public policy, bearing in mind that the paramount public policy is that freedom of contract
is not lightly to be interfered with.
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ARBITRATION ADVANTAGES
Arbitration has many advantages. Foremost of these is that the arbitrator is appointed jointly by all
parties to the dispute, and so that at least in principle, both parties believe the appointee to be the best
person available to hear a particular dispute. Most arbitrators are not formally trained in the law, but
will have received training in the relevant areas by the local arbitration
association (for instance the Addis Ababa Chamber of Trades, Ethiopian Conciliation and Arbitration
Center, Chartered Institute of Arbitrators in the United Kingdom, the American Arbitration
Association , The Institute of Arbitrators & Mediators Australia (IAMA) and so on). The second
advantage is that the arbitrator is normally an expert in the field of the matter under dispute. Most of
their training will have been in the area of the expertise in which they have earned their livelihood. In
the past this has covered many fields of endeavour, but has been used extensively in international trade
disputes, construction, and tenancy disputes. The growing field is in computer and IT related areas.
A further advantage of arbitration, at least in theory, is that the parties are given a wide range of power
to adopt the procedures for the conduct of the arbitration process that they consider best fits the specific
requirements of the dispute. This freedom of the parties to tailor the procedure to the nature of the
dispute is embodied in all arbitration legislation, with the Ethiopia Civil Code Acts having in many
provisions which begin with the words: ‘Unless the parties otherwise agree in writing’. Possibly the
biggest advantage of the arbitration procedure is the fact that hearings are conducted in private, whereas
court hearings are, in the majority of cases, open to the public. In commercial disputes it is important to
ensure that commercial rivals (not involved in the arbitration) are not aware of the nature of the
dispute or of the evidence being given during the hearings because it may be of a commercially
sensitive nature. Most arbitration hearings and the subsequent awards are not reported in the way that
court hearings are reported. There are reports in arbitration journals of some cases — usually those that
have some significance for the relevant industry — but even then it is usually only specific aspects
rather than the whole case. However, even this is changing: a recent Australian High Court decision
has eroded the confidentiality benefit of some specific aspects of arbitration over court proceedings.
Two other aspects of arbitration are that it is virtually universally consensual, and it is binding. The
arbitrator’s jurisdiction and powers are based in a private contract. Thus it is the contract that confers
the jurisdiction and at the same time defines the limits of the arbitrator’s jurisdiction to hear and
determine matters in dispute between the parties. The determination made by the arbitrator is, by
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consent of the parties, final and binding, and subject to extremely limited attacks which may be made
in the courts against that determination.
There are a few (indeed some people assert that there are many) complaints about arbitration.
Theoretically it should be a system that is designed to provide a speedy hearing of a dispute, with
expedited pre-hearing procedures. This is not always achieved and it is dependent upon the willingness
of the arbitrator to control the parties. The biggest number of complaints about arbitration arises from
the mimicking of the arcane court procedures. There is scope for the arbitrator and the parties to take
advantage of the autonomy permitted by the legislation, yet it is seldom done. These complaints
usually revolve around the inflexibility of the legal representatives for the parties in using every
available technicality to further the interests of their client rather than assisting and cooperating in
expedited procedures. Where lawyers do take advantage of the parties’ freedoms and are committed to
the processes as an alternative to the court system they can assist the parties and the arbitrators to great
savings in costs.
THE LEGISLATION
It is important to consider the various sections that are to be found in most arbitration legislation and
discuss the differences. The UNCITRAL Model Law on International Commercial Arbitration is used
as the starting point from which to consider current and proposed legislation in relation to a given
clause.
MODEL LAW
One of the advances in using arbitration as a tool for dispute resolution around the world was the
publication of the Model Law as adopted by the United Nations Commission on International Trade
Law on 21 June 1985. The Model Law applies specifically to international arbitration. The definition
provided by the Model Law to the interpretation of the words ‘commercial’ states that it should be
applied to all relationships of a commercial nature, whether contractual or not (Model Law Endnote 2).
In Ethiopia the important source of legislation for Arbitration is Addis Ababa Chamber of Commerce
& Sectoral Associations (AACCSA) Arbitration Institute. Regional sources of information include
Kenya (Dispute Resolution Center and Nairobi Peace Initiative), Malta (Malta Arbitration Center),
Nigeria (Nigerian Arbitration and Conciliation Act) and South Africa (Center for Conflict Resolution
and Commission for Conciliation, Mediation and Arbitration).
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THE ARBITRATION PROCEDURE
Whilst the matters under dispute will vary widely, the actual procedure of the arbitration is fairly well
set and generally proceeds along fairly well practiced lines.
2.4.8 SUMMARY OF DISPUTE RESOLUTION SYSTEMS

The following summarises most of the standard dispute resolution/avoidance systems currently being
used in the construction industry.
1. TRIALS - Binding
Trial in public courts is what all forms of ADR attempt to avoid. However it is where disputes are
resolved unless the parties agree to an alternative dispute resolution mechanism.
2. ARBITRATION - Binding
Arbitration is one of the oldest forms of ADR. It is designed to have disputes settled by experts in the
field and to be more efficient than the public court system. Variations can involve bracketing the range
of results the arbitration panel can reach or requiring the arbitration panel to choose between the final,
best offer presented by each of the parties.
3. DIRECT NEGOTIATION - Not Binding

Parties negotiate with each other. The purpose is to resolve disputes through discussion and
compromise.
4. MEDIATION - Not binding

A neutral mediator assists negotiations. In the most common scenario, the mediator listens to
presentations from both sides but does not evaluate either side in front of the other. Rather the
mediator uses his/her evaluation as a lever during ‘shuttle diplomacy’ to encourage each party to more
objectively evaluate its position and ultimately to move towards a compromise.
5. MINI-TRIAL - Not binding

Each side presents a condensed version of its case as if at a trial. Opening and closing arguments are
presented. A condensed version of testimony is given. The mini-trial can be used as a starting point for
direct negotiations or other dispute processes.
6. DISPUTE REVIEW BOARDS (DBRS) - Not binding, but a DRB decision may be admitted as
evidence
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DRBs fall into the mid-range of dispute resolution because decisions or findings are made as in a
binding arbitration or trial, but the decision is not binding, only advisory. The purpose is to facilitate
dispute resolution without the risk of binding results.
7. PRIVATE JUDGES - Binding in the United States and Not binding in Australia
Some parts of America, including California, permit the use of private judges and even private juries.
Their decisions can be appealed through the normal public legal system.
8. PARTNERING - Not binding but produces common aims

A system of post contract facilitated association where the parties will work together once the contract
has been let and the consultants all contracted to the client. The aim is to build a close-knit unit with
common aims as set out in a formal charter produced at the end of the facilitated meeting.
9. ALLIANCING - Set up as a binding relationship between the parties concerned.

A system of pre-contract facilitated association of separate parties who as a group will bid for the
project, including all the necessary consultants, the head contractor and the subcontractors.
Refer to Annex 2 for a case study of an arbitration case in Ethiopia.
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CHAPETR III
SPECIFICATION
3.1. Introduction
Specification is defined as the designation or statement by which written instructions are
given distinguishing and/or limiting and describing the particular trade of work to be
executed. In short specification is a statement of particular instructions of how to execute some
task. Specification is one of the contract documents.
Specifications are written based on the prepared design, drawings, general and scientific trends
of workmanship, quality expected, equipment involved and materials to be used for the
particular trade of work. The specifications should clearly specify: -
1) Design and drawing
2) Labor employment
3) Materials to be used
4) Construction method
5) Equipments used
Specifications should be clear, concise, and brief descriptions of what is required to execute the
proposed trade of work. The information that is needed for construction is usually conveyed
by two basic communication lines. They are Drawings (pictorial) and Specifications (written).
In so doing the methods of communication should compliment each other and neither should
overlap or duplicate the other. Specifications are devices for organizing the information
depicted on the drawings and they are written descriptions of the legal and technical
requirements forming the contract documents. Their difference is that the drawings should
generally show the following:
1) Dimensions, extents, size, shape, and location of component parts
2) Location of materials, machineries, and fixtures
3) Interaction of furniture, equipments and space
4) Schedules of finishes, windows and doors
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Specifications generally describe the following: -

1. Type and quality of materials, equipments, labor or workmanship
2. Methods of fabrication, installation and erection
3. Standards, codes and tests
4. Allowance, submittals and substitutions
5. Cost included, insurance and bonds
6. Project records and site facilities.
3.2. Purposes of specifications
The purpose of specifications generally includes:

1. Guide the bidder at the time of tendering to arrive at a reasonable cost for the work
2. Provide guidance for execution and supervision of works.
3. Guide the contractor for the purchase of materials
4. Serve as a part of contract document to limit and describe the rights and obligations of
each contracting parties.
5. Guide the bidder to identify his capacity to execute the work.
6. Serve as fabrication and installation guide for temporary and permanent works.
7. Guide the contractor for the purchase and/or hiring of equipments.
8. Serve for the owner to know what he/she is entitled to receive
9. Serve for the manufacturers of construction materials, equipments, tools etc to grade,
classify, and improve qualities of their produces.
10. Indirectly, the specifications are very much related to the legal considerations,
insurance considerations, bidding requirements, alternates and options, rights,
obligations and remedial measures for the contracting parties.
Note: In the events of conflicts between specification and drawings, the specification governs.
3.3. Types of Specifications

In general, specifications can be broadly classified into four categories as follows:
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1. Manufacturer’s specification: Manufacturers prepare specification of their product for

the guidance of their users, which may include property description and installation
guide lines.
2. Guide Specification : Specifications prepared by an individual or group of individuals
based on manufacturer’s specifications, established trends of workmanship, service and
laboratory tests and research findings to be used as guide lines for preparation of
contract specifications.
3. Standard Specification: Specifications which are intended to be used as a reference
standard in the construction of a project. The guide specification which has been
standardized by a recognized authority is considered as standard specification.
4. Contract (Project) Specification: the specification prepared for a particular project to
accompany the drawings and other contract documents.
The specifications described above can be prepared following the format which has general and
specific parts (general specification and specific specification).
In the general part of the standard specifications the following items are included:-
• Administrative and Procedural Requirements

• Scope, definitions
• Reference organizations and Standards
• Project description, site facilities
• Submittals and quality assurance
• Delivery, storage and handling
• Project records, Insurances, Other general requirements
In the specific part of the standard specifications, detailed description of the quality of items to
be used is given. In addition to this, preparatory actions and methods of incorporating the
items into the project are indicated.
“Technical Specification and Methods of Measurement for Construction of Buildings”, of

March 1991 is the standard specification which has been in use for many years as one of the
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contract documents in our country. This material has the general requirement part and the
specific part.
In the general requirement part the following items, which may be applied to any project and
any trade of work are described in general terms:
011 - General 012 - Site Description 013 - Quality Assurance
014 - Project Records 015 - Site Facilities 016 - Cleaning up
In the specific part the different trades of works (excavation and earthworks, concrete works,
etc.) are described in details and the method of measurements are given.
Specifications could be written in several ways, with the prime emphasis given to either the
producer company’s brand or the performance capacity of the material and so on. Accordingly,
there are the following types of technical specifications.
1. Proprietary Specifications: This specifications call for desired materials, producers,

systems, and equipments by their trade names and model numbers. For detailed
descriptions reference should be made to manufacturer’s specifications. They are of two
types; closed (sole) source and open or equal source.
2. Performance Specifications: specifications which define products based on desired end
results which are performance oriented; most appropriate when new or unusual
products or systems are required or when innovation is necessary. Describing the
problems or conditions under which the products or systems must operate, and the
parameters for the acceptable solutions is difficult and challenging. Testing methods
and evaluation procedures for defining the required performances must be explicitly
specified.
3. Reference Specifications: Specifications which refer to levels of quality established by
recognized testing authority or standards set by quality control authorities. These
specifications are also used in conjunction with other types of specifications.
4. Descriptive Specifications : Specifications which describe all components of products,
their arrangements and methods of assembly, physical and chemical properties,
arrangement and relationship of parts and numerous other details. The specifier shall
take total responsibility for the function and performance of the product.
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5. Cash Allowance Specifications: Specifications meant to direct bidders to set aside a

specified amount of money to be applied to the construction work at the direction of the
specifier.
3.4. Specification writing
Basically specifications are not to be created; they are prepared based on existing standards,
codes, guidelines, and laws.
Specification writing embodies certain methods of presenting information and instructions.
When specifications are to be written, the following shall be taken into consideration:-
a) Specification writing require
1. Visualization (having clear picture of the system)
2. Research (to know the legal impact correctly)
3. Clear thinking (understanding things directly without misleading)
4. Organizing (organizing what we know to write the specification)
b) Specification writing require professional ability to read drawings
c) Specification writing require wide knowledge of the construction materials, various
levels of workmanship, different construction equipments and method of
construction to be employed
d) Specifications use simple and clear language such that it can readily be understood.
e) Specifications shall be brief and short as much as possible (avoid long sentences
without punctuations)
f) Specifications shall include all items affecting the cost of the work
g) Specifications shall be fair and do not attempt to throw all risks and responsibilities
on one of the parties signing the contract, the employer or the contractor.
h) Specifications shall avoid repetition of information shown on drawings to avoid
mistakes and duplications within the specifications and drawings
i) Specifications shall not include inapplicable text and do not specify the impossible or
anything not intended to be enforced.
3.4.1. What are the useful references in specification writing?

The following are useful references in Specification Writing: -
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1. Codes and ordinances of governments, cities, or municipalities. For example,

Ethiopian Building Code of Standards (EBCS)
2. Standards prepared by distinct societies and government agents. For example, ACI
standards, ASTM standards, BS, ES.
3. Standards or model specifications prepared by manufacturers, professional societies,
and government bodies.
4. Master specifications and previously written specifications.
5. Information or experience acquired by personal observation and contact with trained
or experienced people in the construction industry.
3.4.2. Specification language

The specification writer should present his instructions regarding the particular work under
consideration in such a manner that: -
1. The drawings are more clearly interpreted, not duplicated.

2. Rights, obligations, and remedial measures shall be designated without ambiguity or
prejudice.
3. Clearly express the extent of works under consideration; therefore, the phraseology used in
this regard shall be: -
i) Judged by its quality not its length
ii) Should be concise and short and written with commonly used words
iii) Punctuations are important but their usage shall be limited to few
iv) Capitalizing the first letters is mandatory for the following expressions: -
a) Parties to the contract; e.g. Employer/Client /Contractor/ Engineer

b) Space within the building; e.g. Bed Room, Toilet, Living Room
c) Contract documents; e.g. Bill of Quantity, Working Drawing, Specification
v) Minimize pronouns, better to repeat nouns
vi) Minimize the use of symbols
vii) Do not use foot notes, do not underline within a sentence for emphasis
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vi) Words shall be used as follows:-
a) shall in place of must; use “shall” for the duties of the contractor or the consultant to
represent the word “must”
b) “will” is used for the duties of the employer to represent the word “must”
c) “must” –avoid the use of the word “must” and substitute by the word shall to
prevent the inference of different degrees of obligation
d) Avoid the use of words which have indefinite meanings or limitless and ambiguous
in their meanings. For example, any, either, same, similar, etc.
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CHAPETR IV
[[
Quantity Surveying
4.1 Introduction
Quantity surveying is a term or processes used in the construction industry to take

measurements of civil works, prepare specifications, and estimate the cost of works either for
each trade of work or for the whole project.
The following tasks are covered in quantity surveying:

1. Preparation of specification
2. Taking measurements of civil works (Taking off quantities and preparing BOQ)
3. Preparation of approximate (preliminary) cost estimate at the very early stage of the
project
4. Preparation of detail cost estimate at different stages (taking as built measurements and
preparing payment certificates or approval of payment certificates prepared by taking
measurements)
5. Preparation of tender documents and examining tenders
6. Preparation of schedule of prices to negotiate with pre-qualified bidders (labour rates,
material supply rates, equipment rental rates)
7. Determination of values of works (executed works) and preparation of payment
certificates
8. Preparation of final accounts on completion of all of the works.
9. Valuation of property
4.2 Measurement of Civil Works
Measurement of civil works includes the billing of each trade of work either from drawings or
the building itself for defining the extent of works under each trade. The standard book, which
is used here, is standard technical specification & method of measurement for construction of
buildings by BaTCoDA, March 1991.
Specification Worksheet (BOQ form)
It is the format which is used in a bill of quantity to list (include) a short description of the
specification along with its measuring unit, quantity and unit prices to determine the total cost
for each trade of item.
Project: XY
Item Description Unit Quantity Unit price Amount
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There are four clearly defined steps in preparation of Bill of Quantities:

1. Taking off 2. Squaring 3. Abstracting 4. Writing the final Bill of Quantity
4.2.1 Taking off
This is the process of preparing / defining a detailed list of all labor and materials necessary for
the work and entering the items on properly dimensioned paper. The standard form used for
entering the dimensions taken or scaled from drawings to determine the accurate quantity in
each trade of work, except reinforcement steel, is called take off sheet or dimension paper. The
dimension paper used for taking off is usually double – ruled as shown below (A4 size).
Title
1 2 3 4 1 2 3 4
Page Page
Column 1 is used for stating the number of times an item occurs and is called the timising
column. Column 2 is called dimension column as it is used to enter the dimensions of the items
of works. The dimensions are entered in the order indicated below:
Length, Width, Height or thickness. Column 3 is called squaring column. The stated
dimensions in column 2 are multiplied to determine the quantity of the work either in ml, m2,
m3 or in Pcs. or No. Where as column 4 is called description column and description of the
work item is briefly stated.
The following tasks are part of the taking off (used to facilitate defining the quantities):
Describing the item, bracketing (relating the description to the quantity), timising, dotting on
(adding to the timising factor), the ampersand (ditto), waste calculations, deduction of items,
correction of dimensions (nullifying).
A separate sheet (Bar Schedule) is used to prepare reinforcement quantities as shown below.
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Project: Bending schedule to :

Locatio Mark Shape Diameter Length No. ∑ L for each diameter
n (m)
Total
W/m
∑W
4.2.2 Squaring:
The dimensions entered in Column 2 are squared or cubed as the case may be, multiplied by
the timising factor, and the result entered in Column 3. This task is called squaring. All
squared dimensions should be carefully checked by another person before abstracting, and if
correct the item should be ticked with red.
4.2.3 Abstracting:
The squared dimensions are transferred to abstract sheets and all similar dimensions are
collected in the same category to obtain the total quantity of each item.
4.2.4 Writing the Final Bill
After the abstract sheets have been completed and checked, the final bill of quantity is written.
The dimensions are copied from the abstracts, and as each item is transferred it should be
ticked by a vertical line from the abstract sheets. The description of each item in the final
BOQ should be short, precise and descriptive as per the specification.
4.3 Basic Principles in Taking Off
1. Drawings shall be fully understood and clearly detailed.

2. During discrepancies in detailing, dimensioning or if missing items exist obtain
clarification from the designer.
3. The BOQ shall accurately represent the works to be executed.
4. Works, which cannot be measured accurately, shall be expressed as provisional quantity
(PQ) and will result in provisional sum (PS) and lump sum (LS)
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5. Shall be prepared in such a way that discrepancies or mistakes in taking off will not
result in excessive variation in the project cost which directly will affect the budget
allocation for the project.
6. There shall be the understanding that measurements are taken to the nearest cm.
7. Built items shall generally include all possible entrants like labor, materials (including
storing, loading, unloading and handling), fixing, use of plant and equipment, wastage
of materials, equipment; which will result in a better process for establishing prices and
profit.
8. There shall be understanding that there is a standard paper format to carry out
measurements of civil works, namely take off sheet or dimension paper, bending
schedule and specification worksheet.
9. Prior knowledge of the regulations is necessary (For E.g. roofing is measured in
horizontal projection).
10. Measurements of civil works shall be carried out in such a way that it can be easily
checked and audited.
4.4 Types of Taking Off
Mensuration – the calculation of geometric quantities such as length, area, and volume, from
dimensions and angles that are already known.
Girth (perimeter) computation –linear measurement. There are various methods of taking off
quantities for computation of girth.
Centre line method –suitable only when the cross sections of all walls are symmetrical. In this
method centre line length is found and same is used for taking off quantities (therefore only
width and depth vary).
Crossing method – lengths and breadths of walls as shown in plan are taken for working out
various items and this method is useful only if the offsets of footings are symmetrical.
In- to- in and out- to-out method –some wall lengths are taken out to out and others in to in
(offsets are added to out to out lengths) and same are deducted from in -to-in lengths; used for
any type of measurement irrespective of condition of symmetry.
4.5 Technical Specification and Method of Measurements for the different trade
of Works
4.5.1 Building Project
The following specifications and methods of measurement are provided to guide the quantity
surveyor in the preparation of quantities for a building project. A typical building project will
have the following work items.
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A-SUB STRUCTURE
1 Excavation and earth work
2 Concrete Works
3 Masonry work
B. SUPER STRUCTURE
1 Concrete Works
2 Masonry Works
3 Roofing
4 Carpentry and Joinery
5 Metal Works
6 Finishing
7 Glazing
8 Painting
9 Sanitary installation
10 Electrical installation
11 Fence Work
Refer to Annex 3 for technical details for building parts.
Example: - Find out quantities of excavation and earthwork and concrete for the single isolated
footing.
4.5.2 Road Project
The following specifications and methods of measurement have been summarized from the
Technical Specification for Road Projects by the Ethiopian Road Authority (ERA, 2002). The
preparation of quantities is based on high way design and is assumed to have been discussed in
Highway Engineering courses.
Group Name Group Description of Works
Group I – General / Site Works Living quarters, Offices, Laboratories, Vehicles

with operating costs
Group II – Earth Works Clearing & grubbing, Common earth work, rock
and borrow excavation, Overhaul, sub -grade
preparation, and capping layers.
Group III – Pavement Works Sub – base, base , surface coatings and asphalt
concrete works
Group IV – Major / Minor Drainage Works Culvers, Structures ( bridges), Pipes, Drainage
works
Group V – Miscellaneous / Incidental Works Road furniture: guide post, curbs, signs and
retaining walls
Group IV – Day Work Provisions Provisions made for different day work rates
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CHAPETR V
PROJECT COST ESTIMATION AND VALUATION
5.1. Project Cost Estimation
5.1.1. General
Project Cost estimation is the process of valuing on monetary expression, including the cost of
all possible entrants necessary for the planning, implementing and monitoring stages of the
proposed project under consideration. The possible entrants are:
- Preliminary investigation (project appraisal costs)
- design and supervision (consultancy cost )
- construction works (contractor’s cost )
- land owning cost, and
- monitoring costs
Cost due to construction is given special attention here; it includes cost due to material, cost
due to labor, cost due to equipment, overhead costs and contractor’s profit. In order to facilitate
estimation of cost due to material, it is important to know the quantities of various elements
involved in construction of various parts of the building work i.e. material break down is
essential. As an example material break down for 1m3 of plain cement concrete of C-25 (1:2:3
mix) grade is given below:
Materials required for 1:2:3 cement concrete mix – a commonly used grade of concrete for
structural works.
Wet (fresh) concrete mix ……….……= 1m3
e) Quantity for dry base analysis...= 1.55m3
f) Volume of cement…………………= 1/6*1.55 = 0.258m3 = 0.258m3/0.035m3 per bag = 7.4 bags of
cement
g) Sands ………………………….........= 2/6* 1.55 = 0.517m3 of sand
h) Coarse aggregate………………….= 3/6 *1.55 = 0.775m3 of coarse aggregate
i) Water …………………………….….= 0.16 m3 ( assuming w/c 0.62)
Note: - 1.5 to 1.6 times dry volume of the materials is required to get 1m3 of compact dense fresh
concrete mix.
Exercise: Do similarly for C 20 and C 30 concretes
5.1.2 Purposes of Cost Estimation
The main purpose of costing or estimating are to:

• know the volume of work in reference to the fund available
• determine actual cost per unit of item
• identifying engineering estimate of the work for bidding purpose
• work out economical use of materials , labor and equipments
• in cases of variations to determine the extra cost to be incurred
• when changes in cost due to legislation happens, to work out the escalation in cost
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The following information is required to define cost per unit of work

1. Correct information of the market price of the materials at the time of need to be used
as a basic price
2. Correct information of the rates of various categories of skilled and unskilled laborers
as wage rates to be used for daily work rate
3. Output of laborers per day for various types of items (productivity)
4. Correct information of the rates of various categories of equipments and tools as rental
rates to be used for major items of rates
5. Up-to-date knowledge of the construction methods.
Factors affecting cost estimation

1) Type and documentation of the project
2) Construction scheduling
3) Bidding environment
4) Quality and availability of material and labor (given in specification)
5) Construction facilities /tools and method of construction
6) Location of the site: Transportation charges
7) Proper management
8) Land charges (lease)
9) Nature of subsurface condition
5.1.3 Types of Costing or Estimation
Estimation can be broadly classified as preliminary (approximate) and detailed.
5.1.3.1 Preliminary /approximate costing
This type of cost estimation is required to know the financial position of the client before
costly detailed designs are carried out. Such estimates are based on practical knowledge and
cost of similar previous works. Examples of approximate cost estimations are as follows:
A. Cost per functional unit
Hospital =cost per bed, Dormitory = cost per student, Cinema or theatre = cost per seat,
residential buildings = cost per area, road works = cost per kilometer length, culverts or bridges
= cost per meter span, water supply or sewerage projects = cost per head of population.
B. Plinth area method – cost per m2.
This estimate is prepared on the basis of plinth area of the building. The rate per meter square
is deduced from the cost of similar building projects in the locality. The plinth area shall be
calculated based on the roof area, by taking external dimensions of the building at the plinth
level. Courtyard and other open area shall not be included in the plinth area.
C. Cubical Content method – cost per m3
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The estimate is based on cubical contents of various buildings, i.e. plinth area of the building x
height x cubic content rate. Height should be taken from the top of flat roof (or halfway of the
sloped roof) to the top of concrete in foundation.
5.1.3.2 Detailed cost estimate( based on item rate)
This is the most reliable and accurate type of estimate. The quantities of items are carefully
prepared from the drawings and the total cost worked out from up to date market rates. A
detail cost estimate thus requires quantity surveying and analysis of the different rates for the
quantities prepared.
A. Rate Analysis
Rate Analysis is the process of fixing cost per unit of measurement for the different item of
works. Cost due to construction (contractor’s cost) is given special attention here. Total cost
per unit of work (TC) may be grouped into two components; direct cost and indirect cost. The
direct cost (DC) includes cost due to material, cost due to labor, cost due to equipment,
whereas the indirect(IC) cost covers overhead costs, and contractor’s profit. Overhead costs
are expenses for general office facility, rents, taxes, electrical light, water, and other
miscellaneous items.
In order to facilitate estimation of cost due to material, it is important to know the quantities
of various materials involved in construction of various parts of the building or construction
work i.e. material break down is essential as shown above. Different formats, Excel sheets and
softwares (like CONMIS) are used for rate analysis; a typical format is shown below.
Example: - Calculate the Unit price for C -25 concrete per m3 of work (formwork and
reinforcement rated separately). Assume 15% overhead and 20 % profit.
Solution: -
Total cost (TC) = Direct Cost (DC) + Indirect Cost(IC)
IC = (15% + 20%) of DC = 35 % of DC
Direct Cost (DC) = Material Cost (MC) + Labour Cost (LC) + Equipment Cost (EC)
Material cost (MC) – using the material breakdown shown above:

Materials required for 1:2:3 cement concrete mix – a commonly used grade of concrete for
structural works.
Wet (fresh) concrete mix ……..……= 1m3
A. Quantity for dry base analysis...= 1.55m3
B. Volume of cement………………= 1/6*1.55 = 0.258m3 = 0.258m3/0.035m3 per bag
= 7.4 bags of cement
3
C. Sands ………………………….....= 2/6* 1.55 = 0.517m of sand
D. Coarse aggregate…………….….= 3/6 *1.55 = 0.775m3 of coarse aggregate
E. Water …………………………….= 0.16 m3 ( assuming w/c 0.62)
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Cement = 7.4 Bags/ m3 * 180/2 Birr/Bags = 666.00 Birr/ m3

Sand = 0.517 m3 * 120 Birr/ m3 = 62.04 Birr / m3
Aggregate = 0.775 m3 * 100 Birr/ m3 = 77.50 Birr/ m3
Water = 0.16 m3 * 0.25 Birr / m3 = 0.04 Birr/ m3
Total = 681.50 Birr/ m3
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Labour cost (LC)

Assuming the crew consists of a site engineer, foreman, mason, and four daily laborers and a
productivity of 0.50 m3 per hr:
Personnel Salary per hr Utilization Factor (UF) LC/ hr
Site Engineer = 4,000 Birr/ Month / ( 22 days * 8 hrs/day) = 1/10 = 0.1 ( Assuming 10 2.27
= 22.73 Birr/hr foreman under Site
Engineer)
Foreman = 60 Birr/Day * 1/8 Day/ hr = 7.50 Birr/ hr = 1/4 = 0.25 ( Assuming 4 1.88
crew under foreman)
Mason = 45 Birr/Day * 1/8 Day/ hr = 5.63 Birr/ hr =1 5.63
Daily = 4 * 20 Birr/Day * 1/8 Day/ hr = 10.00 Birr/ =1 10.00
laborers(4) hr
Mixer = 32 Birr/Day * 1/8 Day/ hr = 4.00 Birr/ hr =1 4.00
Operator
Total LC ( Birr/ hr) ( i.e. 0.5 m 3 ) = 23.78
3 3
Total LC ( Birr/m ) = 23.78 Birr / hr / (0. 5 m / hr) = 47.56
Equipment Cost (EC)

Assuming a mixer with an hourly rate of 20.00 Birr / Hr and productivity of 0.5 m3 per hour:
Mixer = 20 Birr/hr * 1/0.5 m3/hr = 40.00 Birr / m3
Total EC = 40.00 Birr/ m3
DC = MC + LC +EC
DC = 681.50 + 47.56 + 40.00 = 769. 06 Birr/m3
IC = 35/100 * 769.06 = 269.17 Birr/m3
TC = (769.06 + 267.17) Birr/m3 = 1,038.23 ≅ 1, 040.00 Birr/m3
5.2 Project Valuation
Valuation is the art of determining present value of a property such as a building, a factory or
other engineering structure. By valuation the present value of property is fixed. The present
value of property can be determined on the basis of rent, or income it may fetch. It is
determined or decided by its selling price. The value of property depends on its structure, life,
maintenance, location, etc.
5.2.1 Purpose of Valuation
1. For rent valuation – valuation of a property is done to fix the rent. Rent is fixed on the
basis of certain percentage of the valuation. It is generally 6% to 10% per annum.
2. For buying or selling – every seller or buyer is willing to sell or purchase the property
up to certain limiting price and that is only arrived at by valuation
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3. For Security of loans or mortgage – when it is required to have loan against the security
of any property or when the property is to be used for collateral for security like
performance or advance payment bond, valuation is necessary.
4. Acquisition – when a property is compulsorily acquired by government, compensation
is given to the owner for the valuation is necessary.
5. For Tax assessment – to determine the property tax. House tax, etc., valuation is
necessary.
5.2.2 Important Definitions
The following terms need to be understood in property valuation: Market Value, Taxes, Scarp
Value, Salvage Value, Book Value, Assessed Value, Obsolescence, Gross Income, Net Income,
Annuity, Capital Cost, Capitalized Value, and Depreciation.
5.2.3 Valuation of Building

Valuations of a building depends upon, the type of building, its structure, shape, size, locality,
the quality of material used and present day prices of the materials. This also depends upon the
height of the building and plinth area. Building in market area will have higher value than
building in residential area. The valuation of a building can be determined after knowing the
contents of each item of work, specifications and physical condition of the building. It can also
be calculated on its cost of construction at present day rate after deducting a suitable
depreciation.
The following are the different methods of valuation:
1. Rent Return Method: based on the net rent value, capitalized for the future life of the
building.
2. Valuation on land and building basis: in this method the cost of land is added on the
depreciated cost of the building.
3. Valuation on profit basis: suitable for commercial buildings like hotels, cinemas, etc. In
such cases the net profit is calculated after deducting all outgoings and interest of capital
invested. The net profit is multiplies by future life of the building.
4. Valuation on cost basis: in this method the actual cost incurred in construction of property
with due consideration of depreciation, is taken as the basis to determine the value of the
property.
5. Development method of valuation: this method is used for properties that are
underdeveloped or partly developed or if the building require renovations by alteration.
The anticipated future net income is renovated and multiplied with the future life of the
property to get the value.
6. Depreciation method of valuation: the property value is determined based on the book
value for the year by deducting the deprecation.
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Annex 1 –
Tender Evaluation Report - Format
Tender Evaluation Report may be written using the following Outlines:
Executive Summary
Introduction
Evaluation Results
Preliminary Evaluations Responsiveness
Detail Evaluations Results
Award Recommendations
1. Introduction
1.1. Background
1.2. Basic Data
1.2.1. Tender Opening Records
1.2.2. Engineers’ Estimate
2. Preliminary Evaluation Responsiveness
2.1. Instruction to Bidders Responsiveness
2.1.1. Eligibility
2.1.2. Tender Security
2.2. Form of Tender and Appendices Responsiveness
2.2.1. Form of Tender
2.2.2. Priced Bill of Quantities
2.2.3. Schedules
2.3. Contract Document Responsiveness
3. Detail Evaluation Results
3.1. Basic Data for Comparison
3.1.1. Assignment of Codes and Arithmetic Review
3.1.2. Adjusted and Average Tender Offers
3.2. Commercial Offer Comparisons
3.2.1. Benefit Forgone due to Completion Time Variations
3.2.2. Additional Cost due to Advance Payment Requirements
3.2.3. Additional Cost due to Foreign Currency Requirements
3.2.4. Additional Cost due to Local / Domestic / Regional Preference Margins
3.3. Financial Offer Comparisons
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3.3.1. Front Loading Assessment

3.3.2. Ranking of Tenders
3.4. Award Recommendations
3.4.1. Recommended Tender Offer
3.4.2. Negotiation Issues
Annexes
Annex – A: Basic Data on Tender Offer
A.1: Pre - Bid Basic Data
A.2: Tender Opening Records
A.3: Assignment of Codes and Bidders Particulars
Annex – B: Preliminary Evaluation Responsiveness
Annex – C: Detail Evaluation Results
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Annex 2 –
CASE STUDY – Arbitration
A hypothetical case to show how a dispute gets resolved through arbitration in accordance with Rules
of AACC Arbitration Institute
Here is an example that tries to show a dispute being resolved through arbitration. In this hypothetical
case, as much as possible different issues are addressed in order to apply almost the whole rules of the
AACC Arbitration Institute.
Hypothesis:
• Parties: Claimant = Ethiopian New Seed Ltd [ENS]

• Respondent = Express charm Pvt Ltd
Origins of the dispute: Parties entered into a contract on June 4, 2002 for the sale and delivery of 100
tons of coffee beans, the price of which was agreed to be USD 200,000, i.e. USD 200 per ton. Both
parties agreed that the price would be paid by installments. The seller would receive a fifth of the price
upon delivery of the coffee beans to the Port of Djibouti and the rest of the money upon reception of
the goods in the premises of his company in Italy within 60 days from the day of shipment. The goods
safely arrived in Djibouti on July 1st 2002 where Expressocharm's local representative verified and
certified both the quality and the quantity of the coffee beans. Therefore, the Commercial Bank of
Ethiopia transferred the amount of the first letter of credit that the buyer had opened for the seller at
the bank of buyer's choice. On July 5th 2002, the goods were safely shipped towards Italy. The boat was
right on schedule up until a change of weather caused some delay. The coffee beans arrived to the
premises of the buyer's company on the 4th of September 2002, thus 2 days after the agreed date.
Notwithstanding the unpredictable change of weather, Expressocharm alleged that ENS had breached
the terms of the contract for it had failed to deliver the goods on time. The buyer simply refused to pay
the rest of the price.
However, ENS soon learned that Expressocharm had in fact purchased the same amount of coffee
beans from a Columbian company during the shipment of the Ethiopian coffee beans. The coffee
market in Columbia having just collapsed, the Italian coffee producer had paid a third of what it still
owned to ENS. The latter alleged that Expressocharm had never intended to pay for the Ethiopian
coffee beans. It had entered into another contract with a South American company before it had
performed all of its contractual obligations towards ENS. On January 2nd 2003, after several unreturned
calls, fax and e-mail messages to the buyer, the seller finally decided to have the matter resolved
through arbitration. Hence, he brought the case to the Addis Ababa Chamber of Commerce [AACC]
Arbitration Institute.
Initiation of Proceedings
A. Claimant's request for arbitration

In the Sale contract, ENS and Expressocharm have included an arbitration clause according to which
any dispute arising from the contract will be settled through AACC Arbitration rules. They have also
agreed upon the applicable law to their contract: the French law.
Therefore, ENS addressed a request in writing to the secretariat of the Institute (Articles 1.1 and 3.1of
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AACC Arbitration Rule).

B. Statement of claim
In the application for arbitration, ENS specified the following mandatory information:
• Name + address of both claimant and respondent including the phone, fax and email;
• The arbitration clause included in their contract and upon which claimant relies;
• Facts of the case and the main points of the dispute i.e. the absence of payment by the buyer,
the delay in the delivery by the seller, about force majeure, then who breached the contract?
• Claimant's claim + facts + reasons on which ENS's claim is based (i.e. breach of contract by
respondent: he had no intention of performing or paying the price)=is of bad faith.
• It would be good for the claimant at this stage to specify the name and/or address of his
arbitrator, as per Article 4(1)(i)(e) of AACC Arbitration Rule, for the parties have decided that
the arbitral tribunal will be tripartite; each party appointing their own arbitrator who will in
turn choose the chairman/president of the tribunal.
• Name + address of the attorney which in this case has the power to represent the claimant on
all matters.
The claimant and/or the attorney signed the application for arbitration
• As requested, the claimant submitted to the Institute all the evidence on which his claim is
based such as copy of their contract, the bill of lading, the certificate issued by Expressocharm's
representative in Djibouti (Article 4(1) ii;
• The claimant also shall pay in advance the administrative fee that will be fixed by the Institute
as per the administrative fee schedule (Article 4(1) iii cumulative the administrative schedule).2.
• The claimant also shall pay in advance the administrative fee that will be fixed by the Institute
as per the administrative fee schedule (Article 4(1) iii cumulative the administrative schedule).
As requested, the claimant submitted to the Institute all the evidence on which his claim is based such
as copy of their contract, the bill of lading, the certificate issued by Expressocharm's representative in
Djibouti (Article 4(1) ii;
I. Respondent
A. Statement of defense and of counterclaim
• Within 45 days from the date of receipt of the notice of arbitration, Express charm submitted as
per Article 5:
Written defense (stating ENS breached contract failing to deliver on time…);
Appoint arbitrator (Mrs. Y) if more than one is to be appointed;
Attach relevant documentary evidence to the secretariat (i.e. copy of contract, bill of
lading…)
• Expressocharm did not lodge a counterclaim but if he had, respondent's written statement
should have mentioned same information on respondent as claimant's statement mentioned.
B. Amendments to claims and to counterclaims
• Both parties had the opportunity to amend either their claim or counterclaim but chose not to
do so. So, the next stage will be the composition of the arbitral tribunal.
II. Composition of the arbitral tribunal [Arts 7-12 of the AACC Arbitration Rule]
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A. Number of arbitrators and manner of appointing them
• ENS and Expressocharm have agreed on the number of the arbitrators, i.e. 3 arbitrators will
decide on the dispute
• Each party appointed his own arbitrator (Mr. X for the claimant and Mrs. Y for the
respondent) who, in turn, will appoint the president of the tribunal.
B. Nationality of arbitrators
• The parties have agreed in the Sale contract that the arbitrators appointed by each of them will
appoint the president of the tribunal. The claimant being Ethiopian and the respondent Italian,
they have agreed that the third arbitrator shall be South African.
C. Challenge of Arbitrators
• On February 15 2003, ENS was informed that Mr. X had been an employee of Expressocharm
some ten years ago and decided to challenge the arbitrator.
• On February 24, 2003 (thus respecting the 15 days period planned for introducing such
challenge), claimant alleged in a written statement sent to the Institute, that Mr.X did not
present the required qualities of impartiality and independence because of the arbitrator's prior
ties with respondent.
• After hearing all parties, the Institute decided to disqualify the arbitrator and to remove him.
D. Replacement of Arbitrators
• The Institute decided to use its prerogative to or not to follow the original appointing system
and chose Mr. Z in place of the removed arbitrator (Mr. X). Of course, it took into
consideration parties' and the remaining arbitrators' point of view. Afterwards, the arbitral
proceeding follows.
III. Arbitral Proceedings [Arts. 13-18 of the AACC Arbitration Institute]
A. First steps taken before the arbitral tribunal
• Judging that the facts of the case were not clear, the arbitral tribunal decided to hold hearings
even though the parties had not made such a request.
• All documents presented by ENS were communicated to Expressocharm and vice versa, under
the Institute's supervision.
• Both parties were given a 2 months notice to appear before the tribunal in Djibouti. Even
though he was duly summoned through its representative in Djibouti, the respondent failed to
appear on the fixed date and place. In accordance with the AACC Arbitration Institute's rules,
the arbitrators proceeded with the hearing.
A Place and language of arbitration
• In their Sale contract, ENS and Expressocharm have agreed that the arbitration would be held
in Djibouti. Hence, the award was made in Djibouti [Article 14.4].
B Establishing the facts of the case
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97
• Mr. Z and Mrs. Y along with the tribunal's president Mr. T, after studying the written
submissions of both claimant and respondent and all the documents relied upon such as the Sale
contract, the letter of credit, the bill of lading…decided to hear the parties again.
• During the hearings, the arbitrators summoned ENS to present evidence that the respondent
has indeed entered into another contract with another company before the deadline agreed upon
by ENS and Expressocharm
• C Closing of the proceedings
• The parties were given 3 months to present their case and evidence since the arbitral tribunal
deemed it to be appropriate. Therefore, the arbitrators declared the proceedings closed.
• It then indicated to the Secretariat that the draft award would be ready for submission to the
Institute for approval on April 10 2003.
V. The award
A Decision
• After examination of the facts of the case, the evidence presented and after hearing all
concerned parties (in the respondents case, the legal representative), the tripartite arbitral
tribunal made its decision. Judging that the claimant had not presented sufficient evidence to
prove Expressocharm's bad faith and after it reaffirmed that delays due to bad weather are
foreseeable and therefore do not enter in the definition of a FORCE MAJEURE, the arbitral
tribunal unanimously ruled in favor of the respondent.
B Form and effect of the award
• The parties waived their rights to appeal against the award. It is therefore final and binding on
them. A signed copy of the award containing the date on which and the place where the award
was made, was sent out to both ENS and Expressocharm. The award can be made public but
only if both parties give their consent
C Applicable Law
• The tripartite arbitral tribunal applied the French law that had been designated by the parties in
their contract. Therefore, it was the French definition of Force Majeure that was applied to
evaluate if the claimant had breached any of his obligations.
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Annex 3 –
Building Project – Technical Details
1. SUBSTRUCTURE
Any structure below the ground floor slab level including the basement, retaining walls,
ground slab, grade beam, and foundation is called a substructure. In most of the cases,
substructure work can be categorized as follows:
1. Excavation and earthworks (mandatory)

2. Concrete works (can be neglected sometimes)
3. Masonry works (mandatory)
1. Excavation and Earthworks
What types of works are included in excavation and earthworks?
a. Site clearance
Carbonatious elements are not good in concrete, steel and timber works. In soils under
structures even 5% of these elements will damage the structure. Therefore, these materials
(including trees, bushes and the top 20 to 30 cm soil), termite hills, any other obstruction, too,
have to be cleared. A working space of 1m is required on each side. It is sometimes necessary to
prepare separate specification for obstructions (demolition works) because reusable items like
doors and windows are there.
b. Excavation (bulk excavation)
Excavation to get reduced levels of every structural element below the ground level is called
bulk excavation. They are subdivided as follows depending on the subsurface condition.
Ordinary soil - with boulders and without boulders and can easily be removed by
shovel.
Weathered rock –it can be divided easily without blasting
Rock- bedded rocks that cannot be dug without blasting (requires using explosives)
Note: - Working space for bulk excavation is 25 cm (not used for shallow masonry)
Depth of excavation less than 30 cm – measured per m 2 ,depth > 30 cm per m 3
c. Fill / Embankment
Shall be measured in m3 of net volume to be filled. Fill is required because the reduced level of
every structural element above the structure has to be covered. Excavation and embankment
should not be added at a time in computing their volume, because their costs are different. The
major consideration under embankment is compaction. Compaction is done usually at 20 cm
lift thickness. The subdivisions under fill are:
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Back fill: - filling by using the excavated soil but by removing coarse particles.
Borrow fill: - filling by using fill material from another place when there is shortage of fill or
when better quality material is required.
d. Disposal - cleaning the building area including cart away.

e. Sundry items – application of termite proof solution, providing hard coring, dust blinding,
expansion joints, etc are itemized as sundry items; measured in m2.
2. Concrete Works
a. Concrete
Cast in situ concrete – formed on site and requires formwork and reinforcement. Cast in situ
concrete shall be measured by volume except in ribbed slabs and grouting.
Prefabricated concrete –fabricated (manufactured) in a factory and brought to the site and joined
to make a building. It does not require formwork but needs a special care when connecting the
different elements. It is fast means to construct a building, though the different elements may
lack homogeneity.
Pretensioned (Post tensioned) Concrete –involves in bending up the concrete itself to make it
ready for the downward bending due to load.
Concrete ancillaries- include windowsills, lintels, expansion joints, and permanent and
temporary embedded materials. It is measured in ml or enumerated.
Grades of Concrete
C5 - lean concrete, to protect the structural concrete from damage.

C15- for totally supported structural elements
C20- used for slabs; mix proportion is 1:2:4
C25 – Commonly used grade of structural Concrete; mix proportion is 1:2:3
C30 –Used for chemical stores and nuclear plants
b.
Formwork – measured in m2
A temporary structural element, which supports slabs, beams in casting concrete. It shall be
designed and erected to safely support, vertical and lateral loads that might be applied until
such load can be supported by the concrete structure.
Period of removal (minimum):
1. Vertical formwork to columns, walls and beams: 16 hrs
2. Soffits formwork to slab: 21 days
3. props to cantilever slabs: 14 days
4. Soffits formwork to beams: 21 days
5. Props to cantilever beams: 14 days
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Formwork Classification: Normal finish, Fair face Finish, and Patterned Finish.
c. Reinforcement
The reinforcement bars are tied by ø6 mm mild steel wire and measured in kg
3. Masonry Works
Masonry works are works that are executed by laying building material units of specified
dimension through a binding material such as mortar. Stone obtained from quarries shall be
hard and sound, free from vents, cracks, fishers, discoloration or other defects that will
adversely affect strength or appearance. Stone chips to be produced shall not be less than 450
mm average and 380 mm in individual length. Stone for various masonry works shall be
selected and shaped as follows:
a. stone for facing works shall generally be selected for consistency in grain, color and
texture ,throughout the work
b. stone for below ground work shall be chiseled from natural stone
Stone wall is measured by volume, whereas stone pavement is measured by area, specifying
thickness.
2. SUPERSTRUCTURE
1. Concrete works –
a. Concrete - mostly as discussed in substructure part
b. Formwork: Specify the type of material used and where to use (zigba or steel)
c. Reinforcement: Differentiation is made as to the diameters and where used (sub
and super structure) and Weight per unit length for Ф6 is 0.222 kg/m; for any
other diameter d2, with weight per unit length w2:
w2 = (d22/62) * 0.222
2. Masonry works – measured by volume
Classification of stone masonry works:
1. Stone wall concealed from view or to be left for further finish (cheaper)
- shall be built in stone sizes of not less than 300 mm per course (one lay ) and 400 mm
wide per stone
- faces of stone walls to receive further finish shall have horizontal and vertical joints
raked out to form adequate key for further finish.
2. Roughly dressed stone wall (expensive)
- Shall be built in stone sizes of not less than 300 mm per course and 400 mm wide.
- The joints of the fair chiseled natural stones shall be finished slightly proud
(aesthetical) and cleaned off flush at completion
- The joints shall be raked out to a depth of 15 mm as the work proceeds and prepared for
jointing
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3. Dressed stone wall facing (more expensive)

- The pattern type and size of the stone units shall be as detailed on drawings
- The joints of dressed stone wall shall be finished good and raked out to an approximate
depth of 15 mm.
Hollow and solid concrete blocks, measured by area specifying the thickness
Blocks shall be manufactured from cement, aggregates, red ash, or pumice with no fine
volcanic dust. Trial mixes shall be prepared to attain the average minimum compressive
strength after casting and curing for 28 days. There are different classes of HCB:
Class A = 42 kg/ cm2 (for light loads)

Class B = 35 kg /cm2 (for external walls)
Class C = 20 kg/cm2 (for partition walls)
Class AA=70 kg/cm2 (for load bearing sub structural works)
Class A-AA= 50 kg/cm2 (for load bearing super structural works)
Class AA and A-AA shall be obtained from 0.1 aggregate not from pumice or red ash. Blocks
shall be uniform in texture, size, and shape and free from any cracks and defects and also the
surface of blocks shall have a good key for plaster and rendering. The standard thicknesses of
HCBs are 10cm, 15cm, and 20cm.
Bricks, measured by area specifying the thickness

Bricks are fire resistant, watertight and can also resist compressive action of up to 50 MPa.
Bricks can be used for external, internal, retaining and load bearing walls. Bricks shall be well
made and adequately burnt, free from cracks and particles of lime. Bricks exposed to
weathering shall be selected for least in absorption, high durability, uniform in color and
texture. The thicknesses of bricks are 25 cm (for double layer) and 12 cm (for single layer)
Adobe walls, measured by area specifying the thickness

It is a mixture of clay, water and straw or ‘chid’ with high resistance to drying shrinkage and
cracking. It shall be dried gradually; ordinary type of masonry wall, and used for very low cost
houses.
Stabilized soil block wall

It is a mixture of soil, water, and Portland cement, used for low cost houses.
Note: During measurement, no deduction is made for opening up to 0.25 m2 in area
3. Roofing and wall cladding
Galvanized corrugated iron sheet (CIS)

Galvanized CIS for roof and wall cladding shall be of the required size and thickness
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102
CIS less than G32 cannot be used for roofing and wall cladding of permanent structures but for
temporary works e.g. fence works, for provisional works. Include G26, G28, G30, G32 and G35,
where G26 is the thickest
Galvanized plain steel sheet (GPSS)

GPSS is used for wall cladding, ridge cup, gutter, down pipes, flashing, copping, edge trimmers
etc; shall be to the size, thickness and galvanization required; shall not be less than G28; G24 is
usually used for gutter, down pipes; Overlaps at edges shall be minimum 15 cm
Galvanized ribbed sheets (EGA sheets)

Usually used for factory, hall etc. Shall comply with the requirements of the manual ‘KASI’ or
other standards acceptable to the Engineer to the sizes, thickness and distance to ribs.
Aluminum corrugated sheet for roofing and cladding

The minimum thickness shall be 24 SWG (SWG = standard wire gauge), Corrugated sheets
shall have uniform corrugation parallel with the sides of the sheets.
Aluminum plain sheet accessories

Used for ridge cap, gutter, down pipes, flashing, copping etc.
Roof clay tiles

Tiles shall be manufactured in wet weather and prepared from clay. Clay tiles shall show clean
fracture when broken and shall not be less than 10 mm thick. Clay tiles shall be fixed to timber
using roof, nails, the holes in clays shall be pierced (using embedded in clay tiles)
Fixing accessories of roofing

Fixed to timber using chiseled or diamond edge and convex head galvanized nail drawn from
mild steel, Washers shall be diamond or flat pattern produced from rubber or bitumen coated
fiber homogenous and free from porosity (to prevent leakage)
Hooks, bolts, nuts and screws: - Shall be fixed to steel structures; the sizes of fixing accessories
shall be as recommended by the manufacturers and match with structural drawing.
Hangers and brackets

Used to fix gutters and down pipes; Formed from mild steel not less than 2 mm thick and 10
mm wide; Hangers and brackets shall always be primed (coated) with anti-rust paint.
Gutter and down pipe

Gutters shall be laid to slopes as indicated on drawings not less than 0.05 percent. Gutter and
down pipes shall be overlapped min 15 cm and joints welded.
Method of measurement for roofing
Roof cover, side cladding, and the like shall be measured by area (m2), flat over the projection
area without addition for slopes and laps.
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103
Ridges, flashing, down pipes etc shall be measured by length stating girth (development
length) and without addition for laps, passing angles etc.
Rain water spout shall be enumerated stating the sizes and length. The same is true for most of
prefabricated items.
The following shall be understood as included: perforating, sealing, nailing, bolting, screwing,
battens, joists, wedges, spillers, covering lists , back supports, brackets , cutting ,bracing ,
trimming, jointing, boring ,etc.
4. Carpentry and joinery works
Carpentry: -work on timber intended for structural purposes eg columns, beams, slab, truss
etc
Joinery: - work on timber intended for finishing purposes eg floor finishes, wall claddings,
doors and windows, ceilings etc
Carpentry – includes Truss, rafter, beams and columns.
Shall be made from eucalyptus, kerero, zigba, tid, or other equivalent posts and Shall be
fabricated as per the detailed drawings. Posts shall be uniform in diameter and free from cracks
and shall be pealed off and allowed to season until the acceptable moisture content is achieved,
i.e. 20 % (seasoning = drying up to a certain moisture content)
Eucalyptus and kerero posts to be exposed to weather or buried below ground shall be pressure
impregnated. Trusses and rafter shall be tied with 6 to 8 mm diameter mild round steel.
Purlins - shall be produced from eucalyptus or zigba or other equivalent posts. Purlins shall be
in the sizes shown on drawings (standard dimension 5*7cm). The splices of purlins at joints
shall be minimum 60 cm and shall be securely nailed to trusses and rafter.
Joinery
A. Ceiling
Ceiling shall be built to types, size and thickness on drawings. The face of the panels to be
exposed to view shall be smooth enough to receive further finish. Soffits nailed to supporting
ceiling buttons.
Soffits are made of chip wood, plywood, hard board, soft board nailed to timber buttons
Minimum size of buttons is 4*5 cm and maximum spacing is 60 cm in both directions. Button
shall be fixed to the truss or rafters in 4*5 cm sawn timber suspenders. The joints of ceilings to
wall shall be covered with moulded corner lists not less than 50mm and joints of panels be
covered with mild timber and moulded lists not less than 30 mm wide.
Suspended ceiling Soffits
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104
Cheap wood, plywood and other ceilings suspended from supports by wire, chains and steel
profiles and materials resting on the metal profile.
Milled timber Soffits
Made of zigba or kerero, Minimum thickness is 15 mm, Minimum panel width is 60 mm
Timber boards shall be grooved and tongued, Buttons shall be 50*50 mm and c/c 50 cm
spacing.
Milled timber accessories

Fascia board shall have minimum thickness of 20 mm, Edges shall be chamfered. For Milled
timber cladding - Use a smooth joint that is without tongue and grove, and Cladding to wall
shall be to the size, shape and patterns as on the drawings.
B. Doors, Windows and Wall Panels

Doorframes
Shall be notched to receive iron mongery (hinge, lock and handle) and Lists of cover joints
between frame and wall shall be milled timber not less than 50 mm wide.
a) Glazed wooden doors - the side , top bottom and intermediate rails shall be mortised
and tenoned - rails shall be single width timber
b) Panel wooden doors - plywood or other panels are used in place of glazing
c) Flush wooden door - Finished thickness of flush doors not less than 40mm, Face panels
on either face shall not be less than 8 mm, Cover panels if tongued, boards shall not be
less than 15mm
Wall panels - Wall Panels include fully solid or partly glazed partition for buildings, Tongued
and grooved milled timber boards not less than width of 80 mm and 15 mm thick, If open
jointed milled timber is used, width=100mm and thickness=15mm, Block board with specified
plywood exposed surface of less than 20mm thickness
C. Cupboard and counters
Built in cupboards: - fixed cupboards on construction of the building; shall be constructed from
milled timber and paneled boards. It has frames of 40x40 mm milled timber, fixed to wall, the
bottom part is made up of 20mm thick edge lipped block board with exposed faces covered by
plywood, and Rear, side and top part of the cupboard shall be lined with 6mm exposed face
smooth finish plywood
Drawers: - shall be built in 20 mm thick milled timber, bottom of drawer shall be block board
not less than 6mm thick, shall have milled timber plastic or metal guide rails to each other
Shelves: - 20 mm thick block board with upper face finished smooth and be supported on
hardwood metal or plastic support securely screwed or nailed to the cupboard frame
Methods of measurement for carpentry and joinery

- Structural members other than truss shall be measured by length stating size (eg
columns, beams)
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105
- Roof trusses shall be enumerated stating type and referring drawings (sometimes
measured in meter length)
- Boarding, flooring, partitions, Soffits (ceiling),curtain walls are measured by area and
shall be understood as including frames , corner lists and hard wares(hinge ,handle ,
lock )
- Fascia boards, eaves, skirting shall be measured by length stating girth
- Built in furniture and boards shall be enumerated stating sizes
5. STEEL STRUCTURAL WORK
Steel is used for constructing:-

- Beams, columns, suspended slab, truss, rafter
- Composite structure (steel +concrete)
- Up to 15m span we can use timber trusses, but for span greater than 15m,we have to use
a steel structure
Bolts and nuts

- are used to connect (fix )structural steel with concrete or other material
- welding is usually not recommended for steel structures because it does not allow
movement
Steel plates (steel to steel connection)
- used for splices of joints
- used for bearing plates
Fabrication
- shall follow sequences which are suitable for assembling and erection
- cutting shall be sawing, shearing (steel cutter ),copping or flame cutting (oxyacetylene
cutter)
- holes shall be drilled or punched
- holes shall not be more than 3mm larger than diameter of bolts
Assembling erection
- adequate care shall be taken to ensure that components are not bent or twisted
- bolted connection shall be drawn together
- washers shall be provided where slot holes are oversize
- anchors and embedded connection shall be set and grouted before mounting
Method of measurement
- Beams, trusses, columns and purlins, bracings, rails, etc shall be measured by weight
(Kg), identified by profiles and type of structures
- Connection plates, base plates, angle iron ties, brackets shall be measured by weight or
enumerated stating profiles and dimensions respectively
- Anchor bolts enumerated stating size and development length
6. METAL WORKS
Includes either iron or aluminum works:

- Metal door window frames and Steel profiles produced from standard grade of steel
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106
- Aluminum profiles: - wrought aluminum and alloys are used. Nuts, bolts, screws and
fasteners are coated or produced from non-oxidizing metal.
Fabrication
- Formed accurate to required profiles and sizes
Erection
- be placed accurately in position aligned, plumbed, and leveled
- they are usually door and window frames and hence no assembling of parts except
fabrication and erection
Classification
1) Casement doors and windows
- side , bottom, and top hinged
- LTZ frame (iron made)
- SECCO profile (steel)
- RHS frames (refer KASI manual)
- SECCO profile is more expensive than LTZ
2) Heavy duty sliding door

- Guide and roller trucks shall be in mild steel in the sizes specified
- Rollers shall be heavy duty and produced from stainless steel and be provided at top
3) Louver window
4) Security grills
- Produced from mild steel galvanized or precoated solid plates or hollow profiles of
patterns as shown on drawings
5) Guard rails
- fastened to support securely embedded in concrete or welded
6) Wire netting and fly screen

- netted wire produced from steel
- mesh for flag screen shall not be more than 10 mm
7) Corner protection
-not less than 30 mm
- shall be securely screwed and embedded to angle of materials for protection
- Doors and windows enumerated stating sizes (the glazing work shall be measured
separately)
- Curtain walls by area
- Balustrade rails, corner protection by length stating development length
- Security grills fixed to windows and doors by area
- Louvers enumerated in size stating number of blades (louver jamb sets)
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107
The following shall be understood as included: chiseling, cutting, welding, riveting, shaping,
grinding, drilling, assembling, fixing, protective treatment , decorative paint , frames, beads
,lining , anchors , hardwares etc(hard wares include hinge, lock, handle)
7. FINISHING WORK
1) Plastering and Pointing works

The ingredients are:
- Cement (ordinary Portland cement), Lime
- Gypsum (such as plaster of Paris )
- Aggregate (fine or crushed aggregates), water
Surfaces to receive plaster, pointing or screed shall be thoroughly cleaned and wetted. The
surface should be raked out to a minimum depth 10 mm to form proper key (if the thickness of
plastering is greater than 2.5cm, it may crack) and the surface should be rubbed with cement
slurry (cement +water).
A. Plastering
First coat: - mix proportion 1:2.5(cement: aggregate by volume)
- minimum thickness of 5 mm
- spread by trowel and allowed to cure for 24 hours before applying the second coat
Second coat: - mix proportion 1:1:6 (cement: lime: aggregate by volume) or

1: 4 (cement: aggregate by volume)
- max thickness of 12 mm
- dried for 21 days
Fine finish or fine coat cement plaster: - mix proportion 1:2 (cement +fine sand)
- shall be finished truly and level, use fine sand for smooth finish as final coat
Fine coat lime plaster: - mix proportion 1:2 (lime: fine aggregate)
- further finish up to 28 days
Fine coat gypsum plaster: - mix proportion 1:3 (gypsum: lime putty)
- cured for 28 days
Render coat: - mix proportion 1:2:5 (cement: lime: fine aggregate) or mix proportion 1:3
(cement: fine aggregate)
- shall be manual or machine sprayed, wetted for 7 days
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108
Cement pointing: - mix proportion 1:2 (cement: fine aggregate)

- can be flush or recess pointing
- plaster and pointing works shall be measured by area and Internal and external works
shall be measured separately
The following shall be understood as included: preparing background , hacking out joints ,
grouting , jointing , recessing etc
2) Floor and Wall Finish
Terrazzo tiles: -used for floor finish and skirting

- shall be pre-cast or cast in situ elements
- shall have a minimum topping of two parts of marble or granite chipping from an
approved quality with one part cement
- the minimum grading of the chip shall be 5mm
- usually have a thickness of 2 cm
- shall be applied onto 3 cm thick cement screed bedding (specified thickness )
Pre-cast cement tiles: - produced from crushed aggregates (0.1 mm gravel) and sand mix
- minimum thickness shall be 20mm
- shall be applied on 3 cm cement screed bedding
- cheaper than terrazzo tile
Marble tiles
- shall be in accordance with quality, color and texture as shown (specified )
- shall be straight edged and smooth surfaced
- cement mortar backing for walls and cement screed bedding for floors
Marble chips
- flooring thickness shall not be less than 20 mm and does not exceed 50 mm
- chips shall be irregular shape and the smallest dimension shall not be less than 100mm
- the exposed surface of mortar finish to marble chip shall not exceed 1:3 proportion
Ceramic and mosaic tiles
- ceramic tiles shall be glazed type of approved color , texture and size
- ceramic tiles shall be 6mm thick for walls and not less than 15mm for floors
- mosaic tiles shall be in regular square or hexagonal sizes not exceeding 25mm in
dimension of each size
PVC tiles
- usually thermoplastic
- the tiles and skirting shall be resistant to household oil and acids
- the glue (adhesive ) for fixing PVC tiles and skirting shall be in accordance with
manufacturer’s instruction
- usually 2mm thick PVC tiles and 48 mm cement screed is used
Milled timber floor: - Having a thickness not less than 20 mm and minimum width of 70mm
and shall be tongued and grooved
- Width of 70mm and shall be tonged and grooved
- Nailed to sawn timber joists
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109
- Minimum size of joists 60x100mm c/c 50 cm

- Joists shall be accurately embedded in concrete
- Skirting: - machine smooth finished with minimum thickness of 20 mm and width
80mm, Edges shall be chamfered
COPPING, CILLS, STEPS, RISERS

- can be from marble , terrazzo , concrete , stone etc and shall be laid as per the drawing
Stone and concrete pavements: - dressed or roughly dressed sand stone or precast concrete shall
be laid on compacted fill of 10 mm sand or red ash bedding and joints pointed with cement
The following shall be measured by area specifying material, size and thickness
- all finishes to floors and walls except skirting , copping and cills
- all finishes to risers , treads, and landings to stairs
The following shall be measured in length specifying material, size and thickness
- skirting, risers, treads, cills and copings, dividing strips in floors
The following shall be understood as included:
- preparing background, hacking , raking , grouting , bedding , jointing , rubbing and priming
8. GLAZING
Transparent glass
- Sheet glass (clear glass)
- Transparent glass shall be clear or tinted, transmitting light and capable of showing
objects
Figured glass
- have sufficient imprinting of texture or pattern totally or substantially obscure vision
Opal glass
- vision from inside but not from outside
Wired glass
-shall be in wire mesh, transparent, translucent or figured
Putty
- used for fixing the glass to the frame
- shall be quick , hard setting, tropical putty specially manufactured for glazing works
Method 0f Measurement
- glazing shall be measured by area
- glazing to louvers and special fixing may be enumerated by stating size and thickness
- The following shall be understood as included: - Bedding, mastic, fixing, beading,
cleaning etc.
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110
9. PAINTING WORKS
Oil based priming paints: -

- priming coat – initial or preparatory coats
- applied to surfaces readily mixed or base paints
Aluminum priming paints
- for wood work
- shall be for brush application
Metallic zinc rich priming paints
- shall be applied to iron and steel surfaces
Oil Paints
- water proof
- shall be applied in accordance with manufacturers instruction
- can be applied for walls, wood work , metals
Plaster Emulsion Paints
- normal and usual type of painting
- shall be selected for interior and exterior works
Synthetic Enamel Paints
- used for metals with manufacturers instruction
Method of Measurement
- painting shall be measured by area
- special application to edges shall be measured in length stating the girth
- internal and external surfaces shall be measured separately
The following shall be understood as included: Trimming, cutting, matching patterns,
cleaning, and priming.
10. SANITARY WORKS
It includes all works on building in connection with supply of potable water and removal of
solid and liquid wastes
CLASSIFICATION OF SANITARY INSTALLATIONS

Pipes
- Galvanized steel pipes –used for distribution of water (pipes for cold and hot potable water)
internally and externally installed having plain or threaded ends.
- Pipes are measured by length stating diameter taken along the centerline over all fittings
Valves:
- Flanges used to connect pipes and for controlling
- Check valves, gate valve, service valves
- shall be in specified material and size at positions indicated in drawings
- Enumerated stating diameter
UPVC (unplasticised PVC) – rigid thermoplastic conduit
- can be used for cold water distribution
- usually used for solid waste and surface drainage with vent pipe in horizontal and vertical
stacks
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111
- shall be measured in length stating diameter and understood to include accessory joint
fitting like Y,T, joints
Pre-cast concrete pipes – for solid waste and surface drainage
Solid pipes –surface drainage and sewage
Perforated pipes – subsurface drainage
Manholes: - Manholes are used for inspection, reduction of number of pipes, change of
directions at angles and shall be in pre-cast concrete C 20 quality or Class A hollow brick as
indicated and detailed in the drawings.
- shall be laid on a minimum concrete bed of 150mm
- enumerated stating size and depth including all related earthwork
Concrete pipes shall be measured in length, stating the diameter and understood as including:
setting out, trench excavation, pipe laying, jointing, bedding and backfills
Septic Tanks, Soakawy Pits and Percolation Ditch

Solid and liquid waste (concrete) pipe and Manhole or septic tank
- Measurement shall be done in accordance with the method of measurement for each
item of works
- May be specified on lump sum for costing
Sanitary Fixtures
- Shall be manufactured of standards acceptable for the intended purpose
- Appliances shall be supplied with mounting and plugging devices, valves, chains, waste
plug, traps, handles, flexible pipes, bolts, nuts screws, hinges etc
11. ELECTRICAL INSTALLATION
It includes supply, erection, installation, testing and commissioning of electrical wires as

generally shown on electrical drawings. Materials shall be fully in accordance with qualities,
tolerances, tests, recommendations, method of workmanship as described on specification and
all accessories shall be fixed at the following heights above finished floor level unless specified
on the BOQ or drawings.
1) Underground cable ducts
- made of pre-cast concrete pipes or galvanized steel pipes
- for protection of power and telephone outlet cable
- it shall be the responsibility of the contractor to ensure that the underground duct is
installed correctly according to each party’s requirement
- pre-cast concrete , galvanized steel UPVC are used (similarly as given for sanitary
installation)
- Manholes – similar to the requirements for sanitary installation
2) Distribution boards (DB)
Main distribution boards (MDB) and sub distribution board (SDB)
- The contractor shall supply and install medium voltage MD panel as shown on the
drawings. Arrangement of the panel shall be as to permit the ready incoming and out
going cables.
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112
- Sub distribution board (SDB) shall be surface flush mounted and DB shall be of the
type fully enclosed sheet steel cabinet and hinged cover
- DBs shall be enumerated stating the power and voltage supply including all related
works
3) PVC cables – underground cables shall be pvc insulated steel wire and pvc served overall
and all cables shall have copper conductors
- measured in meter linear
4) Light points, power and socket outlets

- outlets are either of bell, fan , telephone , TV or antenna
- outlets shall be enumerated and understood as including all related works
Light points
- Fed through specified size pvc insulated conductors of thermoplastic conduits of 13.5
mm diameter for surface installation including junction boxes with cover and insulating
caps
- Ditto as above but in steel conduits of 15 mm diameter
Socket outlets – same as light points
Bell points - fed through PVC insulated conductor of 2mm by 0.8 mm2 inside thermoplastic
conduits including junction boxes with covers
Measurement: - enumerated and understood to include related works

5) Electrical fixtures
- Light fixtures –shall be enumerated stating type of fixtures
- Air conditioners
- Fans, Bell systems
- Shall be enumerated stating type of fixture
C. EXTERNAL WORKS, SERVICES
Includes pavements, parking, landscaping and gardening, fencing and Excavation and
earthworks for slope stabilization or drainage ditches.
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113

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CEng 570: Contract Specification and Quantity Survey Lecture Notes: 2001 AY

The main players in the construction industry are:

Resources for the Construction Industry

Services and Management:

1.1. Stages in Construction

1.1.2 Planning and Design stage

1.1.3 Tendering stage

1.1.4 Bid Evaluation / Evaluation of Tenders

1.1.5 Award of Contract

1.1.6 Construction Stage

1.1.7 Commissioning and Acceptance

1.2 Introduction to Procurement

1.2.1 Type of Procurement

Types Goods Competitive International General PN Single

Table 1.1 – Types of Procurement

• Bidders’ Coverage: Competitive Vs Negotiated Tendering

• Geographical Coverage: International Vs Regional Vs National Vs Local Tendering

• Procurement Awareness: General and Specific Procurement Tendering

General Procurement Notice Further information can be obtained from:

Figure 1.1: General Procurement Notice

Prequalification is an internationally accepted practice in procurement management. It would normally

The advantages of pre - qualification in procurement are:

Procedure Employer / Consultant Contractors

Figure 1.2: Procedural Flowchart for Pre-qualifying Bidders

1.3.1. Contract Planning

Delivery System Contract Formulation

Contract Procurement Contract

Figure 1.3: Procurement and Contract Management Processes

1.3.2. Procurement Management

1.3.3. Contract Management

1.5 Procurement and Contract Delivery Systems

Force Account - Since development started

Design Bid Build (DBB) – 1950s / 1987

Design Build (DB) / Turnkey - 1970s Onwards / Mid 1990s

Finance / Design Build Operate - 1980s / ……

CM / Facility Management - Mid 1990s / 2000s

Alliances & Outsourcing – 2000s / 2000s

1.5.1 Force Account

1.5.2 Design Bid Build (DBB)

1.5.3 Design Build (DB) / Turnkey

Typical advantages of this system include:

¾ minimizing Project owners’ risk transferable due to Designers’ faults;

1.5.4 Finance / Build Operate Transfer (BOT)

This delivery system is advantageous because of three major factors:

1.5.5 Construction / Facility Management Consultancy

Construction Management Consultancy Delivery System is a response to problems associated with

Construction Management Consultancy service are particularly attractive to organizations that

1.5.6 Partnering, Alliances, Outsourcing (Running and Specialized Delivery System)

1.6 Procurement Management

Procurement Team Preliminary Evaluation

Procurement Tendering Tender

Figure 1.5: Procurement Management Process

Tender Documents are prepared to:

Tender documents include:

Approval of Tender Documents: Regulatory requirements enforced for:

Box 1.1: Form of Invitation to Tender

Box 1.2: Instruction to Bidders

Box 1.3: Checklist Requirements for Tender Document Reviews

Prepare Checklist for

¾ the owner and his desirous service or

To Manage multiple risks

For Design Build and Turnkey Projects

________ _ ____________