researcher zakaria m. aljarosha supervisor dr. kamalain k. shaath
TRANSCRIPT
Impact of Conditions of Contract for Construction (FIDIC 99) on the Gaza Strip Contractor’s Cost Estimation
Researcher
Zakaria M.
Aljarosha
SupervisorDr.
Kamalain K. Shaath
Statement of the Problem
Condition of Contract for Construction (FIDIC 99) has
been recently ratified by the Palestinian cabinet as the
Palestinian Unified Conditions of Contract for
construction works
Statement of the ProblemStatement of the Problem
Statement of the ProblemStatement of the Problem
To avoid bidding too low or too high, it is necessary to
study FIDIC 99 and develop a practical system to deal
with this matter
Statement of the Problem
GoalGoal
To Analyze FIDIC 99, extract
associated responsibility and risk
factors and to develop a practical
system to help the Palestinian
contractors to better estimate the cost
impact of FIDIC 99
ObjectivesObjectives
1- To study and analyze FIDIC 99 in terms
of responsibilities and risks.
2- To investigate the contractor’s practice in
estimating of cost implications of conditions
of contract in the Gaza Strip and to prioritize
these factors.
ObjectivesObjectives
3- To develop a practical system.
4- To computerize the system.
5- To evaluate the system.
LimitationsLimitations
1- First and second class contractor according
to PCU.
2- FIDIC 99 General Conditions.
MethodologyMethodology
Analysis of FIDIC 99Analysis of FIDIC 99
Responsibilities = 39 factors
To Provide
Staff Welfar
e
Security, Safety
and Services
Contractual
To do
Analysis of FIDIC 99Analysis of FIDIC 99
Risks = 54 factors
Construction
Related
Performance
Related
Contractual & Legal
PhysicalPolitical & Social
Field SurveyField Survey
Questionnaire was designed after
conducting of the Literature Review and
Analysis of FIDIC 99
Research population: Local contractors who
are classified under the first and second
classes in various types of woks
Field SurveyField Survey
32 received
71 sent
Seventy one copies were
distributed.
Thirty two were answered and
received.
Response rate = 45%
Field SurveyField Survey
Formalized Techniques
Computer Tools Tools for FIDIC 99
85.00% 78.10%
93.80%
Contractor’s
Don’t Use
Field SurveyField Survey
FIDIC
87
FIDIC
99
UNRWA
UNDP
PECDAR W
B EU
SMDM
MPW PW
A
Other
s
28.10%
37.50%
65.60%65.60%
56.30%
37.50%
28.10%
9.40%
56.30%
46.90%
15.60%
Standard Contract used by Contractors
Field SurveyField Survey
Avoidance18%
Transfer48%
Mitigation34%
It is observed that none of
the respondents seek to keep
risks.
No doubt that all risks can
not be avoided, transferred
or mitigated. It was
previously observed that
there is no systematic
techniques for estimating
and managing risks.
Accordingly, risks are
unconsciously retained.
Risk Response Strategies
It is observed that none of
the respondents seeks to
keep risks.
No doubt that all risks can not
be avoided, transferred or
mitigated. It was previously
observed that there is no
systematic techniques for
estimating and managing
risks.
Accordingly, risks are
unconsciously retained
Field SurveyField Survey
Rank RII Mitigation Action No.
1 0.92 Insurance against accidents A
2 0.85 Improve quantity and quality of staff B
3 0.80 Buy and store materials C
4 0.78 Increase safety measures and tools D
5 0.75 Increase quantity of equipment E
6 0.71 Closer supervision to subordinates F
7 0.69 Include time allowance G
8 0.66 Increase subcontract works as possible H
9 0.63 Increase working hours I
10 0.52 Assign risk to suppliers j
Mitigation Actions
Field SurveyField Survey
Rank RII Statement No.
1 0.85 Adopting of Dispute Adjudication Board (DAB)
A
2 0.83 Discouraging disputes and maintaining positive relationships
B
3 0.81 Reasonably balanced and fair C
4 0.80 Allocates liabilities precisely D
5 0.79 Easy to understand E
6 0.77 Standardized F
7 730. Availability of legal interpretations G
8 0.68 Non applicable provisions could be deleted H
8 0.68 Availability of commentaries and literature I
Advantages of FIDIC 99
Field SurveyField Survey
Rank RII Statement No.
1 0.79 Assumes that project is well defined prior to contract signature
A
2 0.74 Not well adopted to cope with large number of changes
B
3 0.71 Presence of some biased clauses against contractor
C
4 0.67 Assumes unit price remains valid D
5 0.66 Low contractor involvement in decisions related to design
E
6 0.58 Not applicable in the Gaza Strip F
Disadvantages of FIDIC 99
Field SurveyField Survey
Rank RII Responsibility Factor No.
1 0.83 Insurance against person’s injury and property’s damage
1
2 0.79 Insurance against sickness, disease or death of personnel.
2
3 0.78 Insurance for works and equipments 3
4 0.77 Advanced payment guarantee 4
4 0.77 Site and works clear of unnecessary obstructions, rubbish, temporary works, etc.
5
Responsibility Factors
Field SurveyField Survey
Rank RII Mitigation Action No.1 0.83 Non-availability of goods, consumables, etc. 1
2 0.81 Delay to complete work stated in the contract 2
3 0.79 Work interruption due to variations 3
4 0.78 Delay, impediment or prevention caused by employer
4
5 0.77 Works or goods loss or damage 5
6 0.76 Contractor’s design, workmanship or materials failure during suspension
6
7 0.75 Temporary works loss or damage 7
8 0.66 Contractor’s equipment loss or damage 8
9 0.74 Delayed drawings or instructions due to contractor’s fault
9
10 0.69 Interference in the convenience of public 10
Risks by Probability
Field SurveyField Survey
Rank RII Mitigation Action No.1 0.85 Work interruption due to variations 1
2 0.84 Non-availability of goods, consumables, etc. 2
3 0.81 Interim payment certificate with-held 3
3 0.81 Contract termination by employer 4
5 0.78 Delay, impediment or prevention caused by employer
5
6 0.77 Failure to comply with engineer’s instructions 6
7 0.74 Unforeseen disruption or delay by authorities 7
8 0.73 Errors in positions, levels, dimensions or alignments
8
8 0.73 Delay to complete work stated in the contract 9
10 0.72 Work suspension is a responsibility of contractor 10
Risks by Cost Impact
FIDIC 99 Cost estimating System (FCIES)
FIDIC 99 Cost estimating System (FCIES)
FCIES aims at helping the contractors of the Gaza Strip for more accurate estimation based on FIDIC 99
Responsibilities
Estimated directly
Risks
Monte Carlo simulation
FCIES DescriptionFCIES Description
FCIES TestingFCIES Testing
Anti-bugging
Degeneracy testing
Deterministic model
Continuity testing
Expert intuition
Model Verification Model Validation
FCIES TestingFCIES Testing
FCIES Evaluation
Approaching 5 local contractors classified at first class according to PCU
The results show that the overall satisfaction of FCIES performance is 88.29%
FCIES EvaluationFCIES Evaluation
Allays fears of lack of sufficient information and expertise about FIDIC 99
Helpful in proper understanding the terms of FIDIC 99
FCIES advantages
FCIES EvaluationFCIES Evaluation
Helps to find creative ways for dealing with risks
Provides sufficient flexibility in order to absorb facts and alternatives
FCIES advantages
FCIES EvaluationFCIES Evaluation
Criticisms
Responsibility and risk factors were built in the program, which limits the flexibility of FCIES
FCIES calculates the cost impact of FIDIC 99 apart from cost estimating of bill of quantities
Majority of local contractors do not use formalized techniques for estimation purposes
when pricing a bid
Local contractors do not have suitable tools to estimate the cost impact of FIDIC 99
Introduction of DAB for settling disputes and FIDIC 99 discouraging disputes are the most
appreciated features of FIDIC 99
Conclusions
Con
clu
sio
ns
Conclusions
Not well suitable to cope with large number of variations, Presence of some biased clauses
against the contractor and Low contractor involvement in decisions related to design are
the most disadvantages of FIDIC 99
Conclusions
Providing different types of insurance
Keeping the site and works clear from unnecessary obstructions, rubbish, temporary
works and surplus materials.
Complying with safety regulations
The most important responsibilities are
Con
clu
sio
ns
Work interruption due to variations
Delay in completing works
Non-availability of goods, consumables and construction materials
With-holding of interim payment certificate
Conclusions
The most important risks are
Conclusions
FCIES was developed in order to help the local contractors to estimate the cost impact of FIDIC
99
FCIES evaluators are generally satisfied with its performance
FCIES could play an important role in improving the cost estimation under FIDIC 99.
FCIES
Proper understanding of terms of FIDIC 99
Better assessment of the financial impact of FIDIC 99
Flexible and easy to use
Saves time and minimize efforts
FCIES Advantages
Conclusions
FC
IES
It is recommended that pricing team should be supported with the necessary tools and
techniques
More time and efforts should be provided at the front end of the project where experienced staff should be involved to manage or mitigate
the risks and administrate the contract
Recommendations
Recom
men
dati
on
s
Risk documentation could be helpful in pricing future projects
Early involvement of contractor reduces the possibility of excessive variations. It is
recommended to encourage other types of contracts settings such as design-build or
construction management
Recommendations
Recom
men
dati
on
s
Recommendations
Offering training courses about FIDIC 99
Contractors are invited to use FCIES in order to get more accurate cost estimation
It is recommended to buy and store as much as possible of construction materials at the front
end of a project
Recom
men
dati
on
s
Recommendations for further studiesRecommendations for further studies
Study and investigate probability distribution of different risk factors
Integrate FCIES with cost estimation software in order to have comprehensive system
Conduct another survey when the construction industry recovers and make comparative
analysis
THANK YOUResearcher: Zakaria M.
Aljarosha
Supervisor: Dr. Kamalain K. Shaath
October 2008
Islamic University of
Gaza