ADJUSTMENT OF CONTRACT SUMDefinition;The contract sum is the price agreed with the contractor and entered into the contract. The contract sum should be calculated and checked very carefully as errors are deemed to have been accepted by both parties.Generally;The contract allows the Contract Sum to be adjusted due to the following circumstances:-a) Variations orders issued during constructionb) Finalization of Prime Cost Sumc) Finalization of Provisional Sumd) Finalization of Provisional quantitiese) Calculation of variation of pricesf) Adjustment of errors made in the bills of quantitiesg) Items under the contract but not executed without any APK omissionh) Approved claims

The adjustment of the Contracts Sum for the above is made by issuing JKR-PHK form.1) Variations Orders Every issuance of JKR-APK must be followed by the finalized through Form JKR-HPK, even if there is no difference between the provisional amount and the final value of the Variation works. The adjustment is made as soon as variations works is completed. Variationsmay include:a) Alterations to the design.b) Alterations to quantities.c) Alterations to quality.d) Alterations to working conditions.e) Alterations to the sequence of work. Variationsmay also be deemed to occur if thecontract documentsdo not properly describe the works actually required. Variationsmay not (without thecontractorsconsent):a) Change the fundamental nature of the works.b) Omit work so that it can be carried out by anothercontractor.c) Be instructed afterpractical completion.d) Require thecontractorto carry out work that was the subject of aprime cost sum. Government ProcedureAny V.O. for government project shall strictly follow standard procedure are as follows: KPK Kelulusan Perubahan Kerja APK Arahan Perubahan Kerja PHK Pelarasan Harga Kontrak KKS Kiraan Kuantiti SementaraKPK As an official document regarding to related V.O involved Including costing for indications either addition /omission Require approval from board of tender Approval before proceed with APK. Only S.O. to signed for applications APK Continuity of board approval on V.O, APK are required. Consist of instructions to be carried out by the Contractor Any claim due to this VO will be highlighted in this form. S.O and Contractor to signed (if agreed)PHK After finalized the APK, new contract sum will be adjusted accordingly All collective APK will be summarized Endorsement and agreement from both parties are requiredKKS Any VO involved with anticipated quantity related to provisional qty. As an estimated quantity/cost for client approval. After completions, all provisional quantity will be finalized by preparing PHK

2) Adjustment of Prime Cost Sums Aprime cost sum(sometimes referred to as a PC sum) is an allowance usually calculated by thecost consultantfor the supply of work or materials to be provided by acontractoror supplier that will be nominated by theclient. The allowance is exclusive of any profit mark up orattendance(such as material handling,scaffoldingand rubbish clearance etc) by themain contractor. In Construction the term PC sum is often confused with Provisional Sum. Whilst both terms are associated to allowances being made for a specific activity or item, there are distinct differences in these two terms. PC Sums are normally associated with anaverage costof a specific item whereas Provisional Sums areestimated allowances. Let's look the usage of these two terms in the Construction environment. Check that the works is awarded to the nominated sub-contractor / supplier. Omit the original PC Sum and add the awarded NSCs/NSs contract sum and profit and attendance which is allowed in Contract. The final adjustment is made after completion of works and final coat is ascertained. PC Sums that are not used shall be deducted from the Contract Sum. PC Sumor otherwise referred to asPrime Cost Sumreflects the material allowance being made in the rate for a specific item. A quoted rate normally consists of Material, Labour, Plant and mark-up (profit + overheads). By using the PC sum reference the builder identifies what material sum he has allowed for in his rate. This is normally done when the specification of the item has not yet been clarified (for example finishes, tiles, taps, light fittings, etc.). The builder would allow a reasonably acceptedaverage costfor that item which is generally based on the builders past experience. Care must be taken in analyzing these allowances as builders understand the impact this has on their price and could make below average allowances in order to present the lowest bid.

3) Adjustment of Provisional Sums Aprovisional sumis an allowance, usually estimated by thecost consultant, that inserted intotender documentsfor a specific element of the works that is not yet defined in enough detail fortenderersto price. This, together with abriefdescription, allowstenderersto apply mark up andattendancecostswithin their overalltenderprice and make allowance for the work in thecontractprogramed. An example of a situation where aprovisional summight be appropriate is when work is required below an existing structure, where the ground conditions cannot be determined until the existing structure is demolished and the ground opened up.Provisional sumscan be 'defined' or 'undefined':a) Definedprovisional sumsare considered to have been accounted for within thecontractor's price and programed. In effect thecontractoris taking theriskthat their estimate will be sufficient.b) Undefinedprovisional sumsare not accounted for in thecontractor's price andprogramed. This means that theclientis taking theriskfor the works and thecontractor may be entitled to an extension of time and additionalpayments. The final cost of a construction contract may be influenced by provisional sums and quantities. A provisional sum is a nominated amount of money, usually estimated by a Quantity Surveyor, where the exact scope and cost of specific work cannot be determined at the start of the contract, such as for removal of rock. It is included in the original contract sum, but is monitored carefully so that the sum can be adjusted as required. The provisional sum may be used for work carried out by subcontractors or for materials and components to be provided by suppliers, or for schedule of rates works, where an agreed price rate has been reached (e.g. $30/sq. for plastering existing damaged walls). These items are included where no firm price can be obtained or the full extent of the work cannot be determined at the time the building contract is let. The final adjusted contract sum will vary from the original contract sum when the expenditure against these items differs from that nominated in the contract document. Provisional sums and quantities should be kept to a minimum to minimize budget variations. Omit the original Provisional Sum and add the amount approved in accordance to the current procedures for utilizing of Provisional Sums. The adjustment is made after completion of works and final cost is ascertained. Provisional Sums that are not used shall be deducted from the Contract Sum.

Let's look at an example:Supply and lay 300 x 300mm Tiles (PC Sum $25/m2) 200m2 $42.45/m2 $8,490.00 The above item clearly identifies the amount allowed for tiles is $25/m2 and the total rate inclusive of labour, waste and mark-up amounts to $42.45/m2. That means that the Client can buy or select tiles to the value of $25/m2 without it having any effect on the Contract Price. This also mean that if a lower priced tile is selected the Contract Price reduces with the same margin or vice versa. The use of PC sums are very popular in the Home Builders market as Clients with limited building knowledge understand this concept and enjoy having control over this selection process during the final construction stages of their new home.

4) Remeasurement of Provisional QuantitiesWhere the quantities of the Works are stated as provisional in the bill of quantities, such quantities are the estimated quantities which shall not be taken as the actual and the correct quantities of the works to be executed by the contractor in the fulfillment of his obligations under the contract. The amount to be paid to the contractor shall be ascertained by remeasurement of the work as it is actually executedIf the actual quantities are more than provisional quantities in the bill of quantities, approval from Jawatankuasa Tambahan Kuantiti sementara using form JKR-KSK is required.The value of such work executed by the contractor shall be set off against the amount for the work in the bills of quantities, and the balance shall be added to or deducted from the Contract Sum as the case may be.

5) Variation of Prices The variation of Prices exercise must be carried out in every Interim Payment, and the final adjustment is made after the whole of the Works is completed. The Civil Works ensure the adjustment made must not exceed the quantities allowed in Contract. The valuation and circulation must be in accordance with the Special Provisions to the Conditions of Contract. The net total of any such increases or decreases shall be added to or deducted from the Contract Sum as the case may be. Fluctuations :Inserted in a Building / Infra contract Definition : Adjustment for increase or decrease in the cost of labour/material after date of tender Assessment of the value of fluctuations is progressive and cummulative total added to each valuations Two method of assessment:- The Orthodox Method and NEDO price adjustment formula.

The Orthodox Method Based on informations supplied by the Contractor in respect of the amounts and values of labour and materials used on the works Material based on schedule of basic rates of the principal materials agreed at the time of tendering This schedule shall incorporate in BQ and form of basis of calculations. Contractor to produce all invoices and QS to extract the quantity and prices. Labour is based on examination of the Contractor r time sheet to determine the number of hour worked. The net increase in wage rates is obtained from information's published by the Jabatan Perangkaan & Statistik Negara. NEDO price adjustment formula Quicker and easier method Based on monthly indices published in monthly bulletins The work is divided into Work category or Works group (combinations of work categories into weighted work groups) A base month is established at the time of tender are submitted. A base index for any work category/group is the index shown on the list for the base month. L = F x M E where: L = The value of increase or decrease payable or deductible in respect of the balance due or to become due and payable to the contractor; F = The amount of the balance due or to become due and payable to the contractor (excluding the value of L', and any works dealt under Prime Cost Sums, Provisional Sums, value of steel reinforcement bar. L = F x M E where: Where the Mechanical and Electrical (M&E) works in respect of seven (7) main components are executed by the Contractor, the value of the M&E works shall also be excluded) after deducting the amount in respect of Preliminaries and items based on actual costs or current prices; M = The aggregate total amount of increases or decreases payable under the above provisions in respect of all the previous interim payments made; E = The corresponding cumulative total of all the previous Effective Value of Works. Area to Cover by Price Fluctuations (Based on latest Government Circular KEMENTERIAN KEWANGAN MALAYSIA : SURAT PEKELILING PERBENDAHARAAN BIL. 3 TAHUN 2008 )a) Building Worksb) Civil Engineering Works c) Mechanical and Electrical Works Calculation of Adjustments The increase or decrease payable or deductible shall be calculated by multiplying the Effective Value of Works by a factor referred to as Fluctuation Factor which shall be ascertained from the product of the relevant Recovery Factor and the difference between the relevant Current Index and the Base Index, divided by the Base Index as follows:

Fluctuation = Recovery x Current Index Base Index Factor Factor Base Index

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6) Errors in Bills of QuantitiesAny error in description or quantity or omission of works from the bill of quantities shall not vitiate the Contract but shall be added to or deducted from the Contract Sum as the case may be.

7) Items not executed wothout any APK.Any item under the contract not executed by the contractor without any instruction from the SO shall be deducted from the Contract Sum.

8) Approved Contractual Claims.The amount of contractual claims approved by the Claim Comitee, or Ministry of Finance, shall be added to the Contract Sum.

FINAL ACCOUNT

1.0 Work Process

The post contract stage of a building contract starts immediately after the contract is awarded. As a member of the project team, a quantity surveyor (QS) works closely with other team members to ensure the project will be delivered in accordance with the terms and conditions of the contact and within the cost limit. The post contract quantity surveying services are: cost control and monitoring, certification of payments to the contractor and valuation of variations and settlement of the final accounts.

Final accounts settlement shall be completed in three distinct stages starting from the commencement of the measurement period. Progress of achieving each stage is closely monitored and recorded. The final accounts process actually starts at the commencement of the post contract stage. QS Liaises with the project team and the contractors to collect and collate information required for valuation of variations and, where practicable, to agree the valuation as soon as these variations are issued.

Contractual provision Either before or within a reasonable time after practical completion, Contractor should send document related to preparing final account Subject to Contractor compliance to this obligations, the QS shall prepare Final Account within the provision time frame of final measurement and valuation as stated in the appendix When the Final Account complete, the Arch/S.O. shall send a copy to Contractor and relevant extract to each NSC.Sum to be deducted; Prime cost sum and amount in respect of sub con & associated Contractor profit Provisional sums and value of works described as provisional Variations that are omission including omission of any other works carried out under changed condition as a result of variations Amount allowable to employer under fluctuations clauses Any other amount that is required by the Contract to be deducted from Contract Sum.Sum to be added; Total amount of NSC finally adjusted in accordance with relevant sub con conditions Where Contractor has tendered for the works, that was have been performed by NSC and the tender accepted, the amount of tender suitably adjusted. Any amount due to the Nominated supplier, including cash discount. The contractor profit on the amount referred as above. Any amount payable by S.O. relating to statutory fees and charges, setting out the works, opening up and testing, remedial works where the Arch/S.O authorized payment Addition due to variations including addition for other works carried out under change condition as a result of variations. The value of works against provisional sums or provisional quantity included in the Contract Bill. Any amount payable by S.O. by way of reimbursement for direct loss and expense. Any amount expended by the Contractor as a result of loss damage by fire or other perils where the risks are insured by the employer and Contractor are entitle to reimbursement. Any amount payable to the Contractor under fluctuations clause Any other amount that is required by the Contract to be added to the Contract Sum.

2.0Preparation of Final AccountsThe area to be cover under preparations of Final Account Variations Re-measurement of provisional quantity in the Contract Bills NSC account Nominated supplier account Loss and expense caused by disturbance of the regular process of the works Fluctuations of rates and labor (where applicable)

Final Account procedure Original contract Sum as starting point The bulk of Final Account consist measured work priced at the original bill rates. If Contractor has reason to doubt accuracy any of the original billed items, he can request QS on work concern to be measured on site All relevant item must be shown separately When preparing final account, QS should give Contractor or his rep opportunities to be present when measurements and details are taken or recorded So, the document will prepared in full liaison with Contractor From the draft final account, anticipated expenditure can be prepared This in to enable the account to be finalized fairly soon after work complete as well as interim payment to the Contractor represent realistic assessment of the value of work performed. Delay in settlement of the Final Account represents additional cost to the Contractor related to the financial commitment. The S.O/QS have a contractual responsibility to keep the date stipulated in contract for complete the account with all necessary supporting data provide by Contractor Any Addition to the original contract sum complete with KPK, APK and PHK Any Omission to the original contract sum complete with KPK, APK and PHK New Contract Sum will take after adjustment on addition and/or omission.Final Certificate The Arch/S.O to issue Final Certificate within three (3) month of the end of defect liability period or of completion of making good defects. The amount of the final certificate is the difference between the total of final account and the amount previously stated due under interim certificate. The payment shall be made within 28 days or any other period stipulated in the contract after issuance of Final certificate The final certificate provides conclusive evidence that the quality of material and standard workmanship are to the reasonable satisfaction of the Arch/S.O. All term and condition with regards to the adjustment of the contract sum have been implemented. Quantity Surveyorscan deal with thefinal account preparation, submission & subsequent agreement on behalf of consultants such as architects including both private andpublic sector clients. A final Accounts service which that provided to consultants and clients ensures the following:- Clear statementshowing the contract sum followed by allnecessary adjustments to that sum Prepared in accordance with the terms and conditions of the relevant contract e.g.JCT standard building contract All items fullyassessed andadjustments made for variations, provisional sums, re-measured works etc. Work carried out on a day works basis is included Loss and expense claims / reimbursementaccurately assessed and included Fluctuations where applicable are included Confirmation of the contractor's agreement to final account figure is obtained in writing Architect issues final certificate for final payment to main contractorFinal Account Preparation Procedure (consultant)

Quantity Surveyorsprepare the final account in the manner that is best suited for the particular project with the original contract sum as the starting point. An important part of the contractor's quantity surveyor's work is the agreement of the final account. Under the terms of the contract the private quantity surveyor is responsible for its preparation, but in reality the best approach is for both the client's quantity surveyor and the contractor's quantity surveyor to work together to produce an agreed account.A Final Account in construction contracts is the agreed statement of the amount of money to be paid at the end of a buildingcontract by the employer to the contractor. A final account brings about a sense of finality to the negotiations leading up to the agreement of the Final Account between the parties to the contract.A Quantity Surveyor ensures that in accordance with common practice both Employer (or the Employers representative) and the Contractor sign the Final Account Statement to signify that the Final Account figure represents the full and final settlement of all claims etc. The settlement of the final account negotiations between the contractor, and the architect or quantity surveyor will in due course trigger the issue of the final account statement and ultimately, enable the architect to issue the final certificate.Under the terms and conditions of the contractthe contractor is to provide the architect or quantity surveyor with all documents necessary for the final account preparation not later than 6 months after practical completion. Within 3 months of receipt of these documents the architect or quantity surveyor is to prepare and ascertain the final account sum and send this to the contractor.

The bulk of the final account will generally consist of measured work priced at the original billed rates. If the contractor's quantity surveyor hasreason to doubt the accuracy of any of the original billed items, he can make a request to the quantity surveyor for work concerned to be measured on-site.The adjustment of the contract sum in the final account normally falls under several relevant items, although thequantity surveyor must have regard to all the matters listed in thestandard form of contract and conditions. The contract conditions tabulate all the matters that shall be dealt with in the final account in order to adjust the contract sum in accordance with the conditions.Sums to be deducted:1. Prime cost sums and amounts in respect of named subcontractors and associated contractor's profit;2. Provisional sums and the value of work for which approximate quantities are included in contract bills;3. Variations that are omissions;4. Amounts allowable to the employer under the fluctuations clauses;5. Any other amount that is required by the contract to be deducted from the contract sum.Sums to be added:1. The total amounts of nominated subcontracts finally adjusted in accordance with the relevant subcontract conditions;2. Where the contractor has tendered for work that was to have been performed by a nominated subcontractor and his tender has been accepted, the amount of the tender suitably adjusted;3. Any amounts due to nominated suppliers, including cash discounts of 5 per cent, but excluding VAT;4. The contractor's profit on the above amounts 1,2 & 3;5. Any amounts payable by the employer relating to statutory fees and charges, opening up and testing, royalties and patent rights, and insurances;6. The value of work carried out against provisional sums or approximate quantities included in the contract bills;7. Any amounts payable by the employer to the contractor by way of reimbursement for direct loss/and or expense arising from matters materially affecting the regular progress of the works;8. Any amount expended by the contractor as a result of loss or damage by fire or other perils where the risks are insured by the employer and the contractor is entitled to reimbursement;9. Any amount payable to the contractor under the fluctuations clauses;10. Any other amount that is required by the contract to be added to the contract sum.All relevant items must be shown separately in the final account, and the net amount of each variation and amounts due to each nominated subcontractor and nominated supplier listed. When preparing the final account the quantity surveyor should give the contractor's quantity surveyor the opportunity to be present when measurements and details are taken or recorded, so that the document is prepared in full liaison with the contractor.Delays in the settlement of the final account represent additional cost to the contractor and in the majority of cases the employer is anxious to know his ultimate financial commitment. The architect and the quantity surveyor have a contractual responsibility under the contract to keep to the date stipulated in the contract for completion of the final account and the contractor should produce every assistance in the prompt provision of subcontractors and suppliers accounts, agreement of measurement and prices, and the supply of all necessary supporting data.

Final account-contractor

A Quantity Surveyors offer to undertake all works entailed to settle the final account. We are involved in the final account preparation, submission & subsequent agreement on behalf of both main contractors and sub-contractors.Our Final Accounts services which we provide to both main contractors and sub-contractors ensure the following:- All work executed by the contractor including variations, provisional sums and quantities, day worksetc.are accurately assessed and included Claims for loss/expense and fluctuations included Accuratefinal payment is received at the appropriate time for all work executed on site including the above items Confirmation of the employersagreement to final account figure is obtained in writing Architect issues final certificate for final payment to main contractor

3.0The Problem faced by the firm 1.Changing drawing last minutes by the Architect due to site condition or Clients requirements. We cannot expect to not having a changing along this construction process. When the new drawing had been issued, the Qs have to revise or remeasurement the drawing again.2.Variation Orders (VO) are often a cause of contract conflicts and may lead to negotiation, mediation / arbitration. It includes changing in design, quantities, quality, working conditions, and sequence of work.3.Include both by main contractor and consultants, such as contractors delay in submitting claims and failure to follow the procedure as stipulated in the contract agreement.4.The contractor fails to agree with the valuation of work. The disagreement may cause delay in certifying the amount of final account.5.Problem with the contractor is that they do not keep the records properly to claim the final payments.6.The contractor delay in submitting claims.7.The clients or main contractor overpay to the contractor, this happen when the Qs slightly verify by not looking into work progress or wrong quantities. So when the auditing spot check, the claims are overpaid.8.Besides that, problem can occur due to maintenance items in the contract documents where the contractors still have not been paid after the expire of the defect liability period (LAD). Any forms of contract including PWD203, PAM, and other states that final account will be paid after the LAD. These factors slightly give the implication to the delay or problems in preparing or closing final accounts.9.Adjustment contract sum, there will be additional or omit the tender price, mostly because of the variation order (VO).10.There a rate that the contractor had to follow in certain specification but the contractor normally put the item rate uncertain because of strategies.

The Solution1. Prepare detailed change order proposals to reduce the time associated with the construction administrator regarding the change order. Price and schedule analyses should be enclosed in the proposed change orders.2. Beware of field orders. The architect issues these orders to clarify specifications, deal with technical execution problems, or resolve site access difficulties. The architect has the authority to order minor changes in the work not involving adjustment in the contract sum or extension of the contract time and not inconsistent with the parties intent. Such changes shall be done in writing and shall bind the owner and contractor. If the field order increases costs or time, it should lead to a change order.3. Require that someone with authority to sign off on change orders remain at the site.4. The client or main contractor must verify the claim that the sub-contractor had submitted together with the consultant to verify the work progress within 1 month period so that when next claim submitted it does not gave the Qs to handle so many claims.5. Held a meeting at least twice a week to solve small problem that occur at site, the management and company financial as well so every problem they can give an alternative to solve problem especially the variation order that commonly happen.6. If the client overpay, the must have a re-measurement together with the supporting document .After that, tally the amount and quantity with consentience together.

4.0Monitoring mechanism established by the firm

1. Monitoring Cash Flow- Balancing the 3 elements which is taken by the project manager allows for the successful planning, resourcing and execution of a project.2. Review actual site practices and processes to control expenditure for materials, laborplant/machinery and subcontractors.3. During the project, the actual revenue and expected are tracked on the cash flow chart to monitor the performance of the project. Differences and variances are identified and necessary measure taken to bring the financial performance back on track4. Coordination - External relationship and information; communicating with, coordinating with, and influencing related management units, stakeholders and clients;5. Coordination - Internal relationship, including the use of inter-unit committees within the same management systems and communicating with other individuals6. Leadership - Defining objectives and goals and making them clear, real and important to the management team.7. Planning - The strategic plan, to establish relationships and evaluate the tensions and constraints between the mission, the clients and the socio-economic environment. The strategic plan should be developed from a consideration of alternatives and risks; and8. Planning - The performance plan, which is to define the scope of operations, the quality of output and cost/benefit standard. The performance plan must balance and relate the availability of materials and financial resources, technology, information, skills and time, with the products and services of the activity in order to produce specific outcomes. It must also establish progressive performance indicators.9. Control of Performance -Establishing norms for the level of goal pressure and time emphasis, as well as the level of delegation and control of details; Monitoring physical, financial, accounting and social effects; andPeriodic evaluation of performance at indicator events and timely adjustment of plans.10. Contract and Procurement Management - Purchase and sequencing of delivery of project materials in non-haphazard manners, managing changes as an aspect of performance optimization.

Conclusion

Scope/QualityThe scope of a project (often called the Scope of Work) is a clear, specific statement as to what has been agreed to be performed/achieved in a particular project. In other words, the scope expressly lays out the functions, features, data, content, etc. that will be included in the project at hand. You could also say that the scope clearly expresses the desired final result of a project.Resources/CostThis second element of the Triple Constraint is known as either Resources or Cost. Resources always cost money so the two are interchangeable in many ways. When we talk about the cost of a project, we are talking about what needs to be applied or assigned to the project in terms of money and effort in order to make things happen. This can be resources like manpower/labor, it can be materials needed for the job, resources for risk management and assessment or any third party resources that might need to be secured.Time/ScheduleTime, in project management, is analyzed down to its smallest detail. The amount of time required to complete each and every component of a project is analyzed. Once analysis has taken place, those components are broken down even further into the time required to do each task. Obviously from all of this we are able to estimate the duration of the project as well as what and how many/much resources need to be dedicated to that particular project.

References1 Zakaria, Z., Ismail, S. and md. Yusof, A. (2014). Modelling the determinations Influencing the Need of Computer Simulation framework in Improving the closing of Final Account and Construction Projects Advance Science Letters, 20 (1), 321325.

2 Zarabian Zakaria, Syuhaide Ismail, and Aminah Md. Yusof (2013). Fundamental Variables of Final Account closing success in Construction Projects in Malaysia. Worlds Academy of Science, Engineering Journal of Social, Human science and Engineering Vol:7 No:10

3.PM. Abdul Wahid Kamarulzaman (2014), SBQ 3722 Nota Amalan Ikhtisas III , Universiti Teknologi Malaysia, Skudai Johor.

4. Design Building Wikipedia, (2014), Google search, Bura Hapold.

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