APPLICATION OF METHOD RELATED

CHARGES IN CIVIL ENGINEERING

CONTRACT

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 GENERALLY
 Contractor are usually of the opinion that measured quantities of permanent works
priced at billed rates do not represent the actual or true value of constructional work,
especially where significant variations have occurred.
 Engineers on the other hand believe that priced bill of quantities is nothing more than a
shopping list of items where on completion the work can be re-measured and valued at
the billed rates
 This idea is unsatisfactory as evidenced by the large claims settlements of the many
projects that have been completed, especially where variation and unforeseen physical
condition or artificial obstructions were encountered
 The unit rates are made up of quantity related cost such as labour, materials, plants,
profit and overhead directly to the item of work being constructed.
 The non-quantity related items are items such as transporting to site, erection,
maintenance, dismantling of plant, cabins and other consumable items which cannot be
linked directly or quantified proportionately to the permanent work being constructed.

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 GENERALLY
 Most of the civil engineering operations cost are not proportional to the quantity of the
permanent work and there are no proper and sound approach to recover the cost of
bringing a tower crane on site including its hire, operation and subsequent removal.
 All these costs are usually hidden in the ‘general items’ where provided or in the cost per
cubic metre of the various work sections for which the crane was used.
 An example of such cost is the provision of a temporary bridge over a river to facilitate
transportation of all the resources to the site so that the works can be completed on time
 The cost of the temporary bridge cannot be apportioned into the works items in the bill of
quantities and neither will it be visible in the finished works but at the same time, it would
be unfair if the contractor not paid for the cost of the bridge and neither would it be fair to
the employer if such cost are hidden in apportioned costs to the finished works as this
may lead to very high contract price if the contractor resorts to hiding such cost where it
is untraceable.

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 OBJECTIVES
 It is acceptable idea that the expertise of designing rest with the
Engineer and the expertise of construction method lies with the
Contractor
 Based in this perception, it is logical to assume that the
Contractor should be able to decide on the method of carrying out
the works.
 The inclusion of Method Related Charges is not compulsory
under the CESMM but its usage will result in:
1. Easier evaluation of variation
2. A more stable and realistic cash-flow to the Contractor
3. Draw the Engineer’s attention to the basis of construction costing
4. Resulting more rational designs and buildability construction

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 CATEGORIES
 The MRC are divided into 2 categories:
1. Time-related charges – running costs, hire charges, fuel cost
etc
2. Fixed charges – transportation costs, provision, setting up,
removal of temporary works, mobilisation aand
demobilisations cost

These charges must fully describe them so that the items

entered can be positively identified

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 APPLICATION OF MRC
 MRC items are not subject to remeasurement an therefore
no measurements of quantity or multiplication of rates are
necessary or permitted in the Contract
 The sums entered against MRC would reappear in the Final
Account unmeasured and not changed regardless because
of whether the quantity of work carried out is more or less
than that originally estimated by the tenderer
 The payment for MRC items are to be paid in progress
payment and certified in the same manner as other parts of
the works. (A statement to this effect shall be stated in the
Preamble

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 APPLICATION OF MRC
 In the absence of variations ordered by the Engineer, the
sum entered against the MRC will be paid in full
 The payment can be apportioned monthly (or proportionate
to the progress payment) and agreed between the
Contractor and the Engineer.
 The payment will be based on the progress of the relevant
part of the work involved.
 The payment of MRC will not be changed merely as a result
of a change in the final re-measured quantity of the work
involved or method-related work carried out being different
from the original as estimated by the tenderer

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 APPLICATION OF MRC
 The contractor is not obliged to construct the work using method
or technique as listed in MRC but he will nevertheless still be paid
as though the method or technique so listed has been adopted so
long as the related work which the method-related charge had
been allocated completed successfully.
 As an example, if the Contractor had inserted the method-related
charges for the use of a batching plant but later settled for the use
of ready-mixed concrete instead, the interim payments would still
include payment of the method-related charge by distributing it
over the quantity of concrete placed.
 If however, changes in techniques are instructed by the Engineer,
then these changes will be paid for as variations.
 Hence, the MRC charges are subjected to price adjustment
formula only when variations are ordered.

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 ADVANTAGES OF MRC
1. The use of MRC should remove substantial sums of
construction cost which do not vary in proportion to the volume
of permanent works executed and thus, reducing likely claims.
The Engineer can also discuss and administer the method of
construction with Contractor more openly.
2. When used effectively, MRC should enable the Contractor to
recover in monthly valuations the cost items other than
permanent works on a equitable basis either in the event of
work proceeding as planned or in the event of variations. In
both cases, the Contractor will be able to recover these non-
quantified proportional items on a monthly basis not forced to
wait until the end of the contract to submit claims to recover
such cost. (Ease the cash flow)

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 ADVANTAGES OF MRC
3. The Client should have benefit of a more accurate valuation of
variations with improved monitoring of the financial position of
the contract. It can help to plan cash flow and budget.
4. In reality, there can still be different approaches to bill pricing
but introducing the use of MRC, the different basis of various
methods of computation can therefore be standardized and
more clearly identified.
5. The client should benefit from this practice since MRC cost
structure would be better suited to deal with variations and
changes without the Contractor having to hide or spread his
cost while at the same time being able to receive more prompt
and equitable payment
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 ADVANTAGES OF MRC
6. In design, the realistic separation of MRC from quantity
proportionate rates makes the rate more reliable as cost-
data parameter for future projects and also for design
decision

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 DISADVANTAGES OF MRC
1. The success of MRC approach is largely dependent on its
sensible use of the provision by both Contractor and
Engineer. If Contractor refuse to enter MRC items in their
tenders and QS/Engineers are slow in authorizing
payments, then little will be achieved, particularly in easing
the Contractor’s cash flow
2. Some clients are not in favor of adopting the MRC items in
the BQs because they are of the opinion that the
Contractor will include everything under the sky as MRC
items

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 DISADVANTAGES OF MRC
3. Comparisons of tenders are said to be more difficult
because tender look different due different policies
adopted for pricing.
4. Higher payment at the beginning for the employer

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 Temporary Work

A521.1 Construct temporary access roads to site; fixed charge. sum

A521.2 Maintain temporary access roads for duration of contract period; time-related charge. sum

A522.1 Construct temporary bridges and remove upon completion [over Sg. (……)]; fixed charge. sum

A522.2 Maintain temporary bridges for duration of contract period; time-related charge. sum

A523.1 Construct cofferdams for [water intake] and remove upon completion; fixed charge. sum

A523.2 Maintain cofferdam for duration of construction; time-related charge. sum

A524.1 Install pumping and dewatering at [pumphouse] and remove upon completion; fixed charge. sum

A524.2 Operation and maintenance of pumping and dewatering for duration of construction; time-related sum
charge.

A525.1 Construct river diversion for [water intake] and reinstate to its original alignment upon sum
completion; fixed charge.

A525.2 Maintain river diversion for duration of construction; time-related charge. sum

A526.1 Construct temporary jetty [at Sg. (……)] and remove upon completion; fixed charge. sum

14 A526.2 Maintain temporary jetty for duration of contract period; time-related charge. sum
 CONCLUSIONS

In conclusion, the use of MRC, although not a hundred

percent risk free, can lead to improve design, estimating,
tender selection, contract administration and cost control
techniques, better buildability and cash flow to the Contractor

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