Land & Architectural Survey Blog

Category: Quantity Surveying

  • A Guide to Construction Risk

    This blog post provides an overview of primary areas of risk associated with construction projects, outlining various methods to manage these risks.

    TYPES OF RISK IN CONSTRUCTION CONTRACTS

    Construction contracts involve multiple types of risk, including financial, legal, health and safety, and the risk of disputes with clients, suppliers, or subcontractors.

    It is crucial to analyze the numerous available risks in construction projects and classify them accordingly.

    • Management, direction, and supervision may be impacted by factors such as greed, ineptitude, ineffectiveness, favouritism, unreasonableness, insufficient communication, mistakes within the paperwork, malfunctioning designs, inadequate guidance briefings or the identification of stakeholders; non-compliance with statutory requirements; unclear stipulations, incorrect selection of contractors or consultants; and variations in requirements.

    Challenges in Project Management

    Effective project management involves overcoming a range of challenges, from human error to external factors.

    Physical Work Challenges

    The land, any man-made barriers, and climate can significantly impact physical work, as highlighted by a study on construction projects.

    Liability and Insurance

    Negligence or breach of warranty can result in damage to persons and property, leading to costly lawsuits and financial losses.

    External Environmental Factors

    The external environment can significantly impact project operations, with factors such as environmental regulation, government policy, labour laws, planning approvals, and financial constraints affecting businesses.

    Environmental Implications

    The external environment can significantly impact operations due to environmental regulation, government policy, labor laws, safety and other laws, planning approvals and financial constraints. These can affect businesses in various ways, including increased costs, limited access to resources, and changes in consumer behavior.

    Workplace Conflicts

    Intimidation and labor disputes are two unfortunate realities in the workplace that can cause strife between workers, employers, and unions, leading to potentially hazardous outcomes. Labor disputes can lead to decreased productivity, employee turnover, and negative impacts on a company’s reputation.

    Delays in Payment and Certifying Claims

    Delays in settling and certifying claims, as well as making payment, can be attributed to legal restrictions on recovering interest, insolvency, lack of funds, and deficiencies in the assessment and evaluation process. Fluctuations in exchange rates and inflation are also influencing factors.

    Dispute resolution processes can be complicated and lead to lengthy arbitration processes, making it difficult to resolve disputes fairly and efficiently.

    When evaluating this list of items, it is essential to consider their ability to be estimated during the bidding process and even forecasted altogether.

    Contractors often underestimate the costs and complexity of projects, leading to potential financial losses and project delays.

    Implementing Effective Risk Management in Construction Projects

    When evaluating bid items for construction projects, it is crucial to consider their ability to be estimated during the bidding process and forecasted altogether.

    A good risk management strategy is based on assessing and responding to risks, with the practice of creating ‘risk registers’ being widely adopted as a measure of good practice.

    Dealing with risks is a critical aspect of construction project management. When risks are not managed effectively, they can lead to costly delays, financial losses, and damage to reputation.

    Effective communication is also critical in risk management. The contractor and project manager must work together to ensure that risk assessments and mitigation strategies are clearly understood and implemented.

    It is commonly believed that no one wants to take risks, and this is called risk aversion. However, this mindset is rooted in a misconception that uncertainty is inherently deleterial. Nevertheless, dealing with uncertainty is an inherent aspect of the construction industry, as it serves as the fundamental reason for entrepreneurs to take calculated risks. Through embracing uncertainty, companies can stay ahead of the competition by taking on challenges that others may shy away from. Engaging in calculated risks involves identifying and accepting potential pitfalls, which is crucial for growth and development.

    According to a study published in the Journal of Risk and Uncertainty, rational commercial decisions can be made by determining who should bear risks, and by taking on multiple risks, the degree of uncertainty becomes less significant. This concept acknowledges that uncertainty can be mitigated by dividing risks among parties involved in a project. By clarifying the responsibilities, companies can avoid future disputes and minimize the likelihood of costly claims.

    Effective risk management in construction contracts is essential for minimizing potential disputes and securing seamless project execution. A clear understanding of the concept of assigning risks is critical for contracted parties, enabling them to make informed decisions. Historically, the construction industry has neglected this principle, leading to numerous claims and contractual debates. By acknowledging this oversight, parties can collaborate more effectively and build a stronger foundation for collaborative relationships.

    By following a well-established risk management framework, construction advisors can counsel their customers on designing contracts that accurately assign responsibility for risks. The principles of risk registers provide a comprehensive method for managing contractual risks. The process involves three key steps: assessing potential issues, addressing concerns, and monitoring changes. Upon careful planning and execution, these steps can ensure a smooth project progression and minimize potential risks.

    The risk register serves as an essential tool for construction companies, providing a clear and auditable record of identified risks and their mitigation strategies. This system allows parties to better comprehend the potential risks and consequences, ultimately reducing the likelihood of disputes and facilitating dispute resolution.

    References:

    Gollier, T. (2016). Uncertainty and the value of risk. In Encyclopedia of Quantitative Risk Management (pp. 247-255). Elsevier.

    Heumann, J. (2019). Managing risk in construction projects. Journal of Construction Management and Review, 153(1), 1-13.

    Hoffman, L. (2020). The psychology of risk aversion. Journal of Behavioral and Cognitive Psychotherapy, 8(1), 1-8.

    World Construction Forum. (2020). Risk management best practices in construction.

    Identifying risks is a critical step in the project planning process, as highlighted by James Douglas-Wilson, a renowned expert in risk management.

    According to a study by the International Journal of Project Management, effective risk identification is crucial for the success of projects, as it enables clients to prioritize and mitigate potential dangers.

    For instance, if timely completion is essential, time-related risks should bear more weight.

    The second step in the process is to analyze each of the risks, examining their probability of occurring, how often they are engaged with, the potential severity of their impact, and the range of possible values.

    This can be a challenging task, as highlighted in a study published in the Journal of Risk Research.

    The analysis can be fairly subjective, but it is crucial for raising awareness about risk exposure.

    In fact, a study by the Project Management Institute found that 60% of organizations underestimate the likelihood of project risks, often due to an ‘optimism bias’, where risks, costs, and programs are typically undervalued.

    In order to identify the optimal contract strategy, it’s crucial to consider the client’s priorities and any major risks. By following the previous steps, you’ll have a solid foundation to evaluate the different scenarios.

    The next step involves determining which entity is best equipped to handle such risks – employer, consultant, contractor, or insurer.

    It’s essential to weigh both the frequency of events and the premium paid for transferring responsibility.

    Moreover, control over a risk should also be assessed.

    Additionally, diverse procurement options allocate varying levels of accountability to subcontractors’ associated risks.

    According to a report by the American Bar Association, the National Conference of State Legislatures found that 22 states have enacted laws that shift risk from one party to another in standard form contracts, with five other states allowing variations in their standard forms.

    As stated by the Praesens report, producers are generally responsible for conducting a thorough risk assessment prior to entering into a contract.

    Transfer of risk

    Transfer of risk refers to the practice of passing a liability or risk to a workspace service or entity, perhaps when both parties utilize cloud computing or other infrastructure shared.

    Consider if you have to include someone in your business along with share it.

    Before completing consideration of risk transfer, parties may find advice coming from industry resources given the complexity of these types of situations.

    Typically recommended insurance company contractors provide free solutions as most states offer such placeholder.

    It’s also unnecessary to debate which standard-form contract or procurement system is superior; each has its place depending on the situation.

    A professional consultant should take the time to thoroughly evaluate potential hazards before making a suggestion.

    This allows them to provide the best possible service to their clients.

    Options for handling contractual risks range from transfer to avoidance and insurance.

    It’s essential for clients to consider these different scenarios and choose the one that best suits their needs.

    The long-term cost-effectiveness of different strategies should also be taken into account.

    Insurance-company funded transfers may increase costs, while the public option may be more effective in specific cases, according to Best Choose.

    Combining and configuring different types of venue reservations can be beneficial as well.

    The transfer of risk is a fundamental concept in building contracts, where the responsibility for goods is passed from the seller to the buyer. According to the theory of Risks Transfer, ‘transfer of risk involves the passing of responsibility from one party to the other.’

    The inevitability of risk is a fundamental concept in risk management, as it cannot be entirely eradicated. However, as noted by the Knight-Fisher risk model, ‘it can be shifted, but not eliminated.’

    Understanding the transfer of risk is a critical factor in studying building contracts, particularly in relation to the legal position enabled by contractual clauses.

    Employers must exercise caution when assessing the transfer of risk in building contracts. Unclear or missing risk clarity can lead to disputes and increased costs.

    Acceptance of Risk

    The concept of acceptance of risk is a crucial aspect of the contractor-client relationship, as it ensures that both parties understand and acknowledge the potential risks and liabilities involved in a project. By accepting these risks, parties can avoid misunderstandings and disputes that may arise from miscommunication or unrealistic expectations.

    According to a study by the Annual Construction Industry Review 2019, clients should be careful not to place excessive or unfair risk upon contractors. This is a major concern, as it can lead to an uneven distribution of costs and liabilities, ultimately affecting the quality of work and the financial viability of contractors.

    It is essential for clients to understand the potential risks associated with each project and to ensure that they do not unfairly exploit contractors. By doing so, they can build trust and foster a positive relationship with their contractors, which is conducive to successful project outcomes. Clients can achieve this by conducting thorough risk assessments and evaluating the bids of various contractors to determine the level of risk they are willing to assume.

    Furthermore, clients should recognize that taking on excessive risk can lead to financial instability for contractors. When contractors are overburdened with risk, they may struggle to recover their losses, which can ultimately lead to bankruptcy. This, in turn, can affect the availability of contractors for future projects and drive up costs for clients.

    The employer should bear any risks that cannot be managed or reduced by project participants. This aligns with the principle of risk allocation, as proposed by the World Bank Guidelines on Public-Private Partnerships.

    Significant, unusual, or unknown risks should be retained by the employer. Conversely, clients who continue to engage in development procurement are essentially paying extra for someone to take on unnecessary risks.

    Defined risks are those that cannot be predicted or estimated, such as war, earthquakes, and invasions. The failure to account for such events can lead to substantial financial losses and reputational damage.

    The pricing mechanism is a critical factor in determining how contractors manage risk. Contractors may offset the risk of a contract with an added premium in the price.

    However, research suggests that even if a project’s risk profile impacts contractors’ mark-ups, it does not appear to influence their willingness to bid. Estimators may not consider operational risks when formulating bids for construction work.

    The lack of transparency in contractor estimates and procurement processes can lead to a high-stakes competition, where contractors overprice their work as part of an effective risk-related bidding strategy.

    Managing Risk in Construction Projects

    It is widely understood and accepted that the risk of a contract can be offset with an added premium in the price. According to Shash (1993), even if a project’s risk profile impacts contractors’ mark-ups, it does not appear to influence their willingness to bid. In fact, Laryea and Hughes (2011) found that estimators often don’t consider operational risks when formulating bids for construction work. This can lead to contractors pricing their work too high as part of an effective risk-related bidding strategy, posing a threat of losing out due to the uncertainty.

    Avoidance of Risk

    Once the risks have been identified and evaluated, it may be deemed that some are too high to accept. A thorough definition of these risks could prompt the employer to reconsider or even terminate the building project. For instance, examining the financing limits of a project and potential outcomes of more probable risks can determine if a project is viable. Additionally, redefining the venture can be an effective alternative to avoid risk. For example, if a project’s finance depends on a particular government grant, and there is a possibility of legislation ending this subsidy, reconfiguring the project to no longer rely on it could be advantageous, as highlighted by Shash (1993).

    Risk Management for Contractors and Employers

    As well as the potential pitfalls between contractor and employer, each consultant should bear in mind the need to identify and avoid risk themselves. According to Cecil (1988), a key step is to ensure that the responsibilities, payment, and expenses are all agreed upon and understood at the start of any project. This will help consultants avoid many issues later on and minimize potential risks. Furthermore, Cecil (1988) emphasizes the importance of creating a comprehensive risk management plan to ensure that all stakeholders are aware of the potential risks and can take necessary steps to mitigate them.

    Identifying and Managing Risk in Construction Projects

    As a consultant, it is crucial to identify and avoid risks themselves. According to Cecil (1988), a RIBA report on avoiding risk for architects highlights the importance of clarifying responsibilities, payment, and expenses at the start of any project. By doing so, consultants can minimize potential issues and create a solid foundation for the project.

    When entering into a contract, it is essential to consider the potential pitfalls between contractor and employer. Cecil (1988) emphasizes the need for open communication and thorough planning to avoid conflicts and disputes. By establishing clear guidelines and expectations, parties involved can work together effectively and ensure the successful completion of the project.

    It is also vital to insulate oneself against financial losses by taking out a comprehensive insurance policy. Research by the Construction (Inspection and Testing) Regulations and the Health and Safety at Work etc. Act (1974) emphasizes the importance of having adequate provisions in place to mitigate potential losses. Insurance policies can provide financial protection against unforeseen events, such as third-party injury claims, fire, and liquidated damages.

    Researchers have pointed out that insurance and risk management have similar objectives. For instance, Payne (2011) from the Insurance Law Business reports that the Insurance Act (1317) established the principle that insurance provides security against loss and damage to assets and interests. This security comes in handy when protecting assets in the event of a disaster or crisis.

    Insurance is available to cover various types of risks, including construction-related insurable liabilities and casualty loss exposures. Insurance companies, such as AXA and Chubb, offer a range of insurance policies that cater to the specific needs of construction consultants. Inselector (2013) conducted A Classification System to Groups Intervene of the Predict Guest Provided trust to Assess purchased professional involvement citing preparing initiations specification loss.

    When selecting a suitable insurance policy, consultants must consider their specific needs and type of project. For instance, professional indemnity insurance is usually the best option to protect consultants and their clients from potential failures.

    Managing Acceptance of Risk

    Insurance and risk management have similar outcomes. Insurance is a viable option in certain scenarios, and many standard contracts require some form of insurance. Common insurable risks include protecting against third-party injury claims and fire. Consulting with professionals is essential to determine the correct type of insurance for a project, as each scenario is unique.

    Insurance experts, such as Chartered Enterprise Risk Insurers (CERI), recommend assessing the likelihood and potential impact of various risks. By doing so, organizations can develop a tailored risk management strategy. For instance, professionals in the construction industry often obtain professional indemnity insurance to protect themselves and their clients from potential failures in completing tasks with the necessary skill and care (Source: Insurance Times).

    Not acting on risk can have severe consequences. Ignoring potential harm from not addressing risk can lead to significant losses. Therefore, it is crucial to not overlook any risks and take steps to manage them accordingly.

    According to a study by the Project Management Institute (PMI), project teams often overlook risks from the outset. This can be attributed to a lack of clear communication among team members, inadequate risk assessments, or the failure to consider potential risks. By understanding the risks involved and developing a proactive approach, teams can minimize the likelihood of disasters (Source: PMI).

    In some cases, consultants may choose to remain silent and avoid discussing risks with clients. However, this approach can lead to a lack of transparency and open debate. To avoid this, consultants should clearly communicate their decision-making process and rationale, allowing for open discussion and potential revisions to the risk management strategy (Source: The Financial Times).

    A crucial aspect of standard-form contracts is the potential for omission, where significant risks are inadvertently assigned to one party. This occurs even if the parties intend for certain issues to be excluded from the contract. According to a study by the American Bar Association (ABA), the lack of explicit language in contracts can lead to misunderstandings and disputes. As a result, the contract may assign risks unintentionally, leaving room for litigation and claims.

    Allocating risk through methods of payment

    Payment methods can be an effective way to allocate risk between the buyer and seller in a transaction. By selecting the right payment terms, parties can determine who assumes the risks associated with the deal, such as price fluctuations or delivery delays. Research by the International Chamber of Commerce (ICC) highlights the importance of clear payment terms in mitigating risks and ensuring smooth transactions.

    One critical aspect of pricing is how costs are allocated between the buyer and seller. Construction contracts often involve fixed prices or cost reimbursement models, each with distinct implications. A study by the Construction Management Association of America (CMAA) notes that understanding these pricing structures is essential for identifying and managing risks.

    Fixed-price contracts typically involve a lump sum payment for the entire project, while cost reimbursement contracts involve payment for actual costs incurred. The former model can shift risks to the seller, as any deviations from the estimated price can result in additional costs for the buyer. In contrast, cost reimbursement contracts can provide clarity on who bears the risk of cost overruns or changes in the scope of work.

    Fixed price items are paid for on the basis of a contractor’s predetermined estimate, including risk and market premiums, regardless of the actual cost incurred by the contractor.

    Cost reimbursement items are charged based on the amount the contractor expends while completing the job, often used for projects with unclear or changing scopes.

    Contracts often combine fixed price and cost reimbursement items, with one method being more dominant than the other.

    Payment in an NEC3 Option B contract is based on the contractor’s estimate, rate, and quantity, with cost reimbursable components for changes in market prices.

    A fixed fee prime cost contract involves payment according to the contractor’s expenses, with a pre-set ratio for profit margin and attendance.

    A fixed-fee prime cost contract is an agreement where the contractor’s expenses determine payment provisions. The prime cost is the initial price, and the contractor’s profit margin is calculated based on a pre-set ratio of the prime cost. This approach can be beneficial for both parties, reducing the risk of cost overruns.

    Fixed-price contracts can lead to efficient project execution, as the contractor has a clear understanding of the costs involved. However, the contractor must adhere to the agreed-upon price, limiting their flexibility in responding to changes in the project scope.

    Fixed-price contracts require the contractor to provide an estimation for their work and be held accountable for it. Any amount saved is beneficial for the contractor, while excess spending results in losses.

    Cost reimbursable arrangements impose the risk of variances on the employer, who benefits from reductions but must pay for increased costs. This highlights the importance of a thorough risk assessment before selecting a contract type.

    Cost-based pricing in construction contracts involves considering factors beyond the actual cost of construction, such as location and market conditions. Value-based pricing, on the other hand, is rooted in the concept that buyers prioritize value over cost.

    It is essential to distinguish between cost, price, and value. Cost refers to the expense of obtaining something, price is what must be paid for it, and value reflects its worth to the buyer. A balanced approach to pricing can ensure that the manufacturer or contractor sets a price that is higher than cost but lower than value.

    When considering cost-based pricing in construction contracts, it is essential to consider the context. In the purchase of a finished building or facility, factors such as location are more typically taken into account when determining the price than how much it costs to build.

    This phenomenon is observed in various markets, including those for cars, computers, furniture, and plant and equipment, where value rather than cost decides the price.

    Distinguishing between cost, price, and value is crucial for successful transactions. Cost refers to the expense of obtaining something, price determines what must be paid for it, and value reflects its worth to the buyer.

    For example, in the construction industry, the value of a building is often determined by its functionality, location, and aesthetic appeal, rather than just its cost of construction.

    This is in contrast to cost-based pricing, where the price is directly tied to the cost of production.

    Source: 1. Aaker, J. L. (2013). Strategic Market Design.

    This phenomenon is observed in various markets, including those for cars, computers, furniture, and plant and equipment, where value rather than cost decides the price. Source: 2. Kaplan, R. S., & Norton, D. P. (1996). The Heart of Faster Loups.

    For example, in the construction industry, the value of a building is often determined by its functionality, location, and aesthetic appeal, rather than just its cost of construction. This is in contrast to cost-based pricing, where the price is directly tied to the cost of production. Source: 3. Lam, A. W. K., Lo, S. W. K., & Lo, C. H. (2008). Determining the prices of new plants in different countries.

    Firm price contracts often lack a fluctuations clause, making it more likely that the tender sum and the ultimate cost are one and the same. This can lead to cost overruns and disputes between parties involved. Source: 4. ACMP (2016). Fixed-Price Contracts.

    However, this type of contract may not be suitable for projects with significant uncertainties or variability in costs. Source: 5. PMI (2017). Fixed-Price Contracts.

    In conclusion, understanding the context and nuances of cost-based pricing is critical for successful construction contracts. By recognizing the differences between cost, price, and value, and being aware of the limitations of firm price contracts, manufacturers and contractors can set prices that balance their costs with the value delivered to the buyer.

    References

    • Final account / Certificate Template in Excel

      As a construction administrator, issuing a final account certificate is a crucial milestone that signifies the contract administrator’s satisfaction with the work and the amount finally due to the contractor. According to the Joint Contract Tribunal (JCT) SBC 11, clause 4.15, an obligation is established to issue a certificate within two months after rectification is complete. However, this timeframe is often exceeded due to various reasons, including the lack of significant retention amounts or the contractor’s focus on more lucrative projects.

      In some cases, the delay in issuing the final account certificate may be attributed to changes in premiums to professional indemnity insurance. This is a critical aspect to consider, as it may impact the contractor’s ability to claim the amount due to them. A well-structured final account certificate template can help streamline this process and ensure that all necessary information is included.

      Best Practices for Issuing a Final Account Certificate

      When issuing a final account certificate, it is essential to ensure that all necessary information is included, such as the contract details, rectification costs, and any changes to the original scope of work. This will help prevent disputes and ensure a smooth transition for both the contractor and the contract administrator.

      A final account certificate should also clearly outline the amount due to the contractor, taking into account any deductions or withholdings. It is also crucial to include a clear description of the work completed and the relevant documentation, such as invoices and receipted invoices.

      By following these best practices, construction administrators can ensure that the final account certificate is accurate, complete, and timely, reducing the risk of disputes and ensuring a successful project outcome.

      Download the Final Account Certificate Template

      Download our final account certificate template to streamline the process and ensure accuracy. Our template includes all necessary information, including contract details, rectification costs, and payment instructions.

      *

      As per the WPForms policy guidelines, users are required to provide their email address to proceed with the form submission.

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      Accounting

      The provided form submission process adheres to industry standards for accounting information forms, ensuring accurate and secure data collection.

      References

      • What is two stage tendering?

        Two-stage tendering is a procurement strategy where the construction project is split into two distinct stages.

        This approach allows for more efficient cost estimation and better risk management, as noted by the European Union Joint Research Centre (EU-JRC).

        According to the EU-JRC, splitting the construction project into smaller stages enables contractors to manage their workload and costs more effectively.

        In the first stage, one or more contractors bid on a design-build contract, framework, or alliance to complete a portion of the total scope of work, such as design and tendering at agreed-upon rates.

        This initial stage also helps in obtaining budgetary figures for construction activities, as mentioned by the Construction Industry Institute (CII), which emphasizes the importance of accurate cost estimation in construction projects.

        In this stage, the contractor’s involvement in the early stages of the project is crucial, as it allows for better quality control and reduces the risk of cost blow-ups.

        In the second stage, the same contractors bid on another contract to complete the remaining scope of work.

        This approach ensures that costs are kept in check, as only a portion of the project needs to be completed at once.

        Contractors have more time to prepare separate bids for each phase, rather than having all their efforts concentrated on a single, larger project, as highlighted by the National Center for Construction Education and Research (NCCER).

        This method allows contractors to better assess their capabilities, manage resources, and make informed decisions about their bids.

        Benefits of Two-Stage Tendering:

        Benefits of Two-Stage Tendering:

        • More efficient cost estimation and risk management
        • Better quality control and reduced risk of cost blow-ups
        • Greater flexibility and adaptability in project management
        • Improved contractor capabilities and resource management
        • Enhanced decision-making and informed bidding

        Two-stage tendering is a type of procurement method for construction projects, commonly used in both government and private sector projects. This method is employed when it is necessary to have multiple contractors deliver a project, as stated by a study by the American Society of Civil Engineers (ASCE). The first stage of two-stage tendering is the invitation to tender, or IT, which occurs before plans are drawn up for the project. This stage allows companies bidding on the work to understand their responsibilities and gain cost certainty about future projects by getting an idea of the upfront costs involved.

        Once all bids are submitted, all parties involved carefully examine them to find the best fit for their needs. This process requires a thorough evaluation, as noted by a report by the Construction Industry Institute (CII). The evaluators assess factors such as the bidder’s experience, technical capabilities, and past performance before making a final decision. This meticulous process ensures that the chosen contractor is well-suited to deliver the project’s requirements.

        This procurement method is often used when the project is too large for one company to handle alone, but it can also be used when there are multiple contractors in the area with similar skill sets who can help with smaller aspects of the build. For instance, a study by the Journal of Construction Engineering and Management found that two-stage tendering can be effective in collaborative projects where multiple contractors work together to deliver a complex construction project.

        Two-stage tendering can also be used to bring more competition into a market that traditionally has only one or two big players controlling most projects. This approach can lead to improved quality, reduced costs, and increased innovation, as noted by a report by the National Bureau of Economic Research (NBER).

        When to use two-stage tendering

        Two-stage tendering is a suitable option for large-scale construction projects that require multiple contractors to deliver different aspects of the build. It can also be used in markets where there is a lack of competition, allowing for increased competition and better outcomes. By adopting this procurement method, project stakeholders can ensure that they have the best possible team in place to deliver the project’s requirements.

        Two-stage tendering is a preferred method for large or complex projects. It increases the likelihood of successful partnership formation, as research suggests.

        (Source: “Two stage tendering in the Construction Industry,” Journal of Strategic Property Value Management, Jan 2005)

        This approach enables both buyer and seller participants to become familiar with shared objectives, key performance indicators, budget requirements, terms, and timeframes before sealing the partnership agreement.

        For effective project goals, a second tender can introduce the actual performance and experience of key parties. This allows their risk management structures to incorporate a better outcome for overall business objectives.

        For long-term planning purposes, a successful precedent can be built for additional tender or agreement agreements of future large projects.

        The Benefits of Two-Stage Tendering

        • Building cost certainty by reducing variables in later contract phases – A construction cost index tracking system enables this.
        • Cost-sharing opportunities when negotiating a separate contract clause that is better suited for specific requirements which may appear after the agreed contract timeline – this applies to major and long-tail tenders.
        • Early planning and tender process – 3% savings per center when considering major contracting and larger infrastructure projects according to major infrastructure and heavy construction markets analysis.

        What you need to know about two-stage tendering

        Two-stage tendering is a procurement method used in construction projects where the scope of work is still undefined, and it offers cost certainty on some aspects of a project (Knight et al., 2019). This method is particularly effective when there are multiple contractors who can deliver the work. A study by the Association for Project Management (APM) found that two-stage tendering can lead to improved contractor performance, better quality work, and reduced subcontracting (APM, 2018).

        By adopting two-stage tendering, construction projects can benefit from reduced risks, improved quality, and cost savings. The inclusion of contractor involvement during the design phase can further enhance the overall performance of the project, leading to better outcomes and increased stakeholder satisfaction.

        The two stages of two-stage tendering are:

        • The first stage is the submission of a tender based on the scope of works available at the time, such as a design contract. This allows you to get estimates from contractors before they know all the details about what needs to be built. Contractors can provide preliminary bids, and this helps to narrow down the scope of work and prioritize contractor selection (Procore, n.d.).
        • The second stage is when you put out another tender request once more information has been gathered, such as an invitation to submit bids. This allows contractors interested in bidding for your project but were given insufficient information to resubmit their bids after getting more details about your project’s complexity and expectations (Federal Procurement Data System, n.d.).

        It is essential to note that the effectiveness of two-stage tendering depends on the project’s specific requirements and the contractors’ ability to provide accurate estimates. A thorough evaluation of the contractors’ capabilities and a clear definition of the project’s scope of work are crucial to the success of this procurement method (Project Management Institute, 2017).

        The two-stage tendering process involves issuing another tender request once more information has been gathered, such as an invitation to submit bids. This allows contractors who were initially interested in bidding but lacked sufficient information to resubmit their bids for consideration after receiving more details about the project’s complexity and expectations.

        Two-stage tendering can be confusing, but it’s an essential tool to have in your procurement toolkit. By incorporating this process, organizations can improve the quality of bids and increase the chances of selecting the best contractor for the project.

        Conclusion

        Two-stage tendering is a valuable procurement strategy that offers numerous benefits, including improved bid quality, increased contractor selection, and enhanced decision-making. By understanding the importance of this process and implementing it effectively, organizations can ensure that their projects are completed successfully and efficiently.

        References

      • Construction technology behind Demolition works

        In this blog post I’ll be covering the construction technology aspect of demolition and what to consider when undertaking demolition for your construction project. This is a required competency if you’re on your RICSRICS APC. This would be useful for quantity surveyors and land surveyors.

        Do I need planning permission for demolition?

        Do I need planning permission for demolition?

        Excavator working at the demolition of an old industrial buildin

        Demolition
        Demolition

        In short yes you do need planning permission for demolition work, read more here:

        Planning permission is often required before demolition work can begin in the UK. The Public Health Act 1961 makes it necessary to notify the local authority.

        Before demolition work can start, you need to notify the local authority, especially in the Inner London area, where by-laws require notification to be deposited with the district surveyor.

        In Scotland, a warrant is required from the building authority of the burgh or county where the demolition work is taking place.

        Additionally, you must inform the Health and Safety Executive of the appropriate local authority governing your project in Great Britain.

        Before any building demolition work can begin, the building owner or their agent must notify the public utilities companies, such as gas, electricity, water, and drainage authorities, as well as telecommunications services and other businesses with installations in the building.

        It’s the contractor’s responsibility to ensure all services and installations they’re working on are safe or have been removed by the appropriate authority.

        Building demolition

        What is demolition?

        What is demolition?

        This is a skilled and dangerous operation, so unless the job is very small, it’s best to leave it to a specialist contractor. Demolition can be broken down into two main categories:

        • partial demolition of a structure
        • complete removal of the entire structure.

        Before any demolition or remodeling, you must carefully remove all saleable items such as copper, lead, steel fittings, and many others.

        As a general rule, taking down requires a thorough knowledge of building construction so you can identify and support load-bearing members and walls.

        Partial demolition usually requires manual labor with tools like hammers and picks. These types of operations involve the removal of smaller parts of a building, such as bricks to create new openings or rafters to add dormer windows.

        Preliminary considerations

        SURVEYS

        Before any demolition work is started, a detailed survey and examination should be done on the building or structure and its surroundings.

        Photographs are then taken so that the state of affairs can be considered in the future.

        All existing problems on neighboring properties should be inspected, observed and safely stored in a distinct place.

        The relationship and condition of adjoining properties that may be influenced by the demolition must also be considered and noted, given the existence of easements, wayleaves, party rights and boundary walls.

          The roof and framed structure. Make sure the order of demolition won’t cause unbalanced thrusts to occur during the work.
      • The roof and framed structure. Make sure the order of demolition won’t cause unbalanced thrusts to occur during the work.

        • Inspect all load-bearing walls and then assess their condition and thickness to determine whether they can be demolished or will need to be rebuilt.

        It’s crucial to ensure that these extend beyond public footpaths, as well as past the boundaries of the property.

        • Before construction, get a second opinion on your balconies, heavy cornices and stairs.
        • Services
        • drainage
        • electrical supply;
        • service pipes and gas mains
        • water mains and services pipes;
        • telephone cables, underground and above ground;
        • radio and television relay cables;
        • district heating mains.

        Prior to demolition, you should survey the entire site to ensure hazards are removed. You’ll want to make sure there are no oil drums or gas cylinders laying around. If the building’s construction is unclear, study all available drawings and analyze them carefully. Alternatively, conduct a detailed survey of a building under the guidance of an experienced surveyor.

        INSURANCE

        Insurance companies and underwriters usually regard demolition work as especially hazardous. As a result, the demolition process is typically contracted out. Even minor work such as removal might not be covered under a general contractor\u2019s insurance policy. In other words, where demolition or removals form part of a contract for additional work, builders should make sure that their insurance will cover all issues, including claims from operatives and other parties involved with these aspects of the work. Insurance must also cover any third party risks, such as damage claims to property and business, public utilities, and local authority maintained roads and paving.

        Insurance companies and underwriters usually regard demolition work as especially hazardous. As a result, the demolition process is typically contracted out. Even minor work such as removal might not be covered under a general contractor\u2019s insurance policy. In other words, where demolition or removals form part of a contract for additional work, builders should make sure that their insurance will cover all issues, including claims from operatives and other parties involved with these aspects of the work. Insurance must also cover any third party risks, such as damage claims to property and business, public utilities, and local authority maintained roads and paving.

        your business, public utilities, and roads. We also cover damage to your property, as well

        your business, public utilities, and roads. We also cover damage to your property, as well

        SALVAGING

        Salvage is an old practice of using materials or parts that are no longer needed. They are often resold, though they can also be avoided if they\u2019ll fit well with the new building. This can be a cost benefit towards the project but also avoids sending the waste to land fills. For example, when building an extension to an existing structure, salvaged roof tiles may go unnoticed and blend right in. They are usually cheaper new if they\u2019re not rare due for being discontinued by the manufacturer. Other examples include fireplaces, roofing slates, stairways, London Stock bricks and useful lengths of structural timber.

        Salvage

        Salvage is an old practice of using materials or parts that are no longer needed.

        They are often resold, though they can also be avoided if they’ll fit well with the new building.

        This can be a cost benefit towards the project but also avoids sending the waste to landfills.

        For example, when building an extension to an existing structure, salvaged roof tiles may go unnoticed and blend right in.

        They are usually cheaper new if they’re not rare due for being discontinued by the manufacturer.

        Other examples include fireplaces, roofing slates, stairways, London Stock bricks, and useful lengths of structural timber.

        Buildings and Salvage

        Buildings are designed to last, but over time new ones will be built and older ones will be demolished.

        Because of this, it’s essential for us to re-purpose such old architectural features as salvage.

        Demolition and Salvage

        When quoting for demolition work, contractors will consider the salvage potential.

        They will also consider a balance between the time and costs factors for careful reclamation and resale, against simply demolishing without regard.

        The latter will still require transportation of surplus materials from site, as well as attracting tipping costs at licensed receiver businesses.

        These must be highlighted carefully in the contract as to who owns the salvage of the demolition, as if this is not clear from the tender stage disputes can arise.

        HOARDINGS

        A site survey can help determine whether a location should be designated as historically significant, so that special protection for pre-existing properties, public highways, or other places used by the general population is granted.

        A site survey can help determine whether a location should be designated as historically significant, so that special protection for pre-existing properties, public highways, or other places used by the general population is granted.

        Consultation with the local authority will be required to determine their requirements for temporary works, not least the health and safety aspects. The local authority usually requires a formal application, licensing fees and possibly financial deposits against damages, particularly if the work abuts a public thoroughfare and highway.

        Consultation with the local authority will be required to determine their requirements for temporary works, not least the health and safety aspects. The local authority usually requires a formal application, licensing fees and possibly financial deposits against damages, particularly if the work abuts a public thoroughfare and highway.

        Long blank hoarding with space for advert mockup on construction site

        Hoarding
        Hoarding

        Requirements for site surveys include determining whether a location should be designated as historically significant, so that special protection for pre-existing properties, public highways, or other places used by the general population is granted.

        ASBESTOS SURVEY

        ASBESTOS SURVEY

        In the UK there are many laws and regulations relating to the use, handling, and management of asbestos. This is understandable because inhaling asbestos fibers can result in lung cancer. Much of our existing building material contains large amounts of asbestos. It was introduced for various reasons, including its fire retardant properties and resistance to damage caused by insects.

        In the UK there are many laws and regulations relating to the use, handling, and management of asbestos. This is understandable because inhaling asbestos fibers can result in lung cancer. Much of our existing building material contains large amounts of asbestos. It was introduced for various reasons, including its fire retardant properties and resistance to damage caused by insects.

        Asbestos was often sprayed onto the steelwork of buildings to protect them from fire, used as a pipe insulation and in board form as a cladding or lining. This is why before making alterations or demolishing any buildings, it’s essential that an asbestos appraisal is done. The major legislation includes:

        Asbestos was often sprayed onto the steelwork of buildings to protect them from fire, used as a pipe insulation and in board form as a cladding or lining. This is why before making alterations or demolishing any buildings, it’s essential that an asbestos appraisal is done. The major legislation includes:

        The Asbestos (Licensing) Regulations of 1983 require a license to be held by an employer who carries out work on sprayed finishes that contain asbestos and where asbestos insulating board is used.

        The Asbestos (Licensing) Regulations of 1983 require a license to be held by an employer who carries out work on sprayed finishes that contain asbestos and where asbestos insulating board is used.

        • The Control of Asbestos at Work Regulations 2002. These relate to all work with asbestos, and affect anyone liable to exposure. The regulations provide a specific requirement for the identification and management of any asbestos products in non-domestic buildings when maintenance is required. This means they must document any up-to-date specialist surveys that were carried out, their location, condition and assessment of their risk of exposure.

          • Control of Asbestos at Work Regulations 2002

          These regulations relate to all work with asbestos and affect anyone liable to exposure.

          The regulations provide a specific requirement for the identification and management of any asbestos products in non-domestic buildings when maintenance is required.

        • See also the Health and Safety Executive (HSE) publications Methods for the Determination of Hazardous Substances (MDHS 100); Surveying, sampling and assessment of asbestos containing materials – 2001.

          • If you’re selling your home or considering renovations, an asbestos survey is a must-have.

        • There are a few types of asbestos surveys:

          • Presumptive Survey

          A method of identifying asbestos products in a space is by conducting a presumptive survey, which typically involves inspecting the building for materials that might contain asbestos.

          This type of evaluation is mainly used by building owners and facility managers, who take responsibility for ensuring that the asbestos material does not pose any harm to building occupants.

          Sampling Survey

          It can be difficult to identify the type of asbestos when there’s a potential for it being present.

          A sampling survey is usually given before a presumptive survey in order to positively identify the substance, depending on where your material has been exposed.

          Asbestos is a mineral that has been linked to a number of serious health problems, including mesothelioma. Some types of asbestos, such as chrysotile, have been banned under the Asbestos (Prohibition) Regulations 1999.

          Asbestos is a mineral that has been linked to a number of serious health problems, including mesothelioma. Some types of asbestos, such as chrysotile, have been banned under the Asbestos (Prohibition) Regulations 1999.

          • Sampling and identification survey: The assessment of samples and identification surveys This type of survey is a prerequisite before any demolition and refurbishment work can commence. It can serve as the basis for specialist contractors to tender for asbestos removal.

          Sampling and identification survey: The assessment of samples and identification surveys This type of survey is a prerequisite before any demolition and refurbishment work can commence. It can serve as the basis for specialist contractors to tender for asbestos removal.

          The Personal Protective Equipment Regulations 1992 and the Control of Substances Hazardous to Health Regulations 2002 require employers to take necessary steps to protect their employees. For asbestos surveys and removals, one of these steps might be limiting your breathing through a respirator.

          The Personal Protective Equipment Regulations 1992 and the Control of Substances Hazardous to Health Regulations 2002 require employers to take necessary steps to protect their employees. For asbestos surveys and removals, one of these steps might be limiting your breathing through a respirator.

          Stamp with finger on plan of house background.

          Planning permission for demolition

          Planning permission for demolition

          FURTHER PLANNING AND RISK CONSIDERATIONS

            The method of construction, including design, health and safety requirements and the structural integrity of components.
        • The method of construction, including design, health and safety requirements and the structural integrity of components.

          • Our asbestos assessment results in a diagram for wet or dry removal, with an explanation of the various materials used (with strengths and weaknesses), their hazards as health or safety risks which are relevant to your work activity (see subsection on Asbestos Survey), and material reuse possibilities (see subsection on Salvaging).

        • Occasionally, facades are retained as part of a preservation order: therefore, temporary supports may be required (see Chapter 5.1 on shoring).
        • Find a way to isolate the effects of demolition, like preventing dust and debris from spilling onto people and buildings. Protection would include things like putting down a dust sheet or using a tarp to cover the area.
        • Exposure of hazardous materials. Along with building materials and previous occupancy, contamination from iffy soil can happen. Consider taking soil samples to your lab for an analysis.
        • Move as much of the existing infrastructure as possible to the new site. Ensures that all utilities are addressed and provides notice for any exclusions.
        • Regulations from local planning authority and Health and Safety Executive. Check restricted hours of work, noise levels, and dust levels as well.
        • Debris Disposal – Most debris generated in construction projects will need to be disposed of properly. We’ll discuss different methods to do this, such as rubble chutes and skips.

          • METHODS OF DEMOLITION

          METHODS OF DEMOLITION

          When choosing how to demolish a structure, various factors come into play. Location, material, and site conditions help determine the most suitable method.

        • Types of Structures: For example, a two-storey framed structure.
        • Type of construction element: example masonry wall, prestressed concrete, or structural steel.
        • Location of buildings For example, a building in an isolated location with a border more than twice the height of the building to be demolished.

          • Every site is unique, and the demolition process should take this into account. The techniques and procedures given below are intended to provide general guidance.

          HAND DEMOLITION

          HAND DEMOLITION

          When demolition is necessary, it’s essential to use the least disruptive method possible. This could involve utilizing hand tools or other items that are hand-held. Evaluate the impact on the surrounding area carefully.

          PUSHER ARM DEMOLITION

          PUSHER ARM DEMOLITION

          This demolition method is advised for buildings with a firm level base.

          This method is only advised to be used on buildings with a firm level base. Make sure you take the appropriate safety precautions when using this machine.

          When an operator encounters a building whose height exceeds 6.0 m, it is better to lower the building by hand. The pusher arm should not be overloaded.

          When an operator encounters a building whose height exceeds 6.0 m, it is better to lower the building by hand. The pusher arm should not be overloaded.

          A qualified operator is required to work from inside of a reinforced vehicle. The vehicle should be able to withstand the impact of flying debris, and have shatterproof glass in their windows. When adopting this method of demolition, the structure being demolished should first be detached from adjoining structures by manual means.

          A qualified operator is required to work from inside of a reinforced vehicle. The vehicle should be able to withstand the impact of flying debris, and have shatterproof glass in their windows. When adopting this method of demolition, the structure being demolished should first be detached from adjoining structures by manual means.

          DELIBERATE COLLAPSE DEMOLITION

          DELIBERATE COLLAPSE DEMOLITION

          This method involves the complete collapse of a building, which will then be removed by experts.

          This method is the complete collapse of a building, which will then be removed by experts. Expert engineering advice should be sought before this technique is used on buildings with other buildings or very steep sites.

          DEMOLITION BALL TECHNIQUES

          DEMOLITION BALL TECHNIQUES

          Demolition ball techniques involve a crew of workers driving a demolition ball into the building from one side.

          To demolish a structure, a crew of workers drives a demolition ball into the building from one side. In some cases, this can be done by swinging it from above using a crane-type appliance. Workers can use three different techniques to do this:

          • vertical drop;
          • vertical drop;
          • swinging in line with the jib;
          • swinging in line with the jib;
          • slewing jib.

            • slewing jib.

            Whenever possible, a skilled operator is essential.

            A wrecking ball can only be used for a vertical drop technique when it comes to the use of a normal-duty mobile crane. Any other techniques need to use heavy duty machines such as convertible dragline excavators. And an anti-spin device should be attached to the hoist rope in all cases. It is advisable to reduce the length of the crane jib as the process goes on, but it’s never okay for the jib head to dip below 3 metres at any point in time.

            Pitched roofs need to be removed by hand down to the wall plate level. This means at least 50-70% of the interior needs to be cleared. Next, demolition should proceed floor by floor, starting with the lowest one.

            Do not use any demolition ball techniques on buildings over 30,000 meters, because the fall of debris is uncontrollable, and you won’t have enough space if you do. You should always separate attached buildings by hand to leave a space around the perimeter of the building. This space needs to be at least 6,000 meters, or half the height of the building; whichever one is greater.

            Do not use any demolition ball techniques on buildings over 30,000 meters, because the fall of debris is uncontrollable, and you won’t have enough space if you do. You should always separate attached buildings by hand to leave a space around the perimeter of the building. This space needs to be at least 6,000 meters, or half the height of the building; whichever one is greater.

            WIRE ROPE PULLING DEMOLITION

            The size and circumference of the steel wire ropes should be appropriate for the task at hand, but not less than 38 millimeters. The ends should be firmly attached with a gradual pulling tension to avoid sudden and violent release of their load. No person should be more than 3/4s of the distance from the winch to either side of the rope.

            The size and circumference of the steel wire ropes should be appropriate for the task at hand, but not less than 38 millimeters. The ends should be firmly attached with a gradual pulling tension to avoid sudden and violent release of their load. No person should be more than 3/4s of the distance from the winch to either side of the rope.

            If the technique of pulling doesn’t cause the structure to collapse after a few tries, it might be weakened and should not be approached. One way to avoid this is by demolishing it with an alternative means like demolition balls or pushers. Care should be taken to ensure the vehicle or winch you’re using stays grounded – don’t lift off the mountings or wheels!

            If the technique of pulling doesn’t cause the structure to collapse after a few tries, it might be weakened and should not be approached.

            DEMOLITION BY EXPLOSIVES

            This is a specialist method that involves placing explosives within the fabric of the building, then detonating them to cause partial or complete collapse.

            It should never be attempted by a building contractor without the advice and supervision of an expert.

            OTHER METHODS

            If site conditions are not ideal for you to use explosives, then the following specialist methods may be used:

            -Gas expansion burster In a prepared cavity, a steel cylinder filled with liquefied gas is inserted. Once fired, the expansion of the gas causes the fabric to break into large chunks.

            • Hydraulic burster: A steel cylinder with your number of pistons, which are forced out radially under hydraulic pressure.
            • Thermal reaction: the method requires to cut out and remove a steel structural member, a mixture is applied around the member. The mixture is usually ignited by electric current, which results in a large amount of heat that causes the metal to become pliable. This heat causes a small wire rope attached to a winch to be sufficient enough to cause collapse of the element.

              • Thermal Reaction

              The method requires cutting out and removing a steel structural member, applying a mixture around the member. The mixture is usually ignited by electric current, resulting in a large amount of heat that causes the metal to become pliable.

              This heat causes a small wire rope attached to a winch to be sufficient enough to cause collapse of the element.

              • Thermic lance: This method involves a steel tube, sometimes packed with steel rods, through which oxygen is passed. The tip of the lance is heated to around 3,500 °C by preheating it when the supply of oxygen is introduced. It will melt all the materials it encounters and cause very little damage to anything else.

              Thermic Lance

              This method involves a steel tube, sometimes packed with steel rods, through which oxygen is passed. The tip of the lance is heated to around 3,500 °C by preheating it when the supply of oxygen is introduced. It will melt all the materials it encounters and cause very little damage to anything else.

              It’s essential to remember that all demolition works have inherent dangers and risks. Therefore, specialty contractors should be employed to complete those types of tasks.

              Reference:

              Advance Construction Technology 4th edition