Pre-contract Stage Research Articles

Cost overrun in construction projects in Oman: Case study

There are many challenges in construction industry sector, and one of the most important and critical is completion of the project within the original contract value. As the issue of cost overrun in construction projects is spread worldwide generally and commonly encountered in the Sultanate of Oman.The main objectives of this study are to identify and determine vital factors leading to cost overrun in Building Projects in Oman, evaluate the impact of cost overrun in building construction projects and develop the best protocol strategy for project management teams that can be adopted in order to control the cost overrun in future projects. These objectives have been obtained through several methods, questionnaire survey,interviews with experts in construction industry. Twenty nine major factors lead to cost overrun were identified through literature review and studied in Sultanate of Oman.The study concluded that there are three major impacts of cost overrun in construction projects and industry which are time of completion, delivery of poor quality projects and delay of payment approval. Additional to that, Hire good Supervision Team, a good Cost Controller, Project Manager, a good project design team, well planning for pre-contract stage and proper procurement strategy. Consider the Risk assessment and Risk Control are crucial to minimize the cost overrun in building construction project in Oman. The study have recommended procedure to cost control in future project such as the Employer should have a proper tender analysis of the Contractor’s bid, Detailed design should be finalized before award of work and others.

Legal Governing of e-contracts in Georgian Legislation

Technical progress has essentially changed the social world of humans. Civil turnover has encompassed the contracts already signed using e-means which saves time, consolidates commercial relations, and increases commercial efficiency. This is one of the many reasons why signing e-contract in recent decades has become popular worldwide and is demanding. Constantly promoting and changing technologies has put law against serious challenges. Aside the international legal acts, it has become necessary to make amendments in national legislation, which together with national characteristics is in harmony with international conventions and directives. The global pandemic in 2020 has resulted to the special need for developing internet commercial infrastructure (Smartloan.ge, 2020). This paper focuses on examining the legislation applicable in Georgia in the field of e-commerce, namely Civil Code (1997), Georgian laws: “About e-communication” (2005), “About e-document and free flow code” (2012),“About e-document and reliable e-service” (2017). Despite the fact that indicated laws (particularly the last two bills adopted recent years) is at certain extent in relevance with the international acts acknowledged internationally, e-commerce which is subject to applicable legislation is not regulated perfectly. The aim of this paper is not only the review of the above mentioned legislation, but it also establishes some recommendations for making Georgian legislation perfect in the field of ecommerce. Georgian legislation applies no regalements for directly signing econtracts, namely the customer, as well as non customer contract governing mechanisms. Certain statements and principles of applicable Georgian Civil Code, in addition to Georgian law about e-document and reliable e-service, at the moment of signing the contract and at pre-contract stage which regulates separate issues that are specific to e-communication does not create legal principles. For the purpose of eradicating the mentioned discrepancies, it is necessary to make exact regalement of e-commerce by adopting e-commerce (applicable in whole range of countries) while considering its specification.

The basic concepts of social responsibility in the construction sector

Despite the fact that the completion of construction projects has a direct positive impact on the growth of the national and local economy, companies in the construction sector have a significant negative impact on the environment and people: they consume a huge amount of natural resources, emit pollutants into the atmosphere, produce a large amount of waste, and are exposed to hazards. The resulting disruptions to the daily economic and social life of neighboring communities are (social costs) are given little attention at the stage of the construction tender. Alternative systems, such as social impact and cost estimation, cost-benefit analysis, economic and environmental assessment, proposed by practicing experts - such as social impact and cost estimation, cost-benefit analysis, economic and environmental assessment - do not fully account for these costs. In this regard, it became necessary to find out why social costs are not taken into account at the pre-contract stage. This article is devoted to the importance of socially responsible management of construction projects, and also contains a call to take into account social costs when inviting a tender. The author concludes that the introduction of the principles of social responsibility can bring some economic, social and environmental benefits.

Formulasi Pengaturan Tahapan Pra Kontrak dalam Proses Pembentukan Kontrak di Indonesia

The increasement of human needs in society goes hand in hand with the development of technology. To meet these needs, there must be interaction between people which sometimes has the potential to cause disputes. That’s why a contract is needed. The existence of a contract guarantees legal certainty regarding protection of the rights of the parties and also the obligations that they must fulfill. There are several stages of contract formation which consist of pre-contract and agreement between the parties. According to the system in the Book III of Indonesia’s Code of Civil Law, consensus is the base for the formation of contract that means once the agreement has reached between the parties then a contract is formed. Indonesia’s Code of Civil Law doesn’t yet regulate pre-contract stages of contract formation, even though these stages are equally important. The regulation of pre-contract stages are usually set in the common law system, but along with the times, the regulation of pre-contract stages should also be regulated in the civil law system. As a comparison, Het Nieuw Burgerlijke Wetboek (New Civil Code of Netherlands) has already regulated that pre-contract stages, although the Netherlands is a country that implements civil law system. The pre-contract stages are very important to be regulated in Indonesia because there are many potential pre-contractual issues. This paper aims to formulate the outline of what needs to be regulated in the pre-contract regulations.
 Keywords : Interaction, Contract, Formation, Civil Code

An Exploratory Study into Social Cost Considerations in Ghanaian Construction Industry

Construction causative nuisances, inconveniences, interferences and disruptions to the routine economic and social life patterns of adjacent or neighboring communities are referred to as social cost. This study explores the understanding and level of consideration of social cost by construction professionals in Ghana. Relevant literature sources are reviewed to define, rationalize and classify social cost. The study used the survey approach with a set of questionnaires addressed to construction contractors and professionals to gather the data. It was realized that not much consideration is given to social cost at the tender stage of the construction process. The five factors hindering social cost inclusion in tendering are “difficulty in allocating social costs”, “governmental interferences”, “lack of historical data”, “lack of appreciation of social costs” and “low stakeholder agitation”. The paper advocated for integration of social cost into the tendering process. The study will serve as a foundation to design a social cost assessment system at the pre-contract stage.

Quantity surveying pre-contract administration by Fanie Buys

Following on the success of Prof. Fanie Buys’s first book that provided worked examples to the measuring of building work of a single residential building, this book entitled Quantity surveying, precontract administration builds on his previous work by utilising a three-storey reinforced concrete structure building as the basis for the worked examples. Prof. Buys takes the reader through the key components of the quantity surveyor’s cost advice roles at pre-contract stages, including: establishing early estimates of project cost, assessing the feasibility of the project, refining the estimate through elemental analysis as more design and specification information becomes available, and producing and pricing the full Bills of Quantities for project procurement. It takes one through the whole thought process of coming up with a cost of proposed building works from inception to completion. It has very detailed drawings, including window, door and finishes schedules that give more details and facilitate the job of the estimator to provide a better estimate. The book will serve as an extremely useful resource for quantity surveying students, lecturers and candidate quantity surveyors needing to develop and/or enhance their fundamental understanding of the process of measurement and the associated standard documentation processes in estimates, feasibility studies and Bills of Quantities.

Proposing an Index to Determine the Contract Level at the Pre-Contract Stage from the Viewpoint of Health, Safety and Environment (HSE)

The level of contractor’s HSE is a major concern in outsourcing of the works for large organizations. In each tender a rational level of HSE holding by the contractors is recommended to reduce the project costs. By investigating the classification procedure of the contracts available in reliable manuals and models at international level, 6 main criteria were selected for determining the contract level from the viewpoint of HSE. Also, an indicator, called "contract separation" was proposed by weighting the criteria. Initial weight of the main criteria along with their scoring in this indicator was determined by applying sub-criteria characteristics, namely "specialized workforce", "man-day required for meeting the criteria", "required technology", and "impact of criterion on planning the next steps of the contract". Then, by preparing a questionnaire and applying the experts' opinion, the final weight of the criteria was specified, based on which all the contracts of Shahid Tondgouyan Oil Refinery Company in Tehran were divided into four levels, namely (1) advanced, (2) moderate, (3) basic, and (4) exempted from the initial HSE assessment. Results of the present study showed that the operational risk level had the highest impact percentage on determining the level of contract compared with other criteria, which indicates that regardless of other criteria, in case the level of contract risk is high, some special HSE measures should be planned for that contract according to the advanced contracts. Also, cost of the contract had the lowest weight; although cost of the contract is one of the most effective criteria in the contract classification, it cannot by itself represent the magnitude of the contract from the HSE perspective and its impact must be considered along with other criteria associated with HSE in order to determine the contract level.

Payment mechanisms for contractors for better environmental hazard controlling in road construction projects

PurposeThere is a growing concern that contractors can be motivated for environmental protection through effective fund allocation and proper payment mechanisms. However, an in-depth analysis of environmental hazard-controlling methods and related payments to the contractor in road construction in Sri Lanka is not much popular among the extant literature. Thus, the purpose of this paper is to explore different payment mechanisms that are being used with environmental hazard-controlling methods, to achieve better control in such hazards in Sri Lankan road construction projects.Design/methodology/approachThis research was approached through a mixed research method. Initially, hazard-controlling methods and relative payment mechanisms for the contractor were identified through three exploratory case studies using interviews, observations and document survey. Next, the relative effectiveness of payment mechanisms for contractors for better environmental hazard controlling was identified through a questionnaire survey with a sample of 45 professionals involved in 15 road construction projects.FindingsBased on the findings, a comprehensive list of environmental hazard-controlling methods was derived. Furthermore, four types of payment mechanisms were identified: (A)-payments, where a unit price was assigned; (B)-payments, where a provisional sum was established in the contract; (C)-payments, where fixed amounts (lump sums) were assigned in the contract and (D)-payments made along with some main work item in the contract. Relative effectiveness of these four mechanisms for better control of environmental hazards was varied for each hazard-controlling method being practiced in a road construction project.Originality/valueThese findings would be more beneficial for consultants, project managers, bidders and estimators in the pre-contract stage. This is by identifying cost items for environmental hazard controlling and selecting relatively more effective payment mechanisms to motivate contractors for better control of environmental hazards during project execution.

Parametric time overrun estimation of building projects

Purpose Time overruns are commonplace within the construction industry. These result in deception because project managers critically assess the economic and financial viability of a project before implementation. Forecasting the likelihood of time overruns will not only lead to a reconsideration on the decision to build but also help put in place the necessary control measures – exactly what this research achieved. Design/methodology/approach The paper argues that rather than depending on the critical failure factors that are unknown at the pre-contract stage to forecast the likelihood of occurrence, it will be more useful to rely on project attributes that are known before contract signing. A multiple linear regression analysis is used for the model development based on ten independent variables. Findings About 86.6 per cent of all the projects experienced time overruns. The mean time overrun is 106.5 per cent. Initial contract sum, initial duration, gross floor area, contractor class D2K2, competitive tendering, sole sourcing and single-storey buildings explained about 44.7 per cent of the variations within time overruns, with a mean absolute percentage error of 60.7 per cent. Research limitations/implications The predictive accuracy of the model can, in practice, be tested after the completion of a project by comparing the actual project schedule with the planned schedule. Any disparity in the expected outputs should result in a reassessment of the significant independent variables to improve the forecasting abilities of the model. Practical implications The model is expected to be very useful at the pre-contract stage when detailed designs are unavailable. As a decision support system, it will help the practitioners and decision-makers make informed decisions while minimizing the time and resources spent to arrive at these decisions. Originality/value This research presents a unique opportunity to forecast the likelihood of time overruns within the building sector based on project attributes that are known before the contract-signing phase.

MEKANISME DAN KEABSAHAN TRANSAKSI JUAL BELI E-COMMERCEMENURUT KITAB UNDANG-UNDANG HUKUM PERDATA

The title ofthis studyis themechanismand thevalidity of thetransactione-commerce in terms ofArticle1320Indonesian Civil Law. The research method usedin this studyis the kind ofnormativeresearchthatexaminesthe norms, principles and legaldoctrinesrelating tothe issues raised. Thetype ofresearchthat researchers usein this studyare the type ofresearch on thelevel ofhorizontalsyncisthe norminterms of theInformation and Electronic Transaction Act withthe provisionsof Article1320Indonesian Civil Law.Offer and acceptance are the stages of pre online buying and selling contracts in e-commerce. In this process the good faith of the parties shall take precedence in the transaction. The momentum of the sales contract e-commerce can not be separated from the pre-contract stage. Although the mechanism is different transactions, but in general the contract e-commerce trading has occurred since the purchaser or consumer to send a message of acceptance of the products on offer to the seller (merchant). This suggests that the momentum of buying and selling contracts e-commerce more closely at the theory of acceptance (ontvangstheorie).Subjective terms in the transaction e-commerce are consent of the individuals who are bound thereby and capacity to conclude an agreement. While the objective terms are a specific subject and an admissible cause. Information and Electronic Transaction Act is a lexspecialis provisions of Article1320Indonesian Civil Law. However, in this Act only regulates consent of the individuals who are bound thereby and a specific subject, while capacity to conclude an agreement and an admissible cause has not been accommodated. Therefore, capacity to conclude an agreement and an admissible cause, can refer to the Civil Code as its lexgeneralis. Keywords: E-commerce, Sale and PurchaseTransaction, Mechanism, Validity

Factors influencing the accuracy of pre-contract stage estimation of final contract price in New Zealand

Establishing and prioritising the factors that may influence the final contract price when responding to a call for tenders is crucial for proper risk analysis and reliable forecasting; it could make or mar the ability to achieve expected profit margin in an era of lump sum fixed price contracts where clients often contest variation claims. In New Zealand, these factors have not been researched; hence estimators rely only on judgement to ‘guess-estimate’ in their price forecasting. This study aimed to fill the knowledge gap by investigating the priority factors. 150 responses from professional members of the New Zealand Institute of Quantity Surveyors were analysed using multi-attribute method. Results showed thirty-seven factorswhich could influence the final contract price; the three most influential being poor tender documentation, complexity of design & construction, and completeness of project information. Other factors relating to project, client and contractor characteristics, design consultants and tendering conditions, estimating practice and external factors were reported. Concordance analysis indicated high level of agreement amongst survey participants in the rank-ordering of the relative importance of the identified factors. The findings could assist quantity surveyors to prepare more reliable contract price estimates at the pre-contract stage. It would also improve construction-stage cost control.

Financial Risks and Bankability In EPC Contracts

EPC contracts are the most common form of contract used to undertake construction works on large-scale. EPC Contractor has to deliver a complete facility for a guaranteed price by a guaranteed date and it must perform to the specified level. Failure to comply with any requirements will usually result in the contractor incurring monetary liabilities Risks allocation between the contractor and the project company that satisfies the lenders are bankable contracts. Lenders prefer for one strong party to accept full responsibility, delivering the works on time, on budget and to meet the required technical and performance specification. At times EPC contractors act as a consortium. The work is divided between the parties, such split / cooperation is encouraged keeping intact the efficiency and single point responsibility. The key driver for adopting a split structure is also the tax efficacy considering all financial risks as well. The EPC contract constitutes a large portion of the project cost. Therefore, apart from being satisfied that the project is financially viable, the primary interest of lenders during the pre-contract stage will be to ensure only well qualified credit worthy EPC contractors are considered.

Factors Affecting the Pre-Contract use of the Bill of Quantities

Debates over the preparation, use and relevance of the Bill Of Quantities (BOQ) in the construction industry have been long standing without commensurate research effort to address the problem. The objectives of this research are to determine the extent of use of the BOQ in the Nigerian construction industry, evaluate the criteria for the use/benefits of the use of the BOQ and to evaluate the factors mitigating the use of the BOQ. Data were collected through the administration of questionnaire on 53 randomly selected construction consultants. Majority of the respondents (47.2%) were quantity surveyors, 20.8% were builders, 17% were architects, 9.4% were civil engineers and 5.7% were mechanical and electrical engineers. The data collected were analysed with the Statistical Package for Social Sciences (SPSS) using descriptive statistics and analysis of variance. Key findings are that use of the BOQ constitutes 46.35% of construction professionals’ overall workload, and the most important benefit of the use of BOQs in Nigeria is that they provide common bases for competitive bidding. The five most important factors mitigating the use of the BOQ at the pre-contract stage are: limitation in scope and spread of dedicated computer software for BOQ preparation, Absence/lack of implementation of legislations compelling the use of the BOQ, BOQs are not supported by emerging procurement systems, BOQs are expensive to prepare and lack of complete information on which to base the BOQ. This research provides useful information on the strength of the factors affecting the use of the BOQ at the pre-contract stage.

Public Private Partnerships: Overcoming Pre-Contract Problems Faced by Public Clients and Private Providers in Infrastructure Projects in Singapore

After five years since their introduction, there remains a dearth of public-private-partnership (PPP) projects in Singapore. This paper aims to investigate the problems faced when using PPP arrangements and provide recommendations on how these can be surmounted. Face-to-face in-depth interviews with practitioners from the public and private sectors were conducted. The results show that the problems faced by public PPP clients are: difficulty in deciding if a public service could be bought using the PPP route; private providers’ inability to innovate and understand clients’ requirements; private sector’s low capability in facilities management; and public sector’s constantly changing needs. The difficulties faced by private providers are: inability to recoup expenditure; absence of a PPP champion; high tendering cost; criteria for awards are unclear; and risk allocation is unfair. Recommendations on how problems faced in the PPP pre-contract stage might be overcome are presented.

The need for technical auditing in the Zambian construction industry

As economic crimes such as fraud, bid-rigging, bribery, collusion, coercion and extortion in the construction industry have increased worldwide, so has the fight against them taken centre stage. To uphold the high ethical standards required in the industry, stakeholders need to introduce and promote proactive strategies such as technical auditing to minimise or prevent unethical practices in the construction industry. This paper outlines the need and benefits of technical auditing in the Zambian construction industry. It presents results of a self-administered questionnaire survey in the construction industry in Zambia. The study established that the pre-contract stage was more susceptible to unethical crimes than the post-contract stage, making the appointment of technical auditors at planning stage more appropriate. The highest ranked benefit of technical auditing was found to be client confidence, followed by enhanced accountability, reduced project costs and disputes in that order of significance. It is hoped that the results of the study may be useful in raising awareness about unethical practices and required prevention strategies, and assist in the development of necessary policies and guidelines for the introduction of mandatory technical auditing on publicly funded construction projects in Zambia and elsewhere.

Intellectual property issues in joint ventures and collaborations

The IP issues involved in forming, operating, and (inevitably) terminating a joint venture or collaboration are much more numerous than would typically apply to a straightforward investment in an organic growth, or on a merger or acquisition. The pitfalls are also more insidious. The author approaches the topic within the commercial context, discussing the commercial rationale behind joint ventures and collaborations and the life cycle of a joint venture or collaboration. The article explores the four key stages of a joint venture or collaboration: (1) pre-contract stage: confidentiality and trade secrets; due diligence; structural considerations; (2) formation stage: assignment and licensing of existing rights; the terms of transfer; valuation of IP contributions; (3) duration stage: future contribution of existing and future background rights; ownership and exploitation of foreground rights; maintenance and protection of rights; and (4) termination stage: providing for both unexpected and expected events. The article also provides advice as to avoiding the pitfalls of joint ownership: understanding the differences between jurisdictions; potential problems; and avoiding the banana skins. Joint ventures and collaborations are widely used across a range of industry sectors, but particularly high-tech sectors, such as pharma/bio, information technology, and communications, in which IP rights are particularly important. Parties consistently cite the loss of background IP rights as a major risk in joint venture collaborations, and dealing with IP that is generated in the course of a joint venture or collaboration can also present particular problems, particularly if it is to be used or owned jointly by more than one party.

Allocation of Risks Under Build-Operate-Transfer Delivery Approach for Transport Infrastructure Projects

The need for the build-operate-transfer (BOT) approach in the development of infrastructure projects has risen in recent years, due to budgetary and financial constraints faced by the public sector in both developing and developed countries, tightened by the necessity to repair, maintain, and modernize the existing infrastructure facilities. Risk factors that influence the parties of a prospective BOT contract during the various phases of the contract are presented. In particular, the factors pertaining to the precontract stage and to the political, construction, commercial, and financial categories of possible risks are addressed. Integrated schemes assimilating the risks involved and the corresponding alleviation measures are offered.

Historical Context of CM in Japan

There are several experimental projects of CM tried in Japan in 1970s. One group of them were prefabricated system building projects where whole projects were divided into several independent subsystems. The experimental projects indicated the need of intensive construction management skill to integrate design and construction. However, no party in construction industry was positive to provide these. skills. Eventually, the myths were formed that CM is not suitable in Japan. The myths have been broken since 1990s, because clients' perception and attitude have been changed dramatically in the past decade due to economical environments in Japan. The paper indicates several driving factors which made the change of clients' perception and attitude. These are; tighter project conditions, decreasing long term relationship between client and specific contractors, structural change of construction industry and demonstration of construction procurement practices by foreign investors. The papers shows possible prototype of Japanese version of CM from the aspect of supplied management function by CMR (construction managers). One prototype is PM oriented type where CMR provide various management services at pre-contract stage of construction while construction arrangement depend on ability of Japanese general contractors. The other prototype is work package breakdown oriented where each contractors are appointed on tough competitive biding base.

THE PERGAU HYDROELECTRIC PROJECT PART 3: CIVIL ENGINEERING DESIGN

The Pergau Hydroelectric Project was built as a design and construct contract in Northern Peninsular Malaysia by an Anglo-Malaysian joint venture with funding assistance provided by the British Government. This paper discusses the principles of design development during the pre-contract stage and concentrates on the design options and philosophy leading to the final design solution for the following key aspects of the project works: (a) the Kuala Yong dam and diversion tunnel, (b) the underground powerhouse complex and (c) the pressure tunnels. It also describes briefly the reregulating pond and the aqueduct and pumping station. The paper demonstrates the requirement for the designer and contractor to work more closely together than usual, thereby resulting in significant benefits to the project in that designs can be prepared to suit construction methods and quickly varied to suit variable site conditions or other requirements. A number of particular issues are discussed which illustrate this relationship.

Major construction works: contractual and financial management

This book examines the key issues and best practice to be considered in the contractual and financial management of major construction projects. It encompasses the building and civil engineering sectors by approaching the subject from the viewpoint of both the employer and the contractor. The book covers a wide range of topics, including an overview of project management on major projects followed by the contractual and financial management of the precontract, tendering, and postcontract stages of major projects. The book is divided into the following sections: