Sub-contracting a road project to more than one contractor for the same scope of work but different location can be tricky and some time could resulted in disaster for the main contractor if things being dome base on assumption only. Why is this so?
Practical Contract Management
First let we asked our self. Do the whole stretch of road is design as typical cross-section? What being meant here is do the whole stretch of road was designed with the same dimension ( road width, Shoulder, sub-base and road-base thickness and ect.) regardless which chainage it is. The answer is Yes and No. Then, the next question is how long is the road? let say the road is 1(one) Kilometer. Now we come to the issue of sub-contracting.
This is the scenario. At Beginning of the project we awarded the whole project to contractor A, however after a certain period the progress is to slow and we are far behind schedule. we decide to engage another contractor, that is contractor B and we wanted them to do the next stretch of the project which the length is 600 meters. By looking at the length we assume that the subcontract of the project is 60% of the total construction Project.Then we told contractor B that from the total construction project, 60% of the scope of works shall belong to them. However there is no proper agreement or contract was executed because we are now desperate to finish the work we ask them to start immediately. However the contractor B give the condition that the work shall be measured by quantity and the rates applied shall be as the rate between main contractor and the project owner. We agreed to the condition imposed by Contractor B and Contractor A also agreed that theirs contract is lump sum that is 40% of the original contract sum. As the project progressing we had being paying the contractor base on the factor of 60:40. The contractor B is not happy because they claim that they do more than 60% of work. and they prove that they are correct by doing all calculation and providing the actual evidence. However for contractor A, a proper contract had been executed after the division was done. Bingo!!!! we are now having problem in paying Contractor B. All of the earlier understanding with Contractor B is base on verbal discussion but there is an official letter being issue by Contractor B with regards to their condition before they start doing the work. we assume that the quantity is 60:40 and the original contract rates was applied.
After a thorough check base on the drawing and verification on evidence provided by Contractor B, we discover that, their claim is valid, where the total quantity for contractor A is actually less and the factor of 60:40 is wrong. However we need to honour our contract with contractor A.
Practical Contract Management
Base on this scenario, The Main Contractor now have to subsidised the work done by Contractor B until all the profit that main contractor expected is gone by the wind.
What is the mistake that being done by Main contractor until they are loosing money? These is it.
1. All thing was done on a basis of ASSUMING.
2. Agreed to something that they did not really know.
As a contractor, lets take the above scenario as a lesson. Before we accept any contract in a construction project, We need to do our own estimation by do some quantity take-off work. By doing that even if we need to absorb some construction cost, we might still making some money but at a lower profit rate.
Practical Contract Management
Practical Contract Management
First let we asked our self. Do the whole stretch of road is design as typical cross-section? What being meant here is do the whole stretch of road was designed with the same dimension ( road width, Shoulder, sub-base and road-base thickness and ect.) regardless which chainage it is. The answer is Yes and No. Then, the next question is how long is the road? let say the road is 1(one) Kilometer. Now we come to the issue of sub-contracting.
This is the scenario. At Beginning of the project we awarded the whole project to contractor A, however after a certain period the progress is to slow and we are far behind schedule. we decide to engage another contractor, that is contractor B and we wanted them to do the next stretch of the project which the length is 600 meters. By looking at the length we assume that the subcontract of the project is 60% of the total construction Project.Then we told contractor B that from the total construction project, 60% of the scope of works shall belong to them. However there is no proper agreement or contract was executed because we are now desperate to finish the work we ask them to start immediately. However the contractor B give the condition that the work shall be measured by quantity and the rates applied shall be as the rate between main contractor and the project owner. We agreed to the condition imposed by Contractor B and Contractor A also agreed that theirs contract is lump sum that is 40% of the original contract sum. As the project progressing we had being paying the contractor base on the factor of 60:40. The contractor B is not happy because they claim that they do more than 60% of work. and they prove that they are correct by doing all calculation and providing the actual evidence. However for contractor A, a proper contract had been executed after the division was done. Bingo!!!! we are now having problem in paying Contractor B. All of the earlier understanding with Contractor B is base on verbal discussion but there is an official letter being issue by Contractor B with regards to their condition before they start doing the work. we assume that the quantity is 60:40 and the original contract rates was applied.
After a thorough check base on the drawing and verification on evidence provided by Contractor B, we discover that, their claim is valid, where the total quantity for contractor A is actually less and the factor of 60:40 is wrong. However we need to honour our contract with contractor A.
Practical Contract Management
Base on this scenario, The Main Contractor now have to subsidised the work done by Contractor B until all the profit that main contractor expected is gone by the wind.
What is the mistake that being done by Main contractor until they are loosing money? These is it.
1. All thing was done on a basis of ASSUMING.
2. Agreed to something that they did not really know.
As a contractor, lets take the above scenario as a lesson. Before we accept any contract in a construction project, We need to do our own estimation by do some quantity take-off work. By doing that even if we need to absorb some construction cost, we might still making some money but at a lower profit rate.
Practical Contract Management
