Measure and Pay Contracts

Measure and Pay Contract

Measure and Pay contracts are also known as; “schedule of rates” contracts,  bills of quantities contracts, “ad-measure” contracts. Suitable for more complex works involving a large variety of activities. The quantity of work for the majority of the items of work should be known with a well-judged  and reasonable degree of certainty. This contract format is generally used for construction works contracts rather than services contracts. In the documentation for this system the total works to be constructed will be broken down into different work activities (items) which can individually be measured using a single measurement unit or rate of application for each such measurement item (e.g. linear metre, tonne, litres per square metre, etc).

The document thus prepared for bidding is the Bills of Quantities (BOQ), the majority of the items of which will consist of; 

a description of the separate item which will be subject to individual measurement,

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an estimated quantity for the item, and

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the unit of measurement.

Provisional and/or contingency sums, already priced by the Employer, may also be included; 

to cover unforeseen events/items

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for portions of the work that cannot be readily quantified at the time of bidding.

The total value of these provisional or contingency sums should be small when compared with the overall value of the contract. Lump Sum items will be permitted for individual items of work whose finished magnitude can  be clearly and accurately defined at the time of bidding. In his bid the bidder is required to enter a cost (unit) rate against each item of work in the Bills of Quantities (or a price in the case of a lump sum item). The amount for each item is determined  by either multiplying the quantity by the rate, or simply inserting an amount where the item requires a lump sum. The Contract Price is obtained by totalling the amounts for all the items. During construction each unit rate will be used in conjunction with the actual amount of work satisfactorily completed to date for the respective item in order to make periodic (usually monthly) valuations of the work completed by the Contractor under the Contract and, thereby, determine the amount which is to be paid to him for the work he has completed to date. Additionally, as the work defined by each item is completed, the actual quantities will emerge, and these may be different from the estimated quantities set down in the bidding documents. Hence, the Bills of Quantities system ensures that the Contractor receives payment for the actual amount of work that he has undertaken. Upon completion of the Contract the final quantity of each type of work is re-measured and the Contractor is paid according to t hese revised quantities. Bills of Quantities system is flexible. But, in some cases of substantial underestimation/overestimation by the Employer at the time of the preparation of the bidding documents the Contractor may have the basis for a claim for compensation against the Employer due to his being grossly mislead at the time of bidding. Hence, great care must still be taken to ensure that the quantities provided in the bidding document are as accurate as practicably possible.

The Conditions of Contract provide for adjustment of the rate or price of an individual item if the final quantity of the item differs by more than 25% (plus or minus) from the quantity originally in the Bill of Quantities provided that the increase/decrease in value of the item exceeds 1% of the Initial Contract Price. It should also be borne in mind at all times in the itemisation and compilation of the Bills of Quantities that, in principle, the clearer the actual quantities of work are defined then the greater the confidence on the part of the bidder in determining his rates and prices, and the better and more competitive will be the bid price submitted.