BCGBC4008A – Conduct on-site supervision of the building construction project.
QUESTION BANK – AE3 ASSESSMENT
ELEMENT 1 - QUESTIONS
Q1. What are Prime Cost items?

A Prime Cost (PC's) is an estimate for materials (ie fixtures and fittings) which the owner may not have decided on or chosen or that the price was unknown at the time of entering into the building contract. The builder makes an allowance for these items in the total contract sum and an average standard price is usually allowed for, if the owner selects more expensive items then the difference in price can be claimed for by the builder. PC's are usually one-off items such as fixtures and fittings where the labour costs are static. Typical examples of prime cost items may be bathroom fittings such as toilets, bathtubskitchen fitouts, taps, carpets, light fittings etc.

Contracts will include a separate list of all the items with a detailed description of each item including a cost estimate.

Q2. What are Provisional Sum items?

A Provisional Sum (PS's) is anestimate for labour and materials for completing particular work. The sum is usually an estimatewhich the builder, at the time the contract was entered in to, could not provide an accurate costing for the work. The estimate will include both builder’s and third party (sub-contractor’s) costs. Some PS’s are for unforseen work such as site excavation where the ground conditionsare unknown such as excavations work for pools or basements.

Q3. What if the PC’s and PS’s sum allowed for do not equal the actual amounts incurred, what evidence does the builder have to provide to increase the Prime Cost and Provisional Sum items?

In relation to PS’s the builder needs to provide detailed evidence of the actual volume of work completed thorough site records, sub-contractor quotations and invoices etc. and have it approved by the client before claiming payment.As for PC’s the builder is required to provide quotations/invoices from the suppliers for each of the items finally selected by the client. The increased amount has to be approved by the client before claiming payment.

Q4. What is the accepted deposit a builder can charge for home building work?

A legal limit is set by each state that the work will be carried out in. Within NSW the acceptable amount is 10% if the contract price is $20,000 or less and 5% if the contract price exceeds $20,000.

Q5. If the owner is late in making payments can the builder claim interest on late payments?

Yes, most contracts give the builder a right to charge interest on late payment, the contract will refer to the clause that relates to default interest. Generally, the owner/client must pay the builder specified interest on any amount that is unpaid if it is over the contracted payment date.

Q6. Is the Builder allowed to increase the Contract Price?

Most building contracts have provisions for variations, prime costs and provisional sum items are the general reasons why the total contract sum may change during the construction project. Some situations may arise which is not the builder's fault in these cases the builder may claim for extra costs incurred due to these unforseen events. Most contracts identify what is accepted as variations and set limits on the amounts the builder can increase the contract sum by. The builder has to follow the contract procedures when claiming for variations.

In general most provisional sums and prime costs may automatically increase the total contract sum (without variations) because the owner often selects products and services which cost more than the allowances provided for in the contract.

Q7.a) Who is likely to carry out the preparation of a progress claim?

The builder or site supervisor

b) When would a progress claim be prepared?

After the completion of the workto which the claim is being prepared for or at set times and intervals.

c) Discuss two methods of valuing work in terms of their advantages and disadvantages

Total value since commencement (item by item)

% of each trade completed

Q8.a) In relation to a progress claim, what information would be included in the covering letter?

Contractor’s details, date of progress claim, particulars of the work completed, claim value

b) To avoid the problem of overpayment, how would you verify a subcontractor’s progress payment?

Inspection of work being claimed for, receipts of materials purchased, invoices of materials/equipment claimed for.

Q9. What does the final line of a contractual variation approval show a subcontractor?

New adjusted contract sum

Q10. What does day-work mean?

A small area of work that is difficult to quote and therefore work is carried out on a daily basis charging out at a day or hourly rate.

Q11. What methods might be used to record day-work?

  1. Time sheets itemising hours spent on work
  2. Invoice of work completed
  3. Site diary notations of work completed

Q12. Complete the following progress claim showing the percentages of work complete.

Schedule of contract work Complete to ………30 December

COST CODE / PARTICULARS / VALUE ($) / % COMPLETE / VALUE ($) COMPLETE
Excavation / 200 000 / 100 / 200 000
Formwork / 320 000 / 84 / 268 800
Reinforcement / 170 000 / 100 / 170 000
Concrete-place / 418 000 / 100 / 418 000
Concrete-finish / 139 000 / 100 / 134 000
Masonry / 179 000 / 62 / 110 980
Structural Steel / 208 000 / 43 / 89 440
Woodwork / 41 000 / 11 / 4510
Roofer / 142 000 / 14 / 19 880
Painter / 64 000 / - / -
Electrical / 72 000 / 31 / 22 320
Landscape / 51 000 / - / -
Contract Sum / Total Completed / 1437 930

Q13. What would be the minimum information recorded on day-work?

  1. Area of work to be completed
  2. Hours/days spent on work
  3. Day/hourly charge out rate

Q14. Why is it considered necessary to use cost control reports?

A Cost control report is a cost accounting method and management technique with the aim of improving business cost-efficiency by reducing costs. Businesses use cost control methods to monitor, evaluate the expenditure on a construction project and to control overspending and maintaining payments received to balance with the work completed.

Q15. Can a lending authority stop payment on progress claims?

If the lending authority feels the amount of work completed is not equal to the amount of money claimed, they may not approve payment and only release funds for a lesser amount based on their estimation of the works completed.

Q16. Give an example or situation where a “back-charge” may be used?

Where work has been defective and has caused additional costs to be incurred by the builder for time delay or has affected other areas of work that needs to be redone.

Q17. What type of payments can a builder claim for and at what stages can these claims be made at?

Progress payments are set out in the contract the builder and client enter into. The builder can request a deposit at the start of the contract and various progress payments at designated stages throughout the works. Other forms of payments will be for variations, PC and PS sums allowances, final payments will be received at the end of the project.

For major work the payments are claimed at Base stage, Framing stage, Lock up stage and Fixing stage.

Q18. When can a builder claim final payment?

A builder can claim for final payment when all the work has been finalised as per the contract documents i.e. approved plans and specifications, after the defects liability period has ended and all defect work has been completed and work has been done to the client’s satisfaction. Once the building is deemed safe for occupation a Certificate for Final Inspection is required by Council or Primary Certifying Authority. This certificate is to be given to the client so final payment can be claimed for.

ELEMENT 2– QUESTIONS
Q19. What is the purpose of dispute resolution clausein a contract and how do both parties make use of this?

Most home building contracts contain a dispute settling procedure. In some states parties have no option and are referred to a government sponsored Tribunal (people’s court). Where dispute settling clauses are permitted, the parties are given a number of options to choose from to settle their dispute e.g. mediation, arbitration, small claims court

Q20. When can the owner request a variation to the contract?

A variation can be requested at any time during the contract and parties should refer to the variations clause in the contract they have entered in to. Generally, the owner requests a variation because they would like to change or alter works from what has been shown or specified in the contract drawings/plans. The builder has the option to agree or refuse to carry out the variation if they feel the work may compromise the construction.

Q21. When can the builder make a variation to the contract?

The contract has set procedures that both parties have to follow when making a variation request. Some states require that both parties have to sign a variation before proceeding. However, this is not always possible during a critical building process and the contract allows for this situation. In general a builder will provide a description of the works to be varied and the estimated costs expected, this in turn will be submitted to the owner/client for approval before works can proceed. For unforseen events such as during earthworks variations may be claimed after evidence has been provided to the client of the changed conditions. Variations can be claimed for at the next progress payment stage, or at the end of the contract.

Q22. What is the procedure for variations?

  1. Contactor must give notice of price and description of work in writing
  2. Notice is to be signed and dated by both parties (builder & owner/agent)
  3. Subcontractors are organised and work is then carried out.
  4. The cost of the work is then added to the next progress claim once completed
  5. The final contract sum is adjusted to include the variation amount.

Q23. What can the owner do when the builder is requesting an unreasonable extension of time to complete the owner’s home?

To determine whether the extension of time request is unreasonable check the building start date and the due date for completion. If the completion date has changed and is much later than what was planned for then the reasons for the extensions of time need to be reviewed.

The builder is required by law to have made allowances for foreseeable delays due to inclement weather and known factors, such as:

  • public holidays, rostered days off and weekends
  • breaks in continuity of work (for example, curing of slabs), and
  • Other delays due to the nature of the work e.g. different trades working with each other.

As per most building contracts the builder must state in the contract how many days have been allowed for each of the above categories. If the builder can not estimate the period of delay for a particular category then it must be noted against that category that “it is not possible to estimate”. Delays arising from circumstances beyond the builder's control, or that the builder could not have foreseen at the time when both parties entered the building contract, may be considered reasonable, e.g. strikes, catastrophic storms, pc items not available because out of stock or awaiting delivery etc.

Q24. How doesan owner or builder make changes to the building contract?

Changes to the contract after it has been signed are called 'variations'. These may be changes that the owner or builder have requested, or changes that thearchitect, engineer, primary certifying authority has ordered after building has started.

For most variations, the contract requires the owner and builder to agree in writing to the changes and document the details, including new price and completion date before the work is undertaken.

This is not necessary if the builder reasonably believes the changes will not:

  • require a change of price
  • cause delay, and
  • add more than two per cent to the original contract price.

Q25. Identify five (5) common problems caused by poor supervision during the course of construction:

  1. Job running over budget
  2. Job running overtime
  3. Materials and equipment not on site when required
  4. Sun contractors unable to start on time
  5. Below par quality of construction often need repair or re-doing

Q26. Site meetings are probably the most common way of maintaining the necessary communication processes between workers on site. List four (4) reasons why meetings are held?

  1. To set schedules and timetables for work to be completed by
  2. To review work completed thus far
  3. To identify any problem areas that need resolution
  4. To identify any materials/equipment that need to be ordered
  5. To communicate any changes/variations that needs to be added to site work.

Q27. An agenda is prepared and sent to each person required to attend a meeting informing them of important factors about the meeting. List five (5) of the most important things required in an agenda.

  1. Review of work progress
  2. Client communications
  3. Material/equipment requirements
  4. Evaluation of any problems
  5. Requests for further information
  6. Inspection dates to be set

Q28. List five (5) forms of record keeping that a site supervisor/foreman would need to maintain on a building site.

  1. Site diary
  2. Time sheets
  3. Sign on books
  4. Order books
  5. Faxes
  6. Emails/Letters
  7. Contract documents – DA/CC requirements
  8. Dockets, receipt collection and invoices
  9. Notice of injury book

Q29. Effective communication will stop confusion occurring between the sender and receiver of a message whether it is written or verbal. List eight (8) main things that can cause confusion during the communication process.

Communication is only successful when both the sender and the receiver understand the same information as a result of the communication

  1. Unclear instructions i.e. muddled information
  2. Version control to indicate date/time instructions were given
  3. Lack of feedback
  4. Time frame when instructions need to be carried out or responded to
  5. Misunderstanding and “interpreting” what is being communicated i.e. messages muddled by the sender, or misinterpreted by the recipient. Do not make assumptions.
  6. Distortion – distorting the truth i.e. provide accurate information
  7. Long verbal instructions with out a written back up
  8. The use of technical terminology and abbreviations to parties that do not have the know how
  9. Clarifying responsibilities of each of the parties
  10. Misaligned expectations- When each member has a different expectation on how things are supposed to work. Most often it is over roles, responsibilities and authority.

ELEMENT 3 – QUESTIONS

Q30. How can a builder manage quality control on their construction project?

  1. Good communications are maintained through site meetings
  2. Clear and precise instructions are given which should be backed up in writing or with documentation where necessary.
  3. Work team is to clarify information on areas of work they are unsure about.
  4. Regular inspections are maintained.
  5. Poor workmanship is to be identified and rectified immediately before work continues.
  6. Trades not maintaining good work standards are to be reviewed and the builder needs to communicate to them the level of workmanship expected.

Q31. How can a builder record and document quality control on a construction project?

  1. ITP – Inspection Test Plan
  2. Visual inspections recorded via digital imagery i.e. digital recording or digital photographs
  3. Site reports to be raised at site meetings and recorded in the minutes taken.
  4. Documented site inspection reports to be forwarded to relevant parties.

Q32. What is the primary reference document that controls acceptable standards of low-rise construction projects?

BCA – Building Code of Australia

Q33. List other industry documents that provide further detail of acceptable quality standards for low-rise construction projects?

  1. Australian Standards
  2. Project specifications
  3. Suppliers technical application manuals for specific products

Q34. List the standard statutory inspections required on a domestic construction project?

  1. Pre-commencement
  2. Survey certificates on building position
  3. Footings prior to placement of concrete
  4. Reinforcement inspection
  5. Structural framing
  6. Termite barriers certified
  7. Waterproofing of wet areas
  8. Occupancy

Q35. What are the processes a builder follows to communicate to a trade that work is unsatisfactory?

  1. Meeting with trade to review work done
  2. Visual inspection of area in question
  3. Review reasons for poor quality of work
  4. Reach agreement as to rectification required and diarise decisions agreed
  5. Make permanent record of rectification to avoid future re-occurrence
  6. Back-charge where applicable.

Q36. Who is responsible for the booking and organising inspections by the PCA?

The builder/site supervisor

ELEMENT 4 – QUESTIONS
Q37. What is a Defects Liability Period?

The Defects Liability Period under a building contract is different from the statutory Warranty defect period.

All building contracts will have set out the builder's defect liability period which can range from three to six months from practical completion. The contract will specify when the Defects Liability Period can start which is often when the building is deemed practically complete or when the owner/client moves in and occupies the building.

Q38. What is the purpose of a Defects Liability Period?

The purpose of the Defects Liability Periodis to rectify any works that has not been completed or that has failed and needs repair e.g. areas to be repainted, doors not closing properly, crackingand chipping. Some defects may be serious structural failures or omissions but the majority are cosmetic repairs. Defects that are a direct result of the owner’s occupation or have been caused by the owner are not covered.

Q39. Can an owner withhold a progress payment from the Builder?

All contracts will state whether it is possible for the owner to withhold payments. This clause needs to be identified in the contract entered in to by both parties and the procedures set out in the contract need to be strictly adhered to. Many building contracts only permit the owner to consider this type of action at practical completion.

Owners are advised to seek legal assistance before deciding not to pay a progress claim as this may nullify/terminate the contract. This could lead to legal action to be taken out by the builder against the owner.