The Future Of The Bill Of Quantities Construction Essay

Bills of quantities (BOQ) according to Seeley and Winfield (1999) is a document that consists of a schedule of items of work to be carried out under the contract with quantities entered against each item, prepared in accordance with the Standard Method of Measurement of Building Works (currently SMM7). According to Ramus and Birchall (2003) the BOQ’s are drawn up by a quantity surveyor on behalf of the client based on detailed drawings and specifications from the architect. Also according to them the BOQ’s along with the drawings and specifications are then sent to contractors to price for the upcoming project. The contractors then insert a unit price against each item in the bills and when all items are totalled the result is total cost of the bills and thus the tenderer’s price (Turner 1995).

The history of BOQ’s goes back to the 19th century according to Ashworth and Hogg (2000). They say that with the rise of general contracting in the industrial revolution, the contractors were employing surveyors to prepare a BOQ for the work. The contractors soon realised that it was unnecessary duplication of the bills with all them employing their own surveyor so began to employ a single surveyor to prepare the document from which all the firms would price the work. It was agreed between the firms that the winning contractor would cover the surveyor’s fees. With the payment of the surveyor ultimately coming from the client it soon became apparent that these surveyors would be better employed on their behalf under the direct authority of the architect (Ashworth & Hogg, 2000). This was the traditional accepted form of procurement until post second world war and is still used today mainly on the small to medium scale (Cartlidge, 2006).

The pros and cons of the BOQ’s have been debated and deliberated upon for many years now and the argument has generated some strongly held opinions and many differing views. According to Duncan Cartlidge (2009) that: “during the recent past the bill of quantities has been much maligned as outdated and unnecessary in the modern procurement environment. Indeed it is undeniable that on the face of it the number of contracts based on a bill of quantities has declined sharply over the past 20 years or so”. This is a view held by many in the construction industry as the advantages and a disadvantage of the BOQ’s use is debated. Brook (2008) tells that the BOQ has two primary uses in construction; the first is the pre contract stage of tendering (described above), and the second is at the post contract stage where it is used by the contractor and QS to value work and price variations from the design. Davis, Love and Baccarini (2009) in their article Bills of Quantities: nemesis or nirvana, discuss the benefits and drawbacks of the BOQ at both the pre and post contract phase.

Advantages of BOQ at pre contract phase:

Database – The pricing details within the BOQ provides a cost database for future estimating.

Fee calculation – The BOQ provides an absolute basis for the calculation of consultants’ fees.

Asset management – The BOQ provided readily available data for asset management of the completed building, life cycle costing studies, maintenance schedules, general insurance and insurance replacement costs.

Taxation – BOQ provide a basis for quick and accurate preparation of depreciation schedules as part of a complete asset management plan for the project.

Disadvantages of BOQ at pre contract phase:

Cost and time – The preparation of a BOQ tends to increase the cost and lengthen the documentation period.

Estimating practice – Tenderer’s may ignore the specification (e.g. workmanship requirements), pricing only according to the BOQ. This may lead to under pricing and the consequent risk of unsatisfactory performance as contractors try to avoid losing money.

Procurement – The use of a detailed design and associated BOQ discourages contractors from submitting alternative design solutions, as alternatives will amend quantities. The BOQ is only suitable (if at all) to the traditional procurement system

Advantages of BOQ at post contract phase:

Certainty of progress payments – The BOQ provides a post-contract administration tool and becomes a basis for the evaluation of progress payments. The calculation of these progress claims is straightforward and reliable. This certainty offers contractor, principal and financiers peace of mind in the knowledge that all work is being carried out at prices fair and reasonable to all involved.

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Variation management – The BOQ provides a sound, common basis for the valuation of variations. Also, the prices for variations are reduced by the use of BOQ unit rates. Without a BOQ, the pricing of variations leads to more protracted negotiations.

Risk management – The prices in the BOQ can be used as a basis for comparing a contractor’s price with current trends in the marketplace. This provides a basis for management to determine the likely manifestation of risk factors.

BOQ errors – Errors are not a major cause of variations. Choy (1991) found the average change order to be 7.7 per cent of contract value with BOQ errors representing 4.5 per cent of total variations.

Disadvantages of BOQ at post contract phase:

BOQ errors – Because of the amount of detail required in a BOQ, there is a significant chance of finding errors, omissions and discrepancies between drawings and the BOQ, with consequent disputation. This risk of disputation arising from misinterpretation and error outweighs the advantages of BOQ.

Unit rates – The cost data obtained from contactor-priced BOQ is often used by QSs for cost management, such as valuing interim valuations. This data can be suspect for reasons such as: contractors increase rates on early trades above their real cost, and reduce the cost of later trades, to improve cash flows; some contactors may load later trades to gain benefits from rise and fall.

Responsibilities – BOQ involve a shift in, or “risk blurring” of, the contractor’s responsibility that results in claims and disputes.

Standard Method of Measurement – it is often said that the SMM is much too complex and many disputes arise from its language and how it is interpreted by the contractor and QS.

(Davis, Love & Baccarini, 2009)

There are many other articles that have been published in recent years that have added to the argument over BOQ use. Richard Schofield of the RICS Project Management Faculty in his article “A procurement crossroads” in the RICS Construction Journal supports the use of the traditional procurement and the traditional role of the professional QS. According to Schofield (2007) the traditional practices succumbed to economic pressures from clients to deliver projects faster in times of high inflation and gave rise to management contracting and construction management. These drivers, and the desire to transfer more risk to the contractor, also made design and build more attractive to many clients. According to Schofield (2007), government pressure to engage in compulsory competitive tendering for consultancy services forced fee levels down and with this diluted the level of service from the design team.

This issue is addressed in Building magazines article “Whatever happened to the QS” by Jonathon Woods (2008). According to Woods (2008) many QS’s are saying that they don’t get a big enough fee to spend the time producing a bill of quantities or don’t get enough time to produce a bill of quantities.

The government reports of the 90’s from Latham (1994) and Egan (1998) questioned the rationale behind using the traditional procurement as the main method of construction procurement despite its limitations. However since their reports there has been a significant shift from traditional procurement to the use of other modern methods of procurement. And with the decline of traditional procurement the use of one of its main components, the BOQ, declined too.

The RICS Contracts in Use Survey details down through the years the shifting nature of procurement methods in the UK, and it is clear from its most recent results that the BOQ use is diminishing. The introduction to this survey which was conducted on projects in 2007 speaks a lot about the shift from BOQ to lump sum Design and Build:

“In the 1985 survey, Bills of Quantities dominated the survey with minor use of the Design and Build forms. By the 1998 survey, Design and Build was ahead of Bills of Quantities. This was the time of major shifts in procurement strategies. Clients wanted certainty of risk transfer. This survey (2007) reinforces the dominance of Design and Build as a procurement strategy, with a continued decline in Bills of Quantities. However, Bills of Quantities refuse to die.”

The survey also alludes to the fact that a lot of smaller/minor works project are simple plan and specification and some lump sum BOQ contracts, the larger projects show preference for the construction management version of design and build. The survey itself captures up to 1300 projects across the UK in the year of 2007, the cumulative value of these projects of approximately £7.8 billion. The following figures and tables show the distribution of procurement methods in 2007 based on number of projects choosing a certain method and also based upon the value of contracts. They also give an overview of procurement choices from previous surveys:

Fig. 1.3. Distribution of procurement methods – by number of contracts (2007)

Fig. 1.4. Distribution of procurement methods – by value of contracts (2007)

1985

%

1987

%

1989

%

1991

%

1993

%

1995

%

1998

%

2001

%

2004

%

2007

%

Lump Sum -Firm BOQ

42.8

35.6

39.7

29.0

34.5

39.2

30.8

19.6

31.1

20.0

Lump Sum – Spec & Drawings

47.1

55.4

49.7

59.2

45.6

43.7

43.9

62.9

42.7

47.2

Lump Sum -Design & Build

3.6

3.6

5.2

9.1

16.0

11.8

20.7

13.9

13.3

21.9

Target Contracts

–

–

–

–

–

–

–

–

6.0

4.5

Approx. BOQ

2.7

1.9

2.9

1.5

2.3

2.1

1.9

1.7

2.9

1.7

Prime Cost

2.1

2.3

0.9

0.2

0.3

0.7

0.3

0.2

0.2.

0.5

Management Contract

1.7

1.2

1.4

0.8

0.9

1.2

1.5

0.6

0.2

0.7

Construction Management

–

–

0.2

0.2

0.4

1.3

0.8

0.4

0.9

1.1

Partnering Agreements

–

–

–

–

–

–

–

0.6

2.7

2.4

Total

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

Table. 1.1 Trends in Methods of Procurement – by numbers of contracts

1985

%

1987

%

1989

%

1991

%

1993

%

1995

%

1998

%

2001

%

2004

%

2007

%

Lump Sum -Firm BOQ

59.3

52.1

52.3

48.3

41.6

43.7

28.4

20+3

23.6

13.2

Lump Sum – Spec & Drawings

10.2

17.7

10.2

7.0

8.3

12.2

10.0

20.2

10.7

18.2

Lump Sum -Design & Build

8.0

12.2

10.9

14.8

35.7

30.1

41.4

42.7

43.2

32.6

Target Contracts

–

–

–

–

–

–

–

–

11.6

7.6

Approx. BOQ

5.4

3.4

3.6

2.5

4.1

2.4

1.7

2.8

2.5

2.0

Prime Cost

2.7

5.2

1.1

0.1

0.2

0.5

0.3

0.3

0.1

0.2

Management Contract

14.4

9.4

15.0

7.9

6.2

6.9

10.4

2.3

0.8

1.0

Construction Management

–

–

6.9

19.4

3.9

4.2

7.7

9.6

0.9

9.6

Partnering Agreements

–

–

–

–

–

–

–

1.7

6.6

15.6

Total

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

Table. 1.2 Trends in Methods of Procurement – by value of contracts

From the above results we can see that BOQ by value of contracts is at its lowest level in the surveys history and at its second lowest level in terms of number of contracts. This has lead to rises in spec and drawings and design and build in terms of number of contracts, in terms of value spec and drawings has again risen at the BOQ expense. However design and build contracts by value are down due to rise in construction management contracts and spec and drawings.

It is clear from these results that the use BOQ in procurement is declining, however that does not mean that they are not being used in another sense. According to Ndekugri and Rycroft (2009) that such is the place of the BOQ in the education of the UK’s building industry professionals that even under principal contracts not containing BOQ, the contractor will invariably produce his own bills of quantities, either for his own cost control purposes, or for use in sub contracts. Many others believe that the BOQ should be still incorporated in procurement even if it is not in the traditional sense. Schofield (2007) believes that we should take the best of the new practices that have demonstrated the most improvement and look at combining them with the traditional practices. It is his belief that “the most sensible clients would see the merit of taking a more measured approach to procurement to give them the cost, time and quality certainty they expect”. Woods (2008) also believes that more investment in traditional QS practices can pay the client dividends. According to him the client should realise that by paying less to the QS for their services they are actually paying more for their project. Collectively the QS should be advising the client of this fact about traditional QS practices. Malcolm Taylor (2010) joins the argument for having BOQ involved in some way as in his belief tenderers cannot bid on complex schemes without them. His fear is that tenderers will soon join in appointing a QS to produce one bill for them all to tender, which could open the door for collusion for high pricing to obtain higher profits. So one question raised by some of these arguments is does the BOQ have a place in other procurement methods, or even yet does the QS have a role in any other procurement methods?

The main procurement method taking the place of the traditional is Design and Build (D & B). According to Kennedy et al (1995) most QS’s tend to resent D & B as they perceive it as the main reason for the ‘erosion of their professionalism’ within building professions. According to a survey conducted by Kennedy et al (1995) QS’s encountered the following problems with D & B (Table 3).

Difficulty in the definition of the client’s brief at initial stages.

Difficulty in matching the client’s brief to the contractor’s proposals.

Difficulty in matching the client’s brief to the contractor’s proposals.

Translating the client’s brief into a specification.

Dealing with client variations.

Lack of usable past cost information.

Interpretation of extent of contractor’s responsibility regarding the specification.

Contractor’s ‘front loading’ contract sum analysis.

Design team fees very low resulting in poor availability of information.

Lack of time.

Poor workmanship.

Assessment of tenders can be difficult.

Traditional quantity surveying role diminished by D&B.

Division of what used to be one QS commission into two (1) one QS commission for client and (2) another commission for contractor.

Lack of information from contractor.

Competition too fierce as there are too many QS firms offering the same service.

Contractors do not use QS to their full potential resulting in cost uncertainty.

Table. 3 Problems encountered by QS’s when dealing with D & B

Some astute practices do offer D & B services but according to Kennedy et al (1995) they are relatively low. The main role for QS’s in D & B lies in working with the contractor, which to traditional procurement QS’s is a damaging thought (Turner 1995).

“Design and Build is a serious threat to traditional quantity surveyor’s work. It will reduce need for numbers of staff to prepare bills of quantities and reduce the need for technician staff. Practice personnel will change to comprise qualified, experienced, flexible individuals capable of adapting to changing client requirements.” Kennedy et al (1995)

Another threat to QS’s and the BOQ is the computerisation of the BOQ. In 1999 Sir John Egan told a group of undergraduate QS’s that the construction industry would no longer be needing them as computer technology would do soon be doing their job. From them massive advance have been made in computerised bill production, the software available now can create a BOQ through the CAD system using the design drawings, others can take written take-offs and process them into a bill (Ashworth & Hogg, 2007). Either way they have changed hugely the way a lot of practices operate.