Construction Project Is A Temporary Endeavour

Published Date: 02 Nov 2017

CHAPTER 01

In a Construction industry, Construction project is a temporary endeavour to create a unique product or service. Every project has a clear, definitive objective and activity tasks (PMBok 4) generally the construction project manager is a responsible person to the overall project.

Generally Contract variations are much common in most Contracts due to incomplete Drawings, Specifications, Bill of Quantities and other Contract Documents. And also due to lack of information from the Client to the Consultant with regards to the Project, lead to Variations. This situation inevitably generates unnecessary project delays. Therefore it is an essential requirement to find ways to minimize the possible occurrences of Variations in a Contract.

This research aim is necessity for minimize variation to avoid project delays in a construction project. And consist in it as main objectives to achieve the aim of this research such as; Explore the type of variations in constructions projects, Identify key elements that cause to occurrences of project delays that incurred due to variations and investigate how to mitigate/ avoid the variations in construction projects.

The research methodology utilizes to achieve the research objectives through the complete literature Survey towards identifying of what are the variations in Constructions Projects. As well as find-out methods that are being used to mitigate the variations in construction projects using different sources, carry out discussions, interviews, etc; with various professionals working under contractors and clients in construction projects.

Aim & objectives

Aim of this research is to identify the necessity for minimizing of variations to avoid Project delays incurred due to Variations in a Construction Project. The main objectives of this study included the following:

Explore the type of variations in constructions projects.

Identify key elements that cause to occurrences of project delays that incurred due to variations in the construction Projects.

Investigate how to mitigate/ avoid the variations in construction projects.

Methodology

To suit the hypothesis and achieve the objectives of this research a two stage approach was taken as stated below;

Stage – 1 Primary research

Identify what are the variations in Constructions Projects through the complete literature Survey (explore the Contract and type of variations by using Books, Web Articles, Magazines and other Resources).

Study the research objective is identifying of key elements that cause to occurrences of project delays due to variations, by using documents of Dubai based a project that involved in variations work and due to that Project duration is prolonged for further some months.

Stage – 2 Secondary research

Carry out discussions, interviews, etc; with various professionals working under contractors and clients in construction projects, to analyze and identify the necessity of minimizing of variations to avoid project delay incurred due to Variations in a Construction Contract.

In addition this research methodology, it could be described by below given Diagram as well.

LITERATURE REVIEW

(Primary research)

Investigate Contract and type of variations by using Books, Web Articles, Magazines and other Resources.

DATA COLLECTION

(Secondary research)

Specific Researches and Documents of relevant Projects and Discussions, Interviews, etc;

CONCLUSION AND RECOMMENDATIONS

Specific Researches, Discussions, Interviews, etc; are Researches Final Outcome

The research methodology used to achieve the above aim, objectives is explained in next chapters.

CHAPTER – 02

PRIMARY RESEARCH

Literature review

Introduction

In this Chapter reviews the literature on Construction Project variations and try to explore type of variations and identify effect causes to occurrences within particular sources of data obtained reading material such as specific books, magazines, Articles, journals, web sites and other information relevant to the topic of variation orders.

Explore the type of variations and Identify key elements that cause to occurrence of project delays.

Explore the construction project and contract

What is the project?

In a Construction Industry, Project is a temporary endeavour to create a unique product or service. Every project have a clear, definitive objective and activity tasks, generally the construction project manager is a responsible person to the overall project (PMBok 4). The Client is the project owner in the Construction project, and Design team, Consultants or Management teams engage with project to implement project objectives in accordance with the contractually bind. As well as selected contractor legally bind with the Contract in accordance with requirement of contract agreement to build and complete the project successfully within the schedule, cost and quality.

As examples for Construction Projects; such as Infrastructure works, Industrial Buildings, Railways and highways, Dams, Residential Complex, Bridges, etc;

What is the Contract?

A Contract is an agreement formed between two or more parties that is intended to be legally enforceable, should have following essential elements. Such as, Contract Agreement, the Letter of Acceptance, the Letter of Tender, these Conditions, the Specification, the Drawings, the Schedules, and the further documents (if any) which are listed in the Contract Agreement or in the Letter of Acceptance. (FIDIC 1987).

Furthermore study about the Contract according to the book of "Contract Practice for Surveyor" (Jack Ramus, Simon Birchal and Phil Griffiths 2006) they noted in it as follows.

Influence of Contract Documents for the Contract

There are specific Contract Documents that have been used in Construction industry some are vitally important to form a contract and maintain a contract avoiding cost and time overruns due to variations and Extension of Time until the end of contract period.

Form of Contract

In older days used JCT form of Contract (Joint Contract Tribunal) as principal document, and in these days principally use FIDIC form of Contract or as other form of contract such as NEC form, ICTAD form of contract in Sri Lanka.

Conditions of the Contract

The condition of contract document set out the duties and rights of the parties, and the detailed conditions as per the standards condition of contract Such as the JCT Form, FIDIC Condition of Contract and ICTAD Condition of Contract. Especially some Clauses are critical important which are related to the Variations Clauses 51.1, 52.2, and 40.1 of FIDIC Red Book.

Bills of Quantities

A Bill of Quantities facilitates to price a contract especially for contractor since all the materials and works to be carried out are listed. Basically variations are occurred due to inadequately prepared BOQ. The standard methods of measurements; such as, POMI, SMM7, CESMM3.etc; are used as benchmarks for taking-off measurements.

Project Specifications

Generally project specifications consist with technical and workmanship requirement which have to be fulfilled in construction project. This requires planning to make sure a construction project is successfully completed (By Gilbert Manda 2013). Hence some changes of the specifications; it will effect to create variations to the project as well.

Project Drawings

Basically Project Drawings are provided with detailed for site location, position of the building, access to site, floor plans and elevations. Therefore some changes of details which mentioned in drawings, it will be a reason for variation arises to the project.

Schedule of Rates

Where Bills of Quantities are not provided, a Schedule of Rates is usually used as a basis for pricing the work, As well as for pricing of variations especially in Lump Sum Contracts.

There are different types of Method of Contracts are used by different clients and consultants in construction industry such as, Traditional method, Re-measure contracts, Lump sum contracts, Cost reimbursement contracts, Cost plus percentage, Cost plus fix fee, Cost plus variable fee, Design and build contract, Management path, etc;.

Summary

The Contract Documents are highly important part of the Contract; however, if there are ambiguities, discrepancies or contradictions in contract documents, hence improper contract documents directly create variations to the project during the construction period, it may lead to delays of the project.

Explore what is the Variation?

General Definitions

In a Construction project, Variations are much common in most Contracts due to incomplete Drawings, Specifications, Bill of Quantities and other Contract documents. And also due to lack of information from the Client to the Consultant with regards to the Project, lead to Variations. This situation inevitably generates project delays and disputes.

After a contract has been signed it cannot be changed or varied by the parties. However, given the nature of the construction process, with all of its inherent risk and uncertainty, most standard forms of construction contract include the provision for variations or alterations to the works (Cartlidge 2009).

Variations in construction contracts can mean changes to the terms of the contract or it can mean changes to the scope or character of the works (Lim Chuen Ren 2013). Variations to the scope of construction works are necessary, because no project is perfect and changes are required to meet unforeseen circumstances or changed requirements. Thus, Variations can be in the form of additions, omissions or substitutions (Lim Chuen Ren 2013).

Identify type of variations used in Contract Industry

A Variation may arise in construction in various ways. It arises more often during the progress of work and rarely before the commencement of the work. Variation in construction industry will lead the impact to all parties involved in this sector. The main implication of variation order is in term of time overrun and cost. Most of the variation occurs when major changes in the contract during construction works.

As frequent type of variations can be describe as follows; (Construction project Administration of Mississippi)

Change in Scope – Client or Designers request a design changes,

Unforeseen Conditions – Site Condition differ from the expected, request by contractor or professionals,

Professional errors and omissions – requested contractor or professionals,

Errors –Professional has incorrectly drawn the design plans and specifications,

Omissions – Professionals has inadvertently omitted and item or element from the plan.

Identify possible Causes of Variations in Contract

There are several studies deal with Variations and how variations effect with occurrences of Project delays and disputes on the project. According to the research of the "Effective Management of Contract Variations using a Knowledge Based Decision Support System" (Dr Faisal Manzoor Arain, Dr Low Sui Pheng) they have identified comprehensive possible causes of variations and effect of them. Those are describing as follows;

Owner Related Variations

As per the research of "Dr Faisal" noted in it, Owner who create variations as per his requirements of changes of project objectives. As examples; Changes of plans or scope, Changes of schedule, Owner’s financial problems, Inadequate project objectives, Replacement of materials or procedures, Impediment in prompt decision making process, Obstinate nature of owner, Change in specifications by owner.

Consultant Related Variations

As per the research of "Dr Faisal", Consultant who initiates the variations with subject to the necessary changes due on activities, in some cases, the consultant directly initiates variations or the variations are required because the consultant fails to fulfil certain requirements for carrying out the project. Such as, Design changes, Errors and omissions in design, Disagreement between contract documents, etc.

Contractor Related Variations

As per the research of "Dr Faisal", Contractor who crates the variations in accordant to the practical reasons, the contractor may propose variations to the project, or the variations may essential because the contractor fails to fulfil certain requirements for delivery the project. Such as; Lack of contractor’s involvement in design, Unavailability of equipment, etc.

Other Variations

As per the research of "Dr Faisal" that identified as other variations, the effects of variations are not directly related to the participants. Weather conditions, Safety considerations, Change in government regulations, Change in economic conditions, Socio-cultural factors, unforeseen problems, etc;

Identify the effects of Variations in Contract

According to the research of the "Effective Management of Contract Variations using a Knowledge Based Decision Support System" (Dr Faisal Manzoor Arain, Dr Low Sui Pheng), they have identified comprehensive possible causes of variations and effect of them. Hence, they have identified major reasons are as follows;

Potential effects of variation orders

There are significant effects of variations they have identified by their researches, such as, Increase in project cost, Hiring new professionals, Increase in overhead expenses, Delay in payment, Quality degradation, Productivity degradation, etc;

Applicable contractual Clauses of Variations

FIDIC is an international agency that formulates conditions of contract recommended for construction works where tenders are invited on an international basis. FIDIC conditions of contract are also widely used in domestic projects with minor modifications.

"Variation" means any change to the Works, which is instructed or approved as a variation, refer to "Clause Variations and Adjustments" (FIDIC 1987).

The study of clauses of FIDIC Red book, 1987 4th edition referred to the variations for further identifying the necessity to minimize variations and to avoid project delays; it shows under the Variation clause as follows;

Clause 51.1 Alterations, Additions and Omissions (FIDIC 1987),

Clause 51.2 Instruction for Variations (FIDIC 1987),

Clause 52.1 Valuation of Variations (FIDIC 1987),

Clause 52.2 Power of Engineer to Fix the Rates (FIDIC 1987),

Clause 52.4 Day works (FIDIC 1987),

Clause 53.1 Notice of Claims (FIDIC 1987),

Clause 53.2 Contemporary Records (FIDIC 1987).

Value of Variations

The measured quantities of the variation may be valued in accordance with any of the following methods as mentioned in book of "Contract Practice for Surveyor" (Jack Ramus, Simon Birchall, Phil Griffiths 2006). They are:

by the inclusion in the variation accounts of a lump sum in accordance with a quotation submitted by the contractor and accepted by the architect,

by pricing measured items in the variation accounts,

by ascertaining the total prime cost of additional work and applying appropriate percentage additions.

Quantity Surveyors are involved in dealing with variations that may arise within contracts with regards to,

Identification of required variations,

Immediate measurement and valuation of any variations / additional works,

Advising on the cost implications of variations,

Agreeing contract variation.

The Engineer issued variation orders, then Contractors’ Quantity Surveyor takes off variation order quantities and calculates the affected variation amount of the contract sum; and Consultant Quantity Surveyor and the Client’s Quantity Surveyor will finalise the Contractors’ Cost Submissions in accordance with the Clause: for Variations in Contract Agreement.

Analysis of Delay in Contact due to Variations

Will be discussed in next step (Dissertation B)..........

Summary of Variations

A Variation is generally defined as the Alteration or Modification to the Design with the effect of Quality or Quantity of the Contract Works. It lead to Project Delay such as Cost Overrun along with Time Extension, The Engineer may issue Instructions in accordance with the Standard Condition of Contracts such as referred to FIDIC,JCT ,ICTAD, etc; The issue of Variation Order Instructions ensures that Quantity Surveyors’ Variation Order Value Submission is required, so as to determine Clients’ Monetary Effect.

SECONDARY RESEARCH (DATA COLLECTION AND INTERVIEW & QUESTIONNAIRE)

Phase 01 –Project Study

Experience, Opinions & Observations for identify necessity of minimize the variations to avoid project delay.

In this phase study the research objective is identifying of key elements that cause to occurrences of project delays due to variations. Let’s have a look at a project in Dubai that involved in variations work and due to that Project duration is prolonged for further some months.

Project details

Emirates aluminium smelter complex project, Al Taweelah, Abu Dhabi, and Client: emirates aluminium company limited, main contractor: SNC Lavalin-Worley parsons JV, MEP contractor: BK GULF LLC.

Subject

Cost submission -CCA NO.BKG/CCA/013/CE- 3224, supply and install earthing cables to emergency truck unloading station.

Cost submission -CCA NO.BKG/CCA/002/CE- 3224, Supply and installation of 6m shipping container complete with associated work to install 3320-CPC-040,3320-EMC-018 ,3320-EPU -003 & 3320-EPD-003 as per site instruction SI no.017661-CE-3224-65SI-2002 and proposed temporary power single line diagram.

Causes

This refers to the supply & installation of Earthing cables to emergency truck unloading station as per SI NO.017661-CE3224-65SI-2009 issued on 25 Oct.2009.This has been added to BKGulf contract SOW as time and cost effective variation work. The additional cost associated for this Job is detailed.

This refers to the supply and installation of 6m shipping container complete with associated work to install 3320-CPC-040l,3320-EMC-018 & 3320-EPU-003 as per Site Instruction No. 017661-CE-3224-65SI-2002 issued on 24th August 2009. Hence this is an additional work to BKG original scope of work and has cost and time Impact which is detailed below.

Effect of Contract

Initial Project Value was Dhs. 25,000,000. Project Duration was one year, due to variation instructed at the end of the project, Completion date was prolonged for another 3 month period. EPCM Contractor has approved the Variations and EOT claims total the sum of Dhs.5, 000, 0000. So at the end, actual project   certified value was to Dhs. 30, 000, 0000.

Result Analysis of effect

Cost overrun –

Study the situation of Contract price before and after arise the variations refer to the cash flow programme.

Time overrun -

Study the situation of activities programme before and after arise the variations refer to the master programme.

Analysis the final outcomes of project Study

Identify the final outcomes of this case study as what causes are generating and effects of them to project delay.

Phase 02 - Research Study

Study the mitigation action identified for necessity of minimizes the variations to avoid project delay.

Discover methods that are being use to mitigate the variations in construction projects using different researches done by other Such as, "An analysis of the impact of variation orders on project performance" (Ndihokubwayo 2008) and "analysis of the potential effects of variation orders in construction projects" (Zulkfili OSMAN, Abdelnaser OMRAN, Choo Kim FOO 2009) Some specific suggestions have indicated obviously as mitigation actions in his research.

Phase 03 – Interview & Questionnaire

Carry out discussions, interview etc with various professionals working under contractors and clients in construction projects, to analyze and identify the necessity of minimizing of variations to avoid Project delay incurred due to Variations in a Construction Contract.

Questionnaire Discussions for identify the necessity of minimize variations to avoid project delay.

Basically under this section aim to obtain comprehensive ideas and opinions of industry professionals refer to the involved projects.

Client Quantity Surveyor

Consultant Quantity Surveyor

Contactor Quantity Surveyor

Project Manger Contractor

CHAPTER 03

METHODOLOGY

Will be discussed in next step (Dissertation B)..........

CHAPTER -04

CONCLUSION

Generally variations comprehensively involved with entire project time and cost. It is an extension of time or cost overrun to complete variation work, and by the given time extension; project is delayed related to original completion date. Hence these study finally to determine the necessity for minimizing of variations to avoid project delays and in order to identify and propose a suitable mechanism to administer the Contract smoothly without any delays problem.