Volume 6 - December 2010

SLQS Journal

The Forum of Sri Lankan Quantity Surveyors Across the Globe

Volume 6 December 2010

Editorial Committee
Ajantha Premarathna FRICS, FIQS(SL), ACIArb.
Dhammika T. Gamage

NDT(Civil Eng.), ICIOB, ACIArb, AAIQS, MIIE(SL), IEng, FACostE, FCInstCES

Lakshman Gunatilake MCInstCES, MACostE, ACIArb, MIIE(SL), IEng

Prasanna Pushpajith DipSurv., MSc, MRICS, ACIArb

Editorial Policy
We, the editorial committee reserve the right to select, reject, edit, and excerpt articles at our sole discretion. We will
publish no article which, in the opinion of the editorial committee, can be reasonably interpreted as insulting or offensive
to any individual or group. We will not return unsolicited manuscripts. The opinions expressed in articles contained in the
SLQS Journal are the opinions of individual authors and not necessarily those of the SLQS Journal editorial committee.
Articles are provided for the general interest of the quantity surveying and contract administration community, but the
information contained therein does not constitute legal advice and should not be relied on as such. Neither the SLQS nor
the individual authors assume any responsibility for the accuracy of information reported.
The editorial committee assumes no responsibility for failure to report any matter inadvertently omitted or withheld from
it. The mode of citation utilised within the articles and for the bibliography would be the Chicago method.
Email your own creations to journal@slqs-uae.org with your passport size photograph and brief profile of yourself which
should not be more than 35 words.

December 2010

SLQS JOURNAL
CONTENTS

Page

Editorial
Letters of Intent Beware of the Risks
Ragupathy Nadarajah MSc MRICS

Project Control Practical Aspects

Sajeewa Amantha B.Sc.(QS) Hons.MRICS

Management of Change
Dr. D.A.Harendrasinghe Gunaratne Ph.D; D.Sc;
GC&G;MIESL; MIIE(SL)IEng; MRICS; AAIQS; AIQSSL; Fellow APQSESL; MCIArb; Reg.Arb.
NACSL; Mem.ICCSL; Mem.CCISL; Mem.AACE; Mem.SAVE; Mem.SLAQ; Mem.SLGS

15

Life-cycle Approach to Minimise Construction Waste

D.D.A. Niluka Domingo B.Sc. (Hons.)

18

Application of Risk Management Associated with Activities of Building Contractors in UAE

Chrisantha Fernando HNDE, HND(QS), AMIIE(SL), ICIOB

21

Challenges Facing the Establishment of the Quantity Surveying Profession in Sri Lanka
Ranjith Chandrasiri MRICS MCIOB DipQs(UK) AAIQS ACIArb AIQSSL FIPMSL

24

Setting Smart Objectives

Buddhika Jayatillake MBA BSc(Hons) FCIOB MRICS AAIQS

28

Partnering in the Construction Industry

B. Darshanie Taraka Perera BSc (Hons) TCInst.CES

30

The Implied Terms and the Damages of Contracts under Common Law.
A. M. Manju Sri Nandana BSc. (Hons), MRICS, MCIArb, MIIE (S.L.) I Eng, GCGI (UK).

35

An Out Look of the APC Assessment of Professional Competence By an APC Assessor

Ajantha Premarathna FRICS, FIQS-SL, ACIArb

38

Innovation in the Construction Industry

Shantha Wijayaratne MBA, MRICS, MCInst. CES

41

Head Office Overheads Revisited

Prof. Indrawansa Samaratunga

46

SLQS JOURNAL

December 2010

Editorial
I am writing this editorial shortly after our annual get-together held on 09 December, 2010. On behalf of
the SLQS Committee, we, SLQS-Journal Sub-Committee congratulates the SLQS-UAE membership and their
families for their participation. The get-together was a most pleasurable event and may be considered a positive
beginning to the New Year 2011.
The need to better serve our growing membership within the UAE and the Middle East has been recognized by
the SLQS UAE and arrangements has been made within the 2011 agenda to accommodate such requirements.
I believe SLQS Committee can also improve service to our local membership, partly through becoming more
receptive to feedback from our innovative young membership, which can later be transformed into constructive
proposals or new resolutions within the group.
The lull in the international economy that we are experiencing can be used to further enhance our role as pivotal
industry professionals, through Continuing Professional Development (CPD), programmes that allow us to
develop the competencies necessary to conduct our duties in exemplary fashion. I am sure that you will agree
with us in saying that it is our duty to the industry we are part of to ensure that we are in prime professional
condition to carry out the tasks we are entrusted with. The Editorial committee believes that our relatively young
SLQS-Journal is able to shed some light on your search for the path to best practice.
In this issue, we are delighted to publish Prof. Samaratungas revolutionary paper of Head office Overheads Revisited,
adding great value to this edition. We are also pleased to note some eminently practical and useful contributions
of Sajeewa Amantha in his article on Project Controls, and Crishantha Fernandos Risk Management. Volume 6 is
further enhanced by the article entitled Letters of Intent by Ragupathy Nadarajha, warning for the misuse of this
concept implemented across the industry. Niluka Dominigos discussion of Construction Waste Management is a
good academic proposal to a leading waste generator; the construction industry.
Ranjith Chandrasiris article on Quantity Surveying in Sri Lanka, mentioning both its history and way forward
touches on the roles and responsibilities of all practicing professional quantity surveyors and also all professional
institutions associated with the quantity surveying practice in Sri Lanka.
While sharing his wide experience in assessment of professional competence, (APC), Ajantha Premarathna added
value to this issue and Dr. H. Gunarantha and Buddhika Jayathilaka joined the journal through the management
avenue.
On a closing note, we ask all our readers to recall that this journal is your property. As such, its performance is
indeed your concern and all feedback and articles are not only appreciated, but an active part of being a member
of the SLQS and the construction community.
Yet again, the thanks of the Editorial Committee due to Vishwa Chaturangi for her assistance in editing and to
those writers who have contributed to SLQS-Journal Volume 6.
We anticipate your academic pleasure and hope that you assist us in ensuring it for future readers as well, by
providing high-quality articles of your own in the near future.
On behalf of the editorial committee,
Dhammika T. Gamage

December 2010

SLQS JOURNAL
Letters of Intent Beware of the Risks
Ragupathy Nadarajah MSc MRICS

Senior Contracts Administrator- Thiess John Holland, TBM Tunnelling Division, Airport Link, Northern
Busway and Airport Roundabout Upgrade Project, Brisbane, Australia. A Quantity Surveyor with over 25
years experience in Sri Lanka, Hong Kong, Macau and Australia. Member of the Royal Institution of Chartered Surveyors

Abstract

In a perfect world, work on a construction contract

should not commence before a full and complete contract
has been executed by the parties. It is, however, often
desirable for work to commence before the formal
agreement has been signed. In such circumstances, it
is common practice to issue a letter of intent to enable
the selected contractor to start work. Whilst this is a
convenient solution to bring the contractor on board
as early as possible, letters of intent are sometimes
problematic and subject to dispute.
Disputes can arise over the interpretation of the
obligations of the parties, such as whether the letter
of intent has created a binding agreement or not. A
letter of intent is fundamentally an agreement by the
parties today to enter into a contract in future, with the
expectation that the parties will reach agreement on the
terms and conditions of that future agreement. In the
case of Turriff Construction Ltd v Regalia Knitting Mills
(1971), the courts expressed the general rule that a letter
of intent is the expression in writing of a partys present
intention to enter into a contract at a future date and
that only in exceptional cases would it have a binding
effect (Turner 2010).
In the more recent case of
Diamond Build Ltd v Clapham Homes Ltd (2008), the
courts identified three types of letters of intent. The first
is a pure letter of intent, the second is a simple contract
which is intended to be superseded by a formal contract
and the third is a whole contract with no intention of a
future contract.
Keywords: Letters of Intent, Quantum Meruit

Introduction

The term letter of intent is familiar to most construction

professionals, yet not all practitioners are fully aware of

the true meaning and the potential risks associated with

such letters.
What are letters of intent? Kelly (2007) states that A
letter of intent is a statement of intention that outlines
an intended agreement between two or more parties.
Fairclough & Chance (2004) state that A letter of intent
ordinarily expresses an intention to enter into a contract
in the future but creates no liability with regards to that
future contract. For this reason letters of intent are often
called if contracts.
What are the reasons for issuing letters of intent?
According to McMullan (1991) the reasons for issuing
letters of intent include the following;
1. Delay in reaching agreement of all contract terms or
delay in preparation of the formal agreement.
2. The need for early commencement of works or for
ordering of materials.
3. A declining use of letters of acceptance in favour of
extensive negotiation with the successful tenderer.
Whilst a letter of intent may be issued for one or more of
the above reasons and with no intention of constituting
a contract between the parties, a letter of intent can, in
certain circumstances, create a contract, albeit unintended
by the parties.
A letter of intent is an interim arrangement before a
contract is agreed and signed. Letters of intent should
not be considered as substitutes for a properly drafted
contract, but merely as a safeguard of legal rights whilst
the contract is being finalised (Kilvington 2002). Where
parties do not enter into a formal agreement but rely on
a letter of intent, the consequences can be very costly.

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SLQS JOURNAL
In Monk Construction Ltd v Norwich Union Life Assurance
Society (1992) the Court of Appeal found that the
letters of intent can give rise the following three possible
scenarios;
1. There may be no contract at all. i.e. pure letter of
intent.
2. There may be an ordinary contract.
3. There may be an if contract.
Similarly, in the case of Diamond Build Ltd v Chlapham
Homes Ltd (2008), the courts recognised and confirmed
that three types of letters of intent exist:
1. Pure letters of intent which do not give rise to
contracts at all;
2. Simple contracts, which are capable of being
binding, but are entered into with the intention that
they will be superseded by subsequent finalisation
and execution of the formal contract; and
3. Those that are (so far as they go) the whole contract
(which may be supplemented by verbal agreements,
or even need further terms implied into them), with
no intention that they will be superseded by a formal
contract.
In deciding whether a letter of intent falls into one of
the three types mentioned above, the courts have taken
into account both the wording of the letter of intent and
the perceived intention of the parties at the time of its
issuance.

Quantum meruit

Before exploring the various types of letters of intent, it

is helpful to review the related subject of quantum meruit
and claims in relation thereto. Quantum meruit generally
means reasonable remuneration for work performed at
the request of another.
Pickavance (1997) categorises quantum meruit as either
contractual quantum meruit or resitutionary quantum
meruit. Contractual quantum meruit is a claim for
reasonable remuneration under a contract. Resitutionary
quantum meruit will arise where there is no agreement
between the parties or where the agreement between the
parties has been frustrated, voided or has been become
unenforceable.
Where a letter of intent has failed to materialise into a
contract or where no clear definition of the value of work

to be performed has been agreed by the parties, then

a claim for restitutionary quantum meruit may arise.
Restitutionary quantum meruit will not apply if there is
a contract, in which event and the terms and conditions
of the contract will prevail.

If a Letter of Intent is Non Binding

As mentioned above, a letter of intent, in principle, is

not a contract. When work is carried out under this type
of arrangement, and no contract is subsequently entered
into, a contractor will usually be entitled to be paid on a
quantum meruit basis. In such circumstances, there will
be no fixed date for completion and the employer will not
be able to deduct liquidated damages for delay. It was
held in the case of Murphy v Brentwood District council
(1990) that in the absence of a contract agreement, the
contractor will not be liable for negligence for defects in
the building. (Fairclough & Chance 2004, p2).
The principles affecting the formation (or not) of
contracts where an offer or acceptance is said to be ...
subject to contract... were set out extensively in Masters
v Cameron (1954) (McMullan 1991). The High Court
concluded that the words used by the parties are not the
sole consideration for deciding if contract was formed or
not. The intention of the parties, as evidenced by the
circumstances in each case, is a critical matter to be
discerned by the court.
In the case of British Steel Corporation v Cleveland Bridge
and Engineering Company Ltd (1984), Cleveland Bridge
wrote to British Steel advising of its intention to enter
into a supply contract and proposed a number of terms,
(which were never agreed) and to proceed with the works.
The parties continued to correspond each asserting their
preferred terms, but never reached an agreement. British
Steel subsequently completed delivery of the materials.
Cleveland Bridge claimed that the delivery was late and
that British Steel was liable for damages. The delivery
schedule was one of the items not agreed by British Steel.
The court found that;
1. No contract had been formed
2. British Steel was entitled to recover on a quantum
meruit basis
3. It was possible for a contract to be created by a
letter of intent although it was not the case in this
particular instance.

SLQS JOURNAL
In relation to whether a contract had been created, the
trial judge re-affirmed that;
there can be no hard and fast answer to the question
whether a letter of intent will give rise to a binding
agreement, everything must depend on the circumstances
of the particular case
In summary, if the letter of intent is non-binding then the
following would be some of the key rights and obligations
of the parties:
1. The contractor is entitled to be paid on a quantum
meruit basis for work performed
2. The employer will not be able to claim damages for
delay
3. The contractor will not be liable for defects
4. Limitation for action would be 6 years

If a Letter of Intent is Binding

According to Murdoch and Hughes (1997), a letter of

intent itself does not usually give rise to any legal rights
and obligations. There are exceptions to this general rule.
In the case of Turriff Construction Ltd v Regalia Knitting
Mills Ltd the court held that the letter of intent constituted
a contract. In that case, the plaintiffs (Turriff Construction
Ltd ) were advised that their tender for designing and
building a factory building for the defendants (Regalia
Knitting Mills Ltd), was successful. The Plaintiffs asked
for an early letter of intentto cover us for the work
we will now be undertaking. The defendants issued a
letter stating the whole to be subject to agreement on
an acceptable contract. The Plaintiffs carried out design
work necessary to seek planning permission and obtained
estimates. Six months later, the defendants abandoned
the project. The court held that the plaintiffs had made
it sufficiently clear that that they wanted an assurance of
payment for their preparatory work in any event, and
that the letter of intent constituted that assurance and
therefore the plaintiffs were entitled to be paid.
Fairglough and Chance (2004) have quoted two other
instances where the courts have held that letters of
intent formed a contractual relationship. Generally,
the inclusion of the words subject to contract would
lead the courts to the conclusion that the parties did not
intend to be bound by the letter of intent. However,
in the case of Harvey Shopfitters Ltdv ADI Ltd (2003)
the Court of Appeal found that the court is entitled to
look behind the apparent or literal meaning of the words
of a letter to determine the parties true intention. The

December 2010

courts will analyse each letter of intent as a whole. As a

consequence, even express wording, such as we do not
intend to create legal relations, may not be sufficient to
avoid the courts finding that the letter of intent is in fact
a binding contract.
In another case, Tesco Store Ltd v Costain Construction
Ltd (2003), the judge emphasising the importance of
the intention of the parties to be legally bound found
that a letter of intent issued by the developer, a copy of
which had been signed and returned by the contractor,
did amount to a simple contract. In addition, there
were terms implied into the contract such that the
contractor would perform any construction work in a
good workmanlike manner, and that any design element
would be reasonably fit for its intended purpose.
If there is a binding letter of intent and a full contract is
subsequently entered in to by the parties, the terms of the
contract will govern retrospectively the works carried out
under the letter of intent.
Where there is a binding
letter of intent but no final contract has been entered into
by the parties, the works will be based on the terms of
that binding letter of intent.
Including the above information would reduce ambiguities
in the letter of intent.

What are the points to be considered when

drafting a letter of intent?
It is important to consider the following key points in
drafting a letter of intent, so that the letter fulfils the
intended purpose.
Kilvington (2002), suggests that the letters of intent
should;
1. Clearly describe the scope of works.
2. Set out a mechanism for payment
3. Set a monetary cap that can be paid to the
contractor
4. Include a programme
5. Describe the insurance obligations of the parties
6. Set out the matters need to be resolved for the
contract to be entered into.
7. Indicate that neither party intends to be bound until
the written contract is executed by each of them
8. State that the contractor is not entitled to further
payment by way of quantum meruit

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SLQS JOURNAL
9. Make it clear that once the contract is concluded it
will apply retrospectively
McNair, Milliner and Mazzochi (2003), suggest that a
binding letter of intent (a contract) is preferable for the
owner, because it creates contractual certainty with respect
to those matters stipulated in the letter. Where a binding
letter of intent needs to be issued, they recommend to
include the wording This letter of intent is intended to
create a legally binding contract between the parties

Acknowledgements

The writer takes this opportunity to thank Mr. Les Pearce

MRICS for his valuable comments and editing which was
instrumental in improving this paper and also to Mr Renaldo
Karaman for his useful comments.

References
1

Where the parties desire to use a non-binding letter

of intent, McNair, Milliner and Mazzochi (2003),
recommend to include the words This non-binding
letter of intent is simply a statement of the parties
present intention with respect to its contents. Each party
represents to the other that no reliance will be placed on
this letter and is not intended to constitute, a binding
obligation

Concluding observations

A letter of intent is not a substitute for, but is sometimes

a necessary prelude to, a contract. In instances where
a letter of intent needs to be issued, it is important to
clarify whether the letter is intended to be binding or
non-binding.

A binding letter of intent can be beneficial to the owner

by creating contractual certainty. A non-binding letter
of intent may allow greater bargaining power for the
contractor.
In deciding whether a letter of intent created a binding
contract between the parties, the courts have repeatedly
considered not only the letter itself but the intentions of
the parties and their conduct. Care should also be taken
when drafting letters of intent to include clear intention
of the parties and certain key aspects as described in the
preceding sections.
Where used appropriately, letters of intent can be a useful
tool for securing the early engagement of a contractor
where commencement of work prior to signing of the
formal contract is necessary or desirable.

6
7
8

Fairglough I and Chance C 2004, Letters of Intent,

retrieved January 2, 2011 from
h t t p : / / w w w. c a n n o n w a y. c o m / w e b / p a g e .
php?page=101
Kelly A 2007, Letters of Intent, Australian
Construction Law Newsletter #112, January/
February 2007, retrieved: January 2, 2011
from
http://www.austlii.edu.au/au/journals/
AUConstrLawNlr/2007/6.html
Kilvington H 2002, Letters of Intent Avoiding
Common Pitfalls, retrieved: January 2, 2011 from
http://www.thkp.co.uk/media/bulletins-new/
Letters%20of%20Intent%20-%20HK.pdf
Mc Mullan J 1991, Letters of Intent, IIR
Conference, Construction Law Sydney 1991,
retrieved: January 2, 2011 from
h t t p : / / w w w. m c m u l l a n s o l i c i t o r s . c o m /
uploads/1254701299_letters-of-intent.pdf
McNair D, Milliner R and Mazzochi M 2003,
Letters of Intent, retrieved: January 2, 2011
from
http://www.mallesons.com/publications/
Asian_Projects_and_Construction_Update/Asian_
Projects_and_Construction_Update_31_May_
2003.pdf
Murdoch J & Huges W 1997, Construction
Contracts, Law & Management, 2nd Edition, E &
FN Spon, London
Pickavance (1997) Pickavance, K., 2000, Delay and
Disruption in Construction Contracts, LLP Asia
Limited, Hong Kong
Turner C 2010, Letters of Intent Open to
Interpretation, retrieved: January 2, 2011 from
http://www.ts-p.co.uk/knowledge/publications/
articles/letters-of-intent---open-to-interpretation

December 2010

SLQS JOURNAL
Project Control Practical Aspects
Sajeewa Amantha B.Sc.(QS) Hons. MRICS
Sajeewa is a Quantity Surveyor graduated from University of Moratuwa, Sri Lanka and currently working in
Manila, Philippines, for Australian managed project manegment organisation.

Introduction

The delivery of a project on time, to budget and at the

required quality are generally considered key performance
indicators of any project. How often do project managers
experience projects that are delivered on time, to budget
and at the required quality? Although most projects
are eventually completed more or less to specification,
they are not often on time and within budget. There is
an overabundance of reports on project overruns. Some
research reports indicate that approximately fifty precent
of construction projects encounter substantial time and
budget overrun. Some reports have even suggested that a
good rule of thumb is to add a minimum of fifty percent
to every first estimate of time and the budget. If this is
the case, the goals of on time and to budget would
be extremely difficult task for the Project Manager to
achieve.
The consequences of varying the project plan are apparent.
However, Project Managers need to understand what the
benefits and/or penalties are in terms of cost of delaying
a project. When a project is completed and the facility
commences its useful life, it commences generating
revenue from that point onward. Hence, any delays to
project completion influence revenue generation and
ultimately cash flows and return on investment.

The Project Control Manager is responsible for

establishment of an appropriate project control system for
the project. The key elements of a project control system
and scope of each task are discussed below in detail.

Project Control scope

A number of Project Managers believe that monitoring and

project control are the same thing, and that monitoring
revolves around budgets and plans. This is not the case.
Reports are for the Project Manager and Client to have
summary details on what has happened thus far on the
project. By implication, they deal with the history of
the project, no matter how recent. On the other hand,
control is taking action in response to these reports.
Monitoring is a key element of project control systems
and it is important to establish, for example, if the project
is performing in accordance with plans and budgets
with the sole purpose of invoking controls necessary to
re-establish the project. Therefore, monitoring exists to
establish the need to take corrective action, whilst there is
still time to take such action. Control on the other hand is
management, not paperwork. Control involves analysing
the situation, deciding what to do and actually doing it.

Project Control Plan

The discussion indicates the importance of having an

efficient and effective project control system in place to
ensure successful delivery of the project.

The Project Control Plan is the primary project control

document for a project. It exists as a subset of the Project
Management Plan as the framework for the control,
measurement and reporting of a Project.

This paper discusses the scope of project control in

general, to appreciate the importance of each task of the
project control system. It is important to understand the
effect that each individual task may have on the project
performance. An integrated project control approach
should be used as an ongoing monitor of project health.

The Project Control Plan should be developed to satisfy

both Corporate and Project reporting. The Corporate
section of the plan is to be reviewed at regular intervals
to ensure any corporate strategy changes are incorporated
into the plan. The Project plan shall be prepared at
the commencement of each Project and includes key

SLQS JOURNAL
information on the Project such as scope, definitions,
programming, meetings, reporting, procurement, and
auditing.
The Project Control Manager is the key person responsible
for the implementation of the Project Control Plan. The
Project Control Manager shall ensure that component
personnel are engaged to effect proper control and
reporting regimes over the project. The Project Control
Manager shall be authorised to operate within limits
required by the project control scope. On smaller projects,
the Project Control Managers role will be played by the
Project Manager and he or she is then will be responsible
for the implementation of the Project Control Plan.

Programme Management

A programme is a tool to monitor project performance in

terms of its time factor.
It is a critical requirement that the programming be
completed to the extent necessary for the proper planning,
control and reporting requirements. The networked
programmes are commonly used for the purpose and
Gantt chart formats are popular in the construction
industry because of their simplistic presentation and easy
readiness. Other forms of Programme (such as March
charts) may be used in addition, depending on the nature
of the Project.
The Programming software requirements may be as listed
in Project (Contracts) document and/or the Companys
choice. The Programme shall be developed in the initial
stage of the Project with available information and
then shall be reviewed regularly to introduce necessary
changes with information that is more realistic to reflect
planning changes and progress. The Programme must be
supported by analysis of determined activity durations
and dependency. The Programme may be developed
as resources loaded programmes or time duration
programmes depending on the nature of the Project and
Project (Contracts) requirements.
The level of detail shall be sufficient to enable effective
planning of the Project Works. The Programme shall be
developed at least at level four as a minimum and shall
clearly identify critical path(s) to completion(s). In
general, the Work Break-Down Structure shall reflect
the Project Cost Structure for better reporting and
interpretations.

10

December 2010

The Programme shall be updated at least weekly to

understand the Project status and this is a key performance
requirement that is required to determine the financial
health of the project.
The Project Control Manager needs to work closely with
the construction team and heads of other disciplines to
obtain the correct information to update the Programme
on a regular basis to ensure that the Project Programme
accurately reflects Project status and intentions.
The summary Programmes may be useful in reporting
to higher-level control and reporting (for corporate
reports).
Not all activities in a programme are critical to achieve
Project completion. The Project Control Manager
should understand the critical activities (areas) of the
Project Programme and should closely monitor those
areas/activities to understand how well those activities
are performed. A programme may have multiple critical
paths if the project is having different milestone dates
to deliver the project in different phases. The other vital
point the Project Control Manager should monitoris
that the programme critical path will be moving from
one area to another, depending on the performance of
different areas of the project. Thus, regular monitoring
is an essential function of programme control. Any time
slippages and gains of critical and closely critical activities
should be reported and necessary warning and corrective
measures introduced to the Programme.
The possible actions may have sometimes-critical impacts
on budget, quality, and/or time. The Project Control
Manager should evaluate actions which have zero or
minimal impact on project cost, time and quality. To look
at a simple example: assume that progress reports show
that a project has to absorb a delay to a deliverable on the
critical path. Most Project Managers will without much
thought reach options such as reducing the scope of the
deliverable, reducing the quality of deliverable, applying
additional resources (generally manpower and/or capital)
and rearranging the workload. Some of these options may
be constrained by logistical problems e.g. unavailability of
suitable labour to be assigned to a project when required.
However, in many cases, the Project Control Manager
has to use instinct as to deciding the appropriate course
of action. The basic point here is that logistical problems
and political thinking do exist within a project and the

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SLQS JOURNAL
Project Control Manager should not ignore these facts
but should understand the implication of the action that
is about to be taken and not ignore the effect their action
will ultimately have on the final outcome of the project.

Project Cost Control

The Project budget should be developed at the initial

stage of the Project and reviewed and updated during its
progress to incorporate more realistic figures. The budget
should be structured in a manner that reflects the intended
manner of project execution. It should logically splits
costs according to activities and type of costs in a manner
that provides for meaningful feedback for assessment of
costs versus progress, and feedback for the estimators for
future use.
As the nature of the construction business is one where
productivity is largely measured by inputs of plant, labour
and subcontracts verses linear progress, activity codes
should generally include only these cost types. Materials
and indirect costs should be accounted for in other codes.
There will be activities where this does not apply and
discretion shall be used in these cases.
Project cost shall be allocated in a manner that reflects
the budget structure and intent. A costing map shall be
prepared for the project that describes the way the budget
costs have been allocated. This map will be used for
allocation of costs in a manner that reflects the budget.
A cash flow forecast shall be prepared based on the
project Budget and Programme detailing expenditure
and revenue.
The cash flow forecast shall be reviewed and updated
regularly to incorporate changes to the budget and
programme during the progress of the Project. The
impact of changes shall be clearly identified and reported
to relevant parties for their information, avoiding
any possible payment issues due to fund allocations
by financiers of the Project. The information may be
presented in worksheet form and in graphical format for
easy understanding.

Risk Management

Contract agreements are documents that describe

liabilities and responsibilities of parties to Contracts
in delivering different elements of the project. The
Agreements describe how parties share commercial and

other risks involved with the project in performing their

roles. These risks need to be understood by each party well
in advance. A risk management system should be in place
to respond to any risks that materialise whilst delivering
the project. A Risk register is a good tool the parties
should use in recording, monitoring, and introducing
necessary measures to the risks; each party is liable.
Though Contracts Conditions define each partys
responsibilities/liabilities it is common fact that parties
have different interpretations and opinion on the same
term of the Contract. This will lead to disputes among
parties and will adversely affect project performance.
Early identification of risks involved with the project and
monitoring them closely will minimise potential disputes
and improve project health.
It is apparent that some risks can be avoided or at least the
effects minimised if they are identified in early stages. The
risk register should include not only the risks identified
but also possible risk mitigation strategies and measures
introduced to avoid or minimise the effects. For example,
if the Project Control Manager identifies obtaining a tree
cutting permit from an environmental authority as a
risk which will affect the Project Programme, it is then
the Project Control Managers responsibility to suggest a
strategy to avoid or, if not possible, mitigate the negative
effects of this risk on the Programme.

Procurement Management

A materials procurement plan should be prepared for

the Project and this should highlight any long lead
items and their necessity to the Project Programme. The
procurement plan should be tailored to the size of the
Project and the value of the procurement.
In its simplest form, the Procurement plan may be a
worksheet (Spread sheet). The plan shall include details
of the materials to be purchased by package, details of
the potential vendors, engineering and construction
interfaces, latest date to make a formal order (in order
to meet the programme) and any contract requirements
(specific Vendors or prior approvals for vendor). The
decision on procurement will be made not only on price
and quality but also on availability and delivery time and
methods.
A sub-contract plan should be established by the
Project Control Manager and in general, this plan

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includes elements of the Works to be completed by
Package Contractor(s), latest date for commencement of
subcontract works and from that, a timeline established
for the procurement of subcontractors for each package.
The selection of subcontractor will be based on capacity,
availability, and price. Standard conditions of contract will
be used with any particular terms in preparing necessary
agreements for suppliers and package contractors.

works under Contract(s). The Project Control Manager

shall ensure that whenever an event occurs that may be
covered under an insurance policy that the insurer is
notified and evidence collated in support of a possible
claim. It is again good practice to establish and maintain
a register of insurance events detailing claim number,
policy, likely value, loss adjustment status and close out
status.

The expenditure approval authority matrix should be

prepared indicating limits of authority of all key members
of the Project, and this shall be strictly followed to avoid
later disputes on approved personnel.

Project Organisation

Contract Management

It is essential that adequate commercial controls are

established at the commencement of a Project. Underlying
the establishment of adequate controls is the need to
understand the functioning of Contracts. In particular,
a sound understanding of the operation of the Contracts
with respect to payment terms, notices (including any
time-bar provisions), change orders, delays, insurance
and dispute settlement procedures.
It is good practice to prepare a flow chart on the operation
of the Contract and brief the project team accordingly.
The commercial team may prepare pro-forma documents
for change orders, notices, schedule of change requests
/delays and claims and where required, these document
forms shall be agreed among the parties as information
flow. Any entitlements under the Contract Conditions
should be ensured by communicating messages to the
relevant party as appropriate in a timely manner.
The package contracts shall be managed in a similar
manner to the head Contract pursuant to subcontract
terms and conditions. The Project Control Manager shall
ensure that insurance obligations are met and certificates
of insurances obtained. A schedule of change requests
shall be established and maintained for all packages
contractors. The final forecast value of each package
contract shall be assessed and reviewed periodically to
ensure correctness. A provision of manpower, safety and
environmental statistics should be made a pre-requisite
to entitlement to any payment under the contracts as a
control measure
The Project Control Manager shall ensure that all required
insurances are in place prior to the commencement of

12

The organisational charts clearly identify all positions of

the project. Organisational charts shall be prepared in
a format that suits the requirements of the Project and
these charts should be reviewed regularly and updated to
include changes taken place during the period.
The charts shall be developed for the purposes of
communicating project-reporting lines and identifying
key project personnel by name and position. Furthermore,
they will provide a tool for the management of personnel
and present labour resources on the project.

Meetings

Regular internal meetings and meetings with other parties

of the Project are vital in communicating project issues in
a timely manner.
All meetings shall be minuted and circulated among
participants to receive any comments and/or feedback
on the matters discussed and recorded in the minutes of
meetings.
The Engineering and Procurement meetings and
construction meetings shall be held weekly.
Internal Project Coordination will be held as determined
by the Project Manager and dependent on the size and
complexity of the project.
For major Projects, supervisory board meetings (corporate
level) may be conducted on a monthly basis.
Project coordination meetings are other essential meetings
for major projects where many parties are contracted to
deliver different elements of the project (civil, mechanical,
electrical etc). In these meetings, parties can discuss and
agree on their programme requirements, safety procedures
etc to avoid any future conflicts, which will affect overall
project performance.

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December 2010

Document Control

Manager shall review Contracts and determine reporting

requirements under Contracts and where possible internal
reports shall be used as the basis for Contracts report to
minimise unnecessary duplication of effort.

All correspondence and documents (incoming and

outgoing) go through document control
All correspondence and documents should have a
distinct identifying number
All documents should include a Revision Status to
enable the tracking of changes
A documented distribution matrix to ensure that
documents are effectively distributed to all personnel
requiring them
All correspondence and documents are approved
prior to issue
Registers are maintained for all correspondence and
document transmittals
Registers are reconciled on a regular basis with other
parties involved

The daily progress reporting is one of the key report

that should be maintained to record the progress of the
Project on a daily basis. These reports shall include, as
a minimum, daily progress verse daily planned progress,
deviation from programme in days for the day, summary
safety statistics, manning, equipment (in operations and
idling), issues, and mitigation strategies. A daily report
format should be prepared that will form the basis of
progress reporting to relevant parties of the project.

The Project Control Manager shall implement a file

security system that may include secured hard copy files
and access restrictions on electronic filers. A file access
authorisation matrix should be developed and maintained
for each project. IT administrators should administer
electronic file access restrictions in accordance with this
plan.

The monthly report is the primary report on the health of

the project. It is correct practice to agree on a fixed date
for project status (e.g.20th of each month). Submission
on time is a key performance indicator for personnel
involved in report preparation, review, and submission.
The monthly reports should includes details of Health,
Safety and Environment status, Engineering, Procurement
and Quality status, Progress/Programme status, manning
information, insurance and financial status.

The Project Control Manager shall implement a

document control system. The system should have the
characteristics of:

Whilst restricted access is not required for most project

files, it is essential that only personnel authorised to access
sensitive project files are permitted to do so. These files
will include financial records and reports, commercial/
claim records and personnel data of Project employees
including wages and salaries.

Project Audit Plan

The Project Control Manager shall prepare a Project Audit

Plan for the approval of the Project Supervisory Board.
The Audit shall be performed by corporate personnel or
third parties as required. The Audit plan shall include
financial auditing, total quality management auditing,
health, safety and environmental auditing and quality
control auditing.

Project Reporting

The Project Control Manager shall develop a reporting

matrix detailing type of report, due date, responsibility
of preparation and distribution list. The Project Control

Weekly financial and programme status reports are

common in many construction projects. The intention
of this report is to discover gross deviations from budget
and programme in a time frame enabling early corrective
actions to be taken.

The health, safety, and environment section in general

reports details of total man-hours achieved during
the reporting period including any loss hours due to
accidents. It usually includes accidents, near misses, and
damages. The monthly quality report shall focus on
quality control status. It is good practice to establish and
maintain registers for NCR, RFI, TQ and narrative on
QC issues. Monthly Engineering reports should detail
status of engineering using key performance indicators
as determined on the Engineering plan. This section
of the report in general records engineering percentage
completion, drawings, and reports at approved status and
engineering man-hours during the period.
A monthly procurement report is applicable to major
projects with significant procurement scope. The data
may be presented in a graphical form (typically Scurve) contrasting actual performance with planned

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SLQS JOURNAL
performance. The procurement report shall also include
a copy of the procurement status and expediting status
reports and shall detail key issues and mitigation strategies
and a summary of risks and opportunities exists.

It is good practice to include an updated register for

change orders, including details of notice submission,
value, status (approval, pending), any extension of time
involvement with change order etc.

The programme report shall include actual performance

with planned performance by month and cumulatively.
The report shall discuss slippage and/or gaining of
programme, changes to critical paths, forecast completion
dates, key issues of programme achievement, mitigation
measures, summary risks and opportunities. The manning
report will comprise a manpower histograms/curve
detailing actual verses planned under categories of Project
Management, Construction Management, Construction
Services, and Package Contracts.

Summary

The monthly report should include a forecast cost at

completion that shall accurately reflect the Project
Control Managers view of the likely final cost. The
forecast should consist of a baseline estimate reflecting
the updated programme and actual /anticipated resources
levels to the anticipated end date. The report should
include a financial assessment of risks and opportunities
identified on the project that should be maintained in a
matrix with an assessment of costs on a best/likely/worst
outcome.

Many project control systems involve monitoring,

reporting and introducing necessary corrective actions to
maintain project cost and time targets. The project cost
control systems include monitoring and controlling of
budgets, cash flows, commercial risks, and management
of contracts. The programme control system involves
monitoring and controlling of project time, resources
and, procurement schedules. It will also monitor risks
associated with the programme and strategies to minimise
the effects.
Most Project Managers recognise the need for project
control as it applies to budgets and plans. However many
Project Managers fail to make the connection between
these two elements in responding to situations.
In order that lessons learned on each project are
communicated to the organisation to enable operating
practices and procedures to be improved, a Project Close
Out report will be generated.

Chichester Joinery Ltd v John Mowlem & Co plc (1987)

A quotation submitted by a sub-contractor was accompanied by their standard terms and
conditions. The main contractor sent a purchase order containing their own standard terms
which stated that any delivery made will constitute an acceptance of this order. Sub-contractors
delivered the work, but not until after they sent the main contractor a printed acknowledgement of
order, which stated that the order was accepted subject to the conditions overleaf.
Held that by accepting the joinery the main contractor had accepted the sub-contractors
conditions.

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SLQS JOURNAL
Management of Change
Dr. D.A.Harendrasinghe Gunaratne Ph.D; D.Sc;
Chartered Quantity Surveyo & Engineer; Mediator, Arbitrator & Contract Administrator
GC&G;MIESL; MIIE(SL)IEng; MRICS; AAIQS; AIQSSL; Fellow APQSESL; MCIArb; Reg.Arb.
NACSL; Mem.ICCSL; Mem.CCISL; Mem.AACE; Mem.SAVE; Mem.SLAQ; Mem.SLGS

Human needs and the Response of the Industrial

Society
Man is the only animal who embraced change. He
changed the human Journey from the cave to the
moon, outer space, the universe.

PIM International UAE
A collection of industries constitute an industrial society
just like different people constitute a human society.
Each of the industries will have their objective such as
the following:

The electricity power authority will want to provide

reliable and quality electricity at an economic cost to
different categories of consumers.
The transport authority will want to provide an
efficient and comfortable transport service at an
economic cost to the public.
The food industry will want to provide quality food
at an affordable price to consumers.

Hence the object of the industrial society is to provide

the goods and services needed by society through
the application of the processes of production and
management. There must be collation between human
needs and the response to it by the industrial society.
The behaviour of the industrial society is conditioned by
the market forces that exert pressure on it. The market
forces in turn are conditioned by consumer behavior.
Advertising, which is an important aspect of marketing,
could influence consumer behavior. The survival of an
organization depends on how much of a market share is
owned by it. The desire to dominate the market leads to
competition. Competition is to do / produce something
new. This requires change in the organization.

The Cause for Change

The objective of a wholesaler may be different to that of

a retailer

The concept of organization without reference to its

human resources is futile. The human resources are the
heart of an organization, bringing life into it. Since the
organization is predominantly a human concept, the
human resource imparts all its organismal characteristics
to the organization. The manner in which human
behaviour constitutes or determines the manner in which
the organization behaves. In other words, by looking at
the manner in which its human resource behaves, one
could predict how the organization would behave. Like
human beings, the organization too will show organismal
characteristics.

It is important to note that whatever difference there

would be in their industrial objectives, all industries
and therefore the industrial society have one common
objective, that whatever goods and / or service they
produce should satisfy a need of society, without which it
will not have a demand and therefore a market value.

Organizations, like an organism, must adapt themselves

to their environment if they are to survive and grow. The
pressure for change comes from internal and external
forces. The former is identified as those within the control
of the management while the latter are not subjected to
the control of the management.

Within an industrial sector such as power, the different

boards will have different objectives depending on the
emphasis on services. Thus the objective of a power
distribution authority may not be identical to that of a
power generation authority.

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Internal forces:

These forces can be traced to the processes or to the

people in the organization and to the organizational
environment. These forces could be controlled by the
management. Process forces include break-down in
decision making, communications and interpersonal
relations. The peoples forces are due to low morale, high
absenteeism, waste, indiscipline, high accident rate and
end up with fewer turnovers.
The organizational environment factors are:
Demand for worker involvement.
Alienation due to advancing technology and
organization size.
Growth of unions.
Changing management and employer attitudes,
values and skills.

therefore unable to see the ever-changing situation of the

organization. They will also fail to realize the capacity
of individuals and groups and consequently, they are
underestimated and under-utilized.
The outcome of this is dependency, defensiveness and
narrowness of perspective. This unrealized potential
(or energy) of the organization is called organizational
entropy. A possible outcome is rebelliousness and lack of
system strength to do the work of the organization.

Organizational Life Cycle

Like any other living things, organizations have life
cycles. A typical life cycle of an organization consists of
the following areas:

External forces:

These are due to activities taking place outside the

organization which have an impact on the organization.
This external environment is made up of:
Technological Factors:
1. Knowledge explosion, a more educated work force
2. Advancement in production processes
3. Advancement in sophistication of products
4. Communication explosion
Social factors:
1. Changing values towards work
2. Changing values towards social responsibility of
organizations
3. Government legislation
4. Growing population
Economic factors:
1. Internationalization of markets
2. Rapid change in consumer tastes and product
preferences
3. Growth of conglomerate businesses
4. Increasing cost of scarce resources
5. Increased competition

Organizational Entropy
Quite often, due to the intertia of its human resources,
organizations tend to set up self-imposed blinds which
limit the area and range of their vision. Executives are

16

The inability to change makes an organization rigid

which will not lead to development. An indifferent and
non-responsive attitude to the forces in the internal and
external environment will result in the deterioration of
the organization.

Resistance to Change
People resist change because it is easier to do what they
do than to learn something new. People fight change for
highly personal reasons. The process of implementation
of change will enable managers to find out the limitations
of the people, namely, whether it is for personal reasons or
in the best interests of the organization. Usually a person
is normally in between these two extreme conditions.
Those who are closer to the former end will intensely
resist change and will seldom wish to know the reasons
for change, while the others will show an increasing
desire to cooperate. The change is faster with high
levels of education, communication and greater human
aspirations about what people should have as an expected
part of our life.

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SLQS JOURNAL
Culture and Change

The Case for Change

Culture is a body of learned behaviour, a collection of

beliefs, habits, practices and traditions shared by a group
of people and successively learned by new members who
enter the society.
A culture could be found in an organization. The older
the organization, the more certain it is to have developed a
culture. A change is bound to affect these well-established
relationships and conventions. Obviously this will be
resisted by members of the society.

The survival of every organization depends on its

development. Development is always associated with
change. Thus in the context of development, change
is most unchangeable. Change is painful and needful.
Change is a positive and a necessary sign of growth and
progress.

Since the culture is a long established reality, no change

should attempt to create shock waves. Caution and
careful consideration should be forerunners to the
implementation of change

Desirable change should be evolutionary, rather than

revolutionary. Management of change certainly does not
imply random and unplanned responses to a changing
environment.
It must now be clear that the management of change and
implementing appropriate changes is definitely essential
for development. This is only possible if the management
style of the organization is flexible.

Moresk Cleaners Ltd -v- Hicks [1966]

An architect was engaged to design an extension to a laundry. He invited a contractor to design
and build the reinforced concrete structure. After erection, the structure became defective because
of the negligent design. The architect maintained that he was entitled to delegate certain specialist
design tasks and that he was acting as the employers agent in asking the contractor to design the
structure. It was held that if a building owner entrusts the design of a building to an architect, he
is entitled to look to that architect to see that the building is properly designed. If the architect was
not able to design the work himself he could:
1.
2.
3.

tell the client that the work was not in his field;
ask the client to employ a specialist;
retain responsibility but pay the specialist out of his own pocket then if the advice proves
faulty the person giving him the advice will owe the same duty to him as he owes to the
client.

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Life-cycle Approach to Minimise
Construction Waste
D.D.A. Niluka Domingo B.Sc. (Hons.)

Niluka is a Quantity Surveyor graduated from University of Moratuwa, Sri Lanka and currently reading for a
PhD in Construction Management at the University of Loughborough, UK.

Abstract

Waste generation by the construction industry is a

significant issue for the industry and for the whole
society. In recent years, economic, political and social
pressures to adopt sustainable work practices have led
to a renewed emphasis on developing effective waste
minimisation measures for major construction projects.
Hence, this article illustrates the best construction waste
minimisation practices to adopt throughout the building
lifecycle to minimise construction waste generation as per
research findings.

Construction waste minimisation

Waste management is defined as the process involved

in dealing with waste once it has arisen. The waste
management hierarchy (Figure 1) is a guide to determine
the best available practical preferences to address the
waste issues in construction sites. It represents the best
practicable environmental options within the chain of
priority for waste management starting from prevention
and reduction and extending to waste disposal, which is
the least favourable option.

Key words: construction waste, waste minimisation

Introduction

Many researchers have proved that the construction

industry is a leading waste generator worldwide
(Loosemore and Teo, 2001, McDonald and Smithers
1998, Dainty and Brooke, 2004). For decades, landfills
have provided a convenient and cost-effective solution
to construction waste. Due to increasing population and
speed of development, it is anticipated that the quantity of
waste generated through construction in the coming years
will be considerable and thus requires waste prevention
rather than relying on landfill sites. Moreover, it became
a burden to clients, as they have to bear the costs of waste
eventually. The cost of waste blunts the competitive edge
of contractors, making their survival more difficult in
a competitive environment (Macozoma, 2002). Waste
creates loss of profit for contractors due to extra overhead
costs, delays, lower productivity and extra work in
cleaning and it is estimated that companies that produce
a higher level of waste are at a 10 percent disadvantage in
tendering (CIRIA, 1995). The above factors pertinent to
the environment, economy and society lead the interest
towards waste minimisation among construction industry
practitioners.

18

Figure 1: Waste management hierarchy

However, the most economically and environmentally
preferable option to manage construction waste is waste
minimisation, which is an in-plant process that reduces,
eliminates or avoids the generation of waste. The next
section of this article discusses the recommended best
construction waste minimisation practices according to
current and on-going research in the field of construction
waste management, dividing them into project
lifecycle phases: predesign, design, procurement, and
construction.

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SLQS JOURNAL
Pre-design Phase

Since past researchers have proven the fact that construction

waste could occur as a result of incomplete briefing and
clients lack of interest towards waste minimisation,
literature highlights the need of educating clients on waste
minimisation benefits to develop attitudinal changes
to encourage waste conscious designs and construction
practices from the inception of projects. Additionally,
more emphasis should be given by clients on conferring a
complete brief to the design team to avoid later changes
(including variations) during the construction phase,
which was identified as one of the major sources for
generating huge amounts of construction waste.

Design phase

The Design phase should play a major role in controlling

waste in the construction industry. It has been estimated
that 33% of on-site waste is due to the architects failure
to implement waste reduction measures during the
design stages (Innes, 2004). There is a general consensus
in the literature that design changes, incomplete designs,
designers lack of experience in evaluating construction
methods and the sequence of construction operation,
lack of design information, design complexities and over
specification of materials are key origins of construction
waste during the design phase. In order to minimise
the adverse effects due to the above waste origins, past
researchers suggested waste minimisation practices such
as:

Design standardisation to improve buildability and to

reduce the quantity of off-cuts
Reduce substantial amount of off-cuts by designing
room areas and ceiling heights in multiples of
standard material sizes.
Design management to prevent the over-specification of
materials
Appoint a dedicated design manager with a brief
to minimise waste due to over-specifications. Also,
more time can be allowed for value engineering
design solutions for more complex projects.
Increased use of off-site prefabrication to control waste
and damage
Increase the use of prefabricated elements to improve
the quality work, to reduce the amount of on-site
damage and to reduce re-works.

Environmental impact assessments of the scheme during

the design phase
Conduct regular design and production reviews
where the waste minimisation strategies are consider
a primary performance criterion. This can be
incorporated as part of the design development
process to ensure that the building met the clients
criteria.

Procurement Phase

Past research findings accentuate a number of waste

origins in the procurement stage of a construction project.
Most of these waste origins relate to the responsibilities
of project partners towards waste minimisation. Thus,
researchers suggested the following practices to implant
during the procurement phase.

Supply chain alliances with suppliers/recycling

companies
Arrange partnerships with suppliers to remove excess
materials, to reprocess them and to reuse material
where possible. Such practices could be supported
with financial incentives for minimising waste
Dedicated specialist sub-contract package for on-site
waste management
Appoint a specialist firm to remove waste from a
site while allocating some responsibility to trade
contractors and maintaining good control over
waste processes with the principle contractor.
Contractual clauses to penalise poor waste performance
Include financial penalties for wasteful work
practices in the contracts.
Additional tender premiums where waste initiatives
are to be implemented
Introduce financial subsidies for companies willing
to invest on comprehensive waste minimisation
systems at the tendering stage.
Supplier flexibility in providing smaller quantities of
materials
Encourage supplier to produce materials to project
specifications and to provide smaller quantities of
materials to reduce the need for on-site storage

Construction phase

The Construction phase could be termed the most critical

stage when dealing with waste minimisation, because
waste physically appears in this phase of a project. Over
the decades, much research was conducted in different

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SLQS JOURNAL
parts of the world to identify on-site waste origins and
waste minimisation measures. Many research findings
concluded that waste origins in the construction stage were
due to poor material storage and handling, negligence,
material ordering errors, poor record keeping, poor
workmanship and lack of site waste management plans.
To facilitate waste reduction, researchers suggested the
following practices to implement during the construction
phase in a project.

Stock control measures to avoid the over-ordering of

materials
Tighter stock control measures coupled with the
careful monitoring of on-site progress and raising
awareness of site managers to eliminate overordering of materials.
Improved education of the workforce
Increase attitudes of site operatives to minimise
waste through education on the benefits of waste
minimisation.
Provision of waste skips for specific materials
Centrally control material skips through the
principle contractor to help promote a culture of
material segregation and recycling.
Just-in-time delivery strategy
Adopt a just-in-time delivery strategy to reduce the
potential damage from poor handling due to longterm site storage as well as reducing the potential for
over-ordering materials.
Waste auditing to monitor and record environmental
performance on-site
Adopt waste auditing tools (SMARTWaste etc.) both
to monitor the performance of on-site practices and
to educate the workforce on the benefits of waste
minimisation practices.

Other than the above-specified waste minimisation

practices, it is essential to maintain effective and efficient
communication and coordination systems and documents
management systems throughout the project lifecycle to
avoid confusion and miscommunications when handling
project information among project partners.

Conclusion
Construction waste generation is a reality in the 21st
century with the rapid developments in all parts of the
world. Even though physical waste generates during the
construction or demolition phase of a project, waste

20

origins emerge throughout the project life-cycle. Hence,

waste minimisation practices should be implemented
from the start of any construction project right through
the design, procurement and construction phases to
effectively reduce waste generation and to move towards
sustainable construction targets.

References
1. CIRIA,1995. Waste Minimisation and Recycling in
Construction: A Review, Guthrie, P. and Mallett,
H. (eds), Construction Industry Research and
Information Association, London.
2. Dainty, A.R.J. and Brooke, R.J., 2004. Towards
improved construction waste minimisation: a need
for improved supply chain integration. Structural
Survey, 22, 20-29.
3. Innes, S., 2004. Developing tools for designing
out waste pre-site and onsite. In: Proceedings of
Minimising Construction Waste Conference:
Developing Resource Efficiency and Waste
Minimisation in Design and Construction, October
21, New Civil Engineer, London, United Kingdom
4. Loosemore, M. and Teo, M.M.M., 2001. A theory
of waste behaviour in the construction industry.
Construction Management and Economics, 19,
741 - 751.
5. Macozoma, D.S., 2002.Construction site waste
management and minimisation: international report,
International Council for Research and Innovation
in Buildings, Rotterdam, available at:www.cibworld.
nl/pages/begin/Pub278/06Construction.pdf
6. McDonald, B., and Smithers, M., 1998.
Implementing a waste management plan during
the construction phase of a project. Journal of
Construction Management and. Economics, 16(1),
7178.

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SLQS JOURNAL

Application of Risk Management Associated

with Activities of Building Contractors in UAE
Chrisantha Fernando HNDE, HND(QS), AMIIE(SL), ICIOB
Chrisantha is the holder of two HNDs, both in Civil Engineering and Quantity Surveying and currently
working as a Senior Quantity Surveyor for the Quantity Surveying and Project Management Division of M/s
Arab Experts Engineering Consultants. He possesses nearly ten years industry experience gained in Sri Lanka
and the Middle East.

The purpose of this article is to identify the risks

associated with the building construction industry
in the U.A.E. and to evaluate the application of Risk
Management with a view to reduce or eliminate the
consequences of risks - in particular, risk associated
with the activities of building contractors.
Risk is a complex event which has physical, financial,
cultural and social aspects. The consequences of risk go
well beyond direct physical harm to financial or physical
assets. Risk is not only formed by the extent of potential
harm but the way in which we understand or sort out
information about it.
There were continuous building collapses in the U.A.E
during the year 2009. A building under construction
collapsed in Dubai in August 2009, followed by the
collapse of a nine-storey car park in October, in the
emirate of Sharjah. All construction industry stakeholders
working in the UAE warned that such accidents had
wider implications than just workers on the immediate
site. (James Boley and McGrath, 2009).
The purpose of this article is to evaluate the application of
Risk Management in the building construction industry
in U.A.E. This article mainly identifies the risks associated
with the activities of contractors in construction projects
and how to analyze and respond to events to avoid or
mitigate the impact of risks.
The ABC project, situated in Jebal Ali, Dubai, which is
near completion, was selected to study for this purpose.
The project includes a hotel, a furnished apartment
building and an office building, each consisting of eleven
storeys, along with all services, facilities, landscape and
infrastructure.

The Contract or Contract Document is the main device

used to identify and distribute risk and opportunities on
the project. The Contract is the legal document in which
project members record their agreements regarding the
distribution of risks and opportunities among them.
Bank security, such as Performance Bonds, Advance Bonds
and Retention Bonds, is provided by the contractor to the
employer or the sub-contractor to the main contractor
as a guarantee that the terms of their contract will be
fulfilled. According to the conditions of contract in this
project, these bonds are irrevocable and unconditional.
During the construction boom in the UAE, time or the
project duration was the main factor when delivering the
project and funds were not as important as they flow into
the project gradually. Therefore, it was crucial for the
contractor to hand over the project on time. The ABC
project was delayed for months from the beginning of
the contract, due to the late possessing of the site and
extensive variations instructed during the progress of the
work.
The addition of three floors to the Hotel and Office
Building during the progress of the works caused major
delay to project completion, as this required re-designing
of structural elements and other building services. This
caused additional cost and time, thus delaying the project
handover to the end users. Further negative impact to
the project was the unforeseen financial crisis. This badly
hit the funding of the project, causing more delay to
completion. If the employers requirements were properly
addressed or investigated to meet future demands during
project briefing, this unfortunate risk event would not
have happened.
The price fluctuation of major construction materials is a
common risk in the construction industry. It is obvious

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SLQS JOURNAL
that the price of rebar, concrete and cement increased
rapidly during the years 2008 and 2009. The price
increase was unusual when compared to the last five to
ten years, and even an experienced contractor could not
have foreseen this, thus reducing the contractors profit
or even loss from the project. The shortage of material
availability in the market is a negative consequence of
material price increase, which also interrupts the progress
of work.
Furthermore, poor performance of subcontractors,
inclement weather, disputes and claims, poor site
management are leading factors when delivering a project
on time.
Moreover, the penalty or liquidated damages imposed in
the contract could lead to unexpected hazards; of course,
this clause is required to drive the contractor to complete
the project on time. However, if the actual progress is
behind schedule, he may take precautions to speed up the
work to avoid penalty, which would lead to unexpected
risks, which may have not been identified from the
beginning of the project.
Apart from the above, insufficient labour force and lack
of skilled labourers was the another major problem
contractors faced in Middle East region. This always results
in the delay of the construction progress. Further, using
more unskilled labourers or utilizing the available labour
force without giving them a sufficient rest increasing the
possibility of causing an accident on a work site, leaving
the site safety at high risk.
Also, poor communication, different cultures, personal
attitudes and poor safety are other factors which may
cause harmful hazards. The probability of occurrence of a
hazard may decrease but consequences may be high.
Once a risk is identified, the next step is to analyze it. This
is the process of evaluating identified risks to discover
their extent and the way responses should be prioritized.
Most risk analyses are carried out in two stages:

Stage one a qualitative analysis of risks and

opportunities using qualitative/descriptive scales
such as high, medium and low.
Stage two A quantitative analysis of risks and
opportunities using numerical estimates.
(Martin Loosemore, John Raftery, Charlie Reilly, Dave
Higgon, p.85).

22

To make risk assessments more efficient, a number of

checklists have been produced and maintained from the
beginning of the project. This would allow the formal
Risk Assessment meeting to focus on key issues that might
affect a project. In order to evaluate the risks arising from
the hazard, the following has to be considered:
1. Likelihood or Probability that a hazard will cause an
accident.
2. Severity of the consequence, if the hazard did cause
an accident.
Risk Assessments carried out for all tasks in this project
follow a High, Medium and Low concept with the matrix
set out as below.
The key steps followed are: identify hazards arising from
activities, rate the probability (P) of the hazard occurring,
rate the severity (S) using the index and multiply the
severity (S) and probability (P) ratings to give a rating for
the level of Risk(R) i.e. S * P = R
Assessments were carried out in accordance with the risk
rating matrix described below.
Severity (S)
Probability
(P)
1
2
3
4
5

1
2
3
4

2
4
6
8

3
6
9
12

4
8
12
16

5
10
15
20

10
15
20
Level of Risk (R)

25

HIGH - Major groups numbers 16 - 25

MEDIUM - Intermediate group numbers 9 - 15
LOW - Minor groups numbers 1 - 8

(Extracted from risk management procedure, ABC.. project).

According to the above rating matrix, Bank security and

economic crises can be categorized as Low Probability and
High Impact risk events, while failure to meet program
and liquidated damages for delay can be categorized as
Medium Probability and High Impact risk event. Delay
in delivery of materials and accidents and injuries can be
categorized as High Probability and Medium Impact risk
events whereas increase of material costs and insufficiency
of labour force can be categorized as High Probability and
High Impact risk events.

SLQS JOURNAL
The final stage of the risk management process is the
decision on how to respond to risks and opportunities,
having identified and analyzed them. In essence, the
decision is simple to do something or to do nothing
(Martin Loosemore p.155). The following paragraphs
describe the ways in which one may respond to risks.
Firstly, risk pre-control is the most desirable way to
eliminate risk, thus preventing the risk from occurring.
Carefully studying tender documents such as soil
investigation reports, specifications, drawings and
physically visiting the actual site before tender could
avoid most risks associated in the project.
Secondly, reducing probability of occurrence could reduce
the hazard of the risk, similar to how conducting safety
induction procedures could reduce the risk of accidents
or injuries. Placing construction materials on time and
following up the delivery of materials could reduce the
probability of delay delivery. It is also important that
managers have reactive strategies in place to deal with
crises if and when they arise. This was obvious during the
global financial crisis which affected businesses in recent
years.
Thirdly, some risks in the construction industry can be
transferred or shared between project members. The main
benefit of passing on a risk to another party or sharing
with members is that the chances of the risk increasing
are reduced. Most risks which have been identified so
far on this project are transferred to another party and
few of them are shared between them. Nevertheless, in
transferring risks, there is a cost, which is a premium or
additional cost charged by the party that absorbs the risk.
Insurance is the most common type of risk transfer to a
third party. The risks passed on to insurance companies are
typically of very low likelihood and very high impact.
Finally, where risks cannot be eliminated, transferred or
avoided, they must be absorbed if the project is to proceed.
This requires sufficient margin or risk contingency in the
projects finances to cover the risk should it occur.
Once the decision has been made about the way to
respond to a risk, regular review and, where necessary,
revision of risk assessments must be undertaken. Risk
assessment should also be reviewed following an accident,
incident or dangerous occurrence to ensure that control
measures are revised to prevent reoccurrence. Managers,

December 2010

Supervisors and off-site Managers shall continually

monitor the effectiveness of risk assessments.
In conclusion, there are many potential risks in the
construction industry. Through investigating the contract
document in the tender stage, most of the risk associated
with the construction project can be identified. The price
fluctuation of major construction materials, penalty
or liquidated damages and the conditions on bank
securities imposed in the contract are a few of them.
In addition, unrealistic programme, poor performance
of subcontractors and site management as well as
insufficient skilled labourers may negatively impact the
programme which may lead to unexpected hazards. Poor
communication, different cultures, personal attitudes and
poor safety are other factors which may cause harmful
hazards.
The method of qualitative analysis of risk has been used
in this project to analyze and evaluate the identified
risks and then prioritize them. Based on this method,
price fluctuation of major construction materials and
insufficiency of labour forces are identified as high
probability and high impact risk events. Risk pre-control,
reducing probability of occurrence, transferring or
sharing the risk between projects members are the ways
to respond to identified risks. If not, the risk should be
absorbed if the project is to proceed.
Reference
1. Boley, J and McGrath, (2009), Lessons from collapse
must be shared-experts, ConstructionWeekOnline.
com, August 17, 2009.
2. Federation International Des Ingenieurs - Conseils,
(1987), Conditions of Contract for Works of
Civil engineering Construction, Fourth Edition,
Reprinted 1992 with further amendments.
3. Loosemore, M, Raftery, J, Reilly,C & Higgon,
D, Risk Management in Projects, second edition,
Taylor & Francis Group, London and new York. pp
1-3, 32-33, 35
4. Notes of Value and Risk Management, Heriot-Watt
University, (2010)
5. Risk management guidance, ABC project.
6. Smith, N J, Merna, T, Jobling, P (2006) , Managing
Risks in Construction Projects, second edition,
Blackwell publishing, UK.
7. Weatherhead, M, Hall, C, Owen, K (2005), Integrating
value & Risk in Construction, CIRIA, UK.

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SLQS JOURNAL

Challenges Facing the Establishment of the

Quantity Surveying Profession in Sri Lanka
Ranjith Chandrasiri MRICS MCIOB DipQs(UK) AAIQS ACIArb AIQSSL FIPMSL
Ranjith Chandrasiris quantity surveying carrier commenced as a Technical Quantity Surveyor in 1984. Since
2004 Ranjith Chandrasiri is practicing as Consultant Quantity Surveyor in Sri Lanka. Currently he serves as
an office bearer in RICS Sri Lanka, CIOB Sri Lanka, and Institute of Project Managers Sri Lanka (IPMSL).
Ranjith Chandrasiri is a registered Arbitrator in Institute of Commercial Law and Practice (ICLP Arbitration
Centre) in Colombo.

Sri Lanka was the first country to establish the quantity

surveying profession in South Asia, early in 1960, by
introducing Builders Quantities course in the then
Institute of Practical Technology, Katubedda, which
was established in November, 1958, with the support
of the Canadian government. Presently, this institute is
named the University of Moratuwa, which is the primary
institute in producing academics in the engineering sector
in Sri Lanka.

Standard of Education:

The National Certificate of Technology in Quantity

Surveying was later introduced island-wide in 1972
through Technical Colleges (http://www.nct-tech.edu.lk/
history.html - visited on 8th Jan. 2011). This was a turning
point in QS education in Sri Lanka. Through this three
year part-time course of NCT(QS), many needed QSs
were produced for the construction industry in Sri Lanka.
As a result of ever-increasing demand in the industry, the
BSc in Quantity Surveying course was introduced in
1986 at the University of Moratuwa. With the expansion
of the global construction industry, a number of quantity
surveying courses were commenced in both the public
and private sector during the last decade.

Currently, the University of Moratuwa provides a BSc

degree course in Quantity Surveying to a limited number
of students. The BSc in Quantity Surveying course has
been accredited by the Royal Institution of Chartered
Surveyors (RICS). The Government Technical Colleges
provides full time and part time certificate level quantity
surveying courses designed for school leavers and technical
employees respectively.

Despite significant improvement in the quantity surveying

sector in terms of education and professional practice in
Sri Lanka, currently it faces challenges in a number of
situations which can be summarized under the following
six main headings:
1.
2.
3.
4.
5.
6.

24

Standard of Education
Supervised Training Programme
Fee Competitions among Practitioners
Experience, quality and standard
Employment opportunities
Establishing the Profession

The quantity surveying profession needs to continue to

recruit young qualified people who wish to continue with
their further professional education. For the quantity
surveying profession, currently a number of private
institutions are conducting diploma level quantity
surveying courses targeting school leavers who lost the
opportunity to enter government Universities or other
institutions of higher education.

The students of Government Technical Colleges who

obtain marks above the minimum required level from
the final examination conducted by the Department
of Examinations receive their certificates. The College
of Quantity Surveying, governed by the Institute of
Quantity Surveyors Sri Lanka (IQS-SL), which has
been incorporated by an Act of Parliament in 2007,
provides quantity surveying courses designed to meet the
requirements of the IQSSL.
The question then arises about the quality and standard
of education of some of these private organizations,
situated at various places in Colombo and outstations,
which provide quantity surveying education, where
a considerable number of students follow Diploma
or Higher Diploma courses by paying a fair amount.
Providing a quantity surveying education became a
profitable business due to higher demand for quantity

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SLQS JOURNAL
surveyors in Sri Lanka and foreign countries before the
recession of the global economy.

become employees of an internal consultant of other

professionals of the project.

Attractive advertisements on newspapers show short

and easy routes to reach membership of internationally
recognized professional quantity surveying institutions
and other professional bodies. Currently, no criterion
measure or mechanism has been established by government
authorities or relevant professional institutions for
monitoring the quality and standard of the courses and
examinations conducted by such private educational
organizations.

Quantity surveyors who wish to practice independently

have to face increasing competition within the industry.
The competition may come from within the profession
or other construction professionals, for example, where
the client requires appointing a professional quantity
surveyor at the conception stage as his cost adviser, the
project architect or engineer may express his interest to
provide cost consultancy services as part of his consortium
services reasoning that giving it would give a single point
liability to the client. Finally, clients may prefer to obtain
one-stop-shopping for consultancy services rather than
appointing different parties for different services, which
may think that he may save additional cost involvement
in administrating various professional disciplines.

Supervised Training:

Currently, students who obtained their academic

qualifications face challenges in entering an appropriate
structured training programme with the relevant
professionals supervision. This affects most students
irrespective of the levels of their academic qualifications.
This seriously affects young quantity surveyors who
obtained academic qualifications accredited by foreign
professional quantity surveying institutions such as RICS,
AIQS, IQS-SL with the aim of becoming a chartered
quantity surveyor through an appropriate membership
route.
All professional institutions for various disciplines
have formally recognized the need for structured
supervised professional training to achieve recommended
professional competencies to offer their memberships.
The importance of this training to young quantity
surveyors has been recognized by few employers while the
majority of employers are underestimating its importance
or ignoring trainees.
Currently, the key challenge for employers is to maintain
their existing professional and technical staff including
quantity surveyors and other assets until their average
volume of work returns to normal. Another challenge for
students is to find an employer, who allows trainees to
practice what they studied at the university or college. All
of the above difficulties are influenced by the current job
market, which is directly linked with countrys economic
climate.

Fee Competition:

In many cases, quantity surveyors are being appointed

as sub-consultants to a main consultant by the clients.
Because of this arrangement, quantity surveyors have

Non-Construction Personnel are also attempting to enter

construction consultancy services such as advising on
contract procurement, contract administration, dispute
resolutions, contract drafting etc, which usually fall
under the roles of quantity surveyors. Though quantity
surveyors are expert in Procurement Management and
Contract Drafting, most clients, including government
departments, statutary authorities, banks etc still prefer
to obtain services from personnel from other disciplines
such as finance, legal, and from engineers. The majority
of Consultants who provide consortium services to the
client as the Engineer for contract engage quantity
surveyors as employees, those who have experience in
merely measurements and quantifications, ignoring
their academic or professional qualifications. This would
undermine the professional services to be provided by the
profession of quantity surveying to the society.

Experience, Quality and standard

The quantity surveyors employed by contracting firms

have opportunities for gaining experience not only in
quantity surveying but in various aspects of construction
technology. However, clients expect high quality, proper
and accurate tender/contract documents from quantity
surveyors to avoid future disputes, which may arise at the
post contract stage. The client always expects maximum
value for their money and the contractor always expects
maximum money for their products. A professional
quantity surveyor should have the relevant experience to
understand this concept and should be able to strike a
balance between two parties. Therefore, by appointing an

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SLQS JOURNAL
experience and qualified professional quantity surveyor it
may be possible to minimize disputes that may arise due
to errors in the bidding and contract documents prepared
by inexperienced quantity surveyors. The following
example illustrates one of the disputes which occurred
due to poor drafting of tender and contract documents:
The clause stated below was abstracted from preamble
notes given in a measure and pay contract, where the
Employer was a Statutary Authority.
If the BOQ does not contain any work item which is to be
executed by the contractor in accordance with the drawings
or specifications, the cost of the missing work item is deemed
to be included within other items.
The reason for the error seems that the quantity surveyor
who was appointed by the architect copied preambles
notes from a lump sum contract rather than preparing
particular preamble notes for the project and failed to
grasp the unfairness of the terms which he included in
the contract and their potential legal implications.
Due to recent changes in technology, intelligent buildings
and laboratory buildings have a higher proportion of
mechanical and electrical installations compared to
traditional buildings. Quantity surveyors would not be
able to perform their duties for such buildings unless
they have reasonable knowledge and experience in new
technology.

Re-construction of war-damaged infrastructure and

buildings in the Northern and Eastern provinces are
currently being carried out by various organizations. It is
expected that a substantial volume of new construction
of buildings and civil engineering in the Northern and
Eastern provinces will commence soon and significant
opportunities for quantity surveyors will be available
in a more attractive environment. If the construction
market expands as expected, quantity surveyors will need
to increase their involvement to cater to the demand.
However, under the present procurement policies
maintained by relevant authorities, it is unlikely that the
expected development process will provide opportunities
for local consultants and contractors to the same extent, as
the majority of such re-developments are being planned to
be carried out with foreign grants and loans. In that case,
those project funders would dictate their own terms to
employ their own corporate team of foreign professionals.
Therefore, the government should take maximum care to
safeguard the employment of the local professional when
they are negotiating the terms of the funding.

Establishing the Profession

Substantiate the Value of Quantity Surveying:

Clients may need initial cost estimates and early cost

advice to know the extent of their financial commitment
in advance in order to allocate funds to the projects. The
quantity surveyors should have the experience to provide
a reasonably precise estimated cost, considering current
cost, inflation forecast, and economic climate in the
country.

Practicing quantity surveyors and relevant institutes

should carry out public awareness campaigns in order to
promote the profession. Relevant institutions will have
to play a major role in demonstrating the value of the
services of independent professional quantity surveyors.
Government organizations, banks and potential
developers should be made aware of the importance of
the quantity surveying profession by relevant institutions.
The major Institutes like the Institute of Construction
Training and Development (ICTAD) and Institute of
Quantity Surveyors - Sri Lanka (IQS-SL) may be in a
position to introduce new guidelines in this regard.

Employment Opportunities:

Tools and New Technology:

The demand for construction professionals, including

quantity surveyors in Sri Lanka, has been drastically
reduced since early 2008 due to construction works being
reduced significantly, particularly private commercial
buildings and apartment buildings. This situation
seriously affects the demand for quantity surveyors. The
situation is further influenced by foreign contractors
currently carrying out most of the major construction
in the country as they do not employ local quantity
surveyors in senior positions of the project.

26

Computer aided techniques are being developed for

measurements and quantifications with preparation
of bills of quantities and valuation of executed works.
Application of these new techniques will increase speed,
efficiency, and the accuracy of products or services,
particularly production of tender documents. New tools
would be introduced in the future for improving most
tasks of the traditional quantity surveyors.

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SLQS JOURNAL
Representation:

Presently the UK government consults the RICS on

making legislation and other government decision-making
processes that may affect the construction industry and
the profession. Unfortunately, the quantity surveying
profession in Sri Lanka is not so strong. Achieving such
a strong position will be a challenge for all Sri Lankan
quantity surveyors today.

Supplying the Clients Demand:

All practicing professional quantity surveyors are

required to market and promote their services to the
clients. Quantity surveyors should expand their role from
measurement taking-off to contract management and
financial management. Diversified services should include
procurement management, cost and time management,
tax advice, investment advice and dispute resolution.

Caparo Industries Plc -v- Dickman and others [1990]

The plaintiffs sought damages from accountants for negligence. They had acquired shares in
a target company and, relying upon the published and audited accounts which overstated the
companys earnings, they purchased further shares.
Held: The purpose of preparing audited accounts was to assist company members to conduct
business, and not to assist those making investment decisions, whether existing or new investors
in the company. The auditors did not owe a duty of care to the plaintiffs. Liability for economic
loss for negligent mis-statement should be limited to situations where the statement was made
to a known recipient for a specific purpose of which the maker was aware, and upon which the
recipient had relied and acted upon to his detriment. The law has moved towards attaching greater
significance to the more traditional categorisation of distinct and recognisable situations as
guides to the existence, the scope and the limits of the varied duties of care which the law imposes.
The House laid down a threefold test of foreseeability, proximity and fairness and emphasised
the desirability of incremental development of the law. The test was if the court considers it
fair, just and reasonable that the law should impose a duty of a given scope upon the one party
for the benefit of the other. Lord Bridge of Harwich: What emerges is that, in addition to the
foreseeability of damage, necessary ingredients in any situation giving rise to a duty of care
are that there should exist between the party owing the duty and the party to whom it is owed
a relationship characterised by the law as one of proximity or neighbourhood and that the
situation should be one in which the court considers it fair, just and reasonable that the law should
impose a duty of a given scope upon the one party for the benefit of the other.

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SLQS JOURNAL
Setting Smart Objectives
Buddhika Jayatillake MBA BSc(Hons) FCIOB MRICS AAIQS

Buddhika attained his first degree from the University of Moratuwa, SL in 1993 and subsequently graduated as a Master of Business Administration from the University of Durham, UK. At present, Buddhika is an
Associate Director of Davis Langdon, an AECOM Company. He is a Chartered Quantity Surveyor whose
expertise include strategic procurement/outsourcing and asset management.

Introduction

In order to achieve a desired goal or objective, it is vital

to have a plan in place. Having a plan in place alone does
not ensure achievement of the desired goal. Therefore,
implementing the plan, monitoring and controlling of it
and adjusting and fine-tuning the plan where necessary
are also vital.
However, a plan is only the procedure or the series of
actions intended to be taken to achieve an objective.
Whether it is in ones personal life or at the workplace,
most individuals are masters of devising precise plans
with a degree of certainty to achieve preset objectives.
Yet, it is somewhat tricky when it comes to setting the
right objectives.
Undoubtedly, some individuals have struggled at some
stage in setting the right objectives in their Personal
Development Records (PDRs). As a result, this fault is
commonly seen in some PDRs, listing some intended
actions rather than identifying the right objectives.
This article provides some guidance that helps set
objectives that really work.

Your Objectives should be SMART

It is a well known, widely accepted criterion that the
objectives should be SMART, where SMART stands for
Specific, Measurable, Achievable, Relevant and Timebound.
Specific requires the objective to be the exact final
outcome that one intends to achieve. For example
Completing evaluation of the xyz claim is an exact final
outcome compared to hiring a claims consultant. The
proposed hiring of the claims consultant is more of an

28

action in the action plan that intended to help achieving

the final outcome of completing the evaluation.
This also suggests that hiring of the claims consultant
is not necessarily the only way to achieve the objective.
However, if hiring the claims consultant was set as the
objective, it hinders the opportunity of investigating
alternative methods available to achieve the true objective
of completing evaluation of the claim.
Measurable requires the objective to provide clear
evidence of achievement of the objective. It should be
evident not only to the self but also to anybody else.
Therefore, a measurable objective should ideally have
associated physical output.
In the above claim evaluation example, the production of
the report on evaluation findings and recommendations
could be a clear indication of completion of the evaluation,
and it is evident to and measurable by somebody else.
Therefore the ideal objective could be complete evaluation
and recommendation report on claim xyz
Objectives that use phrases such as improve knowledge,
contribute to, liaise with, gain understanding of
and the like do not provide clear measurable objectives.
Whether the person gained understanding of something
is difficult to be judged and measured by somebody else.
Achievable is a straightforward requirement of a smart
objective. If an objective is clearly unachievable, there is
no point of setting such an objective.
An objective should be Relevant to the purpose it is
being set. An objective such as loosing 15 kilos by 30
June 2011 set in a book-keeping employees PDR is
not necessarily relevant to the employing organization

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SLQS JOURNAL
although it could be a quite relevant personal objective
to the employee (unless of course, the employees work
performance is likely to be affected by the employees
weight). However, there could be some occupations
where losing weight is a quite relevant objective.
All smart objectives should be Time-bound. That is the
objective should be associated with an achievable time
target. Having measurable interim time-bound targets
will also help ensuring progress towards achievement of
the objective.

Ensuring Your Objectives are SMART

Asking the following questions helps ensuring the
objectives are SMART.
Specific Why do I do this? helps deriving the
underlying specific objective. In the claim evaluation
example above, asking the questions such as Why do
I hire a claims consultant? helps filter out intended
actions and deriving the underlying specific objective.
Measurable How do I (and somebody else) know
that I have achieved this? helps making the objective a
measurable one. For example How do I (and somebody
else) know that I have completed evaluation of xyz
claim?

Achievable - Questions to be asked are Can I achieve

this?, How?, Do I have a realistic plan?
Relevant - Questions to be asked are What is the reason
of setting the objective? and Is the objective relevant to
the reason why it was set?
Time bound The question to be asked is When am I
going to achieve this?

Fine-tuning Your Objectives

Keep an eye on your objectives and review them regularly
to ensure that they are still SMART. The objectives that
were once SMART could be no-longer SMART if the
underlying circumstances were changed or affected.
Ensure that interim targets (milestones) such as percentage
completion are achieved. If a milestone was not achieved,
then revise the plan and set new milestones that ensure
achievement of the objective.
Allocate time targets to the intended actions in the plan.
Monitor and ensure that these time targets are achieved.

William Lacey (Hounslow) Ltd v Davis (1957)

A contractor tendered for reconstruction of war-damaged property and was led to believe that they
would receive the contract. William then prepared, at Daviss request, calculations and estimates
which Davis used to negotiate a claim with the War Damage Commission, Davis then sold the
property without concluding a contract for the reconstruction.
Held that a promise by the defendant to pay a reasonable sum for these service could be implied.

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Partnering in the Construction Industry
B. Darshanie Taraka Perera BSc (Hons) TCInst.CES
Quantity Surveying, University of Reading, UK

Introduction
Partnering is considered a radical departure from
conventional procurement approaches in the construction
industry. According to the Joint Contracts Tribunals
(JCT) practice note on partnering: it is neither a
particular procurement approach, nor is it a particular
type of contract: it is about culture and the way in which
the participants view and manage the project.
The key objective of developers when implementing any
form of construction contract is the appointment of
appropriately skilled and experienced contractors on the
basis of the right price, programme and risk allocation.
In a market where the balance of power between the
contractors and employers is shifting, this objective is
increasingly hard to achieve. Partnering is a process that
is being used with increasing frequency in the UK and is
slowly being recognised in the UAE as a solution for the
afore-mentioned matters.
Partnering has been defined by number of authors
in different words. However the essences of all those
definitions means that it is a management approach
used by two or more organisations to achieve specific
business objectives by maximising the effectiveness of
each participants resources.
Partnering in construction contracting started getting
earnest attention in the UK through the Latham report
Constructing the Team (1994). Sir Michael Latham drew
attention to the benefits of partnering in order to avoid
the problems in conventional adversarial procurement
methods. The concept has been well supported by Sir
John Egans report Rethinking Construction (1998). In
it, he emphasized the need of applying principles of the
automobile industry, such as total quality management,

30

lean production principles, integrated supply chain etc,

into the UK construction industry.

Development of Partnering

There are three generations of partnering. Those are

Project Partnering First Generation of Partnering
Strategic Partnering Second Generation of
Partnering
Strategic Collaborative Working Third Generation
of Partnering

Project Partnering - First Generation of Partnering

Project partnering is a set of actions taken by the work

teams that form a project team to help them cooperate
in improving their joint performance. Specific actions
are agreed upon by the project team taking into account
the projects key characteristics, and their own experience
and normal performance. The choice of actions is guided
by a structured discussion of mutual objectives, decisionmaking processes, performance improvements and
feedback. The essential actions of project partnering are
shown in Figure 1.

Figure 1- The essential actions of artnering

(Partnering in the construction industry, John Bennett
& Sarah Peace - 2006)

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Strategic Partnering Second Generation

Strategic Partnering is a set of actions taken by a group

of clients, consultants, contractors and specialists to help
them cooperate in improving their joint performance
over a series of projects. The essential actions of strategic
partnering are shown in Figure 2.

Figure 2 Seven Pillars of Partnering (Partnering in the construction industry, John Bennett
& Sarah Peace - 2006)

Strategic Collaborative Working Third Generation of Partnering

This is a set of actions by a group of consultants,
contractors and specialists to help them cooperate in
establishing and continuously developing a long term
business based on an integrated construction cycle
that links client use of constructed facilities with their
development and production. The process of strategic
collaborative working is shown in Figure 3.

Figure 3 - Strategic Collaborative working (Partnering in the construction industry, John Bennett
& Sarah Peace - 2006)

Selecting Appropriate Partners

The success of partnering greatly depends upon the

continuing will of the participants to make the relationship
work, being primarily about teamwork even though team
members are from different organizations. Therefore,
selecting correct partners is an important factor.
The partners may be selected through personal or business
contacts, by recommendations and in some instances
through competitive tendering. Similar to conventional
contracts, prospective firms should be evaluated on
their technical skills, managerial expertise, financial
resourcesand the like. However, unlike with conventional
contracts, the cultural fit of the firms is important here.
This is a fact which is difficult to evaluate. Therefore the
most important facts to be considered under the culture
of an organisation are:
Ethical values of the organisation
Business practice with respect to dealing with other
stake holders
Commercial objectives of the company

Available Forms of Contract

Even though some landmark publications such as the

Egan Report state that Effective partnering does not
rest on contracts, it has now become a fundamental
requirement to have a contractual background for
partnering arrangements. According to the JCT practice
note, partnering is better served by the existence of an
underlying contract. The Joint Contracts Tribunal (JCT),
Institute of Civil Engineers (ICE) and Association of
Consultant Architects Ltd. (ACA) have provided different
forms of contracts which comply with partnering
arrangements.
The JCT - Constructing Excellence Contract has
been drafted to provide a document that underpins
collaborative working and the formation of integrated
teams within the supply chain. This includes:
a series of bi-lateral contracts that adopt a collaborative
approach within a common framework
a multi-party Project Team Agreement which
enables members of the Project Team to reinforce
their collective approach to guiding the successful
delivery of a project
the active identification and management of project
risks through the mandatory maintenance and
updating of a Risk Register
the flexible allocation of identified risks to the

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party best able to manage the consequences of their
occurrence
The ICE published NEC Partnering Option X12 is
primarily derived from the Guide to Project Team
Partnering published by the Construction Industry
Council. It is not a separate agreement but has been
drafted as a secondary option for incorporation into the
existing NEC family of contracts.
Option X12 is intended for multi-party partnering where
the agreement can consist of single or multi-projects.
All parties who are intended to make up the projects
partnering team will require the inclusion Option X12
in their contracts respectively.Key features of Option X12
include:
The parties must recognize that by entering into
the contract, they are undertaking responsibilities
in addition to those detailed within the basic NEC
contract. Responsibility is still retained for all the
sub-contractors in the chain below.
Where one party misses a particular target, due
to poor performance, thereby letting the other
members down, all parties may lose their bonus for
that target.
Option X12 does not include direct remedies
between non-contracting partners to recover losses
suffered. Remedies (if any) are a matter between the
parties under their individual contracts. This will
apply to all levels of the chain who are part of the
partnering team
PPC 2000 was published by the ACA and is the first
standard form of contract for project partnering. The
authors of PPC2000 claim that it puts partnering
relationships into a contractual context. It was launched
by Sir John Egan and was recommended by several bodies
such as the Housing Forum, Construction Industry
Council in the UK
Some of the key features included in this form are as
follows.
the integration of the project team under a single
multi-party contract, in which all parties - client,
consultants, contractors and specialists - have rights,
obligations and liabilities with respect to each other
governs the pre-construction phase as well as the
construction phaseprovides a procedural framework
that supports the partnering process
Supply chain management on an open book-basis

32

Core group responsible for management of

partnering arrangements
A formal risk management procedure
A partnering adviser to assist the project team
Non-adversarial dispute resolution process

Benefits of Partnering

Time and cost savings are the most highlighted

advantages of partnering. Literature shows that
project partnering can reduce costs by 30% and
time by 40%, whilst strategic collaborative working
can reduce costs by 50% and time by 80%.
Commitment to mutual objectives and a well
constructed decision making/problem resolution
process greatly reduces the extent of claims and
litigation experienced.
Improvements in quality control, reductions
in defects, lower life-cycle costs, and greater
sustainability can be achieved.
Time reductions in selection process and design
enable faster starts to projects.
Designs can be improved through the early
involvement of contractors. It improves the
buildability and creates savings in time and cost.
In strategic partnering the understanding gained
through repetitive projects enhances the entire
teams input.
Synergistic teams can be built by focusing on mutual
objectives. Stake holders in a project can meld into a
true team rather than merely a group with disparate
goals.
Efficiency is improved through organising
administrative functions and focusing on direct
project issues, rather than defensive posturing.
Where strategic partnering is used, staff time is
reduced by avoidance of going through repetitive
learning curves.
Partnering breeds greater co-operation and thus
responsiveness to short-term emergencies or
changing project and business needs.
Partnering creates an environment and culture
which is favourable for value management and the
identification of innovative solutions can greatly
improve project performance.
The concentration of the whole team on customer
objectives makes the programming of construction
work more effective and hence improves certainty.
Both cost and time creep can be kept in check more
efficiently. Contractors and consultants can benefit

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SLQS JOURNAL

from a known workload.

Improved safety performance can be achieved
through the understanding of joint systems and
procedures more thoroughly.

Drawbacks of Partnering

In a demand driven market it is the clients who

do not see immediate benefits from partnering, as
it is seen to blunt competitive pricing. In this case
contractors would rather like the idea for this exact
reason, as well as work continuity, better resource
planning and business sustainability. Again, if not
based on long-term shared benefits, successful
partnering is unlikely to evolve.
Organizations trying to establish a partnering culture
may face severe problems in competing to win other
projects.
Partnering relationships may restrict firms from
developing more profitable new businesses.
Forming teams from people who fit the partnering
ideal may exclude creative individuals, new ideas
and distinctive skills.
Powerful partners may dictate terms and conditions
to weaker partners who depend on them for future
work and so cooperative teamwork can be impossible
in some instances.
Changes in commercial and organizational
conditions may vitiate partnering.
Targets that expect too much and too soon may
vitiate partnering.
Having strategic collaborative working relationships
too often may disturb individual projects in the
interests of long-term development.
Partnering can be undermined by targets that can be
achieved only at the expense of those further down
the supply chain.
For some, changing the thinking that it is necessary
to win every battle at the other stakeholders expense
will be difficult.

Potential Barriers to Successful Partnering

Although much of the literature has concentrated on

the success of partnering, some writers have alleged
that they have missed the importance of the social and
psychological issues associated with the application of
partnering in an industry which is traditionally adversarial.
It is also criticised by some authors that partnering is not
appropriate for all procurement arrangements.

In the Royal Institute of Chartered Surveyors (RICS)

research paper done by Wood (2005), analysis was done
on the prevailing literature written on potential barriers to
partnering. It shows that some writers have contended that
partnering is a long way from resulting in the contractor
benefits claimed by some authors. Wood has categorized
the barriers under two main headings, cultural and
economic barriers. These are briefly mentioned below.

Cultural Barriers

Difficulties in establishing real trust between client

and main contractor are a major barrier and are time
consuming. Publications such as Towards positive
partnering (Barlow et al, 1997) have positively
supported that notion.
Absence of openness and honesty in either party has
been identified as barriers.
Behaviour of individuals is another barrier. Even
though senior members of the organizations have
realized the partnering ethos, the lower level teams,
particularly at the site level, may not understand
the new approach. Wood (2005) shows that the
commercial staffs are found to be more difficult to
adapt in this respect as they are used to addressing
problems in a contractual manner rather through
pragmatic solutions.
Difficulty in changing the lowest cost mentality is
found to be another barrier. Wood argues that some
clients are obsessed with lower tender prices in the
tender stage rather than looking at what they are
going to pay later.
The complexities that can emerge due to cultural
differences of the organizations have been identified
as another barrier.

Economic Barriers

As a principle, risk ought to be transferred to the

party who is most capable in managing that.
However, discrepancies in allocating risk create
many problems. This has been identified as a major
economic barrier.
The mechanism of sharing pain/gain is another
barrier. This should be fair and reasonable for either
party. However there are many criticisms about the
percentages of sharing the pain and gain.
The clients use of their buying power in an
adversarial way, described as leverage, is another
factor that could affect the partnering ethos.

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The Impact of Market Changes

While the current economic crisis weighs heavily

on construction industries everywhere, in super-fast
developing countries like UAE, the impact is probably
more prominent than in most other countries. Many
researchers have proved that developers still having
partnering agreements in place now say that they are
paying more than the market rate for contractors services.
The easiest decision is to abandon partnering and return
to more traditional procurement methods.
However contractors are still willing to engage in
partnering arrangements under the economic down turn
as they believe it to be a better way to exist in the market
while earning a secured profit.

Conclusion

Partnering has been identified as an improved solution

to the adversarial culture of conventional construction
contracts. It is a well tested method in the UK construction
industry, yet is not very popular in the UAE. The project
partnering concept has been developed over the last two
decades in three generations. Partnering contracts were
based on a non-binding agreement called a non-binding
partnering charter in the beginning. However this has
been changed due to discrepancies the contracting parties
had to face because of the non-existence of a legally
binding contract. There are several forms of contract
catering to this requirement.
Even though partnering has provided a number of
benefits, there are drawbacks as well. Furthermore, it has
been identified barriers to successful partnering under the
categories of Cultural and Economic barriers. However,

the concept has been proven to be unsuccessful under the

current economic down turn.

REFERENCES
-

-
-
-
-
-
-
-
-
-
-
-

Bennett J. and Peace S. (2006); Partnering in the

Construction Industry; a code of practice for strategic
collaborative working; Butterworth-Heinemann
Broome J; Procurement Routes for Partnering; a
practical guide; London; Thomas Telford
Bennett J. and Jayes S.; The Seven Pillars of
Partnering (1998); Reading Construction Forum
Bacon J (October 2009), A Quick Guide to
Partnering; Journal of the Chartered Institution of
Civil Engineering Surveyors; pp 30-35
Construction Industry Board, working group 12;
Partnering in the Team (1997); London; Thomas
Telford
Egan J; Rethinking Construction (1998)
Clamp H. et al (2007); Which Contract: choosing
the appropriate building contract; Fourth Edition;
RIBA Publishing
Latham M; Constructing the Team (1994);
Department of the Environment
The Joint Contracts Tribunal Limited; Practice Note
4 (2001), Partnering
Thomas C.; Profitable Partnering for Lean
Construction (2004); Blackwell Publishing
Walker I; Wilkie R; Commercial Management in
Construction (2002); Blackwell Publishing
Wood G; Partnering Practice in the Relationship
between Clients and Main Contractors; RICS
Research Paper Series; Volume 5, Number 2; April
2005

Viking Grain Storage v T H White Installation (1980)

The contract concerned the supply of grain silos. The grain developed mould whilst stored, due to
inadequate ventilation.
Held that the defendants were liable for not provideding goods fit for their purpose.

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The Implied Terms and the Damages of
Contracts under Common Law.
A. M. Manju Sri Nandana
BSc. (Hons), MRICS, MCIArb, MIIE (S.L.) I Eng, GCGI (UK).
Senior Quantity Surveyor, Trafalgar Technical Services Limited, UAE

The breach of contract occurs when one party to the

contract fails to perform one or more of his/her or its
contractual obligation(s). The claimant(s) of the breach
must identify the terms of contract that are not complied
with. The terms may be express, implied or a mixture of
both.
The express terms of a contract are ascertained by
discovering what the parties actually said or wrote, but
there are two main rules to consider in relation to the
express terms:
1. The parol evidence rule in the case of Henderson v
Arthur (1907).This rule was applicable in England
but not Scotland.
2. Whether a pre-contractual statement is a contractual
term or a representation.
The implied terms: a contract, containing express terms,
may contain implied terms. An implied term is one
which is not actually formulated by the parties, but which
the law imports into the contract.
Furthermore, in any contract, in addition to the express
terms, implied terms are assumed to exist, even if there is
no agreement between parties either orally or in writing,
the law assumes that the terms exist.
The implied terms are invisible and when they are assumed
to exist they have equal force to the express terms of the
contract and they are not inferior in any way and can be
fully enforced.
There are three basic terms implied in contracts;
1

1. Some terms are implied in particular categories of

contract (for example: a contract for sale of goods,
a contract of hire purchase) by statute, in the act of
Sale of good Act 1979.
2. Some terms are implied in contracts by virtue of rules
evolved by the courts, in the case of The Moorcock
(1989).
3. Some terms are implied on the basis of rules of
customs, in the case of Hutton v Warren (1836).
Lord Diplock explained the effects of a breach of a
contractual obligations in the case of Photo Production
Ltd v Securicor Transport Ltd (1980) that :
Every failure to perform a primary obligation is a breach
of contract. The secondary obligation on the part of the
contact-breaker to which it gives rise by implication of
the common law is to pay monetary compensation to the
other party for the loss sustained by him in consequence
of the breach1.
The remedies for breach of contract can be any of the
following:

Damages
Quantum meruit
Specific performance/ specific Implementation
Injunction / Interdiction

Depend on the estimation of what damages are to be paid

by the party during the breach of contract, the damages
can be divided into two parts by (i). remoteness of
damages and (ii). measure of damages.

David Kelly & Ann Holmes, Principles of Business Law, 1998, Page 147

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The modern rules relating to remoteness are based on tests
originally formulated in the case of Hadley v Baxendale
(1854), where it was said that damage is not too remote if
either of the following is satisfied:

If the loss arises naturally, that is, as the probable

result of the breach of contract,
If the loss could reasonably be supported to have
been in the contemplation of the parties as the
probable result of the breach of contract. What was
within the parties reasonable contemplation, that is,
what was foreseeable, depends upon the knowledge
of the parties and the time that the contract was
made.

In the event of a breach of contract, the injured party

has a choice of remedies; provided that any action is
brought within the Limitation period, explained in the
Limitation Act 1980. Under this remedy, the claimant
can seek monetary compensation for the loss suffered.
When damages are claimed, the amount of such damages
is calculated pursuant to the relevant breach of contract
principles vide:
The rule of common law is that where a party sustains a loss
by reason of a breach of a contract, so far as money can do it,
to be placed in the same situation with respect to damages as
if the contract had been performed. In the case of Robinson
v Harman (1848).
In a leading case of Western Web Offset Printers Ltd(1996)
v Independent Media Ltd , this was a plaintiffs appeal
against an award of damages for breach of contract. The
issue was whether the proper measure of damages was the
loss of the net gross profit. The court held, allowing the
appeal and substituting the figure of 176,903.88 for the
award of damages. In the circumstances the plaintiff was
entitled to be compensated for loss of gross profit.
The test for mitigation is that the victim should have
acted reasonably:
take any step which a reasonable and prudent man
would ordinarily take in the course of his business...
In the case of British Westinghouse Electric and
Manufacturing v Underground Electric Railways Company
of London(1912), it was stated that the claimant was under
a duty to mitigate his/her losses. To reduce losses, the
responding party has to take all necessary cost mitigation

36

measures. In the case of Hadley vs. Baxendale, it was stated

that the damages for the loss of profit were too remote as a
consequence of the breach and therefore not recoverable.
Furthermore, the court stated that the recoverability
of the damages depended upon the knowledge or the
contemplation of the parties at the time of entry into the
contract and in particular the knowledge of the party in
breach.
In the case of Victoria laundry (Windsor) v Newman
Industries Ltd (1949), the court of Appeal held that the
plaintiff was entitled to recover the damages for their
general loss of profit but not for the loss of profit from
the lucrative contracts.
The basis on which the damages are claimed will depend
upon the type of loss suffered which is usually linked
to the nature of the breach of contract. Some common
examples are as follows:
a.
b.
c.

Market value compensation

Defective performance value
Loss of profits. It has been held that the loss of profit
was recoverable in the case of Victoria Laundry (
Windsor) Ltd v Newman Industries Ltd(1949).
d. Remedial damages
e. Restitutionary Loss and
f. Non-Pecuniary loss

In the other hand, if the parties enter into a contractual

agreement without determining the reward that is to
be provided for performance, then in the event of any
dispute, the court will award a reasonable sum. This
assessment was called the basis of Quantum meruit. In the
case of Craven-Ellis v Canons Ltd (1936).

1.0 Bibliography
Legislation
-
-

Limitation Act 1980

Sale of goods Act 1979

Case Law
-

-
-

British Westinghouse Electric and Manufacturing

v Underground Electric Railways Company of
London [1912] AC 673
Craven-Ellis v Canons Ltd [1936] 2 K.B.403
Dunlop Pneumatic Tyre Co.Ltd v New Garage &
Motor Co. Ltd [1915] AC 79(HL)

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-
-
-
-
-
-
-
-
-

Hadley v Boxendale [1854] 9 Ex.341

Henderson v Arthur [1907] 1 K.B.10
Hutton v Warren [1836]1 M &W 466
Ownes v Brummell [1977] QBD
Photo Production Ltd v Securicor Transport Ltd
[1980] AC 821 (HL)
Robinson v Harman [1848] 1 Ex. 850
The Moorcock [1889] L.R.14 P.D.64
Victoria Laundry (Windsor) Ltd v Newman
Industries Ltd [1949] 2KB 528
Western Web Offset Printers Ltd v Independent
Media Ltd [1996] C.L.C.77

-
-
-
-
-

Internet Sources

Other sources

Ewan McKendrick, Contract Law Text, Cases

and Materials (13th edn, Oxford University Press,
2008)
Denis Keenan, Smith & Keenans Law for Business
(13th edn, Bell & Bain Ltd, 2006)
Gary Slapper & David Kelly, the English legal
System (5th edn, Cavendish Publishing Ltd, 2001)
David Kelly & Ann Holmes, Principles of Business
Law, (2nd edn, Cavendish Publishing Ltd, 1998)
Richard card, John Murdoch, Sandi Murdoch, Estate
Management Law, (6th edn, Lexis Nexis, 2003)
Smith & Keenans, English Law 14th edn, Pearson
Education Ltd, 2004

http://sixthformlaw.info/02_cases/mod2/cases_stat_
interp.htm >accessed 7/01/10
http://www.scotcourts.gov.uk/sheriff/index.asp
>accessed 25/01/10

Leicester Board of Guardians v Trollope (1911)

The clerk of works altered the design of a floor and as a result dry rot broke out in the floors some
four years after completion. It was alleged that the defect arose owing to the negligence of the
architect in not seeing that the concrete was properly laid in accordance with the contract. The
architect denied that it was his duty to supervise the laying of the concrete and that this was the
duty of the clerk of works who had been appointed by the Guardians.
It was held that while it was the duty of the clerk of works to supervise the details of the work, the
laying of a floor such as this could not be regarded as a detail and that, therefore, the architect
was liable in negligence.

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An Out Look of the APC Assessment of
Professional Competence
By an APC Assessor
Ajantha Premarathna FRICS, FIQS-SL, ACIArb

has been a member of the RICS since 1993, and a Fellow since 2000, a fellow member of IQS-SL, holds
ACIArb and works as a Director of Commercial and Contracts, for Dubai Properties. He has over 25 years
of experience in Quantity Surveying and Contract Administration in Sri Lanka, Oman and the UAE. He
regularly acts as a Chairman during RICS APC interviews; Ajantha is also a member of the RICS World Regional Board for the MENEA region, and is a representative of Institute of Quantity Surveyors of Sri Lanka
for UAE.

The aim of this article is to provide a briefly assessors,

view and goodness to APC Candidates to be successful
in their assessments. The APC is a process by which
most of the professional bodies seek to be satisfied
those candidates who wish to become members of the
institute are competent to practice as professional in
their relevance field.

To demonstrate this competence, candidate must firstly

go through a period of structured training. The objective
of which is to show that the knowledge of theory gained
primarily from accredited academic course has been
complemented with practical experience. It is not only
this but candidates have to prove his achievements of the
required professional competencies through a process
called final assessment interview.

The Competence is to have the ability to perform a

task or a function. This ability can vary from being able
to be an expert. A competence is also a statement of the
capabilities required to perform a specific role and is
based upon behaviours, knowledge, skills and attitudes.
It is for this reason most of the Professional Institutions
have their own assessment of competencies before they
grant the professional membership with their respective
institutions through an Assessment of Professional
Competence, APC.

The APC is a process by which most of the Professional

bodies seeks to be satisfied that candidates who wish
to become members of the institute are competent to
practice as a professionally qualified quantity surveyor.
To demonstrate this competence, candidates must
firstly go through a period of structured training. The
objective of which is to show that the knowledge of
theory gained primarily from QS education of either
BSc(QS)/NCT(QS) in Sri Lanka or similar courses has
been complemented with practical experience. It is not
only this but candidates have to prove their professional
competencies through a process called final assessment
interview. This route for membership, APC, Assessment
of Professional Competence, is generally common to
most of the professional quantity surveying institutions.

The competencies should generally have following three

levels which are to be achieved by the candidates;
Level 1
Level 2
Level 3

Knowledge and understanding of the subject

area.
Application of knowledge /understanding
(Use it practically on the ground).
Reasoned advice and/or depth of technical
knowledge.

The supervisors, counsellors and the APC assessors

will make the judgment as to whether candidates have
achieved the required above levels of competence.

38

In brief most of the APC therefore comprises in two

parts:
1. A period of structured training. During this period
candidates keeps;
Records of Experience gained in a daily diary
form.
Log Book is a summary of experience of the diary
under various competencies.

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Records of Progress against the various

competencies.
Professional Developments, or CPD/LLL records
for the minimum requirement stipulated by the
respective institutions.

2. Final assessment interviews with a panel of three

practitioners/assessors over a period of maximum
one hour depend on the institution.
During this short period of one hour assessor will not
be able to assess the whole range of competence of the
candidate. Therefore, it is the duty of the supervisor/
counsellor of the candidate to constantly test the
competencies of the candidate. In the absence of constant
monitoring of progress of the candidate during the
structured training period by the supervisor /counsellor
most of the candidates have not been able success in the
whole APC process. If the counsellor is not confident
on the progress of competencies and other areas of the
structured training of the candidate shall be advised not
to appear for the interviews until such time candidate is
fit for the interview.
Competencies can generally be classified to two areas as
follows;
1. Mandotory competencies - relate to personal, interpersonal, business and professional practice skills
etc.
2. Core competencies primary skill of the practice
area of the candidate.
These classifications of the competencies may be varied
from institute to institute. The standards or levels of
competence that candidates are expected to satisfy may
also vary from country to country and from institute to
Institute.
The structured training is a key element in the APC
process. The intention of this is to deliver and receive the
training requirements over an agreed period and to the
specified levels of competence.
The CPD, It is also important to have continuous
professional development, CPD (or Life Long Learning,
LLL) programmes as a part of the training period.
Depending on the requirements of the institution the
candidates have to maintain CPD log for a specific CPD
hours fixed by the institution. CPD or LLL provide
candidates with the opportunity of gaining Professional

Development, additional knowledge and skills that might

not be available in their day to day training and working
experience. It may be broadly defined as any activity
which is aimed at maintaining or improving professional,
technical and personal skills or knowledge. The studying
of business management or law may consider as CPD to
an extent. Candidates should give serious attention to
have continuing professional development through out
the structured training period. And it should not consider
that at the end of APC it would be the end of CPD. It
is a continuing process of the carrier of professionals.
Professional development may involve a mix of formal
training courses, distance learning programmes and
structured reading. CPD or LLL should complement the
candidates training and experience for:

Technical skills development linked to the core

competencies.
Skills development linked to specific common
competencies.
Professional practice skills development linked
to those competencies associated with professional
practice. The CPD/LLL will equally support to
enhance the day to day knowledge of the practice in
the industry.

It is important that professional development is planned

and evaluated by candidates in discussion with their
supervisor/counsellor. The candidate shall use CPD to
improve his core competence areas or competences which
have no much exposure at work place or competences
which are lacking behind with candidates experience.
The Critical Analysis, a written report which gives a
detailed breakdown and analysis of the critical issues of a
project(s) with which the candidate has been personally
involved during the training period. The objective is to
allow candidates to demonstrate their problem solving
skill and high standards of professional and technical
knowledge. The conclusion of the report must contain
a critique of the outcome and also careful consideration
of the experience gained. It would give the overall picture
of the candidate by analyzing in depth and in detailed of
the report.
It is the general trend of the candidates to select two
or more issues for the report. However, it could be one
critical too. In many cases candidates are trying to select
and analyze the contractual issues related to claims and
disputes. In my opinion it is not always necessary to select

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contractual issues for the report for critical analysis. As
examples, it could be a simple issue related to variation,
measurement, tendering, selection of tenderers, mode
of payments, ambiguity in documents, pricing and
correspondences etc. The issues like claims, settlements
of disputes, arbitrations are interesting topics and writerfriendly to analyze critically. Other main objective of the
report is not the number of issues described in the report
by the candidates it is to demonstrate to what extent the
candidate has been involved with the issues and how the
candidates has handled the issues in his capacity. The
logical and factual presentation of the issue(s) is the most
important in the report. Using of many appendixes may
confuse the reader of the report. Using of tables, graphs,
graphics, photos etc. at the appropriate place of the report
is more effective than adding several appendixes at the
end of the report. This will enhance the readability of the
report.
The critical analysis report would be the basis for the start
of the interview. It will basically start to understand;
Has the candidate identified the key issues?
Have the options been considered and have good
sound and logical reasons been given for those
options rejected?
Are the chosen solutions supported by reasoned
judgment and has the candidate demonstrated
sound problem solving skills?
Does the critical analysis contain a conclusions
together with an understanding of the lessons
learned?
Has the candidate demonstrated a high level of
written communication skills in terms of spelling,
grammar and presentation?

In this case, consideration would be given for those

candidates their mother language different from
English. However, candidates should not take for
grant this opportunity. They should demonstrate
the maximum proficiency of the language which
they choose to sit for the APC.
Has the candidate demonstrated satisfactory level
of professional and technical skills contained in the
report?

The Interview, the final assessment of the professional

competence comprises with an interview. It will allow
candidates to demonstrate their abilities against the
various competencies that form the requirements of the

40

training period. This will assess by asking questions and

setting oral problems. It allows candidates to demonstrate
on their experience and their problem solving skill.
During the interview it will explore whether the candidate
is able to put theory into practice. The interviewer would
not question outside of the candidates actual training
and experience. However, the objective of the APC is to
consider whether a candidate is competent to practice as
a chartered surveyor of the respective institute.
In the interview, it will consider the national and regional
variations as they apply to the standards or benchmarks
that have been expected by the Institute. In other words,
it will consider at the interview how variations may relate
to current issues and local practice.
The presentation skill of the candidate is a very vital part
of the interview. The presentation can be made standing
or sitting by using multimedia, notes, diagrams, flipcharts
or any other means of presentation modes. The simple
logic and tips for the presentation are;

Prepare, plan and rehearse to maintain the time

limitation. Over run of timing is a negative sign of
the presentation.
Structure the core of the report for presentation in
simple language.
Keep the link of all the sections of the report until
end of the presentation.
Maintain body language, level of the voice, eye
contact, proper pronunciation, pauses at the correct
place and correct time.
Have a clear and simple conclusion.

Show your strong personality throughout the interview.

This would have a very positive influence to the assessors
as to judge future professional practice of the candidate
on the ground.
In Conclusion, the skills gathered from whole process of
the APC shall use for the self-marketing by the candidates
demonstrating his or her strong personality at the
interview with combination of strong communication
skills coupled with knowledge of theory and professional
competence with experience and practical background.
In brief it can be narrowed down to that the Strong
Personality and Communication skill of the candidate is
the success to the APC.

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Innovation in the Construction Industry

Shantha Wijayaratne MBA, MRICS, MCInst. CES
Assistant Commercial Manager
Oman Tourism Development Company

Introduction to Innovation

Every innovation is a change but not every change is an

innovation. It seems there is no clear definition of the
concept of an innovation and in fact many different
definitions are available. The following are some of the
definitions occasionally given by experts:
Innovation is the process through which firms
seek to acquire and build upon their distinctive
technological competence, understood as the set
of resources a firm processes and the way in which
these are transformed by innovative capabilities
(Dodson and Bessant- 1996 )
Innovation means the application of new
knowledge to industry and includes new products,
new processes and social and organisational change
(Firth and Mellor - 1999)
The process of innovation is a rhythm of search,
selection, exploration and synthesis, cycles of
divergent thinking followed by convergent thinking.
(CEM study pack).
However, the general concept is that something
new, a product or process, is created and put to use.
Understanding the clients needs is most important in
the business world, since the value of innovation in those
industries depend on the actions of clients and are largely
initiated by clients. Innovation can be defined as a futuredirected activity and a mentally constructed shadow of
future competition scenarios.

Innovation in General:

According to Weyrich, sustaining innovation in a business

organisation requires an understanding of the companys
core competencies, an innovative corporate culture and a
systematic approach. The process involves the innovation
phase, the implementation phase and market penetration
phase.

Successful business owners continually innovate with

regard to internal systems and processes in order to create
and sustain a source of competitive advantage. There are
many industries which are not in a position to survive
in the market without innovation. For instance, in
computer technology, software developments improve
more frequently with new innovations. The automobile
industry, pharmaceuticals industry and electronic industry
are more vulnerable. However, in many industries, there
are some discoveries found by chance. The introduction
of penicillin is a good example. In the construction
industry, these discoveries are very rare. Most are based
on hard work with proper management of knowledge
and creativity

Innovation in the construction industry

In 1997, the British Property Federations survey of

major UK construction clients showed that more than
a third of clients were dissatisfied with the performance
of professional construction service providers in coordinating teams, design and innovation, providing speedy
and reliable service and providing value for money.
Often the construction industry sector is blamed for
being over conservative and low in innovation. The long
delivery time when compared to most of other industries
seems to be the main reason for the industry being less
innovative and creative. The clients need to see the final
product on the target date or even before and most clients
reluctant to pay extra money for any innovative activities.
This hinders the possible innovative or creative thinking of
the people involved. Many other industries allow time for
their workers to indulge in innovation. For instant, 3M
famously allows their development staff up to 15 percent
of their working time to pursue personal projects that
are not necessarily related to their work. The result is a
stream of new products.

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In the current scientific world, innovation in most
businesses depends on the knowledge management of
the organisations. This encourages many writers to focus
on verity of theories to identify and manage tacit (gain
through experience) knowledge, explicit (quantified and
systematic) knowledge, etc. From the literature, it seems
that most US and European companies have adopted
knowledge management strategies and are actively
using them to further their businesses. Following are
comparisons of some of the sub-topic areas on which many
industries have been focusing, to improve innovation and
identification of where the construction industry stands.

Factors inhibiting innovation:

Focus on a firms habitual activities and core capabilities

is both advantageous and disadvantageous to a company.
The requirement of breaking free of the past which inhibits
innovation has been identified. The power of the present
and experience needs to be used for improvement, instead
of inhibiting organisations from developing dynamic
problem solving techniques. The automobile industry
in Japan is a good example. They always encourage their
workforce in innovation and provide environments to
implement all creative ideas. The survival of the software
industry also largely depends on continuous innovative
processes.
Unfortunately, it seems the employers of the construction
industry have not been encouraging enough of innovation.
Even though innovative thinkers are engaged in the
construction process, most project environments inhibit
this, mainly due to time and cost constraints.

Implementation and integration of innovation:

Integration of knowledge among many individuals

including users and integrating users into the process of
production is valuable in many industries. Some areas of
the construction industry also practice this to some extent
by involving the clients teams in the conceptual design
process. However, during the detailed design process and
construction process, this integration seems to be poor.
Inability to recognise the final product and the cost of
changes also contribute to this. For instant many housing
development projects are developed based on designers
requirements or clients initial concept. Intermediate
involvements of the users are minimal in general.

Creativity and innovation:

Mainly focused on the link between creativity and

42

innovation. Under this heading are identified the different

levels of knowledge that organisations have which can
be used for change-management and problem solving.
It also focuses on the importance of identifying and
codifying knowledge to help organisations become more
creative and innovative. The knowledge management
professionals in many industries now focus on this idea,
with the software and automobile industries especially
focused on these different levels of knowledge. They
focus on innovations from all levels of those involved in
the process and encourage them through reward systems,
such as publishing their work in company magazines and
the like.
In the construction industry these procedures are
followed at the top range of the process. For instant the
Architects, Engineers and similar others are rewarded for
Best Design, etc. by professional bodies and government
authorities. However, creativity at the other levels is
mostly ignored. The foremen, site engineers and workers
are not encouraged for innovation and creativity in
many instances. Generally in construction projects the
site crew is rarely authorised to use or propose different
construction techniques or even slightly deviate from
the design drawings. One reason for this is risking the
responsibility of the design engineers with unauthorised
changes. However, some companies, especially the ones
from developed countries, identify the importance of
these site-level innovations up to some extent.
Generally, the knowledge of the contractors and suppliers
is not properly used at the design stage. They can support
by providing ideas of easy constructability as well as on
the usage of high quality and cost effective materials,
construction techniques, etc.

Problem Solving:

Innovation and creativity in solving problems are

essential for continuing project success which generates
ideas in many ways from people both inside and outside
the assigned teams. The involvement of the work force
for problem solving is a good technique to encourage
innovation and creativity since this forces them to store
and retrieve the details of previous experiences to use
as a base for the new problem solving approaches. The
automobile industry, especially in Japan, seems to have
been using this method on their way to success. Industries
like tourism, air ticketing and sales and marketing widely
use spontaneous problem solving methods and outcome

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feedback to the management through a bottom-up
information system.
In construction, we mostly see a top-down information
system, which does not encourage innovation and creativity.
The workers involvement or use of their comments based
on practical problems are rarely incorporated into the
design management process. However, with the advent of
globalisation, the current trend seems to encourage this
bottom-up information system. For instance, some hotel
and residential development projects encourage new ideas
based on customer comments mainly due to competition
in the market environment.

Experimentation and innovation:

This is a widely used technique in many industries

producing pharmaceutical and chemical products. The
construction industry has not widely experimented on
cost effective materials, different construction techniques
and efficient usage of plant and labour. The flexibility
of managers on constructive mistakes, support for
experimentation and motivation of innovation can
improve the employees lateral thinking.
However, the issue related to the construction industry
is the time and cost constraint due to the nature of the
industry. Many clients are unwilling to accept additional
costs or late completion of their projects for the sake
of the development of the industry. I feel that it is the
responsibility of professional institutes to implement
these activities through their professionals without large
damage to the clients. Model housing is a good example
of experimentation in the industry.

Prototyping:

Is a very useful innovation of software products related

to construction industry. It allows the facility to widen
innovative thinking without any real construction and
to get the feeling of how the real product appears. The
method is very cheap and trials of different proposals
incurs almost zero cost. However, many professionals in
this part of the world (M.E.) are still not fully utilising
this facility and are more comfortable with traditional
methods in dealing with changes.

Systematic learning for innovation:

Many industries in the current competitive world focus

on the systematic learning of previous experience for
future use. The current professional education system

also encourages this by introducing many methods of

proper record keeping such as the use of construction
related database softwares. However, there is generally
less focus on these matters especially during post contract
administrations. However, some construction companies
use these methods as guidance for the tendering
exercises.

Organisational learning through stepwise

process of innovation:

Organisational learning is vital for progressive

development in this competitive world. Single loop
learning (concentrate on symptoms of problem)
encourages new knowledge to improve the quality and
efficiency of existing operations. Double loop learning
(seek out deep causes) encourages new practice in an
organisation which involved more innovative thinking in
many business industries. The construction industry has
been adopting this to a much lesser extent than many
other industries.

The dynamics between individual and

organisational learning:

They are mainly the interaction of individual learning to

organisational learning process. The process involves the
cycle of conversion of leaning between individual and
organisation between tacit and explicit knowledge. In
general, the process involves the four stages of socialisation
(share individuals tacit knowledge), externalisation
(tacit knowledge articulated into explicit knowledge),
combination (create new abstract knowledge system
called invention) and internalisation (convert explicit
knowledge back to tacit knowledge).
However, this method cannot be adopted exactly as
it is due to very nature of construction. During the
construction itself, many different groups enter the
process from time to time. For instance, specialist
teams like project management, structural, construction
management finishing and MEP engage during different
stages of the construction phase.

Intelligence and innovation:

This is developing and relating organisational intelligence

to innovation. In the current industry, there are instances
where organisational intelligence is not encouraging
innovation since most employees are engaged on a
temporary or project basis. Many companies do not
expose their know-how to other parties. For instance,

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many construction companies share internal cost details
with selected employees in different stages. This inhibits
industry innovation. Activities due to climate change and
global warming have large impacts on the construction
industry. The recent tsunamis and cyclones are prior
warning to the industry.

Memory-based knowledge management:

The idea is to facilitate the required flow of information.

In order to face the competitive world, companies need to
focus on experiments in line with their commercial needs.
In the construction industry, cohesiveness among teams
is vital and at the same time the responsibility of sharing
information is more important. These innovative patterns
are adopted by some companies by arranging gatherings,
aiming for socialisation with other project team members.
It also emphasizes sharing positive experiences as well as
negative. In some parts of the world, however, this is
impractical due to cultural barriers and the nature of
the industry. In the Middle East, these social events are
minimal among construction teams. Some reasons are the
huge numbers of people involved in the process and the
swift nature of developments, as well as the involvement
of different nationalities.

Continuous innovation:

As the name suggests this is the process of continued

focus on innovation. The worlds leading companies have
been adopting this pattern. The construction industry
has enough chances for continuous innovation with the
technical development. In the Middle East, Dubai was
recently at the peak of its construction industry, which
encouraged innovation in order to meet targets. In
other areas of this region we notice some relatively less
innovative products.

Knowledge brokers and continuous innovation:

There are professional undertakers who facilitate

innovation and provide advice to increase innovation
and creativity in any industry. In the construction
industry providing solutions to existing problems is vital.
In the construction industry, this process seems to still
be in premature stages even though some professional
institutions constantly monitor and provide solutions.
Collection of information at all levels seems to not yet be
identified properly. It seems that until recently, even most
key players in the construction industry had not taken
effective steps to continue innovation and development
of the industry.

44

Conclusion

Often the construction industry is criticised as being

overly conservative and low on innovation. One reason
identified by researchers is non-financing for research
and development due to cost-control measures. In todays
construction environment of globalisation of markets,
intensification of competition and growing complexity
of relationships with clients, suppliers, contractors and
employees, organisations find that they need to innovate
to survive and succeed
The discussion demonstrated why the construction
industry seems less innovative than other industries. It
is generally recognised that construction industry is
slow in adoption of technical innovations compared to
many other industries. By definition most construction
projects are innovations initiated by the demands of
different clients which have specific requirements. The
main problem with the industry is non-integration of
innovative ideas acquired in one project to the next project
and the knowledge acquired is not properly managed for
the benefit of the industry.
However, most leading firms in the field have identified
the requirement of innovation and diversifying from
the traditional practices. Knowledge management has
come to the fore as a leading device for the process. The
traditional role of information managers has converted
with the information and communication technologies
available by integrating with the design and construction
process.
There are some industries like pharmaceuticals in which
innovation is forced by the societys needs. Similarly,
computer and information technology-related industries
need innovation for survival. Therefore it is clear that the
construction industry has been labelled as less innovative
than many other industries and now it is moving ahead
with many new innovations with identification of potential
and proper concerns on knowledge management. The
recent encouragement to build a knowledge-sharing
culture in construction project teams will be of benefit
in changing the construction industry into being more
innovative than some other industries.
The existing infrastructure and building stocks may not
be equipped to cope with the predicted implications of
the changes in the global climate. Therefore, no matter
how lacking in innovation the industry was, the time

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has now come to rethink and apply effective measures to
promote innovation and creativity in the Construction
industry.

References:

Knowledge Management in Construction by Chimary

J. Anumba, Charles Egbu & Patricia Carrillo
The Management of Innovation and Technology: John
Howells - 2005
The Handbook of Industrial Innovation: Mark
Dodgson and Roy Rothwell - 1994
Project Management 3rd edition: Hurvey Maylor
2003
Managing Organisational Change, Roy McLennan,
1989

A strategic Approach to Organisational Dynamics, ,

Bernard Burnes 2000
Theory and Practice of Change Management, John
Hayes 2007
Project Management: Planning and Control
Techniques, Rory Burke 2005
Web search- understanding innovation in construction
in 1999 by RICS research foundation
Web search- innovation in the construction process by
Kristian Widen on 06.11.2003
Web search- Innovation Process in the Construction
Industry published by Centre for Innovative and
Collaborative Engineering

White, Frost and others -v- Chief Constable of South Yorkshire and
others [1999]
The House considered claims by police officers who had suffered psychiatric injury after tending
the victims of the Hillsborough tragedy.
Held: An employer has a duty to protect his employees from physical but not psychiatric harm
unless there was also a physical injury. A rescuer, not himself exposed to physical risk by being
involved in a rescue was a secondary victim, and as such not entitled to claim. Primary victims are
victims who are imperilled or reasonably believe themselves to be imperilled by the defendants
negligence. Lord Steyn: (T)he law on the recovery of compensation for pure psychiatric harm
is a patchwork quilt of distinctions which are difficult to justify In my view the only sensible
general strategy for the courts is to say thus far and no further. The only prudent course is to treat
the pragmatic categories as reflected in [case law] as settled for the time being, but by and large
to leave any expansion or development in this corner of the law to Parliament. In reality there
are no refined analytical tools which will enable the courts to draw lines by way of compromise
solution in a way that is coherent and morally defensible. It must be left to Parliament to
undertake the task of radical law reform.

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Head Office Overheads Revisited
Prof. Indrawansa Samaratunga

Head Office Overheads is not an expression that is

found in FIDIC Forms of contract, resulting in frequent
debate as to why a prolongation cost claim (especially
under FIDIC Forms of contracts) should include a Head
Office Overheads element. Typical expressions such as off
the Site overhead charges (FIDIC4th 1.1(g)(i), FIDIC
1999 1.1.4.3) and Contractors general overhead costs
(FIDIC4th 52.3) found in FIDIC Forms of contract
are generally construed to mean Head Office Overheads.
Whilst in some parts of the world they are referred to
as Home Office Overheads, an accountant would use
the expression General and Administrative (G & A)
expenses of the company in referring to the Head Office
Overheads.
In the books of accounts of a Contractors Head Office,
the Overheads (G&A expenses) are generally recorded
under the following heads (which vary from company to
company):-
-
-
-
-
-
-
-
-
-

Executive and administrative salaries, allowances & recruitment costs etc.

Head Office rent and maintenance.
-
Utilities, phone/data/fax, postal and bank charges.
-
Depreciation of company assets.
-
Furniture and equipment.
-
Stationary and printing.
-
Professional fees.
-
Auditing expenses.
-
Advertising and marketing (including tendering costs).
-
Interest on company borrowings.
-

Though the total of all these expenses (taken as a percentage

of the company revenue) is usually considered as a suitable
basis for the pricing of tenders and building-up new
rates / prices, some of these expenses are inappropriate
for inclusion in the prolongation cost calculations of a

46

delay claim. There is no reason, for example, why the

Employer of the delayed project should bear a part of
a bad debt related to another project of the Contractor.
Similarly, the Employer of the delayed project has no
liability to bear any part of a claims consultants fees paid
for the preparation of a claim for another project of the
Contractor. Therefore, during an audit of the books of
accounts of the Contractors Head Office by the Engineer
or the Employers other Contract Administrators (or by
the Contractors Contract Administrators in auditing
a Subcontractors books of accounts) in order to verify
whether the Contractor (or the Subcontractor) has
calculated the Head Office Overheads element of a
prolongation cost claim in a fair and reasonable manner,
the following should be given due consideration:

Insurance.
Travel.
Bad debts.
Entertainment.
Pantry expenses.
Contributions.
Sponsorship fees.
Idle resources.
Training.

(a) Capital expenditure (building extensions, new

furniture etc) should be appropriately depreciated.
(b) One-off annual/quarterly expenditure (advertising
costs, audit fees etc.) should be distributed over
the year/quarter and the cost of bulk printing etc.

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should be distributed over the relevant period.
(c) Insurance costs and financing costs of projects should
not be included in the Head Office Overheads
account. (They should be in the project accounts).
(d) Claims consultancy fees should not be included in
the Professional Fees head.
(e) Any bad debts written-off under the Head Office
Overheads should be completely removed from the
calculations.
(f ) Cost of idle resources should be in the project
accounts and not in the Head Office Overheads
account. (It is permissible to allow the cost of some
idle resources such as the asphalt plant of a road
works contractor to be in the Head Office Overheads
account).
(g) Cost of an employee (such as a Commercial Manager)
whose time is totally dedicated to a project/projects,
should not be in the Head Office Overhead account,
despite being stationed at the Head Office.
(h) Sponsorship fee/parent company fee paid as an
annual/monthly sum of money or as a percentage of
the revenue could be a Head Office Overhead, but
not if it is a portion/percentage of the profit.
Once the Head Office Overheads account is rationalized
in the above manner (lets call it the Rationalized
account), it would be suitable for prolongation cost
calculations.
Where a project completion had been delayed, it is not
difficult for a Contractor to demonstrate (using daily
records, photographs, correspondence etc.) that the cost
of his Site Overheads increased due to the necessity of:- supervision staff to stay longer on Site
- site huts to be maintained for a longer period
- tower crane to be retained on Site longer than
previously planned
- performance security, insurance etc. to be extended
- etc.
The prolongation of these Site Overheads are manifest
and therefore this part of the claim generally receives few
challenges, but when it comes to the matter of Head Office
Overheads, the impact thereof on the site/project costs is
not so obvious and therefore Engineers and Employers
often have the following questions, as to:-

why should there be an increase in the Head Office

Overheads when the project completion is delayed?

-
-

why should any Head Office Overheads be an

additional cost under the contract?
why should a formula be used (whereas the
Contractor should demonstrate all costs using
records)?

Moreover (unlike for Site Overheads), there are no site

records that can be produced (other than the Head Office
books of accounts) to support this part of the claim.
The answers are found in the explanation of how the
Contractor sustains his Head Office. Since the Head
Office does not have an individual income/revenue,
the cost of sustaining the Head Office has to be borne
by all the projects of the Contractor, by contributing a
proportional sum every month from their project revenue,
in order to meet the Head Office Overheads. Therefore
such contribution is a cost incurred in the execution of
the Works (not different to paying authority fees, taxes,
subcontract/supplier payments, and any other project
expense).
The resources deployed in the project were expected to
generate revenue and pay to the Contractors Head Office
a sum of money (to fund the Head Office Overheads)
for the duration of the Time for Completion, following
which the same resources were expected to be deployed in
other projects to generate revenue in order to contribute
further money to fund the continuing Head Office
Overheads beyond the aforesaid Time for Completion,
which was prevented by the Employer by delaying the
project completion, requiring the said resources to be
retained on Site for a prolonged period of time, resulting
in the need to contribute more money from the delayed
project to sustain the Head Office, which is an unforeseen
additional cost, which is the answer to the second
question.
The answer to the first question is that, it is not an increase
in the Head Office Overheads but an increase in the
contribution required from the delayed project to fund
the continuing Head Office Overheads (though such
Overheads may not have increased) for the prolonged
period, because the resources were not released to generate
such contribution from other projects.
Since there are adequate provisions in FIDIC Forms of
contract entitling the Contractor to additional payment
in respect of costs incurred as a result of a delay caused

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by the Employer or by those for whom the Employer is
responsible or by an event for which the Employer assumed
the monetary risk, and since Head Office Overheads
contribution is part of such cost, the Contractor would
be in a position to successfully argue his Head Office
Overheads claim, provided that it is quantified in an
appropriate manner.
Where both parties are agreeable to use an existing
formula such as Hudson, Emden, Eichleay or Hank Laan
(see the Schedule at the end of this article), quantifying
the Head Office Overheads claim would be quite simple,
but where there is disagreement, such formulae cannot
be used with FIDIC Forms of contract and most bespoke
forms of contract (or with claims for damages for breach
of contract) due to the necessity to deal with the actual
(but fair and reasonable) costs incurred or to be incurred,
in addition to other limitations/weaknesses found in such
formulae.
It is ideal (but may not be convenient) to have a
transparent method to apportion the Rationalized Head
Office Overheads of a Contractor to all his projects and to
recover monthly from each project, its due contribution,
neither based on the revenue (as is being practised by
some contractors) nor based on the overall expenditure
(as practiced by the others), but based on the limited cost
of staff, workers and equipment deployed on the projects
(or in other words, based on the cost of those resources
that a Contractor moves from one project to another
and from which he generates revenue). If this is practised
by Contractors, there would be no need of formulae to
establish the quantum of Head Office Overheads element
of the claim. The Contractor can simply produce proof
of the contribution made by the delayed project towards
the Head Office Overheads, during the delay period. But
the general practice among Contractors (mainly due to
administrative convenience) is to use either the revenue or
the overall expenditure as the basis for the apportionment,
thus necessitating the use of a formula to later assess (for
the purpose of a claim) what a fair and reasonable Head
Office Overheads contribution should have been, because
the actual contribution made was disproportionate (and
therefore not fair and reasonable). Moreover, a Contractor
is at liberty to collect from any of his projects whatever
level of contribution that he prefers, in order to fund
the Head Office Overheads (which is the contribution
that would be recorded in the project accounts), but an
Employer is required to reimburse only what the project

48

should have contributed fairly and reasonably, and not

what was actually contributed. Such fair and reasonable
contribution could either be lower or higher than such
actual (but unfair and unreasonable) contribution, and
can only be assessed by using a formula, which is the
answer to the third and final question, and therefore the
use of an appropriate formula in the assessment of the
Head Office Overheads element of a claim should neither
be questioned nor rejected.
Where a necessity arises for the use of a formula, which
is free of those shortcomings referred to in the Schedule
given at the end of this article, the following formula
developed by the author is available, which is currently
being used successfully by Contractors and Consultants
in the construction industry:-

CP
SCP

Additional
Payment due

where:

= Actual total overhead costs (G&A expenses) of

the Contractors Head Office during the period of
EOT of the delayed project (Rationalized).
CP = Contract Price of the delayed project divided by
its original Time for Completion, and multiplied
by the period of EOT
SCP = Sum total of Contract Price of each
concurrent project divided by its original Time
for Completion, and multiplied by the whole
or part period of EOT (of the delayed project)
through which it was in progress, taking into
consideration all projects in progress at the time,
including the delayed project.
The application of the formula to a project and its claim,
would demonstrate that the Contractor is not attempting
to recover (from the Employer of the delayed project), all
or most of its Head Office Overheads incurred during
the relevant period, but only a fair and reasonable
portion of it, which is the transparency that an Employer
would expect. (Such transparency does not exist when
using Hudson or Emden Formulae). It would also
be transparent to the Contractor that he is not underrecovering on the reimbursement of the contribution,
fairly due from the delayed project. Since the pace of the

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project (fast track, slow paced etc.) has been factorized
through the CP component, a fast-track project (where
it is very likely that the Contractors highest paid Project
Director and most of the brand new equipment are
deployed) would need to contribute proportionally higher
than a slow-paced project, which is a fair distribution of
Head Office Overheads that cannot be criticized. Also a
weighting has been introduced (to multiply by the full or
part period of EOT through which a concurrent project
was in progress) in order to avoid unfair apportionment
to a project which was not concurrent through the full
period of EOT. (Such factorization and/or weighting to
ensure a fair apportionment cannot be found in Hudson,
Emden, Eichleay or Hank Laan Formulae). Since actual
costs are taken into consideration, this Formula can be
used in claims under FIDIC Forms of contract and since
a transparent method of fair apportionment is used, this
Formula would be acceptable to both Contractors and
Employers. For the same reasons, this formula should
still be acceptable as a means of assessment of Head
Office Overheads element of a prolongation cost claim
at arbitrations and litigations even where the Form of
contract is not FIDIC, and also where a claim is for
damages for breach of contract.
One would wonder why the Authors Formula takes into
consideration the period of Extension of Time (EOT)
rather than the period through which the delaying event
continued. (It is not all the monetary aspects of the delay
claim that should be calculated for the period of actual
delay! Cost of prolongation of the Site Overheads for
instance, should be calculated for the period of actual
delay whereas financing charges in respect of reduced
revenue should be for the period when the Contractor
actually suffers from such reduction (i.e. probably after
2 months of the occurrence of the actual delay, given 28
days for certification and 28 days for payment. Likewise,
financing charges for the late release of first moiety of
Retention Money should be for the period from original
date for completion to the end of the EOT, whereas in
respect of the second moiety it should be a year later.
Thus each kind of prolongation cost is incurred during
a different period of the project time line). Head Office
Overheads element should be calculated for the period
when the Contractor was unable to generate revenue
from other projects using his resources which were
unforeseeably retained in the delayed project, which is
the same period for which EOT was determined.

A refined version of the formula could be developed

by using an S-Curve distribution instead of the linear
distribution adopted for the CP factor but the necessity
to use calculus and probable non-availability and/or
unacceptability of the information required by such a
version may pose administrative difficulties/impossibilities
in its application for most projects. For this reason, parties
to contracts consider the linear distribution to be adequate
in order to arrive at a fair assessment of the Contractors
Head Office Overheads contribution that should be
reimbursed as part of a prolongation cost claim.

Schedule
HUDSON FORMULA:-

HO/P
100

Contract Sum
Contract Period
(Weeks)

Period
of Delay
(weeks)

where :
HO/P = the percentage of head office overhead cost and
profit allowed in the Tender
Authors Comments:(a) This formula does not comply with the actual cost
requirement of FIDIC Forms of contract (or of
claims for damages for breach of contract) due to
the following reasons:- The actual Head Office Overheads percentage could
either be more or less (at the time of delay/EOT)
than that included in the Tender.
- The average-per-week interim assessment is a
departure from the actual.
(b) There is no transparency as to:- whether the Contractor is attempting to recover
all or most of the Head Office Overheads from the
Employer of the delayed project.
- whether the other concurrent projects of the
Contractor are also sharing the Head Office
Overheads in a fair and reasonable manner.
- whether the Contractor is over-recovering/
under-recovering on the Head Office Overheads
contribution of the delayed project.

49

December 2010

SLQS JOURNAL
EMDEN FORMULA:H

100

CP

PD

where :

h = head office percentage arrived at by dividing
the total overhead cost and profit of the Contractors
organization as a whole, by the total turnover.

c = contract sum

cp = contract period in weeks

pd = period of delay in weeks
Authors Comments:(a) This formula does not comply with the actual cost
requirement of FIDIC Forms of contract (or of
claims for damages for breach of contract) due to
the average-per-week interim assessment.
(b) There is no transparency as to:- whether the other concurrent projects of the
Contractor are also sharing the Head Office
Overheads in a fair and reasonable manner.
- whether the Contractor is over-recovering/
under-recovering on the Head Office Overheads
contribution of the delayed project.
EICHLEAY FORMULA:Step 1.
Contract Billings
Total Contract
Billings
for Contract Period

Total Head Office

Overheads for
Contract Period

Allocable
Overhead

Step 2.
Allocable Overhead
Days Of Performance

Daily Contract
Head Office Overhead

Step 3.
Daily Contract
Head Office
Overhead

50

Days of
Compensable Delay

Additional
Payment due

Authors Comments:(a) This formula does not comply with the actual cost
requirement of FIDIC Forms of contract (or of
claims for damages for breach of contract) due to
the average-per-day interim assessment.
(b) Where the value of billings of other projects of the
Contractor is low, the delayed project would attract
most of the Head Office Overheads, which would
not be acceptable to an Employer.
HANK LAAN FORMULA:Contract Billings
Total Company
Billings

Total Head Office

Overheads
(during the period
of delay)

Additional
Payment due

Authors Comments:(a) The actual cost requirement of FIDIC Forms

of contract (or of claims for damages for breach
of contract) are satisfied to some extent by this
Formula but the method of apportionment used in
this formula would not be acceptable to an Employer
for the reason stated in comment (b) under Eichleay
Formula above.
(b) Authors Formula is a development off this formula
in search of a fair apportionment acceptable to both
the Contractor and the Employer.

(Editoral Comment Samaratunga Formula was first

published in 2001, in his Doctoral Thesis Contract
Administration in the Middle East under FIDIC-4th ,
and later became a popular topic in his Sound Contract
Administration training trilogy)