Whilst the term Bill of Quantities
might seem straight forward – if you don’t understand how it can be used in a contract or the tolerances some builders or developers apply - you can find yourself paying for additional labour and materials that you hadn’t factored into your price and wind up paying the difference yourself.
First up there is some techno babble to deal with.
A Bill of Quantities (can be very dangerous) is not a Schedule of Rates (can be your friend).
SCHEDULES OF RATES.
A Schedule of Rates is a list of the types of materials and labour that is likely to be encountered in completing the job and the price that will be charged for providing those materials and labour at a unit rate. (e.g. $x per cubic metre of sheet and $y per hour of labour).
A Schedule of Rates is very useful as a tool in circumstances where a trade contractor:
1) agrees with a builder that a particular Schedule of Rates will apply in the costing of variations; or 2) does not know the full extent of work to be performed (eg repair work or renovations) and uses the Schedule of Rates to calculate how the different materials, services and labour will be priced.The Schedule of Rates is usually prepared by the trade contractor but does not specify any actual quantities.
BILLS OF QUANTITIES
A Bill of Quantities is written as part of the contract and supposed to be a list of all of the materials and labour and the quantity of each that is to be performed under the contract. It is usually prepared by consultants acting for the developer or the builder. The trade contractor is asked to price each component.
When a price is placed next to each item the total of those prices is supposed to result in a total price of the work to be performed under the contract by the trade contractor.
Trade contractors can be lulled into a false sense of security believing that all the hard work of checking drawings and specifications has been done for them and laid out in the Bill of Quantities which is not necessarily the case.
THE VERY BAD NEWS ABOUT BILLS OF QUANTITIES
There is no such thing as a Guaranteed Bill of Quantities
, even if that is what it is called on the Bill of Quantities, in the contract or in the tender documentation.
The reality is that contracts usually specify a percentage that a Bill of Quantities can differ from the actual labour and materials required to complete the project.
An example of how this has been used against a trade contractor was a case where a building company (which has since gone into liquidation) specified 25% as the amount that a Bill of Quantities could depart from reality and promptly left an entire floor off a 4 story building in the Bill of Quantities.
Depending on the circumstances, there might be something that you can do about this but if there is it is going to be costly and take a long time (think in terms of years). It is also more than likely that you will not be able to make this claim under the Building Industry Fairness (Security of Payment) Act 2017 (BIF
).
Trade contractors get caught out when they sign a contract which requires the trade contractor to perform the work as set out in the drawings and specifications at the price calculated in the Bill of Quantities. If the drawings and the Bill of Quantities don’t line up then you, the trade contractor, can become liable for the extra work to be performed if the Bill of Quantities is less than the work you actually perform.
Some contracts also restrict the use of the Bill of Quantities to valuing variations.
The fact that you are working on a government project does not protect the trade contractor from these issues.
OTHER PITFALLS WITH BILLS OF QUANTITIES
The other pitfall is that a trade contractor who relies on just the Bill of Quantity clauses in the contract, will then not feel it necessary to review all of the other clauses in a contract that affect risk such as variations and extensions of time.
The reality is that those issues are just as relevant for a Bill of Quantities contract as they are for any other type of contract. After all, this is the building industry and there will be delays and variations and if you don’t have a reliable means of costing them, you can lose money every time a delay or variation arises.
WHAT TO DO ABOUT A BILL OF QUANTITIES.
Dealing with Bills of Quantities is simple.
| 1) | Do not trust them; |
| 2) | Carry out an independent assessment of the work required by the drawings and specifications; |
| 3) | Check the contract to see what the permitted deviation is; |
| 4) | Only agree to the absolute practical minimum deviation from the quantity specified in the Bill of Quantities; |
| 5) | Check the contract to see how the Bill of Quantities is to be used for the purposes of the contract; |
| 6) | Make sure that all other risk issues in the contract including progress claims, variations, extension of time claims, prolongation costs, retentions, practical completion and final completion are dealt with in a way that reflects the degree of risk taken into account in your price. |