Professional

Practice 2
Group Assignment (QSB 3614)
Semester 5, 6th June 2016

Chew Jun Ming (0310173)

Wilson Lo Wei Kong (0317382)
Abang Azrul Azim (0316674)
Lee Kai Yang (0314835)
Ahmed Munzir B Akmal (0304924)
Fatin Atiqah Putri Binti A Razak (0308496)
Table of Contents
Professional Practice 2 [QSB3614]

Coursework No. 2 Preparation of Final Account

Introduction

Question 1

2-6

Question 2

7 - 11

Question 3

12 - 15

INTRODUCTION

This report is briefly explaining the adjustment of the essential elements in

preparation of the Final Account. However, this report is set up to recognize the
significance and implications if some works are entirely left out in the Bills of
Quantities and also not picked out as provisional sums or P.C sums.
The conditions of the situation mentioned includes Works like entrance porch
in which are shown on the drawings but not sufficiently designed for measurement of
quantities are entirely left out in the Bills of Quantities and also not picked out as
provisional sum or P.C. sum.
This report will cover the definition, method and adjustment fundamental
component in preparation of the Final Account. Other than that, it also defines of the
provisional and P.C sums relating to the circumstance assumed and later discuss on
the significance and implications from two points of view, consisting of the client and
the Contractor. Lastly is the conclusion.

QUESTION 1
You are required to prepare a report to your director, explain to
your director, explaining briefly the essential elements in
preparation of the final account.
The director would also like to know the significance and
implications of works like entrance porch (which are shown on
the drawings but not sufficiently designed for measurement of
quantities) are entirely left out in Bills of Quantities and also not
picked out as provisional sum or P.C. sum.

Internal Memo
To:

Mr. Director

From: Project QS Sdn. Bhd.

Re:
Report on the essential elements to be adjusted in Final Account.
Date: 6th of June, 2016

As mentioned above, this report emphasize on the essential elements that will
affect the sum of final account. The aim of preparing the final account is to establish
the final contract value which will determine the sum that the Contractor to receive.
According to Clause 30.10 of the PAM Contract 2006, final account must be issued
not later than six (6) months after the Practical Completion of Works. In order to
proceed with that, Contractor should submit all the relevant documents and
information which is necessary for the final account preparation made by consultants.
Final Account is prepared to establish the final construction cost of project. A
complete Final Account should including the following elements:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)

Variation Works (Clause 11.6)

Re-measurement of Provisional Quantities (Clause 11.6 (f))
Omission of Prime cost and Provisional sum (Clause 30.11 (c))
Adding-back of NSCs and NSs Final Accounts (Clause 30.11 (c))
Adjustment of Profit and Attendance (Clause 30.11 (c))
Adjustment of Provisional Sum based on actual expended and omitted if
not expended (Clause 30.11 (d))
Additional Expenses Claims (Clause 11.7)
Loss and Expenses Claims (Clause 24.4)

First of all, variation works is falls under Clause 11.6. The valuation of
variation and work executed by the Contractor for which a provisional quantity is
included in the contract and the expenditure of provisional sum shall be based on
11.6(a), (b), (c), (d), (e) & (f). This shall exclude the work for which a tender had been
acknowledged under Clause 27.14. For example, variation may occur in circumstance
such as the architect gives instruction to change the floor design. If there is no
provision for variation, the Employer may need to get the agreement of Contractor
and the Contractor may negotiate for higher cost. This variation clause is to permit
changes to be made and subsequently adjust or amend the contract sum. Besides, the
valuation rules can be applied where the Works are completed by the Contractor for
which the provisional quantities and provisional sum had been included in the
contract bills.
Next, re-measurement of provisional quantities is stated under Clause 11.6(f).
The Provisional Quantities are estimated quantities only, for instance the quantities for
excavation works and piling works. It is unrealistic to know the concrete quantities for
the Works mentioned at the early stage and subsequently, the amounts shall be remeasured by Quantity Surveyor in-charged based on the actual Works that completed.
The quantities are subjected to changes however the rates priced in the Contract
Documents will remain constant.
Basically, Prime Cost sums are the sum of the specialist Works completed by
the Sub-Contractor which usually comprehensive of profits and attendance whereas
Provisional Sums are the sum of work done that can be acknowledged but with no
detailed drawing provided and thus, the sum cannot be itemized in bills of quantities

(BQ). The question worth to be raised up is that, why is there a need to allow
provisional sum in the BQ since adjustment is to be made at the final stage? Lets take
entrance porch as an example and the possible reasons are as stated below:
(a) For instance, contractually, an entrance porch is to be built but with very
limited details of drawings. In this case, the provisional sums need to be added
into BQ so that client will be aware of the budget of the project as it allows an
approximate contract amount for the purpose of cost control.
(b) Contractor needs to include the Provisional Sum Works in order to plan his
work programme and to finish the Works on time. It will easily cause disputes
if provisional sum is not added into the Contract Documents. In this case,
Contractor can easily claim for extension of time (EOT) as architect will have
to issue Architects Instruction for variation works which are against the
requirements as per agreed in Contract Documents, for instance, entrance
porch.
Prime cost sums and provisional sums with related profit shall be omitted from
the final account based on Clause 30.11(c) due to the prime cost sums and provisional
sums are just estimated sum and act as estimated allowance but both of them are
subjected to changes. Since they are omitted from the final account, the NSCs and
NSs final account shall be added back. Every NSCs and NSs need submit the Final
Account together with the pro-rata amount for profit. In short, the adjustment is made
after completion of Works and final cost is ascertained.
Provisional sums and prime cost sums that are not being used shall be
deducted out from the contract sum. The profit shall be adjusted based on the amount
of final account whereas for attendance shall be remain unchanged due to the
attendance is a fixed amount or lump sum amount and it is provided for supervision
Works and therefore, it is not subjected to changes. However, for profit it is based on
a certain amount of percentage, for instance 2% of the total cost of project. The
explanation of charging of profits and attendance by main Contractor is as the main
Contractor is mandatory to provide the general lighting, hoisting material and power
and etc.
Furthermore, Adjustment of Provisional Sum Based on Actual Expended and
Omitted If Not Expended is also stated under Clause 30.11(d) in PAM Contract 2006.
Adjustment of Provisional Sum is mainly for the things which did not have any
design, details, specification, however fundamentally to construct within the project.
The Provisional Sum is needed to adjust during the Final Account as there is no
accurate sum that Contractor place at the Contract Documents. Meaning, any
adjustment of Provisional Sum will be measured based on all the actual expended of
Provisional Sum by the Contractor. If some Provisional Sum is not expended, such
amount shall be deemed to omit from the contract bill during the Final Account.
Next, the Additional Expenses claims which is stated under Clause 11.7 in
PAM Contract 2006 (With Quantities). The aim of this clause is to permit the
Contractor to be reimbursed as part of the cost of variation, for the additional
expenses he has incurred carrying out the Variation, and for which he would not be
compensated under Clause 11.6. However, the Contractor is certified to claim for the

additional expenses in accordance to the Clause 11.7 (a) provided the Contractor shall
give written notice to the Architect of his intention to claim for such additional
expenses and the Contractor shall send to the Architect and QS complete particulars
of his claim Clause 11.7 (b).
Last but not least, Loss and Expense claims which stated under Clause 24.4 in
PAM Contract 2006 (With Quantities) incurred by the Contractor which complying
with Clause 24.1, the Architect and Quantity Surveyor shall make certain and include
such amount of loss and expenses into the Final Account. The words shall ascertain
stated in the clause basically means that the Architect or the Quantity Surveyor must
access the claim based on particulars and calculations submitted by the Contractor but
not merely rely on a general assessment before including the amount into the final
account. Any claim under common law is outside the jurisdiction of the Architect and
Quantity Surveyor, and the Contractor has to resolve this with the Employer.
However, there are 3 elements which shall be excluded from Final account
based on Clauses 30.11(e) to (g).

Liquidated damages imposed by the Employer, Clause 30.11(e).

Set-off by the Employer, Clause 30.11(f).
Interest payable by either Employer or Contractor, Clause 30.11(g).
These items excluded from Final Account due to:

Architects are certifiers and they certify work done only and not the parties to
the Contract. They need to be fair and independent and it is not their
obligations to decide the party who is in dispute.
Disputes may effortlessly happen from either party with such components
being included in the Final account, causing the final account scarcely to be
finished by the day's end. The primary goal is not to postpone the timely
conclusion of the Final Contract and it basically implies without a final
account, the Architect and QS cannot be discharged.

Implications of Omission of Provisional Sums

a)
b)
c)
d)
e)
f)

Having the condition as below:

The Works omitted is the entrance porch;
Shown on drawing but not sufficiently designed for measurement of
quantities;
Works entirely left out in Bills of Quantities;
Not allowed as Provisional or Prime Cost Sums;
Using the PAM Contract 2006 (with quantities), and
Variable assumptions made accordingly.

Conclusion

There are essential elements needed to adjust during the Final Account.
However, owing the presence of provisional sums due to the error made by the
Quantity Surveyor would imply consequences to both the client and Contractor.
Moreover, the quantity surveying consultant firm would also suffer loss in both
monetary and accountability. This report mainly focuses on implications to the client
and the Contractor involving the project.

QUESTIONS 2

In accordance with Clause 30.10 of the contract, the Contractor duly submitted his
Final Accounts within 6 months after the issuance of the Certificate of Practical
Completion. You are then required to asses this application and prepare the Final
Account for the apartment project based of the following valuations and adjustments
made to the Contract Sum:
Information provided are as follows:
a) The Architect had granted the Contractors first application for extension of time
and approved additional insurance premium amounting to RM 25,000.00 in
accordance with Clause 24 of the contract due to the delay in the completion of the
Works caused by the Employers late decision on the selection of carpet.
In his second application for extension of time, the Contractor submitted a loss and
expense claim for RM800, 000.00 in his Final Accounts to you. The Architect had
disputed the Contractors second application.
b) There are four variation orders carried out by the Contractor:

i.

Variation Order No. 1:

Changes of internal wall
layout to suit Employers
requirements.

ii.

Variation Order No. 2:

New guard house.

iii
.

Variation Order No. 3:

Changes from carpet to
textured homogeneous floor
tiles

iv. Variation Order No. 4:

Addition
(RM)
100,000.00

500,000.00

1,300,000.00

c) The following are the Nominated Sub-Contractors accounts:

Omission
(RM)
300,000.00

700,000.00

46,000.00

i.

Lift Services:
Profit @ 2%
Attendance as item

ii.

Air Conditioning Services:

Profit @ 2%
Attendance as item

iii
.

Electrical Services:
Profit @ 2%
Attendance as item

iv. Provisional Sums: Entrance

Porch

Original P.C. &

Provisional Sum
(RM)
1,000,000.
00
20,000.
00
15,000.
00

NSCs final
account
(RM)
1,200,000.0
0

800,000.
00
16,000.
00
15,000.
00

1,000,000.0
0

1,800,000.
00
36,000.
00
30,000.
00

2,100,000.0
0

500,000.
00
4,232,000.
00

Project:

PROPOSED CONSTRUCTION OF 1 UNIT 11-STORY APARTMENT ON LT 444,

Employer

NO. 2 JALAN TAYLOR'S, 47500 SUABNG JAYA, SELANGOR DARUL EHSAN

Taylor's University

:
Contracto
r:

Antimeat Builder Construction Sdn. Bhd.

FINAL ACCOUNT
RM

1.0

Original Contract Sum

2.0

Less :

34,500,000.00

P.C. & Provisional

Sum

5,800,000.00

Total Builder's works

3.0

28,700,000.00
Variation works
(V.O. Nos 1 - 4)

Add :

Total
Additions
Total
Omissions
Nett Additions

4.0

1,900,000.00
1,046,000.00
854,000.00

Add back : NSCs' final account

4.1
4.2
4.3

Lift Services
Air-Conditioning
Services
Electrical
Services

4.4

854,000.00

29,554,000.00

1,200,000.00
1,000,000.00
2,100,000.00
4,300,000.00

4,300,000.00

Profit and
Attendance:
a. Profit @ 2% of
RM 4,3000,000.00
b. Attendance @
lump sum

5.0

RM

86,000.00
60,000.00
146,000.00

146,000.00

25,000.00

25,000.00

Contractual Claims:

5.1

Insurance
Premium

FINAL CONTARCT VALUE

Project:

34,025,000.00

PROPOSED CONSTRUCTION OF 1 UNIT 11-STORY APARTMENT ON LT 444,

NO. 2 JALAN TAYLOR'S, 47500 SUABNG JAYA, SELANGOR DARUL EHSAN

Employer
:
Contracto
r:

Taylor's University
Antimeat Builder Construction Sdn. Bhd.

STATEMENT OF FINAL ACCOUNT

Final Contract Value

R
M

34,025,000.00

Deduct: Assumed Previously Certified (Cert

1-20)

R
M

32,000,000.00

BALANCED DUE TO CONTRACTOR

R
M

2,025,000.00

DECLARATION OF
AGREEMENT

We, the undersigned, hereby confirmed our agreement to the attached Final Account and
Statement of Account as follows:
1)

That the Final Account and Statement of Account is correct and is in accordance
with the Condition of Contract.

2)

That the Final Contract Value of RM 34,025,000.00 is correct.

3)

That we have no further claims whatsoever against each other.

................

................

Employer

Contractor

Date:

Date:

................

................

Project:

Witness

Witness

Date:

Date:

PROPOSED CONSTRUCTION OF 1 UNIT 11-STORY APARTMENT ON LT 444,

NO. 2 JALAN TAYLOR'S, 47500 SUABNG JAYA, SELANGOR DARUL EHSAN

Employer:

Taylor's University

Contractor:

Antimeat Builder Construction Sdn. Bhd.

STATEMENT OF FINAL PAYMENT

We, Antimeat Builder Construction Sdn. Bhd. Hereby acknowledge receipt of a cheque drawn
on Standard Chartered Bank Malaysia Berhad (Number 502503) for sum of Ringgit Malaysia
Two Million and Twenty Five Thousand (RM2,025,000.00) only from Taylor's University
being full and final settlement for the above mentioned
project.
With the acceptance of this payment, Antimeat Builder Construction Sdn. Bhd. agrees that it
has no further claims or moneys due and payable from Taylor's University.

................
Contractor
Date:

QUESTION 3

Explain the basis on how the following variations may be finalised and priced during
the Final Account stage:
a. The Contractor had priced RM 150,000.00 for the Contractor All Risk Insurance
policy in the Preliminaries Bills. However, when the Contractor failed to purchase this
insurance, the Employer bought the said insurance for RM 180,000.00 on behalf of
the Contractor.
b. Contractor is required to provide a desktop personal computer in the Preliminaries
section but the item was left unpriced, i.e. BQ item was left blank in the rate/amount
column in the Contract Documents. The Architect instructed the Contractor to provide
a laptop computer costing RM 10,000.00 in lieu of the desktop computer.
c. A wash trough as required and priced in the Preliminaries section was not
constructed due to site constraints imposed by the Employer. However, the vehicles
leaving the site during construction were always kept clean including the public roads
using water jet washing.
d. Mistake was made in rate for 50mm thick concrete blinding is RM 10 per m3. Item
was not rationalised during contract documentation. However, original quantity in BQ
is 100m3 but re-measured quantity is 2,000 m3. The Contractor submitted a loss and
expense claim for RM 50,000.00 and also claimed for revised rates.

3a. The Contractor had priced RM 150,000.00 for the Contractor All Risk Insurance
policy in the Preliminaries Bills. However, when the Contractor failed to purchase this
insurance, the Employer bought the said insurance for RM 180,000.00 on behalf of
the Contractor.
PAM Contract 2006 (With Quantities), under Clause 19.0, stated that
insurance against injury to person and loss and/ or damage of property required
Contractor to arrange for insurance to support the indemnity given in Clause 18.0
(injury to person and loss and/ or damage of property to Employer). The purpose of
insurance is to:a) Clause 19.1(a) - insurance cover to Employer, Contractor, and other parties.
b) Clause 19.1(b) - third parties for any personal injury or property loss.
c) To cover losses and minimizing disputes between Employer and Contractors.
d) Potential costs, fees, rights, and damages for the Employer and the
Contractors.
Contractor had priced the said insurance policy in the Preliminaries Bills as it
is stated in Clause 19.3, Contractor and all Sub-Contractors to take insurance to cover
any local workmen which not subject registration under SOCSO and is bound to get
registered before Commencement of Work. The duration of cover of the Contractor
All Risk Insurance policy shall be valid up to the Completion Date and 3 months after
the Defects Liability Period (DLP).
Contractor has failed to purchase the insurance, this gives default powers to
the Employer as stated under Clause 19.5, and Employer can purchase the insurance
on behalf of the Contractor, and the premium paid shall be recovered through a set-off
under Clause 30.4. Should such risks were to happen, the Contractor is able to claim
from the insurance company and not taken out from own personal asset.
Employer has increased the said insurance from RM 150,000.00 to RM
180,000.00 on behalf of Contractor as stated under Clause 19.5, If the Contractor
makes default in insuring, the Employer may (but is not obligated to) insure against
any risks in respect of which the default has occurred and the amount of premiums
and any other cost incurred, this gives Employer the rights to change the premiums
covered from RM 150,000.00 to RM 180,000.00. Therefore, the final price for the
said insurance is RM 180,000.00.
.
3b. Contractor is required to provide a desktop personal computer in the Preliminaries
section but the item was left unpriced, i.e. BQ item was left blank in the rate/amount

column in the Contract Documents. The Architect instructed the Contractor to provide
a laptop computer costing RM 10,000.00 in lieu of the desktop computer.
When the computer equipment in the Preliminaries is left unpriced, it shall be
deemed that the Main Contractor has included the rates and prices elsewhere
incorporated throughout the bills of quantities. This is neither the default nor breach
of the main Contractor since there is no specific rule or standard way to pricing
preliminaries. Hence, the Quantity Surveyor shall identify the cost of the computer
equipment to allow the Employer to omit the cost of the computer equipment as stated
in Architects Instruction.
Clause 11.6 in PAM Contract 2006 states that the valuation of Variations and
work executed by the Contractor for which a Provisional Quantity is included in the
Contract and the expenditure of Provisional Sums (other than for work for which a
tender had been accepted under Clause 27.14) shall be made in accordance with the
following rules:
Clause 11.6(a) stated that where work is of a similar character to, is executed
under similar conditions as, and does not significantly change the quantity of work as
set out in the Contract Documents the rates and prices in the Contract Documents
shall determine the valuation. Therefore, the Quantity Surveyor shall omit the cost of
computer equipment based on current fair market price or the cost from previous
contract documents of a similar project.
3c. A wash trough as required and priced in the Preliminaries section was not
constructed due to site constraints imposed by the Employer. However, the vehicles
leaving the site during construction were always kept clean including the public roads
using water jet washing.
The Clause 11.6 under PAM Contract 2006 states that the valuation of
Variations and work executed by the Contractor for which a Provisional Quantity is
included in the Contract and the expenditure of Provisional Sums (other than for work
for which a tender had been accepted under Clause 27.14) shall be made in
accordance with the following rules:
Under PAM 2006 under clause 11.6(c) of Valuation rules, the clause states that
where work is not of a similar character to work as set out in the Contract Documents,
the valuation shall be priced at current fair market rates and prices are to be
determined by the Quantity Surveyor.
Hence, the Quantity Surveyor shall omit the cost of wash through in the
preliminaries and adds the price for the water jet machine. The price of the water jet
machine is determined based on current fair market price or the cost from previous
contract documents of a similar project.

3d. Mistake was made in rate for 50mm thick concrete blinding is RM 10 per m3.
Item was not rationalised during contract documentation. However, original quantity
in BQ is 100m3 but re-measured quantity is 2,000 m3. The Contractor submitted a
loss and expense claim for RM 50,000.00 and also claimed for revised rates.
In Pam 2006 under Clause 11.6 of Valuation rules, the clause states that the
valuation of variations and work executed by the Contractor for which a Provisional
Quantity is included in the Contract and the expenditure of Provisional Sums (other
than for work for which a tender had been accepted under Clause 27.14).
PAM Contract 2006 (with Quantities) Clause 11.6(b) had stated that where
work is of a similar character to work as set out in the Contract Documents but is not
executed under similar conditions or is executed under similar conditions but there is
a significant change in the quantity of work carried out, the rates and prices in the
Contract Documents shall be the basis for determining the valuation which shall
include a fair adjustment in the rates to take into account such difference, therefore,
the Contractor can claim for the re-measured quantity of element with a fair
adjustment in rates that stated in the Contract Documents.
In Clause 24.1(a), the Contractor must give his evidence along with the
calculation as to justify his sum of claim for RM 50,000 to the Architect clearly and
this must be done with 28 days from the date of the Architects instructions or the
state of occurrence of matters referred to in Clause 24.3, whichever earlier.
Based on the above situation, the Contractor will faced a lost due to the
irrationalized rates priced during the contract documentation; this is because the final
account rates will follow the rates that initially priced in the agreed contract document
between two parties. As for the re-measurement quantity, Contractor has the rights to
claim for a fair adjusted rate of the elements due to the mistakes done by the
consultant team in preparing for drawings and taking-off.
By following the price of RM10 per m3 for the 50mm think concrete blinding
using the initial quantity of 100m3, the total cost will be RM 1,000, whereas in the
new quantity of 2,000 per m3, the new total cost will be RM 20,000, and the different
is RM 19,000. As the result of this, the Contractor can only claim an additional of RM
19,000 for the total cost of the 50mm thick concrete blinding instead of RM 50,000.