Summary
This chapter seeks to establish that a need exists for both the simplification and the rationalisation of the bill of quantities (BoQ) cost
model. The present day uses of the BoQ are compared to those for
which it was originally intended. This comparison demonstrates
that, in practice, the BoQ and its current uses are at variance with, or
have exceeded, original intentions.
Having established the need for new improved cost models in
Chapter 2, this chapter looks at some of the methods used by academic
researchers and practitioners to, firstly, overcome the difficulties faced
by the BoQ and, secondly, to integrate cost with time. The methods are
compared and critically evaluated. The evidence supports the proposition that simplification using significance theory alone simplifies the
BoQ, but does not improve or enhance its role in the systematic quantification of delay and disruption claims. In short, simplification using
significance theory does not make the BoQ capable of fulfilling the
various tasks required of todays cost model. Because most problems
associated with the conventional BoQ exist because it fails to model
work items and cost realistically, it is proposed that improvement and
increasing the realism within the BoQ can best be achieved by simplifying the method of measurement or by a change from work items
towards work packages or operational groups.
3.1. Introduction
The BoQ has been in use for a number of centuries. Originating in the
UK, evolved significantly in the nineteenth century, mainly as a
result of the growth in transport such as canals and railways. The
evolution of the BoQ was accompanied by amendments to conditions of contract, which were in turn revised in line with changes in
case law and statute. Case law at this time centred on liability for
28
inaccurate BoQs, measurement rules, errors in composite descriptions, and alleged omissions of items, e.g. Moon v. Witney Union.1
Measurement problems probably led to standardisation and
development of the first standard methods of measurement.
According to a Royal Institute of Chartered Surveyors (RICS)
report in 1993, the BoQ is used in approximately 50 % of all construction contracts by value. This figure is nearly a decade old, and the
use of traditional contracting has been reduced by the increased use
of the design and build, BOOT and BOO procurement routes, PFI/
PPP arrangements, and partnering and alliancing relationships.
However, the 50 % figure is probably low, since it does not appear to
take into account the wide use of BoQs in the above procurement
options such as design and build. The BoQ is still the cost model
used by the parties in estimating cost in the iterative process of
refining the design and specification and for appointing subcontractors. This reliance, or continued use of the BoQ even in these
untraditional procurement routes, lies in the fact that estimators,
quantity surveyors and cost accountants all appear to use the standard methods of measurement. Reliance upon detailed standard
methods of measurement means that estimators, quantity surveyors
and the cost accountants, naturally, develop or compile detailed and
lengthy BoQs. Pricing or estimating such BoQs is then carried out
using norms or data from either long-established commercial
databases or using the contractors/estimators own, equally longestablished book of rates. The practical problem is that although
the popularity of BoQs may not have changed, the uses to which
they are now put have, in contrast, changed dramatically.
Professor John Uff QC, in his recent paper Are we all in the wrong job?
Reflections on construction dispute resolution,2 when discussing the rise
of the quantity surveyor, says:
29
Bills of quantities then took on more significant roles both as a vehicle for calculation of interim payments and doubling as the specification, under the Joint
Contracts Tribunal (JCT) with quantities forms of building contracts. These are
still lump sum contracts, but for the Institution of Civil Engineers (ICE) and other
types of contract, the bill of quantities later acquired full contract status, the work
becoming subject to remeasurement. In the past few decades both natural
evolution in forms of procurement and conscious policy have led to a move
against bills of quantities, towards milestone interim payments and lump sum
contracts of an increasingly turnkey nature. No one today wants to incur the cost
of interim measurements, nor to run the risk of interim payment disputes.
Contractor
Contractual interface
Are we all in the wrong job? Reflections on construction dispute resolution. Uff J. A
Society of Construction Law Paper based on the talk given to a joint meeting of the
Society of Construction Law and the Society of Construction Arbitrators in London,
3 July 2001.
The Contractors Use of Bills. Skinner DWH and Jepson B. Chartered Quantity
Surveyor, pp. 6368, September 1980.
30
phases, and not at the tendering stage as was initially intended. This
is not surprising, since once the BoQ is used in the tendering stage, it
adopts its contractual purpose during the construction phase. The
contractual purpose of the BoQ appears to be to produce a cost
model for payment purposes during the construction contract.
However, because the BoQ is the only contract document concerned
with detailed financial issues, in practice it is often used in all
matters involving money and naturally becomes the central vehicle
for the financial control of civil engineering and building works.
In short, experience and academic surveys appear to indicate that
the BoQ is now used as a cost estimating model, tendering model,
planning model and a contractors site cost control model, lies at the
centre of most payments, and is used in the valuation of variations
and claims (including those for delay and disruption). The important
question involves an analysis of whether the BoQ adequately fulfils
the varied requirements of the industry. In other words, let us investigate if the BoQ warrants improvement, total replacement or commendation. As a starting point, the positive and negative aspects of the
BoQ are evaluated.
31
32
10
11
See Footnote 5.
See Footnote 9.
33
effectively and efficiently and is at least commensurate with the estimators assumptions. In practice, site contract managers do not want
information on BoQ work items for their purposes they want to
control, pay for and resource actual site operations. In short, their
interest is very different from that of the estimator, and BoQ items
discourage any useful sharing of information.
In practice, experience tells us that whilst many contractors may
(in private) admit that the current BoQ system is not suitable for
accurate/realistic estimating and planning, they quite willingly
manipulate the BoQ unit items in order to develop their own cost
models based on proposed site operations. So although, in practice,
the structure and associated complexity of the BoQ may not be a
perceived problem, when situations arise where delays and variations need to be evaluated, conflict arises simply because the BoQ
does not reflect the true manner in which the fixed, time-related and
other resource costs are actually planned to be incurred on site.
3.4.1.2. Level of detail in the BoQ
Too many low-value items
It is widely accepted that BoQs contain many low-value items. The
academic starting point for this proposition was Lichtenberg,12 who
highlighted the problem of overwhelming detail in the BoQ. The
BoQ is so detailed because it acts as a specification, a long list of all
the materials to be incorporated and, most importantly, because it is
developed by applying the rules from, typically, a standard method
of measurement. As a consequence, employers seek to provide as
much detail as possible, confusing hundreds of pages in a BoQ with
being precise. The standard methods of measurement simply categorise or specify at such detail that reliance on them, in practice,
generates very lengthy BoQs.
The level of detail chosen for itemisation in the method of measurement has a direct effect on the level and on the number of BoQ items. For
example, the methods of measurement itemise each time there is a
new material description, e.g. a change from 16 mm diameter reinforcement to 20 mm diameter reinforcement. Barnes stated, If the method of
measurement were to be revised, the opportunity should be taken of
structuring the rules for itemisation and classifying them more precisely,
12
34
Design process
Fig. 3.1. The relationship between estimating accuracy and the design process
35
racy with which it is estimated. This may be because, perhaps, lowvalue items simply receive low priority or because low-value items
generally relate to abstract work.
Accuracy level
13
14
15
16
Design Phase Estimating: State of the Art. Ogunlana O and Thorpe T. International
Journal of Construction Management and Technology, Volume 2, No. 4, pp. 3447, 1987.
Probabilistic Approach to Estimating and Cost Control. Vergera AJ and Boyer LT.
ASCE Journal of Construction Division, Volume 100, pp. 543552, 1974.
The Successive Principle, Procedures for a Minimum Degree of Detailing.
Lichtenberg, S. Sixth Annual Proceedings of the Project Management Institute,
Washington, pp. 570578, 1974.
Civil Engineering Standard Method of Measurement. Third Edition. Barnes NML. The
Institution of Civil Engineers. Handbook, Thomas Telford, London 1992.
36
left behind when the contractors men and machines had moved
on. The BoQ was originally introduced in a labour-intensive
building industry and did not take account of plant and temporary
works. As the industry developed, the use of plant increased but the
BoQ rates still compounded all the resource costs and relied on the
principle that quantity is proportional to cost. Barnes suggested that
this situation could be tolerated, so long as the work was never
varied after tenders were accepted. However, most practitioners
would agree that variations and delay and disruption claims are
simply inevitable. It is in the evaluation of changes, delay and
disruption that unit rates (compounding all costs) primarily fall
down; those BoQ items that are not quantity-proportional are often
evaluated on a totally unsystematic, inaccurate or unrealistic basis.
In 1971, Barnes found that 70 % of all claims required consideration
of the distinction between costs. Five years later in 1976, Barnes introduced the concept of method-related charges (MRC) to the Civil Engineering Standard Method of Measurement (CESMM). It was now possible
for contractors to price certain work items that they considered not to
be simply quantity-proportional. Three charges were available to estimators: (1) the quantity-proportional charge, (2) the time-related
method-related charge and (3) the fixed method-related charge. It
was intended that the three types of charge would be more closely
related to the manner in which costs were intended to be actually
incurred on site. Accordingly, it was hoped that the MRCs would
allow the automatic evaluation of variations and increase the realism
of quantifying claims for delay and disruption. It was decided that the
MRCs were a function of each contractors own method of working
and therefore should not be set against predetermined items and the
MRCs were not mandatory. As a consequence, in practice, MRCs
were not commonly used in the UK, and in 1992 Barnes conceded that
the three price bill does not model value perfectly because it does not
model all the many variables which can affect cost. The problems
that MRCs were initially designed to overcome still remain today.
Contractual
interface:.
Contractor:
Client:
Partial
Work remeasurement.
Fail
Site management.
Fail
Fail
Cashflow prediction.
Partial
Cost control.
Partial
Partial
Planning.
Good
Partial
Comparison of tenders.
Obtaining quotations.
Partial
Construction supervision.
Partial
Fail
Partial
Control model is different from payment model. Too many work items in
work operation hence no effective control.
BoQ not directly linked to time model. Even the S curve approach is
approximate.
BoQ items and rates are converted into site operations. Control is crude
and feedback non-existent.
Unit rate restricts use of operational estimating. Too many low-value items.
Unit rate manipulation makes this difficult. Need to increase tender realism.
Unit rate does not link the design and costing exercises. Large variances between
work items rates and tender, therefore use by clients to estimate is questionable.
Success Remarks
Use
37
38
Contractor
Contractual interface
39
17
40
19
Barnes used Paretos law and concluded that 20 % of the total cost
in a BoQ was occupied by 75 % to 95 % of the BoQ items. Nevertheless, Barnes suggested that the low-value items were necessary to
convey the detail of the proposed work. However, because his
empirical research had concluded that the low-value items had little
influence on the final account, Barnes concluded that they could be
eliminated from the financial control of the contract. Barnes noted
the inadequacy of the standard form methods of measurement used
to compile BoQs, stating, It is one of the paradoxes of the contractual system that the BoQ contains prices for fixing components of the
work which are so small that their fixing cost cannot economically be
defined. As discussed above, Barnes espoused the many advantages of operational estimating and the need to adapt standard form
methods of measurement to encourage operational estimating.
Moyles (1973)
20
18
19
20
Summing Up. Short GS. Second Conference on Contracting in Civil Engineering since
Banwell. EDC for Civil Engineers and Municipal Engineers, National Economic
Development Office, 1970.
See Footnote 9.
An Analysis of the Contractors Estimating Process. Moyles BF. M.Sc. Thesis,
Loughborough University of Technology, 1973.
41
was still laborious and involved pricing all the BoQ items and
ranking them in descending order. When 80 % of the total value was
reached, the corresponding items were selected.
Harmer (1983)
21
22
23
21
22
23
Identifying Significant BoQ Items. Harmer S. Chartered Quantity Surveyor, pp. 9596,
October 1983.
Cost Significance Applied to Estimating and Control of Construction Projects. Saket MM.
Ph.D. Thesis, The University of Dundee, 1986.
Significant Items Estimating. Allman I. Chartered Quantity Surveyor, pp. 2425,
September 1988.
42
24
25
24
25
Financial Management of Construction Projects: Cases and Theory in the Pacific Rim.
Betts M and Gunner J. Longman Inc., White Plains, New York, USA, 1993.
Integrated Cost and Time Models for Measuring, Valuing and Controlling Construction
Projects. McGowan PH. Ph.D. Thesis, The University of Dundee, 1994.
43
44
26
27
Introducing Bills of Quantities (Operational Format). Skoyles ER. Current Paper 62,
Building Research Station, 1968.
Operational Bills: Users Comments. Abbot B, et al. The Architects Journal, pp. 617620,
March 1970.
45
28
29
Practical Application of Operational Bills Two. Skoyles ER and Lear RF. Current
Paper Series, Building Research Station, 1968.
See Footnote 9.
46
30
31
32
47
48
49
Operational modelling
Short (1970)
Skoyles (1968)
Barnes (1971)
Barnes (1971)
Moyles (1973)
Harmer (1983)
Saket (1986)
Allman (1988)
Betts and Gunner (1993)
McGowan (1994)
50
7. Improvements need to take account of the fact that the lowvalue items, whilst not strictly necessary for estimating, must
be itemised somewhere in the contract. There is a need to
increase the realism of estimating and to create a direct link
between cost and time. The approach in this book seeks to allow
the direct effects of delay and disruption to be evaluated both
in terms of cost and time. It also facilitates sufficiently accurate
construction site control. Further, the approach does not restrict
the contractors flexibility in deciding methods of construction
and pricing, and allows tendering on an equal basis.
8. Resource/labour productivity is at the centre of estimating, the
planning process, site control and the evaluation of delays and
disruption. The proposition is that resource productivity should
be used to develop a new approach to modelling cost and time.
In short, a cost model composed of work packages related to
site operations, linked to a time model composed of the identical
work packages, would form a direct tangible link between cost and
time. A single labour and/or plant productivity would characterise
the work package.
Chapter 4 demonstrates the development of such characteristic
productivity work package models. The process represents a
synthesis of the operational modelling and significant items
approaches with the distinct advantage that the models are not
project-specific and do not involve highly sensitive model factors.