SM031 APPENDIX G2 CONVERSION OF MEASURE AND
VALUE TO LUMP SUM CONTRACT
SUBJECT:
PROCEDURES FOR CONVERTING A NZS 3910:1998 MEASURE
AND VALUE CONTRACT DOCUMENT TO A LUMP SUM
CONTRACT FOLLOWING CLOSING OF TENDERS
Purpose
Detail the procedure to amend the contract documents of a measure and value contract to convert it
into a Lump sum contract.
How To Implement Conversion to Lump Sum
1. Consultant to obtain Regional Project Manager (RPM) approval in principle to convert from a
measure and value to Lump sum contract.
2. RPM to obtain Regional Manager and National Highway Manager approval to convert to a lump
Sum contract.
Background
This appendix describes the process required to be followed where there is intention to convert a
Measure and Value Contract to a Lump Sum Contract following tender closing and the selection of the
preferred tenderer. This includes a Contract Risk Profile Model to assist in identifying, in particular,
Contract Specific Risks and the Documentation, by way of formal agreement for Attachment to
Contract Agreement, required to be completed, with the examples being made contract specific. A
Schedule of Rates for Variations and a Breakdown of Lump Sum Contract Price are to be completed as
part of the Documentation.
These notes are intended as guidance for the Consultant and NZTA’s Project Manager for changing a
contract from a Measure & Value Contract to a Lump Sum Contract following closing of tenders and
during negotiation with the preferred tenderer. The intention of conversion to a Lump Sum contract is
to move some of the “quantity risk” from NZTA to the Contractor. Clause references are made to
NZS 3910: 1998, Conditions of Contract for Building and Civil Engineering Construction.
1.
CONTRACT CONVERSION
1.1
A Contract Risk Profile must be drawn up to identify all risks and enable consideration of those risks that
are proposed to be carried by NZTA and the risks that it is intended the Contractor carry. Refer to clause
2. The Contract Risk Profile, in the below section.
1.2
It is important that:
(a) the quantities indicated in the original Schedule of Prices are not inflated – as these would likely be the
basis of the Contractors later lump sum calculations. Changes to the quantities allow the potential for
additional unnecessary cost to NZTA.
(b) consideration be given to whether the contract is well enough defined that it should be “tendered” as a
Lump Sum Contract.
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1.3
In conversion of a contract from Measure & Value to Lump Sum Contract the Schedule of Prices (SOP)
must be removed and replaced with a more appropriate Variation Rates Schedule. A breakdown of the
Lump Sum tender price is acceptable.
The reason for not having a Schedule of Prices is to reduce the risk of NZTA carrying the quantity risk if
there is a “significant” discrepancy (clause 2.2.5). This should be further emphasised by providing an
explicit clause excluding the provisions of clauses 2.2.3 to 2.2.6 which will not apply because the
Schedule of Prices has been removed.
1.4
The Consultant must be selective in determining the items to appear in the variations schedule.
Dayworks rates should be incorporated in the Variation Rates Schedule.
Rates for items should be the same or similar to the corresponding rates in the original SOP (may be for
provisional quantities), as the SOP will have been priced against a quantum of works required,
introducing pricing tension.
1.5
Sufficient time must be allowed for the Contractor to be satisfied that the quantities in the original
Schedule of Prices are representative of the volume of work required to fulfil the contract, particularly
given that the quantity risk is to be substantively moved to the Contractor.
1.6
A baseline must be agreed with the Contractor below which NZTA will carry the risk for quantity variations
– soft ground, undercutting etc. For example the baseline could be the subgrade as is normally the case
in roading contracts.
The Consultant will have to exercise significant care during the MSQA phase to protect NZTA’s interests
in terms of the potential for the Contractor to damage the subgrade (or material below the baseline).
1.7
Where NZTA expresses a desire to require all the earthworks risk to be placed on the Contractor, the
Consultant shall advise of the likely geotechnical investigation requirements in order to provide a
reasonable assessment of the associated risk to the Contractor.
Investigations are generally expected to be significant and of additional expense to NZTA, but will be
necessary to allow the pricing of that risk by the Contractor.
1.8
The Consultant shall provide “For Construction” drawings where at all possible, for the renegotiation of
the Lump Sum price. “For Construction” drawings are generally of greatest accuracy would normally
provide greatest certainty as to the requirements of the Contract Works.
1.9
It should be noted that negotiation with the Preferred Tenderer in the conversion of a Measure and Value
Contract to a Lump Sum Contract is in itself a “Variation to the Contract” and is likely to attract a premium
in reaching agreement.
2.
THE CONTRACT RISK PROFILE
The Contract Risk Profile describes known risks, and states whether the risk is included (Risk Included –
Contractor) or excluded (Risk Excluded – NZTA) from the Contract Price.
The purpose of the Risk Profile is to familiarise the Consultant and NZTA with the risks that lie with NZTA
under a Measure and Value Contract conforming with NZS 3910, and to consider the risks that are
intended to lie with the Contractor under a NZS 3910 “modified” Lump Sum Contract.
The intention of conversion to a Lump Sum contract is to move some of the “quantity risk” (noted * in the
Contract Risk Profile below) from the “Risk Excluded” category to the “Risk Included” category. If a Lump
Sum Contract includes a SOP, then despite the wording of 2.2.2 there is the risk of “significant”
discrepancies transferring the risk back to NZTA (2.2.5).
The quantity risk associated with unforeseen ground conditions remains with NZTA (9.5 in the Contract
Risk Profile below). Other than this transfer the Generic Risk Profile is the same for a Measure and
Value Contract and for a Lump Sum Contract.
When considering conversion of a contract from Measure and Value to Lump Sum, the Consultant and
NZTA must consider any project specific risks that are to be shifted between parties. This is the purpose
of a Contract specific section in the Risk Profile. Note that the Contractor must be party to transfer of risk
and agree the baseline.
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Contract Risk Profile - Lump Sum Contract
Risk Description
Risk Status
Clause Ref.
NZS
3910:1988
Brief Explanation
A.
Generic Variation or Time Risks
2.2
Lump Sum Contract
2.2.2
Quantities in SOP inaccurate compared to actual work
required
9*
2.2.5
Significant discrepancy in SOP
9 * (only if SOP
removed or 2.2.3 to
2.2.6 provisions
don’t apply)
2.2.6
“Provisional” items in contract or “measurable”
Risk Included
[Contractor]
Risk Excluded
[NZTA]
9 * (only if SOP
remains)
9 * (this is effectively
the Variation Rates
Schedule)
All Types of Contract
2.7.4
Ambiguity in document resulting in delay or cost to
Contractor
9
2.7.7
Late issue of documentation resulting in cost to
Contractor
9
4.2.6
Nominated Subcontractor not performing resulting in
delay or cost to Contractor
9
5.4.3
Making good damage to adjoining property where
damage “required” by others
9
5.5.2
Separate Contractor activities causing delay or cost to
Contractor
9
5.6.4
Fixing of loss or damage resulting from excepted risks
causing cost to Contractor
9
5.8.5
Rectification required due to incorrect information
supplied by the Engineer
9
5.11.5
Licenses, consents or approvals causing delay or cost
to Contractor not reasonably foreseen
9
5.13.4
Additional work required to locate utility if not indicated
or in substantially different location
9
5.14.2
Protection or dealing with Treasure causing cost or
delay to Contractor not reasonably foreseen
9
5.16
Late supply or materials, services or work by the
Principal
9
6.2.4
Failure of Engineer to properly carry out his duties
resulting in cost or delay to the Contractor
9
6.4.2
Engineer ordered sampling or testing where the
results are compliant
9
6.4.4
Engineer failing to inspect works in reasonable time
resulting in cost or delay to Contractor
9
6.4.7
Costs incurred to open up works at a later date for
inspection if works are compliant
9
6.6.4
Failure to issue Certificate of Practical Completion or
Defects Liability Certificate within time resulting in cost
or delay to Contractor
9
6.7.4
Failure of Engineer to grant permission to continue
within 1 month of request after 3 months suspension
of works
9
9.1.1
Engineer ordered variations:
(a) changing quantity
(b) omitting work
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Risk Description
Clause Ref.
NZS
3910:1988
Risk Status
Brief Explanation
(c)
(d)
(e)
Risk Included
[Contractor]
Risk Excluded
[NZTA]
9
9
9
changing character or quality
requiring additional work
changing the level or position
9
9.1.2
Engineer directed change in the order of the works
9.5
Unforeseen conditions
9
10.3.1
Extension of time (weather, variations, strikes, loss or
damage to the Contract Works, unforeseen
circumstances)
9 (unless varied by
Special Conditions)
10.7.4
Occupancy or use by the Principal causing delay or
cost to the Contractor
9
11.2.4
Search for defect and remedial work during the
Defects Liability Period directed by the Engineer and
Contractor not liable for defect
9
12.8.1
Change in regulations or statutes after award that is
not otherwise provided for in the documents
increasing the cost to the Contractor
9
12.9
Provisional sums expenditure
9
12.10
Prime cost sum expenditure
9
12.11
Contingency sum expenditure
9
B.
Contract Specific Risks
Note – where the
contract specified
risk is to lie with the
Contractor it should
be specifically
included in the
Lump Sum price
e.g.
Work required beneath specified cut-off line
e.g.
Undercutting of subgrade
9
9
e.g.
Stockpile and disposal sites
9
e.g.
Land entry agreements
9
e.g.
Work required to address neighbour complaints
9
e.g.
Resource consents for all work required
?
e.g.
Liability for damage to services
9
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3.
DOCUMENTATION
Following negotiation of the conditions associated with conversion of a Measure and Value Contract, the
Contract is to be formalised by modifying the following model “Attachment to Contract Agreement”, as
may be relevant to the particular contract, and attaching it, together with the Schedule of Rates for
Variations and the Breakdown of Lump Sum Contract Price, to the original Measure and Value Contract
document.
Attachment to Contract Agreement
1. This Attachment to Contract Agreement details the basis of this contract.
2. NZTA Contract Nº ________, ___________________________ was tendered and evaluated as a Measure
and Value contract.
3. Subsequent to the evaluation of the tender, the NZ Transport Agency and [Contractor] agreed to
renegotiate the basis of the tender to establish a new basis of contract being a Lump Sum contract.
4. This Attachment to Contract Agreement summarises and replaces [Contractor’s] tender submitted on
___________, and all other tender correspondence relating to the post acceptance negotiation of the basis
of contract.
5. Where any term or condition of this Attachment to Contract Agreement is in conflict with any term or
condition elsewhere in the Contract Documents, this Attachment to Contract Agreement shall take
precedence.
6. The Special Conditions of Contract are changed as follows:
2.1.1 – This contract is a Lump Sum contract.
No Schedule of Prices is included in the Contract Documents, however a Breakdown of Lump Sum
Contract Price and Schedule of Rates for Variations are included as part of this Attachment to Contract
Agreement. This schedule is not a Schedule of Prices, and the provisions of 2.2.3 to 2.2.6 do not apply.
7. The Lump Sum Contract Price of $_______________ shall be paid on a milestone basis as items identified
in the attached Breakdown of Lump Sum Contract price are completed in part or total. The terms of
payment are:
e.g.
▪
▪
Item ____, Preliminary and General
-
Payment certified on establishment, $____________
-
Monthly payment certified, $______________
-
Payment certified on disestablishment, $__________
Items ________ inclusive, balance of contract works
-
Payment certified monthly pro rata to the percentage of each
item assessed to be complete at the end of the previous month.
▪
Payments certified are subject to the application of retentions in
accordance with Clause 12.3 of the Conditions of Contract.
▪
All other terms of payment are in accordance with Section 12 of the
Conditions of Contract.
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8. The Lump Sum Contract Price of $____________ is deemed to cover all costs and expenses whatsoever
for the completion of the Contract Works as shown in the Revision _____ Drawings and as specified in the
Contract Documents. For the avoidance of doubt, the Lump Sum Contract Price includes:
e.g.
Any variance between quantities previously scheduled in the documents issued for tender and the
actual quantities required to complete the Contract Works as shown on the Revision _____
Drawings and as specified in the Contract Documents.
e.g.
All preliminary and general costs regardless of the time taken to complete the Contract Works,
subject only to additional costs being compensated at the Working Day rate in accordance with the
Conditions of Contract.
e.g.
All costs associated with erosion and sediment control to achieve specified standards of control
and to the satisfaction of ________________.
e.g.
The installation of drainage works at invert levels to enable drainage to function as shown on the
drawings, with the undercutting of trenches and backfilling of trench undercut being treated as a
Variation to the contract.
e.g.
……….
9. The Lump Sum Contract Price does not include:
e.g.
Any Variation in quantity which results from an instruction by the Engineer to change the line, level
or location of any part of the Contract Works from that shown on the Revision ___ Drawings in the
Contract Documents,
e.g.
The undercutting of subgrade material, which will be treated as a Variation to the contract. [Work
undertaken beneath the baseline]
e.g.
Any fencing which will be treated as a Variation to the Contract.
e.g.
……..
10. Variations shall be valued either as the rates given in the Schedule of Rates for Variations where applicable
or in terms of clauses 9.3 or 9.4 of the Conditions of Contract.
11. The contract period of ____ Weeks commenced on ______________ giving, at that time, a Due Date for
Completion of _________________.
WITNESS to signature
of the Contractor
Contractor
WITNESS to the signature
of the Principal:
Principal
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Schedule of Rates for Variations
1.
2.
Variation Rates
e.g.
Item
1.1
Description
Undercutting existing subgrade – excavate and place in fills
e.g.
1.2
Extra over to excavate rock and compact in _______________
m3
e.g.
1.3
Place Bidim A34 in subgrade undercut
m2
e.g.
1.4
Uplift and spread topsoil in areas to receive grass
m2
e.g.
1.5
Grass topsoil and maintain grass
m2
e.g.
1.6
Apply and maintain hydroseeding
m2
Rate ($)
Dayworks Rates
e.g.
Item
2.1
Description
Labour
(a)
(b)
(c)
(d)
3.
Unit
m3
e.g.
2.2
e.g.
2.3
Unit
General Labourers
Machine Operators
Tradesmen (carpenters, electricians, etc)
Foreman/Supervision
Rate ($)
Hr
Hr
Hr
Hr
Materials – percentage mark-up on Net Costs for all materials
provided under dayworks
Plant – Percentage application on Contractors’ Federation
rates for Plant provided under dayworks
%
%
Percentage Working Date Rate
Where applicable the following rates shall be used in the valuation of Variations:
e.g.
3.1
On-Site Overheads
e.g.
3.2
Off-Site Overheads and Profit
e.g.
3.3
Working Day Rate
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Breakdown of Lump Sum Contract Price
Section
1.
Description
Preliminary and General
2.
Site Clearance
3.
Earthworks
4.
Sub-grade Preparation and Stabilisation
5.
Topsoil and Grassing
6.
Stormwater
7.
Sub-basecourse Layer
8.
Basecourse Layer
9.
Chipseal Surfacing
10.
Pavement Marking
11.
Signage
12.
Safety Barriers
13.
Bridge – Piling
14.
Bridge – Abutments
15.
Bridge – Piers
16.
Bridge – Superstructure
Lump Sum Price ($)
Total Lump Sum Contract Price
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