1. PROFESSIONAL PRACTICE 1.1 PROFESSION: What is a profession? A profession includes: A large body of specialized information and discipline Mastery of this material and associated skills which is obtained through long standardized period of education, training and apprenticeship Regulation (education, quality, conduct etc.) by an association of experienced members of the profession Providing service to those who do not have this expertise Besides these a profession is also required to: Conduct research which improves the quality of their services and report findings not only to their colleagues but also to the public Maintain a caring relationship with the client or person/s served based on altruism, trust and virtue Based on the above criteria, determine whether architecture can be called a profession. How is a profession different from a trade or an occupation, which also form associations to monitor and regulate their work e.g. hairdressers, waiters, auto mechanics, shopkeepers etc.? In most instances trades-people are not accountable for the quality of their product whereas professionals do not sell products but services for which they are fully accountable. Lately, consumer oriented laws are, however, forcing trades-people in western countries to be more honest and accountable. Professionals are different because: they have obtained substantial and specialized education they have to exercise discretion wisely. An auto mechanic may have one correct way of fixing a problem, whereas, there could be very many good design solutions and the architect has to make a wise decision from a large number of choices. They have higher fiduciary (trust) responsibilities. This is characterized by good faith and loyalty and exercise of skills and intelligence on behalf of the beneficiary at all times. Unlike trades-people, professionals are not guided by profit considerations alone – you don’t need to check the scales every time. The duty of the professional is to place the client’s interest above one’s own and the public interest above both. Trade includes manufacture, purchase, sale or resale of commodities whereas a professional has nothing to sell except his knowledge and skills. He does not advertise his skills or work unlike the trades-people who are heavily dependent on advertising of their product to attract buyers, The relationship of the professional with whom s/he works (colleagues and other specialists) and people s/he serves (client or public) is consensual and fiduciary. The professional:
Needs to provide client with good judgment and learning – act as the client’s expert advisor. Oliver North’s attorney objected to questioning by US Senators as he felt that his role was not to sit idly while his client was facing serious legal difficulties. Needs to provide clients with information and options so the clients have the opportunity to understand the situation and make the best choice of action. Must have no conflict of interest with the client. Needs to have diligent self-policing of incompetence as well as of intentional misconduct and abuse. This is the true hallmark of professionalism. Earlier professionals were expected to exercise good judgment and fair dealing. To ensure these were rigorously maintained professional codes of conduct or ethical standards were established to improve the standard of practice and policing of the profession. However, the codes have often been used to determine if actions fit into the approved ethical guidelines rather than whether the underlying concept of good judgment and fair dealing have been meted out to the client, public or the profession. 1.2 PROFESSIONAL ETHICS Ethics is a set of moral values which define what actions we take are “right” and what are the principles for the “good”. The subject of ethics is best left to the philosophers as it is very difficult to come to specific terms. It has often been argued that teaching ethics is useless, as it is a trait acquired from childhood to maturation. What is not arguable is that architecture students need to be made aware of the ethical standards expected of a professional architect. It is expected that an architect maintain high moral and ethical obligations to the public to whom service is rendered. In a public opinion poll in the US in the mid 90’s architects were rated higher in ethical behaviour to lawyers and some medical doctors and almost all business people. The clergy was ranked the highest. Ironically, in Nepal the priests would probably be rated one of the lowest and the architect probably in a favourable position. Professional ethics are established to codify those standards of ethical behaviour which members of a professional organization must adhere to. The main problem in ethical behaviour comes when self-interest, guided or not by practical ethics, differs from our professional ethics. Pragmatic and self-interest concerns are always present in practice but our main obligation should always be to our client, users of the buildings as well as the general public. However, when an architect faces financial ruin and loss of firm, practical ethics may cause him to deviate from strict adherence to the code. Nonetheless, he may not disobey the law. The code of ethics calls for the obligation of its members to obey the law. A violation of the law is a violation of the code of ethics, however, some violations of the code may not be unlawful. Actions against some laws have been deemed morally right in certain circumstances e.g. civil rights movement, antiapartheid actions, democratic movement during Panchayat and Rana era etc.
1.2.1 Brief Look at AIA and RIBA codes Earlier the American Institute of Architects had two sections to the code: advisory and mandatory – “Responsibilities of the Profession, Advisory” and “Standards of Behaviour … Mandatory for Membership”. This was later changed in 1993 to goals that architects should aspire (as opposed to responsibilities) and rules of conduct which are obligatory (as opposed to mandatory). Some of the highlights of the earlier documents were: Part One: Obligatory Architect to maintain highest integrity Architect’s honesty of purpose must be above suspicion Moral responsibilities to associates and subordinates Act with entire impartiality (between all parties in a project) Part Two: Mandatory Architect can only be compensated by his fees for work done on the project No service without compensation (no free sketches except for established clients) Architect shall not compete for a project on a fee basis Architect shall not injure the professional reputation, prospect or business of a fellow architect. He shall not attempt to supplant another architect or undertake a commission for which another has been previously employed until he has determined that the original employment has been terminated. Architect cannot be employed for a project for which he has been an advisor Architect shall avoid paid publicity Architect shall not guarantee the cost of the project Mandatory adherence to these standards. In the 1993 AIA Document 330, these rules were changed to allow submitting competitive bidding, providing discounts and providing free service because of action by the Justice Department based on the concept that common good is “right”. Supplanting rules were also changed. The five obligatory rules of 1993 documents included: General Obligations, Obligations to the Public, Obligation to the Client, Obligation to the Profession and Obligation to the Colleagues. If an architect is found to have breached the code of conduct, the Council can investigate the matter and either reprimand or suspend the architect. Suspension from the Council leads to his cancellation of his right to practice. The Royal Institute of British Architects also has codes of conduct very similar to the AIA codes. It consists of three principles. The first principle deals mainly with agreeing to the conditions of appointment and agreed fees, not sub-letting work without the permission of the client and acting impartially in the interpretation of the building contract. Principle two deals with informing client about any conflict of interest, not advertising and giving credit to works of employees. Principle three deals with giving correct information, not offering gifts or discounts to gain work and not supplanting another architect unless his appointment has been terminated. A member proven to have
breached the code of conduct can be reprimanded, suspended or expelled from the Institute, in which case he would be unable to practice architecture. 1.2.2 SCAEF Code of Conduct The Society of Nepalese Architects (SONA) does not as yet have a code of ethics, however, these are expected to be prepared in the near future. The Society of Consulting Architectural and Engineering Firms (SCAEF), which has been in existence since November 1990 has a code of ethics applicable to its members. As of 2001, out of the 39 members 8 firms are mainly engaged in architectural works. The SCAEF codes are a revised and improved version of the Code of Ethics for Engineers first prepared by the Nepal Engineers’ Association (NEA) in 1969. The NEA code of ethics laid out ethical conduct under 3 headings: 1) Relations with the Public 2) Relations with the Employer and Client and 3) Relation with Engineers. This was later expanded by SCAEF to 5 sections: 1) Responsibility towards the Nation 2) Responsibility towards the Client 3) Responsibility towards the Profession 4) Responsibility towards Fellow Professionals and 5) Client’s Responsibility towards the Consulting Engineer. The fundamental principles of professional engineering ethics are: The Engineer will uphold and advance the honour and dignity of the engineering profession in keeping with the high standards of ethical conduct: Will be honest, fair and will serve with devotion his employer, his client and the public Will dedicate himself to the advancement of the competence of the engineering profession Will use his knowledge and skills in the service of humanity Responsibility towards the Nation Moral Responsibility – towards community/ gain public’s confidence Involvement in Community Development Refrain from Work which is against National Interest – against national interest, endanger human race or environment Responsibility towards the Client To gain and Maintain Client’s Confidence To be Loyal to Client – use best technical knowledge and skills To Protect Interest of the Client – with absolute professional integrity To Safeguard Client’s Confidential Information To disclose any Conflict of Interest Responsibility towards the Profession The Necessity of Formal Qualification Refrain from Claiming Skill not in his Profession The Need to Exercise Greater Skill in Specialized Jobs – exercise best judgment and advise client accordingly
Need for High Quality of Skills Eligibility for Agreed Remuneration only Refrain from Holding Position Where There is Conflict of Interests Need for Professional Development – exchange of professional experiences Responsibility towards Fellow Professionals Respect Fellow Professionals – not undermine professional credibility of others Refrain from Unhealthy Professional Rivalry Refrain from Associating with Undesirable Firms/ Individuals Client’s Responsibility towards the Consulting Engineer Selection of Consulting Engineers on Merit Basis Payment of Agreed Fees as per Agreed Payment Schedule Respect for Professional Relationship Acceptance of Consequences Arising from Deviation of Advice Relation with Third Party Analyze clause by clause how closely members are adhering to the above codes. Unlike the AIA, RIBA, IIA or even the Nepal Engineering Council acts, expulsion from membership of SCAEF for a breach of code does not hinder the member from practicing. Also SCAEF tends to be exclusive and somewhat elitist as its members consist only of larger, more established firms. Some of the drawbacks of the SCAEF code of ethics How can an architect or Engineer be accountable for the actions of the client? The clauses are more appropriate for inclusion in the Contract Agreement rather than as part of the code of conduct of SCAEF members. Concern shown only for fellow professionals. Silent about appropriate/adequate compensation and working conditions for subordinate and employee professionals and providing opportunity for their professional development, which is expressly stated in the NEA codes. No specific mention against discounts, commissions, gifts or other inducements No mention about giving due recognition to the professional contribution of employees. The Architects Professional Conduct Regulations 1989 India contains most of the clauses of SCAEF except the clauses on the responsibility of the client. In addition, it includes the clauses on giving proper recognition, remuneration and working environment etc. to employees. It disallows discounts and commissions and advertising. It stipulates members to follow specified competition guidelines and fee structures for services rendered. The Architects’ Council of India can look into complaints of misconduct and if found guilty, the architect can be reprimanded or removed from the register after which the architect would be barred from practicing in India. 1.2.3 Nepal Engineering Council Act and Code of Conduct The Nepal Engineering Council Act 2055 became effective since 11 March 1999. As per
the Act one has to be registered with the Council in order to be able to practice engineering in Nepal. Since Nepal does not have a separate Architects’ Council, architects have to register with the Nepal Engineering Council in order to practice in Nepal. This is the only statute regarding engineering practice. SONA or SCAEF do not have any statutory backing and serve only as professional associations that have no authority to stop any member or non-member from practicing in Nepal. The Council has the authority to prepare policies, plans and programs for engineering services; award recognition to institutions providing engineering education; determine minimum qualifications for practicing engineering and to strike out from its register the names of those who violate the professional code of conduct. Since the Council is still in its infancy, it has not as yet begun its regulatory functions. These are expected to be taken up once the Council is more established and begins to function smoothly. The Council has prepared a brief code of conduct for its members. The main elements of the code are: To practice engineering profession with discipline and honesty for the welfare and honour of the profession To maintain good relations with the client and to keep confidential all information related to his work Not to discriminate against the client because of his religion, race, gender, caste or any other reason Not to accept any financial benefits other than professional remuneration and related facilities To remain accountable for one’s professional services To disclose the name, designation and registration number in all the drawings and documents Not to advertise in a way which would unnecessarily influence clients If a complaint is received against a member for a breach of code of conduct and the investigation committee of the Council finds him guilty, he will be suspended from membership and his name will be removed from the register of the Council. He will then be prevented from practicing until he is again reinstated by the Council. 1.3 DISCUSSIONS OF CASE STUDIES OF PROFESSIONAL CONDUCT Example of misconduct – undercutting of fees, commission from contractor, collusion with project manager, inflating the bill of quantities etc. Example of high professional conduct – Citicorp Centre in Midtown Manhattan. Building raised on 4 nine-storey high columns placed at the centre of each elevation. Architect Hugh Stubbins Jr.; William J. LeMessurier (pronounced Lemeasure), leading structural engineer, designed the 25,000 ton steel skeleton under the 59 storey tower’s sleek aluminium skin. In 1978 a student calls to tell his professor thinks column placement wrong. Column design result of compromise to rebuild the existing St. Peter’s Church. Buildings corners cantilevered out 72’ out over church and plaza, dramatic effect. LeMessurier explains
structure best solution to cover quartering winds. New York City’s building codes required adequate strength in perpendicular winds which had been determined safe. In the spirit of intellectual play, he decided to check for winds at 45° and was surprised to discover strain on bracing increased by 40%. When cross-checking he found that welding at joints had been changed to bolted joints to reduce cost as well over designed strength. He had doubts about bolted joints’ ability to withstand quartering winds. Consulted leading Canadian engineer Alan Davenport who ran tests in wind tunnel, which confirmed his fears. Calculations showed joint at 30th floor would fail in a 16 year storm and with dampers in a 55 year storm but high chances of electricity to control dampers failing during storm. Additional welding at joints required. To prevent disaster LeMessurier decided to blow the whistle despite knowledge this could lead to possible protracted legal action, bankruptcy and professional disgrace. Would definitely be a shock to Citicorp management and shareholders. Contemplated keeping silent, even suicide. Grilled by company lawyers. Leslie Robertson, structural consultant for the World Trade Centre brought in review design. LeMessurier and Stubbins went to meet the chairman of Citicorp who was very supportive. Department of Buildings informed. But, efforts taken not to leak information to avoid panic. Evacuation plans prepared, constant watch of weather and damper. Robertson, constantly monitoring the building and progress. Citicorp released bland press release. Qualified welders hired to conduct welding after office hours throughout the night. Strengthening carried out successfully. Building can now withstand 500 year storm. LeMessurier sued by Citicorp for $4.3 million but settled for $2 million which was the limit of insurance coverage. Example of no villians and all heroes. Reference: Legal and Contractual Procedures for Architects; Bob Greenstreet and David Chappell; 1996. Nepal Engineering Council Regulations; Nepal Engineering Council, 2057. Report on Consulting Architectural and Engineering Industry in Nepal; The Task Force on Consulting A & E Industry in Nepal; 1990 Professional Practice: A Compendium of Business and Management Strategies in Architecture; Andy Pressman; 1997 2. PROFESSIONAL RELATIONSHIP 2.1 ARCHITECT-CLIENT RELATIONSHIP For the practicing architect, attracting and retaining fee-paying clients is a matter of survival. In the US, out of over 13,000 architecture firms owned by AIA members, only 5% employed more than 10 architects while 62% were one-person firms and growing. In India out of over 23406 registered architects in 1998, 10% were in the public sector, 30% in the private sector while 60% were self-employed. In Nepal as employment opportunities in the public and semi-public sectors become saturated, the trend towards individual private practice will have to be expanded. Currently less than 5% of the buildings in Nepal are designed by architects and the majority of the architects are concentrated in Kathmandu Valley. If the percentage of buildings designed by architects
can be increased and architects begin practice in the rapidly urbanizing centers of the country, the scope for private practice is quite significant. The success of private practice hinges on successful client-architect relationship. Professional organizations recognize this and include it in their code of ethics. Breakdown in relationship is less from failure in design and more often due to breakdown in the contractual relationship due to misunderstanding, miscommunication or general lack of comprehension of the relative responsibilities of both parties. It is important, therefore, for both parties to have a clear understanding not only of their own rights, responsibilities and duties but also of the other party. This understanding can be brought about through discussions, letters, recorded minutes of meetings etc., however, use of contracts is one of the most convenient ways of establishing the ground rules. Although one can produce one’s own contract, uses of standardized contracts ensure that important issues are not left out. They have been continuously reviewed and revised and tend to be fair to both parties. For the meeting of minds to be successful, two conditions must be fulfilled: The relationship needs to be detailed out as much as possible so that both parties understand them fully The understanding needs to be achieved BEFORE the contractual relationship has been formalized The AIA, RIBA have various types of standardized agreements. The Indian Institute of Architect also recommends the use of a standard contract agreement. SONA has yet to produce its own set of contract documents, whereas, SCAEF has a standard agreement based on FIDIC and ADB documents. Many projects being implemented in Nepal through donor funding have to use the contract agreements of the concerned agencies e.g. the World Bank, ADB, UN, USAID etc. The contract document also allows the architect to “educate” the would-be client on the roles and responsibilities of each side and conversely what is NOT part of the basic services. The standard agreements always specify the basic services to be provided. This helps to protect the architect against unrealistic expectations of the client and also alerts the client to his role during the period of the contract. Although this appears to be a tedious task, not as interesting as discussing design and also has the possibility of frightening off a few clients, it is better to lose an uncertain client before the work begins rather than during the process. Architects are most vulnerable to working for a client on a verbal or informal basis in the beginning of their careers because of the need to grab any client at any cost. As a result they are overworked and underpaid. Example – client in Baneshwore demanding daily site visits delayed payment, conflict. When dealing with a client, a few things which need to be kept in mind: Time to Sign Contract It is quite common for architects to produce a few sketch designs at preliminary meetings with the client before signing a contract. This is not necessarily a bad practice as it is akin
to “fishing” and helps secure the client. But such work should be limited and agreement should be entered into within a reasonable period of time. In Nepal certain clients are notorious for trying to milk architects for designs, simultaneously engaging two or more, and finally getting the agreeable design developed cheaply through an overseer or draftsman. It is often very difficult to deny clients when they request to take the sketches to discuss with family and friends. They should be judged carefully before parting with such sketches. When the client tends to prolong the signing of an agreement, the future of the relationship needs to be carefully evaluated. Better to lose a potentially troublesome client than to risk problems later on. Architects in heavy demand or with substantial workload can charge for preliminary works, but this may not be possible for beginners. Clarifying Client’s Requirements Sometimes a client has difficulty clarifying his requirements and despite a lot of work the architect cannot satisfy him. To safeguard against this, at the outset it must be made very clear to the client that the architect is paid to review and clarify the client’s program. If the client is vague about his requirements and needs substantial assistance from the architect to gather and analyze necessary information (market studies, field studies, soil investigations etc.), he should be informed that additional fees will be required. When to Stop Designing The architect is supposed to provide a design which fulfills the client’s expectations. Sometimes some clients are very difficult to please and the architect has to produce a continuous stream of drawings causing him to overrun his budget. It is possible to limit the number of sketch design at the contract stage, especially if such a situation can be foreseen. However, this requires the client’s agreement and he may be reluctant to setting limits. Fees can also be set according to the amount of work done, but again the client may not agree to this. Nonetheless, it pays to plan for such contingencies to prevent problems later on. Accuracy of Estimate During the early phase of design, the client needs to be given only preliminary cost of the project. However, care must be taken to keep the cost fairly accurate. Many consultants in Nepal tend to deliberately provide underestimates to the clients in order not to scare them off. This is not a good practice as it unnecessarily puts the client in a financial difficulty later on which could be harmful to the future relationship. Detailed estimates need to be prepared before bids are invited. Certain consultants have been known to deliberately inflate and underestimate certain items and later delete them or include them as additional items. This is done with bad intentions and made known to certain contractors so they can outbid others by quoting unrealistically low or high prices for these items. Delays Beyond Architect’s Control Delays can occur in getting necessary approvals/ agreements, financing etc. where architect has no obligation to expedite the process. The client should be made fully aware of any such delays. There should be no misleading of the client. If long delays are foreseen in some projects (legal/financial etc.) it may be wise to include limits to project
extension periods. Extent of Services There is a tendency to think that the role of the architect as advisor and consultant more or less covers everything about building design and construction. Both clients and architects often fall into this trap. Architects could be providing too many services for too little fees. It is advisable to prepare clear terms of reference (TOR) for the architect’s services, clarify the TOR to the client and include it in the contract. This will avoid overexpectation of services from the client. Site Visits Site visits should be made at appropriate intervals depending on the stage and nature of the project (setting out, before cover-up, reinforcement, concreting etc.). The contract agreement should be, however, be thoroughly studied while advising on site work or conditions and process should be followed accordingly. Misunderstanding of instructions can lead to conflict between client, contractor and architect. Architect’s Fees The amount and timing of the architect’s fees is very important for the smooth functioning and proper financial management of the firm. In many instances architects face difficulty in receiving timely payments, putting him into financial crises and completely disrupting his plans. Often a certain percentage of the fees is never paid at all and payment of fees is an issue that often brings about conflict in the client-architect relationship. Thus mode of payment, payment amount or percentage etc. must be clearly stated in the contract agreement and must be made clear to the client. Despite all the care, certain clients are always reluctant to make timely payments. Therefore, it is good practice to promptly submit bills, maintain excellent records of all transactions and keep sending polite reminders. Although legal action is possible, it should be done only after careful consideration because of the cost, time and potential public relations damage. 2.2 ARCHITECT- CONTRACTOR RELATIONSHIP Although there is a contract agreement between the owner and architect and the owner and the contractor, there is no contract between the architect and contractor to guide and formalize their relationship. However, the contract agreement between the owner and contractor (the standard HMG document is based on the World Bank’s small contracts format while the documents used by SCAEF and ADB are based on the FIDIC format) gives certain rights to the architect (designated as “Engineer” in many of the standard documents) associated with his contractual duties to the owner. The documents also specify responsibilities of the architect to both the owner and the contractor. It is while trying to balance his duties to the two parties that he faces potential problems, especially with regard to accuracy of drawings, specifications and contract documents; certification of progress payments; review and approval of work, substantial completion certificate and claims. To carry out the balancing act properly, the architect should strive to gain the respect rather friendship of both the parties.
The contract document designates the Project Engineer/manager (who normally represents the architect at the site) as the main line of communication between the client and the contractor. Since the architect is vested with the authority to receive and give instructions on behalf of the owner, the architect’s action or lack of it, makes the owner liable to the contractor for the architect’s improper actions. The owner also expects to recoup any losses incurred due to the architect’s action/inaction. The owner expects the architect’s full loyalty in protecting the owner against poor workmanship and excess costs. However, as per the contract, the architect, despite being hired by the owner, is expected to act impartially between the two parties. A few areas of potential problems are: Errors in Drawings and Estimates As per the contract documents, the contractor is responsible for the careful review of drawings, specifications, estimates etc. and pointing out any errors, omissions or inconsistencies. This does not cover review to ascertain whether the drawings are in accordance with applicable laws or building codes. Genuine claims by contractors can arise due to errors in the drawings and documents, whereas, the owner may be reluctant to bear the additional costs. The architect has to objectively deal with such conflicts. Construction Supervision The architect has the authority to ascertain that works are being undertaken as per the contract. He has the authority to reject defective materials and construction, make variations, certify payments etc., however, he needs to carefully follow the procedure spelled out in the contract. He can ask for testing of works which if found proper has to be paid for by the owner. The owner expects the architect to favour him during such decisions while the contractor may question the objectivity of the architect. The architect is expected to act fairly towards both the parties; however, he may be put under great pressure by the owner, especially if the owner happens to be the government or a large institution. Changes to the Construction Contract Changes in the construction contract are quite common due to problems in the drawings, specifications, site conditions, weather, acts of God etc. Sometimes the owner orders extra work. Change orders can sometimes effect the profit or loss situation of the contractor if loss making items are increased or profit items are deleted unreasonably. The associated time extensions also affect the contractor if there are bonuses or liquidated damages built into the contract. When there is mutual agreement between the owner, architect and the contractor, the change orders can be executed without problems. However, even if the contractor disagrees, he is obligated to perform the work whether agreement is reached or not. Owners are also very sensitive to changes as they increase cost. Some owners even insist on deleting items to reduce costs. Thus the architect needs to be very careful while making change orders in the contract as he could come under attack from both the parties. In certain circumstances, the architect needs to be extra careful about requests for change, especially if he suspects there is collusion between the owner and the contractor. This is
not unusual if the owner is the government and is represented by corrupt bureaucrats. In case of legal action, the architect is liable to be made the scapegoat. Because of such malfeasance the World Bank and ADB have now made it mandatory to include a clause on corrupt and fraudulent practices which can terminate a contract and blacklist a contractor. This clause becomes completely redundant when the owner himself colludes with the contractor. In such severe situations the architect has to be vary careful and may even have to consider terminating his agreement. Example of an architect who wanted to cancel the tenders because of suspicion of collusion among contractors during bidding and the owner insisting on continuing giving the excuse of excessive time loss in rebidding. Unfortunately, there are also innumerable examples of architect’s colluding with contractors as well as with clients. 4. Disputes The architect is given the power to resolve all claims and disputes between the client and the contractor, including any claims arising out of the architect’s errors or omissions. Unfortunately, many contractors tend to discount the architect’s ability to be fair in determining disputes between the owner and the contractor and prefer to refer them to arbitration. As arbitration involves extra time and cost, it is important that the architect resolve claims and disputes fairly so that the contractor builds more faith on his neutrality. Payments The architect has to process the contractor’s interim and final payment requests. Care has to be taken against “front-end loading” or excessively high or low rates for certain items in the contract. He should consider asking for additional guarantees if he feels such imbalance could affect the smooth performance of the contract. Payment is a sensitive issue as the owner does not want to pay for work not performed while the contractor does not want to continue work unnecessarily at his own expense. The architect needs to certify payments within the stipulated time period. Unless there are valid reasons e.g. defective works, persistent delays, failure to pay subcontractors etc., the architect should not unreasonably withhold payment certification as it can be very financially damaging for the contractor. While processing of payment requests need to be as thorough as possible, minor errors or omissions can easily be adjusted in the subsequent bills. Project Completion It is the architect’s responsibility to certify substantial completion and final completion of the project. After substantial completion, a significant proportion of the retention money is released, building use is permitted, liquidated damages period is terminated, defects liability period is commenced and preparation of final bills initiated. Before certification, a joint inspection is made and a list of minor items to be completed is prepared. Conflicts can arise during the preparation of the list or determining whether the substantial completion certificate can be issued as it involves large financial outcome. 2.3 ARCHITECT’S RELATIONSHIP WITH OTHER CONSULTANTS AND STAFF Consultants
When a construction project requires certain services outside the normal services offered by the architect, on the advice of the architect, the owner may employ specialists. This is common for a one person practice. Separate contracts should be made with the specialists so that the architect is not made liable for the specialists’ work. Some of these specialist services are town planning, quantity surveying, structural engineering, mechanical engineering, electrical engineering, interior design, landscape design etc. Often it is more practical and profitable, especially for an architectural firm, to include these services within its normal services in which case it must increase the fees to account for payments to be made to the consultants. When the architect takes on the full responsibility of providing the specialist services, he is liable for their performance so he must ensure their work is undertaken with skill and care. He also needs to make the owner clear about such an arrangement as he has to bear their costs. Where the specialists’ inputs form a part of the architect’s services, it is advisable for the architect to sign an agreement with the specialists prior to the commencement of the work, clearly outlining the scope of services, responsibilities, terms of payment, duration of services etc. in order to avoid misunderstanding and conflict later on. When dealing with fellow architects, the architect should not try to compete with them unfairly i.e. by reducing fees, offering discounts or other inducements in order to undercut their fees. He also should not discredit or try to undermine the professional credibility of other architects. Until and unless it has been determined that the contract of an architect has been terminated in a fair and proper manner, no attempt should be made to supplant that architect. Such actions not only create problems among architects, they are in breach of the code of ethics of architects. Staff The architect should take every care to ensure the health, safety and general welfare of his employees as far as he reasonably can. This includes providing a proper working environment, training and social benefits. Although a contract is not generally necessary for employees, a statement of the terms of employment should be provided. The terms of employment should generally include: Names of parties Date of commencement of employment Wage or salary rates Payment intervals Working hours Benefits such as paid leave, sick leave, insurance, provident fund, pensions, gratuity etc. Job title and job description If the employment is for a fixed period, the date of expiry of employment Restrictions on private work, if any Position as to copyright Certain obligations are implied on both the architect and his staff after employment. It is the duty of the architect to provide work, wages, take reasonable care of the employee’s safety and indemnify them against liability in the proper performance of their duties. He should also recognize and respect the professional contribution of his employees,
associates and consultants. Similarly, it is the duty of the staff to work honestly and faithfully and not to permit personal interests to conflict with their duties. They should use reasonable skill and care in performing their jobs and to indemnify the architect against liability incurred as a result of a breach of duty. Reference: Professional Practice; Dr. Roshan H. Namavati; 1997. Professional Practice: A Compendium of Business and Management Strategies in Architecture; Andy Pressman; 1997. Legal and Contractual Procedures for Architects; Bob Greenstreet and David Chappell; 1996.
3. PROCEDURE OF HIRING A/E CONSULTANTS 3.1 DIFFERENT PROCEDURES Basically there are three ways of engaging architectural and engineering firms: direct engagement, selection by ability and selection through design competition. Direct engagement of consultants is not permitted by the Financial Administration Rules (FAR) of Nepal for public works, except for very minor works. However, this procedure is very common among private clients who are not bound by any such legal provisions. This process is normally followed for engaging consultants with high reputation, for specialized works or when the client has a good relationship or trust with a particular consultant. The biggest advantage of this procedure is that least amount of time is spent in the selection process and work is entrusted to a reputed or known and trusted consultant. The drawback of this process is that the client has to depend upon the skill and knowledge of a single consultant. He does not have a choice of design options as in a design competition. The process of selection by ability is mandated by FAR Nepal and is most commonly adopted by bilateral and multilateral agencies in Nepal. The consultant is selected after evaluating the technical proposals submitted by all the participating firms. The advantage is that the firm with the best technical capability is selected for the work. The disadvantage is that it takes much longer to select the consultant. The choice is also limited to a single proposal and there is no guarantee that the consultant with the best evaluated ability will produce the best design. Selection through design competition is usually resorted to when the project is prestigious or significantly large and complex. The biggest advantage of this process is that it allows the selection of the best design proposal among many alternatives. The client can actually see and choose among finished design products before hiring the consultants, whereas, in the other processes the client is unsure of what he will get at the time of engaging the consultant. Design competitions also give less experienced or less well known consultants who may be more talented than established but less creative designers an opportunity to display their skills, although this chance is denied to them in limited
competitions. The disadvantage is that the process is quite time consuming and extra costs are incurred for conducting the competition, for prizes, honoraria etc. In case of start-up firms winning the competition, there is the danger that they may not be financially and technically capable of executing the project. In such a case, the firms are often asked to enter into joint venture with a more established and experienced firm. 3.2 FINANCIAL ADMINISTRATION REGULATIONS The selection of consultants for all Government works is governed by the Financial Administration Regulations (FAR). According to FAR: Consultants can be selected through direct negotiations if the fees are less than one lakh rupees; For works which have consultancy fees ranging from rupees one to five lakhs, sealed tenders will be invited from consultants comprising of separate technical and financial proposals; For works with consultancy fees exceeding rupees five lakhs, sealed technical and financial proposals will be invited from consultants; HMG can request for technical and financial proposals from any institution in which it has more than 50% share and conduct direct negotiations with it based on the proposals. (This provision appears to have been included to enable HMG to award work directly to NEPECON and avoid the sometimes lengthy and tedious process of selecting consultants through the two envelope system. Of late there has been some criticism that NEPECON does not have the technical capability of undertaking some of the works and sublets them to local consulting firms, thereby acting more as a commission agent rather than a consulting agency); For consultancy services of smaller and general nature, the fees should not exceed 3% of the total cost of the project. Invitation notice to consultants along with the TOR of the project works will have to be published in a national newspaper and the firms will have to submit details of their office, CVs of their professional employees and income tax certificates. For projects with fees ranging from one to five lakh rupees, 15 days will be allowed for submitting the technical and financial proposals while 15-35 days will be allowed for the projects with fees in excess of five lakh rupees. Where loan or grant agreements make specific provisions for joint venture between foreign and local consultants, the consultancy services will be awarded only if local firms are included as JV partners. In situations where local consulting firms compete with foreign firms, the local firms will be awarded the contract even when their proposed fees are higher by up to 10% than that of the foreign firm. Before opening the technical and financial proposals appropriate criteria will be prepared based on: Experience, qualification and competence of the firm Qualification and work experience of the proposed personnel Work methodology, time schedule and manpower requirements
Possession of related technical equipment Administrative and financial condition of the firm All the technical proposals of the firms will be evaluated according to the approved criteria and a list of all firms scoring higher than 60% will be prepared. In case there are less than three firms scoring more than 60%, the firm scoring highest among those scoring more than 50% will be included in the list. The financial proposals of only those firms which are included in the final list will be opened for further evaluation. During the second stage of evaluation, the financial proposals will be provided a weightage of 60% while the financial proposals will be given a weightage of 40%. The firm with the highest score will then be invited to sign the agreement. If the first ranking firm is not found appropriate, the contract will be awarded to the next highest ranking firm. The fees for the entire works from feasibility studies, research, design, drawings and specifications to construction supervision should not exceed 10% of the cost of project. Special approval will have to be obtained if this ceiling is exceeded. 3.3 SELECTION BY EVALUATION OF TECHNICAL ABILITY In this method the architect/consulting firm is chosen by the client based on technical competence, managerial ability, availability of resources in terms of finance and professional manpower, fee structure etc. Emphasis is given to technical competence rather than fee structure. Many firms tend to compensate for their lack technical competence by proposing low fees. Therefore, negotiation of fees is carried out only after the technical capability of the firm has been confirmed. One of the problems of this process is that it favors the larger and more established firms as start-up or smaller firms rarely have the requisite experience, manpower or finance to compete with the larger firms. Smaller firms have often been heard to complain that this process helps larger firms to form a cartel which prevents smaller firms from competing for large and profitable projects. The procedures for selecting a consultant are as follows: Preparation of a terms of reference Formation of an evaluation committee Preparation of evaluation criteria for selecting consultants Preparation of a long-list of consulting firms Preparation of a short list of consulting firms Invitation of proposals from short listed firms Evaluation of technical proposals Negotiating and signing of contract Typical Terms of Reference The terms of reference are prepared to define the objectives and scope of the proposed services, advise the prospective consultants about the scope of work at the time of invitation and define the services to be provided by the consultants. In case of bilateral or multi-lateral funding, the TOR needs to be approved by the funding agency. Elements to be included are:
Background – project formulation, owners, funding sources etc. Objectives – general objective of the project and purpose it serves, principal outputs desired Scope of consulting services desired – geographic area to be covered, types of services to be rendered, the way and method of access to information, data and how to work in coordination with the client to achieve project goal; outline of each major type of work, degree of accuracy required, work methodology and staff inputs. Data, services and facilities to be provided by the client, including counterpart staff. Time schedule and types and number of reports required – desk report, inception, appraisal, field, draft and final reports, construction progress reports etc. Formation of Evaluation Committee The evaluation committee is formed by the client to evaluate the technical proposals submitted by the interested firms. Members of the committee normally consist of one or more concerned professionals, financial experts, an administrative/ legal expert etc., at least one or more of them being a representative of the client. The recommendation of SCAEF to also include representatives from the Engineering Society or funding agency is generally not being followed in Nepal.
Preparation of Evaluation Criteria The evaluation criteria for selecting consultants- both for short-listing as well as the second stage- is prepared prior to the preparation of the long list of consultants. The criteria depends on the nature of the project, funding sources, geographical area, work volume etc. Since these are specified in the TOR, the criteria should be prepared only after finalizing the TOR. The criteria are drawn up by the client with the help of experts and ways of allotting scores are finalized. The scoring methodology is kept strictly confidential; however, the consultants are informed of the general criteria on which they will be judged. For projects which are funded by international agencies, it is normally specified that the criteria has to be approved by them. Preparing a Long-list of Consulting Firms In Nepal the most common method of preparing the long-list of consulting firms is by publishing a notice in a national newspaper and compiling the names of the firms that respond. SCAEF’s proposal to consult Nepal Engineering Association or other related organizations, embassies or business directories is rarely followed unless specified by the funding agencies, especially for large projects where international firms may be eligible to apply. In many cases where it is deemed that local firms do not have the requisite technical capabilities, funding agencies like the World Bank, ADB, UN etc. publish notices about the project in their regular gazettes and international consulting firms registered with them submit letters of interest directly to the agencies. Local implementing agencies are generally not involved in such selection procedures, but they are informed of the ongoing progress. This is often justified by the fact that the entire cost of consulting services (including all foreign currency costs) is financed by the funding agencies, unlike in the construction works where the recipient country has to contribute
certain funds and consequently is primarily responsible for the bidding procedures. The invitation notice to the consultants includes a brief description of the project, information to be submitted by the firms (CV, company profile, list and cost of works ongoing or completed, staffing, management system etc.), selection procedure and weightage, personnel required, method of making proposal and final date of submission etc. Preparation of Short List of Consultants The consultants included in the long list are allotted scores according to the criteria prepared earlier. A reasonable number of firms scoring the highest marks (5-10) are then short-listed for the second stage of the selection process. The criteria against which firms should be evaluated could include eligibility, availability, experience in similar projects, experience in similar geographic and climatic regions, work volume (in monetary value) and man-power etc. While evaluating the firms, they must be checked whether they are linked to any contractors or manufacturers. The evaluation committee evaluates the firms included in the long list in an unbiased manner and prepares the list of the short-listed firms which is then sent to the client and the funding agency for approval. Invitation of Proposal from Short Listed Firms The most widely used system of inviting proposals from the short listed firms is the two envelope system where separate technical and financial proposals are invited from the firms. Each of the selected firms is provided a copy of the invitation documents prepared by the client and previously approved by the funding agency. The invitation document comprises the letter of invitation, background information, terms of reference and draft contract agreement. The letter of invitation should normally include: Brief description of the project; List of attachments e.g. background, TOR, forms to be completed etc.; Contact office and person to be contacted for further information, whether country visit is a must or not; Anticipated man-months of consultancy services so the consultants can get a clear understanding of the scale of the proposed assignment; Provisions for association with other firms; Source of funding and any requirements that need to be considered; Time allowed for submission; Reference to local laws which may apply especially with regard to taxes, duties, exemption if any etc.; Details regarding submission of proposals, viz., language, number of copies, address and date for submitting proposals; Tentative date for negotiation of contract and commencement of works Period of validity of the consultants proposal
The background information provides information which will help the consultant prepare his proposal in an informed and responsive manner. It should explain the history and need for the project, the purpose and the intended benefits and beneficiaries. It refers to other ongoing or completed projects which may have a bearing on the project as well as reports and documents that need to be referred. In addition it may include information which do not strictly form a part of the TOR such as temperature, rainfall, travel conditions, availability of accommodation etc. The terms of reference gives the consultants sufficient idea about the scope of works and how the client perceives the likely deployment of the consultant’s resources. The TOR forms a part of the final contract and provides the basis for assessing the performance of the consultant. Therefore, it should be clear and detailed about the various activities of the proposed assignment and how certain information should be provided e.g. bar chart of activities, manning schedule of various staff, works completed by the firm, methodology of completing the project, CV of proposed personnel etc. The draft contract agreement provides the consultant with a clear idea of the type of contract he will be expected to enter into. As instructed by the invitation document, the short listed consulting firms submit technical proposals and financial proposals sealed in separate envelopes. In case of bilateral/multilateral funding, consultants are often requested to submit three copies of the technical proposal as one copy remains with the client, one is sent to the funding agency and the third copy is used by the evaluation committee for its evaluation purposes. A single copy of the financial proposal is submitted in a sealed envelope which is not opened until the evaluation of the technical proposals has been completed. Evaluation of Technical Proposal The evaluation criteria for the technical proposals are more detailed and systematic than the criteria used for short-listing. This is also prepared and finalized before the technical proposals are invited. This is to ensure that complete information required for the evaluation of firms is provided by the prospective short-listed firms in the required format. The evaluation criteria are normally divided into: Qualification and experience of the firm Approach and methodology for carrying out the work Proposed personnel Qualification and experience of the firm: This is normally allotted 100 to 300 marks out of a total of 1000 marks. The more important, complex or specialized the work, the higher the marks allotted. However, most of the firms in Nepal are yet to establish themselves properly and tend to hire short-term consultants for specific jobs. The consultants are relieved as soon as the work is complete and without them, the firms are incapable of undertaking similar works in the future. Thus, most of them appear strong in experience only on paper. That is why every time there is an advertisement for a large project, there is a mad rush to hire consultants and good consultants are deluged with
offers by many consulting firms. Unfortunately, the firms do not try and retain these consultants after the works are completed and any experience the firms may have gathered vanishes with the termination of the consultant’s services. Approach and Methodology: This is generally allotted 200 to 400 marks and illustrates how well the consultant has understood the TOR. It shows the consultant’s evaluation of the task and how he allocates his resources. The consultant is evaluated on his understanding of the project objective, work methodology, including any innovative ideas proposed, work program, man-month requirements and counterpart facilities required. Proposed Personnel: This is normally allotted the highest marks, ranging from 300 to 700. Since it is actually the personnel who will be responsible for the proper execution of the work, they are given more weightage. This is also to safeguard against firms that are strong in experience only on paper. The team leader is given the highest rating and other key members are rated in decreasing order. The personnel are evaluated for their experience in similar projects, qualification and other relevant training. Firms are instructed to submit CVs of all the proposed personnel. Negotiating and Signing of the Contract After the ranking has been completed, the evaluation report has to be approved by the client and by the funding agency, if any. The firm whose technical proposal has been adjudged the best is then invited for negotiations within 2 weeks of approval of the evaluation report. The sealed financial proposal of the first ranked firm, which was submitted along with the technical proposal, is then opened in the presence of the consultant. Detailed negotiations on the proposal, beginning with the scope of works, are then carried out until a satisfactory agreement is reached with the firm. When agreement has been reached, the financial proposals of the other firms are returned unopened. However, if a satisfactory agreement cannot be reached due to some serious disagreement, the negotiations are terminated and negotiations are commenced with the second ranked firm, and so on. If the project is funded by a multilateral agency, the agency must be informed about the failure of negotiations with the first ranked firm and the reasons for disagreement and approval must be sought to begin negotiations with the firm next in ranking. One of the problems of the two envelope system is that consulting firms sometimes tend to submit much higher than normal rates in their financial proposals, knowing very well that once they obtain the highest ranking in the technical proposal, the client is under great pressure to conclude an agreement with them. Funding agencies are also often reluctant to terminate negotiations with the first ranked firm based primarily on financial disagreements. Knowing this, the consulting firms try, as far as possible, to stick to their unreasonably high proposals during negotiations and the client is often forced to conclude negotiations at rates much higher than the normal fees. Case study of negotiations between Pokhara Sub-metropolis and the consultant for the Environment Improvement Education Program. Case study of disagreement between the Project Management Unit and Department of Civil Aviation regarding concluded
negotiations with the consultants for the airport improvement projects. Because of this persistent problem of overvaluing of financial proposals by the consultants, the World Bank had initiated a single envelope system to replace the twoenvelope system. In this system the financial proposals are opened along with the technical proposals and are also included in the evaluation of the firms. The financial proposals are given a certain weightage, normally about 20%. The firm scoring the highest in the evaluation of both the technical and financial proposals is then called in for negotiations. This process has not as yet been adopted by ADB. For obvious reasons, SCAEF is not in favour of this procedure; in spite of the many advantages it has for the clients in compelling consulting firms to submit more realistic fees.
3.4 ARCHITECTURAL COMPETITIONS Architectural competitions are generally held for large and complex buildings or for buildings of national importance. Many landmark buildings of the 20th century have been built through architectural competitions e.g. Sydney Opera House by Jorn Utzon, Pompidou Centre by Renzo Piano and Richard Rogers, Boston City Hall by Kallmann McKinnell and Knowles (their first major commission), New Opera House of Paris by Carlos Ott etc. It is a natural desire of clients to see and choose among many sketch designs prepared by many architects. However, to do this becomes an expensive proposition, as he has to pay all the architects for their work. Architectural competitions sanctioned by the respective professional bodies allow architects to compete without fees and at the same give the client an opportunity to choose among various differing alternatives. In open competitions hidden talents among architects can be discovered and architects who would never have been considered for big or important projects get an opportunity to display their talent and ability. For a little extra cost and time, the client is able to draw upon the talents of architects who decide to take up the architectural challenge and there is the possibility that a truly outstanding design will emerge. Competition guidelines are laid out to ensure that the conditions and limitations remain the same for all competitors. Guidelines are usually set out by professional bodies. SONA or SCAEF have not as yet prepared standard uniform guidelines although a few competitions have been held in the past with SONA acting in an advisory capacity e.g. design competition for KMC building in Juddha Sadak and ICIMOD headquarters. The Indian Institute of Architects has specified certain guidelines based on Architectural Competition Rules framed by the International Union of Architects on behalf of UNESCO. In its recommendation to the government SCAEF appears to favour selection of firms by evaluating their ability rather than through architectural competitions. Architectural competitions have been recommended for very restricted types of projects and for limited competitions among select group of consulting firms. This not only tends to create exclusivity among SCAEF firms, it also tends to discriminate against smaller non-member firms and talented newcomers.
To ensure that the client receives a design of high standard and the competition is fair to all the competitors, it is essential that the designs are judged by architects who are qualified and competent to interpret the competitors' drawings and judge whether they best meet the client’s requirements. Thus one of the crucial elements in holding a successful design competition is the appointment of prominent and respected architects as assessors. Design competitions can be open or limited and held in one or two stages. In an open competition, invitation to participate is issued to all those interested through a public notice and anyone desirous of competing can register and submit designs, however, these are normally restricted to members of the professional organization or even students of architecture (a third year student won the competition for the design of the Vietnam War Veterans’ Memorial). In a limited competition only a select group of architects deemed to have adequate experience in similar projects are invited to compete. New architects rarely get invited to limited competitions. In open competitions it is common to award prize monies and honoraria to a limited number of winners, whereas, in limited competitions, apart from the prize monies, all the participating architects normally receive some sort of compensation for their efforts. In a single stage competition, the designs are judged and awarded in a single stage, whereas, in a two stage competition, the designs submitted during the first stage are reviewed and only a limited number of architects with the best designs are invited to further develop their designs for the second stage. The winner is selected from among the designs submitted for the second stage of competition. Some of the important elements of a design competition are: Appointment of prominent and competent architects/specialists as assessors. The assessors or senior assessor usually assist in the preparation of the project brief, study and understand the client’s requirements and site conditions, finalize the conditions and prepare the final report of award. Preparation of a project brief to be distributed to prospective competitors. The project brief should clearly state the objective of the competition, the site conditions, the conditions of local authorities that need to be met, the nature of the problem, the requirements of the client as well as the competition conditions which need to be fulfilled in order to be eligible to compete. Finalization of competition conditions prior to announcement of competition. The condition should clarify registration procedures if any, mandatory eligibility requirements; number, nature, scale and dimensions of documents, plans, models etc.; estimates if required, nature of prizes, names of assessors, timetable etc. Non-disclosure of the names of competitors. Throughout the competition, the names of the competitors should remain anonymous to the assessors so that judgment will be fair. Drawings should be coded and the names should not be disclosed until the awards have been finalized. Award of the project to the winning design. In case no design is found worthy of the first prize, the other prizes should be awarded and the client is under no compulsion to execute any of the designs. If the award winning architect is found to be lacking in experience, he
can be asked to associate with an experienced architect or firm e.g. the winner of the design competition for KMC building was asked to associate with an established firm and she did. Reference: Professional Practice; Dr. Roshan H. Namavati; 1997. Report on Consulting Architectural & Engineering Industry in Nepal; Task Force on Consulting A & E Industry in Nepal; 1990. Financial Administration Regulations 2056; His Majesty’s Government of Nepal. Council of Architecture: Directory of Architects; Council of Architecture India; 1998. Architects Handbook, Ready Reckoner; Charanjit S. Shah; 1996. Handbook for Users of Consulting Services; Asian Development Bank; 1991.
4. CONTRACT AGREEMENT 4.1 General Work can be started after a simple oral agreement or a brief letter from the client. However, to avoid misunderstanding and conflict with the client later on, it is always advisable to have a written contract agreement where all aspects of the architect’s as well as the clients responsibilities and obligations are clearly spelled out; the staff, work schedule as well as the fees are agreed upon and termination and method of dispute resolution is specified. Some architects and clients also tend to prepare their own contract documents with very specific conditions. Although this is useful in very unique and special projects, for general as well as specific works, it is much safer to make use of standard contract documents. Besides using documents which have been proven and accepted through extensive use, adopting them ensures no important issues are omitted. In most cases the standard agreement can form the basic document and alterations or additional clauses can be added as required. The standard contract documents are usually prepared by the respective professional bodies for use by their members e.g. AIA, RIBA, IIA etc. Many multilateral organizations have also developed their own standard contracts to be used in projects funded by them e.g. the World Bank, The Asian Development Bank etc. SONA has yet to develop its standard format. On the other hand SCAEF has prepared a model form of agreement for use among its members based on formats prescribed by FIDIC and ADB. It is quite a comprehensive document and suitable for use for all types of architectural works. Normally a contract document should cover three principal areas, either in the contract proper or in the appendices attached to it. These are service definition, staffing and payment procedures. The service definition sets out the obligations of each party and defines the steps to be followed in initiating, modifying and terminating the services. More general obligations are included in the text while the specific responsibilities are detailed out in the appendices. Since the consultants are normally selected according to their proposed staffing, the actual list of professional staff is attached in the appendix. The payment procedures outline the method of payment including definition of payment
items, method of calculating payment due, frequency of payments, recovery of advance payment, retention etc. In addition there are other clauses related to performance bonds/bank guarantees and retention which are generally applied to construction contracts and not to consulting services contract, however, the FAR often require such provisions. The contract documents also cover provisions for price adjustments, in case contracts extend beyond one year, liability of the two parties and method of resolving disputes. A closer look at some of the standardized contracts will highlight these important areas. 4.2 SCAEF’S Model Agreement SCAEF’s model form of agreement is adopted from FIDIC and ADB. It is recommended for use by its members but also appears quite suitable for use by all architects. It consists of three parts: a) Form of Agreement b) General Conditions of Contract and c) Appendices. The General Conditions of Contract is divided into two parts. Part 1 deals with standard conditions which are applicable to most projects while Part 2 includes special conditions which are applicable to specific contracts. Part 1 remains unchanged whereas any alterations to be made to Part 1 or any particular conditions, data, information or general rules that apply to a particular project are included in Part 2. The Appendices, which form part of the contract agreement, relate to Terms of Reference, Undertaking by the Client, Undertaking by the Consultant and Remuneration Payment. Form of Agreement It is a brief memorandum of agreement which identifies the two parties entering into the agreement, the date of agreement, a brief description of the nature and scope of services and inclusion of various appendices as part of the contract. It is signed by the two parties and their witnesses. Although SCAEF has not included the total cost of services in its model form, it is quite common to include these in the form of agreement. General Conditions of Contract This is divided into Part 1: Standard Conditions and Part 2: Conditions of Particular Applications. Part 1: Standard Conditions is further subdivided into: General Conditions Terms of reference – perform as per attached TOR (Appendix A) Relationship between parties – not master/servant or principal/agent Language and Law – English/ law of Nepal Changes in legislation – adjustment of remuneration as per changes in legislation Definitions – singular/plural, male/female Headings – not part of agreement/ not to effect contract Notices – to be given in writing Commencement, Completion, Alteration and Termination of Contract Agreement in force – after signing of agreement Commencement of services – from the date stipulated in Part 2 Completion date – as stated in Part 2 or as mutually agreed upon Alterations – TOR can be modified through mutual consent given in writing
Assignment – cannot assign obligations or benefits without client consent Death of client – obligation passed on to successor Partnership – addition or withdrawal of partners not to effect contract Sub-contract – can be done only with the client’s written consent Termination client can terminate contract through written notice giving at least 30 days notice force majeure consultant can terminate contract if payment is not made within stipulated period or if project is postponed by more than 6 months. Consultant to be paid in full for work performed up to effective date of termination or postponement Inability of consultant to perform due to reasons beyond his control or circumstances which he could not have reasonably foreseen Default by consultant – failure to discharge his obligations as per the agreement as notified in writing by the client. Can be referred to arbitration if there is disagreement Termination not to effect the accrued rights and liabilities of either party Undertaking of the Consulting Firm Responsibilities of Consulting Engineer – carry out services with due diligence and efficiency, protect interests of client and minimize expenses Records – keep accurate and systematic records and allow client to inspect records and accounts Information – furnish all required information to client Confidentiality – maintain confidentiality about project. Any disclosure only with permission of the client Prohibition or association – will not bid for project and will disqualify contractors, engineers or others affiliated with it Indemnification - will indemnify client and his agents against all actions, claims and liabilities arising out of consultant’s actions including violation of copyright, patent. Clients Equipment and Materials – client’s property if furnished or purchased with client’s funds. Proprietary rights of the client in reports and records – records and reports to be confidential and remain the property of the client. Cannot be used for purposes unrelated to the agreement without the client’s consent. Insurance – consultant to insure against third party liability and damage to equipment provided by client. Client not responsible for insurance of consultant’s personnel. Notice of delay – promptly notify of any delay and may request for time extension Liability of the Consulting Firm Except for gross negligence or criminal action, liability of consultant not to exceed total amount due to him as stated in Part 2 Liability to expire on date of completion as stated in Part 2 Liable for violation of patents or copyrights introduced in his documents Not liable for work not undertaken by him Not liable for actions of client, contractor or supplier not covered by TOR or his instructions or written orders
Liable for payment of taxes, duties, fees as per law Obligations of the Client Client should provide all relevant information and give decisions timely so as not to disrupt performance of consultant Provide free access to land during performance of services. Not hold liable for any resultant damage Where applicable assist in obtaining necessary visas, licenses, permits and customs to bring in equipment, permission to bring reasonable amounts of foreign currency for services and personnel, authorization to take out earned foreign currency and repatriation in event of emergencies. Client to compensate for any unrecovered cost of taxes, duties etc. where exemptions apply. Client to provide equipment as listed in Appendix C. When delay occurs in provision of equipment, if notified, consultant will be entitled to appropriate time extension and adjustment in remuneration. Agreement on new arrangement if not provided. Client to provide counterpart staff as listed in Appendix C. Staff to work under direction of consultant and to be replaced if found inadequate. Agreement on new arrangement if not provided. Consultant to cooperate with other firms engaged by client as listed in Appendix C. If work held up by such firms, consultant entitled to time extension and proportional remuneration. Agreement on new arrangement if anticipated services not forthcoming
Settlement of Disputes Disputes to be settled under arbitration rules and procedures of Nepal. Decision of arbitrator to be final Personnel Services to be carried out by personnel during period indicated in Appendix B Reasonable time extension of 20% or 1 week whichever longer Designate team leader responsible for liaison between client and consultant If necessary replace staff with person of comparable experience with client approval Client’s staff to be remunerated and removed by client Remuneration to the Consulting Engineer Client to pay consultant as set forth in Appendix D Additional remuneration to be paid if supplementary services required. Cost computed on a time basis as well as for all reimbursable costs incurred If additional work required due to damage to work or equipment as a consequence of war, political disturbance or causes beyond consultant’s control, appropriate remuneration to be paid Payment to the Consulting Engineer Payment to the consultant to be made as set forth in Appendix D Payment within 30 days of invoice otherwise interest to be paid If dispute in certain item of invoice, payment for rest of item not to be held up. Payment
for disputed item to be made after settlement of dispute If applicable foreign currency earnings to be available for repatriation unless specified to the contrary in Appendix D Exchange rate of foreign currency to be determined by selling rate published by an official source on date of payment General Rules of Agreement Part 2: Conditions of Particular Application The following notes serve only as an aide-memoir and are not exhaustive. Specific conditions can be included as necessary depending upon the nature of the assignment. Notices Client’s address and responsible official Client’s alternative address Consulting Engineer’s Address Consulting Engineer’s alternative address
Languages and Law Language(s) in which agreement is drawn Ruling language The law to which agreement is subject Authorized Signatories: Signatures required to make agreement effective Others Commencement Date Completion Date Financial Liability of Consulting Engineer – limited to 100% of total remuneration Expiry of Liability of Consulting Engineer – date Settlement of Disputes – place Client’s individual experts Specification and designs – specifications and design in metric system and embody latest design criteria. Specifications and designs prepared in an impartial manner so as to ensure competitive bidding. Specified standards to be accepted and well known Special clauses related to particular project APPENDICES Appendix A: Terms of Reference Background of the Project and Objectives Objectives of TOR Scope of Works Data Collection Reconnaissance Inception Report Survey and Investigation
Study Reports Design Reports Construction Documents Implementation Reports Monitoring and Evaluation Reports Operation and Maintenance Reports Request for Proposal Qualification and Experience Required Man-power Inputs Time Schedule Evaluation Criteria and Marking System Other Information Required Undertaking by the Consulting Engineer Scope of Service Personnel Nomination Assignment Period Equipment to be Provided by the Consulting Engineer Completion Targets Undertaking by the Client Client’s personnel Services of Other Firms Coordination among Different Parties Equipment and Facilities to be Provided by the Client Remuneration to be Paid Remuneration and Payment Remuneration Salary Social Benefits Overhead Fixed Fee/ Profit Site Allowance Out-of-pocket Expenses Per diem Site Accommodation Travel Transport Office Accommodation Consumables Utilities Report Reproduction Documentation Mode of Payment - Upon Signing - On Submission of Inception Report 25%
15%
- On Completion of Survey and Investigation 50% - On Submission of Draft Reports 80% - On Completion of Final Reports 100% Exchange Rate of Currency (Selling Rate) Price Escalation - Annual Increment on Salaries 10% - Annual Increment on Commodities 10% (as actual) - Other Items 10% (as actual) Provision of Taxes, Duties, Fee by Government Guarantees, Retention Interest Rate 10% per Annum 4.2 ADB’s Sample Documents ADB’s sample document is fairly representative of documents used by many multilateral agencies. Unlike the SCAEF document it is a single document with appendices. Nonetheless, almost all the clauses of the agreement are similar. It is a standard document with certain clauses with blank spaces to be filled in according to specific projects. The owners (recipient country) can make certain minor changes or additions to the document as per its requirement, but the revised document has to be approved by the ADB before it is signed. However, most of the clauses are standard and do not require modifications. The cover page states the country, loan number, the name of the project, names of the client and the consultant and the date of agreement. The opening part of the document is a form of agreement where the date of agreement, names of the client and the consultant, the name of the project and the guaranteeing government is identified. Article I covers Services where the services to be provided are identified in the TOR set forth in Appendix A. The Commencement date is also fixed in number of days from the day the client gives notice to proceed with the work. Article II deals with personnel. The personnel are to be listed in Appendix B. Works are to be carried out by them but if replacement is necessary, the person should be of equal or better qualifications. The client can also request the consultant to replace any incompetent staff. Remuneration rates of the replacement need to be approved by the client but it should not exceed the remuneration of the previous person. The consultant needs to appoint a Project Manager for the field work. Article III deals with payment to the Consultant which shall be made in foreign currency as set out in Appendix C and in local currency as set out in Appendix D. It stipulates the ceiling for foreign and local payments as well as the currencies. It states remuneration will be provided on time actually spent and defines what may be included in the remuneration rate. Similarly, it defines what payments can be made out-of-pocket, the type and number of international travels for consultant and family, other expenses such as airport taxes, visas, communications, reports, tests etc. The article also states the mode of
billing and payment such as advance payment, submission of monthly statements of payment, time within which payment will be made by client. Article IV relates to the undertaking of the client. This article identifies the clients responsibility of exempting the consultant from any taxes and duties, other privileges and exemptions provided, access to land and the services, facilities and equipment to be provided as listed in Appendix E. Article V deals with the undertaking of the consultant. It states the general standard of performance by the consultant, preparation of specifications and designs, maintaining accurate records, assigning sub-contractors only with the approval of the client and maintaining confidentiality. The article also prohibits the consultant from associating with any contractor or manufacturer bidding for the project and providing indemnity to the client against the shortcomings of the consultant’s works. The proprietary rights of the client in equipment provided and reports and records is spelled out. The consultant has to take out professional liability insurance and bear responsibility for welfare of his personnel and give any notice of delay. Article VI under general provisions deals with matters related to suspension, termination of the contract by the client or consultant, the termination procedure, settlement of dispute, force majeure and variation of contract. Article VII identifies the effectiveness dates of contract, authorized representatives, the addresses of the client and the consultant and their signatures. The appendices include: Appendix A – terms of reference; Appendix B – personnel and manning schedule; Appendix C – foreign currency cost estimates of remuneration (home office and fiels), out-of-pocket expenses and summary; Appendix D – local currency cost estimates; Appendix E – services, facilities and equipment to be provided by the client. 4.3 IIA’s Model Agreement The contract agreement recommended for use by IIA is a concise document suitable exclusively for architectural works, unlike the SCAEF or ADB documents which can be used for all types of civil works. It is not as comprehensive as the other models but it has been extensively used in India and has proven useful for architectural works. In place of the form of agreement, it has a letter of appointment which states the project, the services desired and the fees offered, signed by the client followed by a clause about agreement to undertake the assignment and signed by the architect. The second part is the Conditions of Agreement which consists of standard clauses. The TOR which is included as an appendix in the SCAEF and ADB models is included in the main text as article 1: Scope of Work and article 2: Schedule of Services. The scope of work is a check-list of a broad category of all the works normally involved in a comprehensive contract whereas in the actual contract only those works specific to the project are expected to be included. The check-list includes site evaluation and analysis,
EIA, architectural work and site development, structural engineering work, sanitary, plumbing, drainage, water supply and sewerage work, electrical work; heating, ventilation and air-conditioning work, acoustical work, landscape work, interior designing and graphic signage. The Schedule of Services describes the different stages of design development from site evaluation and analysis and EIA report to concept design, preliminary design, working drawings, specifications, bill of quantities, periodic site visits. Certification of contractor’s bills and preparation of completion report does not appear to be included. The mode of payment and amount to be paid as well as the basis for determining payments (on a percentage basis) is given in articles 3 and 4. Article 5 deals with reimbursable expenses (comparable to out-of-pocket expenses). These are generally appended to the general conditions in the other model agreements. Article 6 states the client’s responsibilities with regard to providing the architect with detailed requirement of the project, all necessary information and paying the architect on time. Article 7 deals with the formation of a coordination committee which is optional. Article 8 denies the architect any further work if he violates the agreement, ethics or fee structure recommended by IIA. Article 9 covers the execution of the assignment and includes responsibilities of the architect, termination clauses, general clauses about alterations in designs, time extensions, site visits, client’s right not to execute the project etc. Unlike in the other models the article states that the architect has proprietary rights over the documents, not the client. Article 10 states all disputes to be referred to the Council of Architecture. References: Report on Consulting Architectural and Engineering Industry in Nepal; The Task Force on Consulting A & E Industry in Nepal; 1990. Handbook for Users of Consulting Services; Asian Development Bank; 1991. Council of Architecture, Directory of Architects; Council of Architecture; 1998.
5. FEE STRUCTURE FOR PROFESSIONAL SERVICES 5.1 TYPES OF FEE STRUCTURES There are four basic types of fee structures used by consultants depending upon the types of services rendered and the conditions under which services are to be performed. These are man-month or time-based fees, lump-sum fees, percentage fees or cost plus fixed-fee. Whatever fee structure is used by the consultant, the remuneration should cover all salary, social benefits, overhead, profit and out-of-pocket expenses. The salary, social benefits, overhead and profit are dependent on the efficiency and employment policy of the individual firms. These are also determined by the past experiences of the firm in similar projects, enabling the firm to propose fees which are competitive as well as financially sustainable. Very often audited vouchers are produced to justify the fee structure. The out-of-pocket expenses are actual expenses incurred during the performance of the services other than salary payments and are reimbursed to the
consultant on actual expenditure basis after submission of actual vouchers e.g. payment for air travel after submission of air tickets. Man-month Contracts This is also commonly referred to as time-based or “cost plus fee” contracts. This is the most preferred contract by the multilateral agencies. Fees are paid as per agreed rates per man-hour, man-week or man-month and are paid for the time the consultants actually spend on the job. In addition there are other expenditures such as per diem, travel costs and out-of-pocket or direct expenses for equipment, printing etc. The advantage of this type of contract is that it most closely reflects the actual costs incurred by the consultants during the performance of the services. This contract generally has a “ceiling” and is accompanied by an explicit obligation of the consultant to complete the given task within the stipulated amount and time. The disadvantage is that payment is done according to consultant’s inputs rather than outputs so that there are chances the desired output is not obtained within the given period and greater client monitoring is required. Lump-sum Contract In lump-sum contract a fixed amount is negotiated for a specified output. Its biggest advantage is that it is simple to administer and payments are made at specific intervals according to the work progress. The client also has the advantage of transferring the risk of price rise and need for doing more than the anticipated amount of work to the consultant. In this case the consultant has to take these into consideration while estimating the contingencies in his quoted price. The fixed amount to be charged is normally derived from man-month type of calculations or alternatively from percentage type calculations. Percentage Contract This has been the traditional type of fee structure where the consultant is paid an agreed percentage of the actual construction cost. The percentage to be charged for each type of work is based on a scale drawn up by a national association of engineers or architects and normally ranges from 2.5% to 10%. The percentage scales are supposed to be the minimum fees and the consultant is free to charge higher fees if necessary. More accurate concept of the actual fees to be charged can be developed as the consultant gains more experience and knowledge over the years. It is simple to administer and the advantage to the consultant is that fees automatically increase as the cost increases. The disadvantage is that the consultant is not motivated to achieve the best design or reduce cost. However, this type of fees is one of the least favoured by the multilateral funding agencies. Cost Plus Fixed Fee Contract In this type of contract the consultant is paid a fee based on time-based rates for the design and management plus a fixed amount of fee, usually for his expertise and knowhow. It is quite similar to the man-month contract except that in a month contract the consultant’s fees are built into the man-month rates whereas in this type of contract it is calculated as a separate fixed amount of fee. This type of contract is generally used for the design and construction of industrial plants or research and development works where the degree of input cannot be estimated or the output specified with any confidence.
5.2 PREPARATION OF A COST PLUS FEE FINANCIAL PROPOSAL The cost plus fee type of financial proposal is the most favoured by multilateral agencies. The proposal clearly shows the breakdown of the different costs in a standardized format. Not only does this make it easy for the consultants to prepare the financial proposal, it also makes it easy to conduct item-wise negotiations. The following steps are taken in the preparation of the financial proposal: Preparation of the Activity Chart The activity chart is normally a simple bar chart showing the proposed sequence and duration of all the different activities of the project. One of the two axes of the matrix shows the different activities and the other the time in months. The proposed activities should cover all the different aspects of the TOR. The amount of time allotted for each activity is usually an estimate based on the architect’s earlier experience in similar works. Because of this, the time estimates tend to differ from firm to firm. Staffing Schedule Based on the activity chart a staffing schedule, also in a bar chart format, is prepared. The input of each professional is checked against each activity of the activity schedule and the sequence and duration of his input is then determined. This is done for all the different staff required and the total man-month requirement of each staff is identified. It is preferable to separate the staff inputs required during the design and the construction phase. Determination of Man-Month Rates The man-month rate for each type of staff is then calculated. The man-month rate should include i) base salary ii) social costs iii) overhead iv) fees and v) overseas and inducement allowance if applicable. The base salary is the salary to be paid to the individual but does not cover any other allowances. To justify the base salary the consultant should be able to produce vouchers of salary being paid to the individual or someone comparable to him. Social costs are additional costs the consultant has to pay to his staff because of legislation, work agreements of established practice. This includes sick leave, vacations, medical and life insurance, providend fund, pension or gratuity etc. This can vary according to the practices and regulations of the different countries as well as the management practices of the consulting firms. Social costs typically range from 20% to 60% of the base salary. If required, the consultant should be able to justify the percentage of the social costs proposed through vouchers of actual payments as social costs. Overhead includes the consultant’s cost of doing business. This includes office rent, office supplies and equipment, secretarial and clerical staff, travel expenses, communication expenses, supporting technical staff etc. The overhead cost is also expressed as a percentage of the base salary and typically ranges from 65% to 150% of the base salary. The overhead cost is often an indication of the consultant’s efficiency and the consultant has to justify the cost if necessary.
The fee represents the consultant’s gross profit before taxes and is usually expressed as a percentage of the sum of the base salary, social costs and the overhead. This can vary between 5% and 20% depending upon the policies and practices of the consulting firm. The overseas or inducement allowance is paid to staff on overseas assignment and varies according to the nationality of the firm and the country of assignment. This is not applicable for in-country assignments. The sum of the base salary, social costs, overhead, fees and, if applicable, overseas allowance forms the man-month rate to be charged. This calculation is done for each staff. If there are international staffs, it becomes necessary to calculate the man-month rate in foreign currency. Other Expenses Apart from these, out-of-pocket expenses and contingencies also need to be worked out. The out-of-pocket expenses are estimates of the per diem allowance, travel costs, project office rentals, vehicle and equipment rentals, report printing and reproduction etc. Contingencies are normally allocated to cover any unforeseen expenses or shortages, if any, in any of the other categories and ranges from 5-10% of the sum of remuneration and out-of-pocket expenses. The total sum of all the remuneration, out-of-pocket expenses and contingencies is normally the ceiling figure for the cost of consulting services. 5.3 SCHEDULE OF PAYMENT The payment schedule depends upon the type of remuneration structure adopted. In the man-month type of fee structure monthly bills are submitted indicating personnel time inputs and reimbursable costs. The same method applies for the cost plus fixed fee contracts. In the case of percentage fee structure, payment is made according to the different phases of the services rendered. Different percentages are agreed upon to be paid after each phase is completed and paid after the work phase is completed. Different phases are agreed upon for both the design and the construction phases. Since the percentage fee is based on the final project cost, final adjustment has to be made once the construction is complete since the interim fees are based on the estimated cost and later on the bid amounts which are bound to change after the construction is complete. For the lump sum fees, payment is made as per agreed percentage of total sum according to completion of different stages of completion of the project e.g. at contract signing, completion of 25% assignment, 50%, 75%, draft report and final report. 5.4 SCAEF’S RECOMMENDED BREAKDOWN OF SOCIAL COST, OVERHEAD AND FEES
In its guidelines SCAEF has recommended social costs to be 42% of base salary, overhead to range between 75-100% of base salary and the fees to vary from 15-20% of the sum of base salary, social cost and overhead. The proposed breakdown of each cost is as follows: Social Cost Breakdown Paid Leave 15-21 days/year Sick Leave 7 days/year Provident Fund Dasain Salary 1 month/year Medical Allowance Life Insurance Pension / Gratuity Total 41.73% or 42% Overhead Breakdown Head Office Rent Head Office Utilities Adm. Salaries Non-revenue Earning Professional Salaries Printing and Reproduction Computer Costs Transport Business Promotion Depreciation Postage Insurance Library Materials Financial (bank commissions/interest) Advertisement Fees for Lawyers, Auditors Research and Development Staff Training and Education Professional Indemnity Insurance Social Activities Total 75-100% Fees Reserves and Profits, Business Risk
5.40 – 6.00% 2.50% 10.00% 8.33% 5.00% 2.50% 8.00%
16% 7% 14% 15% 3% 8% 6% 16% 6% 1% 6% 1% 0.5% 0.5%
15-20%
5.4 IIA’S STANDARD SCALE OF SERVICES FOR COMPREHENSIVE ARCHITECTURAL SERVICES The IIA’s guidelines for charging professional fees are on percentage basis and could serve as a useful tool for architects of Nepal to determine appropriate fees for their
services. An analysis of a few consulting firms’ fees based on cost plus fee was found to range from 6-10% of the total project cost, whereas, the minimum fees recommended by IIA for comprehensive services including site supervision and certification of contractor’s bills is 6%. Thus there does not appear to be a major deviation in the total fees charged according to the different systems. The IIA recommends architects to be engaged, as far as possible, in comprehensive architectural services and has designed a scale of fees for comprehensive services including pre-design study, architectural, structural, electrical and plumbing design, air conditioning, heating, acoustics and interiors and if required, detailed designs of external services including roads, drainage, sewerage, water supply, street lighting, landscaping and signage. The fee structure is based on the tendered cost of the total project including repetition of designs. The fees recommended are the minimum scale and architects are free to increase the fees according to the type and complexity of the assignment. For works costing up to Rs. 5 lakhs and community development works such as community housing, slum upgradation etc. fees are negotiable between the architect and the client. For all other works the minimum rates as given below are to be followed: Urban Design Site development, housing (excluding high rises) All Other Building Projects (comprehensive) Additions/alterations Interiors Site Supervision and verification of Contractor’s Bills Site Visits, models, presentation Drawings
1% 2.5% 5% 7.5% 10% additional 1% actual cost
6. CONTRACT AGREEMENT A contract document is a legally binding agreement between two or more parties for the performance of certain services. Various types of contract documents are used for construction works, namely, admeasurements (Bill of Quantities), turnkey or semiturnkey and lump-sum contracts. The most common type of contract for civil works is the admeasurement type of contract where price for a given work is determined by measurement and valuation in relation to agreed price formulas and rates. In the turnkey contract, the entire works including survey, design, construction, installation and testing of equipment are to be executed by the contractor. This type of contract is common for industrial and other specialized works. In semi-turnkey contracts, certain portions of the work are undertaken on a turn-key basis, whereas, in a lump-sum contract, a fixed agreed amount is paid for a given work. Just as in the case of a contract agreement between a client and a consultant, any type of contract can be formed i.e. verbal, written etc., however, it is safer and more convenient to use standard contract documents. SCAEF recommends the use of contract documents
prepared by FIDIC while HMG has prepared a standard contract document based on the World Bank’s Standard Bidding Documents for Small Contracts (for contracts less then $5 million but applicable to most construction works in Nepal). Since its introduction in 1999, it is compulsory for government agencies to use these documents for their larger civil construction works. For smaller works, HMG does not requiring tendering. Direct award can be made for works costing less than 1 lakh rupees and works worth less than rupees 10 lakhs can be awarded based on evaluation of sealed quotations invited from at least three contractors. A very concise and simple contract often in Nepali is generally used for such small works.
6.1 HMG’S STANDARD BIDDING DOCUMENT The document consists of various sections: Invitation to Bidders – This includes background information such as source of funds, eligible bidders, qualification of bidders, information to be submitted for qualification; instruction on preparation of bids such as filling bid rates, currency of bid, bid validity, bid security; instruction on submission of bids such as mode, deadline, modification and withdrawal; instructions for bid opening and evaluation and award of contract including clauses on performance security and corrupt and fraudulent practices. The clause on corrupt and fraudulent practices was introduced as mandatory during the late 90’s when it was discovered that corruption was very common in the construction phase. This clause becomes effective only when the client is strict in safeguarding his investment. When the client is an HMG bureaucrat with bad intentions and who is in collusion with the contractor, the clause becomes redundant. Private parties and even INGOs and NGOs are also not immune from this problem as the works are often entrusted to certain employees who are not always honest. Bidding Data – Many of the clauses of the invitation to bid are standardized, thus variable clauses such as addresses, deadlines, bid security amount etc. are included in the Bidding Data. Also, since it has been noted in the past that contractors rarely take the time to study the contract documents carefully, the Bidding Data helps to draw their attention to some of the main clauses the contractors need to be aware of but often overlook, leading to their bids being rejected as non-responsive. This problem has arisen because of lack of proper control and monitoring in the classification of contractors. Many class A contractors have been found to be operating without proper office, staff and equipment and quite a few of them don’t even know how to interpret the contract documents. Form of Bid – This is a standard format where the contractor makes a firm commitment to undertake the works for a given amount of contract price. Qualification Information – This is a standard format where the contractor provides information regarding his registration, volume of work undertaken during the last 5 years; details of projects completed with dates and value of contract, list of equipment available
(owned or leased, make and condition), qualification of key personnel, financial reports, access to finance, ongoing litigation, if any. The qualification information is used to determine whether a contractor qualifies for the work before his bid is opened. Often the client visits the contractors’ sites to verify the accuracy of the information provided. The advantage of requesting qualification information along with the bids over the prequalification method is that it discourages collusion among contractors. During prequalification, the pre-qualified contractors are identified and their number is limited, making it easier for them to collude in their bids. In the “post-qualification” method collusion is difficult as it is not known at the time of submitting bids whether a contractor will qualify for the bids or not. From past experience it has been noted that competitive bids are often submitted during post-qualification, whereas, after pre-qualification, it is normal to receive only three bids. The lowest bid is approximately 9 percent above the estimated cost, since HMG regulations stipulate bids can be accepted up to 10% above the estimated cost without much difficulty, whereas, higher bids require approval from higher authorities and questions can also be raised during the annual audit. Although, of course, in countries like Nepal the audit often is another source of corruption and collusion. Form of Agreement – This is a standard form of agreement between the client and the contractor with their signatures and the commitment of the contractor to complete the works as per the contract. Conditions of Contract – This outlines the various conditions which apply to the contract. It also defines the role the consultant has to play during the administration of the contract, generally through his representative at the site, the Project Manager/ Engineer. Otherwise, the consultant does not form any direct agreement with the contractor. All his powers to act during the construction phase are derived from these conditions where his role is to serve as the client’s representative and look after his interests. However, as per the contract, he is expected to act as an impartial judge between the client and the contractor. This can lead to difficult situations as the client being the consultant’s paymaster expects favorable consideration from him whereas the contractor tends to suspect that the consultant’s decisions will always favor the client. Almost all the clauses are standard and apply to most contracts. The conditions are normally not altered. All variable conditions are included in the Contract Data. However, in case it is felt necessary to alter or delete any of the standard clauses or add new ones, this is done through an insertion in the Contract Data specifying the alteration or deletion of the clause. Some of the duties assigned to the consultant as per the contract are: Will decide contractual matters between client and contractor fairly and impartially. There is a provision that either party can refer the matter to an adjudicator if he feels the decision of the consultant was taken wrongly; May delegate duties and responsibilities to others after notifying client and the contractor; Give permission to the contractor to sub-contract part of the works; Give approval to contractor to replace key personnel or remove any member of the contractor’s staff if the member’s presence is felt undesirable; Approve insurance of the works, equipment, staff etc. as per the contract;
Approve work schedule and any subsequent revisions including any time extensions. This becomes quite contentious if there are provisions for liquidated damages or bonus payments; Approve temporary works; Instruct contractor what to do if any material of historical importance is discovered at the site; Check quality of contractor’s work and notify him of any defective work which needs to be corrected. Can also ask contractor to carry out tests to determine if the works are as per specifications. If contractor does not correct the defective work within a specified time, he can have it corrected and deduct the cost from payments due to the contractor; Approve changes in the rate if the quantity of a certain item exceeds the quantity in the BOQ by more than 25% and the additional cost constitutes more than 1% of the Initial Contract Price; Approve any variations in the contract and cost of variation and adjust Contract Price and time extension accordingly; Certify contractor’s monthly bills and final bill; Determine Compensation Event and adjust Contract Price accordingly e.g. hard rock instead of normal soil; Approve and certify Dayworks; Issue Completion Certificate of the works (Substantial Completion); Issue Defects Liability Certificate after determining all defects have been corrected and certify final payments; Determine if a fundamental breach of contract has occurred after either of the parties has given written notice about such a breach of contract. If contract is terminated, determine payments to be made to the contractor; Certify if the contract has been frustrated due to events beyond the control of the employer or contractor. In certain cases the architect does not sign a comprehensive contract agreement with the client in which case he is neither responsible nor authorized to carry out many of the tasks identified above. His site visits could be very intermittent and he would report to the client any inconsistencies in the design and execution or any deficiencies in the quality of construction. The client would then be responsible for ensuring that the inconsistencies are rectified. Contract Data – All the variable conditions specific to each contract are included in this section so as to avoid altering the standard conditions. The name of the contract, names and addresses of the client, his representative, the Project Manager, the intended starting date, the location of the site, the defects liability period, the percentage of liquidated damages, bonuses, insurance, language, applicable law, currency of payment, adjudicator, retention amount, performance security and any additional conditions are included in this section. Technical Documents – these include drawings, specifications, bill of quantities and form part of the contract documents
6.2 SAMPLE BIDDING DOCUMENTS OF ADB (FIDIC) The sample bidding documents of ADB is an admeasurement contract based on the FIDIC document. Most of the general conditions of contract are similar to HMG’s standard contract document except that they are more detailed out. The format is also similar except that the Appendix to the Bid is inserted instead of the Bidding Data and the Contract Data is replaced by Conditions of Particular Application where amendments to the general conditions are included. Consequently, the Conditions of Particular Application hold precedence over the General Conditions of Contract. The FIDIC documents have been drawn up and are more suitable for situations where the construction industry is highly developed and contractors are efficient and well equipped, where minor delays inevitably lead to significant losses for both the client and the contractor and where contractors tend not to make unreasonable or unjustified claims. As a result provisions have been made in the contract to pay compensation to the contractor for any kind of delays which are not a consequence of the contractor’s actions and specific time periods have been stated for actions to be taken. In underdeveloped countries like Nepal where the bureaucracy has a bad reputation for delaying decisions, both the client and the contractor are prone to cause delays at every stage for reasons often beyond their control or the existing legal provisions make it difficult to pay compensation to the contractor for each and every lapse, the document needs to be used with extra care otherwise contractors can make huge claims as has been the experience in several big civil works in the past. The opportunities for corrupt and fraudulent practices are also further increased. Some of the clauses which could be difficult to accommodate or could pose problems in the Nepali context due to conflict with the Financial Administration Regulations are: Compensation to contractor for delays in supplying the relevant drawings (c 6) Additional payment to contractor if highways or bridges have to be strengthened (30) Compensation for any delay in providing site on time (42) Work stoppage on all locally recognized rest days except on special situations such as emergencies or expediting of work (46) Reassessment of rates for variations or if sum increases or decreases by more than 10% (52) Payment of interest on amounts due to contractor if payment is not made on time (60) Payment to contractor in times of special risks (wars, riots, calamities etc.) for removal of equipment or expenditures incurred in expectation of completing the whole of the contract (65 –8) Arbitration to be settled in the International Chamber of Commerce (67) Default of client if payment to contractor is delayed by more than 30 days after due date and payment to contractor for any loss or damage arising from such termination (69). 6.3 CONTRACT ADMINISTRATION Once the contract has been signed between the client and the contractor, efficient and effective administration of the contract becomes very important to get the best results.
This becomes mandatory for the architect in case of a comprehensive contract agreement with the client. Some of the responsibilities which are important and the architect needs to be aware of in contract administration are: The client/project director needs to inform the contractor about the authority given to the architect and his project engineer to administer the contract. Similarly, the contractor needs to inform the client and the project engineer about the authority delegated to his representative, especially with regard to acknowledgement of directives. The architect/project engineer should thoroughly study the plans, specifications, estimates, contract documents etc. before commencement of the works. Any errors or omissions discovered or reported by the contractor should be notified to the client and rectified. The working drawings and specifications complement each other and must be read in conjunction. All items may not be shown in both the plans and specifications but they need to be present in at least one of them, otherwise they will be considered additional items. In case of conflict, as stated in the general conditions of contract, normally precedence is given to the specifications. Specifications are of two types, method specification and performance specification. Method specification details out the exact equipment and procedure to be used in performing a construction operation whereas the performance specification indicates the result to be achieved and the contractor has the freedom of choice of equipment and method e.g. in structural, electrical, plumbing works etc. The architect/project engineer should be fully acquainted with the contractor’s plan of operations, safety provisions and schedule of progress. He should also keep track of all revisions in the plan and its impact in the progress of the works. The time of completion is normally mentioned in the contract. When a project is not completed on time, the contractor has to pay for the damages suffered by the client due to such delay, not as a punitive measure. This is covered in the clause on liquidated damages and specifies the amount to be paid by the contractor for each day of delay. On the other hand, there are provisions in the contract to allow time extensions to the contractor if certain events occur which are beyond his control – owner directed changes, acts of God, strikes, war etc. In case of delays due to acts of God, time extension needs to be provided but compensation can be claimed from the insurers. In owner caused delays both time extension and additional payments may be required. But in case of delays due to the contractor no time extensions or payments are required. The architect/project engineer needs to ensure construction is carried out as per the plans and specifications according to the terms of the contract The architect/project engineer needs to take measurements of quantities and determine payments to the contractor. The progress payments need to be made on a monthly basis or after reaching predetermined milestones. Payment is generally made for work completed, material delivered to the work site and work prefabricated but not yet incorporated in the project. It is customary to withhold a certain amount referred to as a retention money from the progress payment as a guarantee against any defective work as well as make proportional deductions for any advances paid in accordance to the terms specified in the contract. The typical retention amount is 10% of the progress payment – sometimes 5% for smaller contracts – of which half is released on the issuance of the Substantial Completion Certificate and the remainder is paid after the expiry of the
Defects Liability Period (normally 6 months to 1 year but covering at least one full monsoon season). Maintain records of all project activities: correspondence, daily diaries of events (source of information, outcomes etc. which can serve as evidence in case of later controversies), personnel, supplies and equipment, project progress reports, final report, photographs etc. If necessary, the architect/project engineer needs to issue contract modifications and directives within the scope of the contract. The change orders are often necessitated due to design modifications initiated by the owner or designer. Changes may also be required due to differing site conditions, unforeseen work essential to complete the work, variations in the estimated quantity of an item of work (if initiated by the contractor), unforeseeable delays which increase the cost or time of construction, substitution by alternate equipment, material or process. Modifications often require adjustments in the contract price and construction time which needs to be carefully determined by the project engineer and mutually agreed upon by the client and the contractor. Often prior agreement cannot be made when the work has to be continued and agreement is made later. If there is disagreement later on, this becomes a dispute. The architect/project engineer should keep control of materials at the site. He needs to approve different materials, samples and tests of materials carried out by the contractor. He must also ensure that the materials are being stored and handled in a way so as not to destroy their quality or strength. He must conduct regular inspections and keep records of materials and equipment brought to the site or used in construction. This becomes important in case of termination due to default of contractor. After the contractor submits a letter stating that the works have been completed, the project engineer, together with the contractor or his representative, should inspect the works and make note of any defects or unfinished works. If these are considered to be minor which can easily be completed during the defects liability period, the substantial completion certificate is to be issued after which the building can be taken over by the client and the defects liability period commences. Once the contractor corrects all previously noted defects as well as any new defects by the time the defects liability period is completed, the project engineer issues a defects liability certificate after which final payment is made to the contractor and all retention is returned. Except for any outstanding disputes, the contract between the client and the contractor is deemed to have ended. The architect/project engineer should properly evaluate and decide on any claims and disputes, if any. A claim is a request by the contractor for additional payments or time extension because of an occurrence of an event beyond his control. A dispute is a disagreement between the client and the contractor on some contractual matters. The project engineer needs to give his unbiased judgment on any dispute; however, if any of the party is dissatisfied with his decision, he is entitled by the contract to refer the matter to arbitration.
References: Standard Bidding Document; His Majesty’s Government of Nepal; 1998. Sample Bidding Documents, Procurement of Civil Works; Asian Development Bank; 1988.
Manual for the Administration and Supervision of Construction; Harihar Man Amatya; 1993. Construction Methods and Management; S. W. Nunnally; 1998.
7. REGULATORY CONTROLS Comprehensive development plans are prepared for the future growth of the cities based on the goals and aspirations of the local communities. The success of the implementation of plans, however, depends greatly upon the preparation and strict execution of complementary regulatory controls, the most important of which are subdivision and zoning regulations and the national building codes. While subdivision deals with the breakup of land and design of streets and other infrastructure, zoning deals with the use of the land, the building bulk and set-backs. The national building code is related to the minimum standards to be followed in building design and construction in order to make the building safe. 7.1 LAND SUBDIVISION Land subdivision is the act of breaking up a piece of land into separate parcels. It is normally done to permit the transfer of the subdivided parcels to someone other than the owner of the original land. The primary purpose of the breakup is to allow development to take place on the land e.g. for housing, industrial or commercial use etc. Although subdivision is also done for dividing property among heirs or for continuing the use of the land (farm sold to another farmer for agriculture purposes), the major intention of subdivision is to develop the property. Subdivision is primarily a tool to regulate urban development, unfortunately in Nepal, subdivision is conducted by the Land Registration and Land Survey Departments which have no concern for the city plans. Subdivision regulations govern the process by which individual lots are created out of larger tracts of land and form an integral part of the larger master plan of the city. In general, subdivision regulations govern the rules and standards for converting farm land or vacant land into plots for urban development. These relate to the size and shape of the lots and the width and length of the streets. They also include construction standards for streets, curbs and gutters, water mains, sewers and sidewalks. On the other hand zoning regulations divide the city into zones for different classes of land uses such as residential, industrial, commercial etc. and specifies the spatial relationship between land and building and the open spaces surrounding the building. The subdivision has to consider certain provisions of the master plan e.g. proposal of future roads, parks etc. The regulations also require that the existing utilities (local streets, sewers, water mains etc.) tie in properly with the proposed utilities in the land to be subdivided. Intentions to regulate the width of the street, length of the block, size of lots, frontage etc. are also reflected in the subdivision regulations. Sometimes the cost of public facilities is divided between the developers and the taxpayers, but often the developers are required to dedicate land for streets and to install at their own expense the
necessary public facilities to serve the development. More recently, the developers have been required to dedicate certain amount of land for parks, schools and even to contribute towards the cost of constructing a sewage disposal plant. Unfortunately, Nepal does not have any subdivision controls as a result of which subdivisions are occurring in an unplanned and haphazard manner by individual land speculators. Individual plots of irregular shapes and sizes without proper access and infrastructure are being created without regard to any city development plans or planning rules and standards. The following need to be considered when reviewing a subdivision proposal submitted for approval: Major streets are aligned with existing or proposed streets adjacent to the property Utility lines are properly sized to fit the wider system Drainage or natural hazard problems are not created for future residents or adjoining properties Improvements are adequate to serve proposed uses and quality of construction minimizes future public maintenance costs Natural amenities are preserved Size and shape of plots serve their proposed use and met zoning and land use regulations Subdivision can be served with necessary public services and facilities Timing is right with regard to the community’s ability to provide services, for example, the land cannot be an isolated lot far away from the built-up area where it will be too expensive to extend services Design is suitable and creates maximum safety for future occupants Even in the developed countries the reviewing agencies are not always competent or knowledgeable about the process and community goals are often not clear enough resulting in poorly executed subdivision. Since subdivision is an integral part of the planning process, it needs to be closely coordinated with other plans of the city and cannot be implemented in isolation. Some of the plans which need to be considered are: Water and sewer plans which establish the service area and the size, standard, location and phasing of treatment facilities and lines to serve the area based on desired land use pattern for future growth Park and open space plan which identifies the location and standards for park and recreation spaces to serve future growth and open space which needs to be preserved Environmental plan identifying critical areas which need to be protected from development such as flood plains, steep slopes, geologically sensitive areas, historical areas, forest lands, agricultural land etc. Street and transportation plan indicating location, capacity and nature of the system Fiscal plan which determines the proportion of the cost of public facilities which needs to be contributed by new subdivisions Capital improvement plan which shows where and when physical improvements will be made, their scale and how they will be financed Ideally, subdivision proposals should be reviewed before final approval by the local government as well as other concerned agencies such as water and sewer department, roads and highway department, power and telephone companies, school authorities, health department, fire department, parks and recreation department etc.
7.1.1 Subdivision in Nepal There are no specific subdivision regulations per se in Nepal but a few related regulations have been included in the bye-laws for Kathmandu and Lalitpur. Throughout the country land is subdivided arbitrarily and approved by the Land registration Department. As a result developments are often haphazard and follow no definite plans, access for emergency vehicles is absent and buildings have been erected in areas that have no infrastructure services. The subdivision regulations need to be closely coordinated with other city plans such as transportation, infrastructure, parks and open spaces, capital improvement plans etc. Either these plans do not exist or they are prepared independently by different line agencies which make no attempt to coordinate their activities. Consequently, sectoral activities are often implemented separately and timed improperly to conflict with each other’s work e.g. road is dug up by the Department of Water Supply soon after the Department of Roads finishes blacktopping the road. The bye-laws for Kathmandu and Lalitpur include some subdivision regulations for planned housing sub-zone. These include minimum road widths for different classes of roads within the development area, minimum plot width of 6 m. and minimum area of 2.5 Annas, prescribing depth of plots according to area, minimum open spaces – from 2.5% to 5% according to the size of the land to be subdivided. About 15-20% of land has been prescribed for parking for buildings with high occupancy e.g. hotels, auditoriums, commercial complexes, schools and colleges, office complexes etc. The municipalities which are primarily responsible for issuing building permits tend to adhere only to regulating building bulk and setbacks whereas the land registration office has neither the knowledge nor the expertise to regulate urban development through subdivision controls. 7.2 ZONING ORDINANCES Zoning is the division of the city into different zones in order to regulate the use of private land. The zoning regulations specify the permitted uses, the bulk of the buildings, set-backs and other requirements in each of the zones. In its simplest form, zoning was developed to segregate residential areas from commercial and industrial development. Zoning is an expression of police power to regulate activity by private people for the health, safety and general welfare of the public. This kind of power rests only with the state legislature and municipalities can exercise this power only after it has been delegated to them by the state e.g. Town Development Act and the Local SelfGovernance Act. Zoning needs to be consistent with the comprehensive plan of the municipality. Whereas the plan indicates the future development aspirations of a city, zoning ordinances provide the detailed means of achieving these plans. Zoning is also closely related subdivision regulations. While subdivision involves the design and size of plots, the streets and other infrastructure, zoning controls the use of the lot as well as the building bulk, set-backs
