Table of Contents

  1. Introduction
  2. Responsibilities
  3. Control Budget
  4. Field Change Orders
  5. Subcontract Cost Control and Administration
  6. Cost Analysis
  7. X, Y and Z Control
  8. Field Purchase Order Control
  9. Backcharges
  10. Attachment Summary

1. Introduction

The purpose of this procedure is to detail the methods to be used for gathering, reporting, administering, analyzing, forecasting and providing the basis for controlling costs incurred in the field.

The basic concept of the Company cost control and reporting procedure is specified in BN-EP 610 Home Office Cost Management Procedure. This Field Cost Management Procedure is based on the same principles and basic philosophy and complementary to BN-EP 610.

2. Responsibilities

The Field Cost Engineer is functionally responsible to the Site Control Manager and through him to the Project Construction Manag­er. A line of communication exists between the Lead Home Office Cost Engineer and the Field Cost Engineer.

The Field Cost Engineer's duties include continuous scope evaluation including extra work, review of progress payment certificates, cash flow forecasts, contribution to the establishment of estimated finals, specific cost studies and issue of field cost reports.

The Home Office Cost Engineer is responsible for the overall cost reporting of the whole project, based on the field reports where this is relevant. He also contributes to the establishment of the estimated final costs and budgets.

3. Control Budget

The field control budgets will be established in the Home Office, in conjunction with the Construction Department.

The control budget for the X, Y and Z accounts and direct hired labor if any will be based on the "as sold" estimate.

The control budgets for the subcontracts will be based on the scope of work defined by the original form of tender plus a contingency for possible scope increases and escalation.

The field budget control is affected in the field by field change orders or every scope change in accordance with the Change Order Procedure BN-EP 205.

4. Field Change Orders

4.1 Definition

During the construction phase of the project it may be necessary to have work performed which is not a part of the scope of the Prime Contract between Company and the Client. For all such additional work and after review by both the Project - and Construction Manager a Field Change Order must be issued for approval by the Client.

An approved Field Change Order is an authorization to execute the work and to adjust the budget.

A scope change involving Home Office Engineering must be promptly referred to the Home Office for processing as a Home Office Change Order.

Change orders are contract amendments between Client and Company and NOT between Company and any Subcontractor.

4.2 Initiation The preparation of a Field Change Order can be initiated either by the Client by means of a written request or by the Project Construc­tion Manager.

4.3 Type of Field Change Orders (Attachment 1)

A firm or fixed price field change order is based on an estimate of material and labor costs plus overheads, fees, contingencies and escalation in accordance with instructions from the home office.

Field change orders for cost plus or reimbursable extra work should include an estimate of the total cost involved.

In most cases, through Client's approval of material purchases, daily labor and/or equipment time sheets, etc., is required on a daily or weekly basis. Upon the completion of the work the final value of the order is adjusted in accordance with the total costs incurred.

In all cases, the client's written approval must be obtained. If this is not possible then the approval of the Project Manager is required prior to the execution of any work or commitments to a subcontractor.

4.4 Numbering and Distribution

The Home Office Change Order Form UE(1)-6-2 is used for field changes by adding the word "FIELD" to the heading and an "F" before CO in the right hand top corner.

All Field Change Orders must be numbered sequentially (also includ­ing those Field Change Orders which have been rejected by the Client).

Copies of approved and/or rejected Field Change Orders shall be distributed as per the project document distribution schedule.

4.5 Field Change Order Register

The purpose of this register is to ensure that the Home Office is informed of all Field Change Orders.

The register shall be maintained by the Site Control Department. A copy of this register shall be included in the monthly progress and cost report.

5. Subcontract Cost Control and Administration

5.1 Definition

This section establishes the control of unit rate subcontracts. The control of lump sum subcontracts is essentially the same, the lump sum may be considered as a "pay-item" and its progress expressed as a percentage complete.

Cost analysis consists of comparing scope, commitments and achieve­ments with the budget and the schedule. Based upon performance to date, either the forecast of cost at completion is reaffirmed or revised. Cost control includes the use of this information as a basis of revising methods and execution in order to produce accept­able standards of performance.

Each subcontract will be administered separately by computer and/or manually. (whichever is applicable).

5.2 Control Budget and Contingency A control budget will be available for each subcontract with a breakdown on the level of pay-items. The difference between the control budget and the original form of tender value is the subcontract contingency. All contingency infor­mation is confidential and should not be disclosed to the Subcon­tractor, or other unauthorized parties.

5.3 The Subcontract Scope

The subcontract scope is defined by the pay-items with their de­scription on the form of tender appended to the subcontract purchase order. The amount of work formally committed is defined by the pay-item quantities on the form of tender. The form of tender must, in principle, be updated by the Home Office at least each quarter to reflect possible changes in quantity.

If administration is done by computer, the Home Office Cost Analysis Department will input all form of tender data into the computer. Computerized form of tender reports will be made available to the field (Attachment 2).

5.4 Field Progress Measurement

- "Engineering Quantity Input Form" (Attachment 3)

The Home Office will quantify every drawing which is certified for construction by filling in form BN-US 118-5, which is then issued to the field as an attachment to the drawing.

- Quantity Alterations and Cost

The Home Office is expected to advise the field on any price consequences as a result of new and/or revised issue of drawings.

The Subcontractor shall be requested to advise Company field of any price consequences as a result of new and/or revised issue of drawings.

- "Quantity of Work Done Input Sheet" (Attachment 4)

Each Subcontractor reports his progress monthly, by submitting "Quantity of Work Done Input Sheet". Weekly reporting is recommended for subcontractors with progress problems.

- "Progress Payment Certificate" (Attachment 5)

Following review and approval of the quantity of work done input sheets by the Quantity Surveyor, the input sheets are submitted to the Field Cost Engineer or the subcontract admin­istration group who will prepare a monthly "Progress Payment Certificate" stating the value of the work done. The subcon­tractor will use the certificate as backup for his invoice.

- "Drawing - Actual Comparison Report" (Attachment 6)

A copy of the approved Quantity of Work Done input sheets must be submitted monthly to the Home Office Project Control Depart­ment for processing in the computer if applicable. The output reports i.e. the Drawing - Actual Comparison report will be made available to the field with copies for the subcontractor.

5.5 Additional Work

There will be a certain amount of work on each subcontract for which no drawing quantities takeoff has been made by the Home Office.

This will be either:

- Work to which existing pay-item rates can be applied change in quantity of work. Such work is considered to be in the Subcon­tractor's scope of work and does not require an "Extra Work Authorization". ·

- Work to which no existing pay-item rates can be applied (scope change). Such work requires an "Extra Work Authorization" which describes the work and shows the price agreed upon and further conditions.

5.5.1 Definition of an "Extra Work Authorization" (Attachment 7)

An Extra Work Authorization is an instruction and an authorization to a Subcontractor to perform work not covered by the scope of the requisition to the original subcontract and for deletions of work.

Work covered on EWA's can be executed on one of the following basis:

a. On a lump sum basis.
b. On unit price basis (existing or negotiated).
c. On daywork rates (existing or negotiated).
d. A combination of b. and c.

All EWA's at pre-qualified value limits, established in agreement with the Project Manager, shall be signed by the Project Construc­tion Manager and issued to the Subcontractor.

EWA's shall be numbered per subcontract purchase order number followed by an EWA sequence number for example: A110/001, A110/002 etc.

No other means of authorizing extra work will be allowed, e.g. any verbal or written communication (such as AVO's, Interoffice Memo's and the like).

5.5.2 Types of Extra Work Authorization

- Fixed Price EWA

A Fixed Price EWA covers the extra work, if a firm lump sum quotation can be obtained from the Subcontractor before issu­ance of the EWA.

- Open-Ended EWA

In many cases the nature of the work makes it impossible or impractical to obtain a firm quotation before the work is initiated. In such cases, the work shall be carried out on a reimbursable unit price or day work basis. Before any such open ended EWA is issued, the Company initiator and the Cost Engineer shall establish an estimated cost of the work, based on exist­ing unit rates. These estimates are required for cost forecast­ing and shall not be divulged to the Subcontractor.

5.5.3 Preparation of an "Extra Work Authorization"

The Company initiator of an EWA is responsible for a proper description and calculation of quantities of the work and must submit the draft EWA to the Field Cost Engineer who will estimate the costs involved and prepare the formal EWA.

The Cost Engineer and the Project Subcontracts Manager is responsi­ble for screening to ensure that the work is not covered in the subcontract. The reason for the EWA and the scope of work must be clearly described and accompanied by a Cost Estimate. Whenever possible the estimate should be based on agreed unit rates. The initial rough draft is to be attached to the green (field) copy of the EWA.

If new unit prices or lump sums are required for the additional work, the Project Subcontracts Manager will negotiate the required rates with the Subcontractor before authorizing him to commence the work.

For a new unit rate or lump sum quotation, the Subcontractor should be asked to submit his quotation in a letter addressed to the Project Construction Manager.

If a fully computerized system is used, the Home Office Project Control Department will input the new EWA's into the computer. To this end each EWA will be input as a "pay-item" with a pay-item number consisting of a two digit pay-item chapter number followed by the EWA number. The chapter number shall always be eight (8), subdivided to categorize EWA's as follows:

81 ... = Field Changes
82 ... = Engineering Changes
83 ... = Client Changes
84 ... = Back Charges
85 ... = Miscellaneous Changes

The Cost Engineer is responsible for adding the pay-item onto the EWA.

5.5.4 Extra Work Authorization Register

The Cost Engineer will prepare and maintain an EWA Register.

The EWA numbers assigned will be reported monthly. This summary will be included in the Monthly Progress Report.

5.5.5 Extra Work Authorization Report (EWAR) (Attachment 8)

Each month the Cost Engineer will issue for each open-ended Extra Work Authorization an Extra Work Authorization Report (EWAR) stating the actual quantities and amounts expended during the month, includ­ing the forecast of cost at completion.

EWAR's shall be numbered per subcontract purchase order number followed by an EWAR sequence number for example: A110/1, A110/2 etc., and shall give reference to the subject EWA number. Distribution of EWAR's is the same as for EWA's.

5.5.6 Cost Control Aspects of EWA's

For Budget Control purposes all Extra Work Authorizations and Reports shall always give a breakdown of the manhours and costs in accordance with the proper Cost Codes for the work involved.

The Project Construction Manager shall review the estimated final costs for all outstanding open-ended EWA's each month.

Whenever it becomes evident that the actual manhours and/or costs of an open-ended EWA will be significantly higher or lower than the initial estimates, the Project Construction Manager shall issue a revision to the original Extra Work Authorization.

The Subcontractor shall not receive a copy of such a revision unless a modification or elaboration of the extent or timing of the work is also required. The current total estimated costs of all EWA's and EWAR's not yet covered by Purchase Order Amendments shall be reported in the proper cost codes as "Additional Costs to Complete".

After an EWA has been covered by a Purchase Order Amendment, such amount shall be reported as "Commitment".

5.5.7 Purchase Order Control of EWA's

An EWA is subject to the terms and conditions of the applicable Purchase Order and shall be covered by an Amendment to the Purchase Order.

- Fixed Price EWA's and P.O. Amendments

Fixed Price EWA's shall be covered by a Purchase Order Amend­ment immediately after the Procurement Department has received a copy of the EWA.

- EWAR's and P.O. Amendments

When the work covered by open-ended type EWA's is of relatively short time duration, i.e. one or two months, such EWA's shall be covered by Purchase Order Amendment upon receipt by the Procurement Department of their copy of the "FINAL" Extra Work Authorization Report.

- Interim EWAR's and P.O. Amendments

When the work covered by an open-ended EWA is expected to require an extended period to complete, the Procurement Depart­ment Home Office shall periodically issue amendments to the Purchase Order upon receipt of the interim EWAR's provided that the amounts on these interim EWAR's are such that amending the Purchase Order is justified. The timing of such interim amend­ments will be determined in consultation with the Project Manager. The amendment to the Purchase Order will cover only actual costs incurred/work performed as indicated on the interim EWAR's.

5.5.8 Definition of a "Pay Item Authorization" (Attachment 9)

Sometimes it is possible and more practical to establish pay-items rather than to issue an EWA. The subcontractor should be requested to submit his quotation with the new pay-item rate(s) to the Company Field Office for review and possible approval.

The Project Subcontracts Manager will negotiate the new required pay-item(s) before the Subcontractor is authorized to commence the work.

Following agreement, a Pay Item Authorization is released which describes the work and shows the agreed pay-item rate(s) and further conditions.

The approval to begin the work is given by the Construction Manager signing the "PIA Form". The authority for this approval is based on prequalified value limits.

If a fully computerized system is used, the Home Office Project Control Department will arrange for the input of the new pay­-item(s).

5.5.9 Authorization of EWA's and PIA's by the Client

Authorization by the Client is required when additional work is not covered by the Prime Contract between Company and the Client.

5.6 Progress Monitoring of Daywork (Attachment 10)

Control of work performed on the basis of daywork rates will be accomplished in cooperation between the Construction Specialist and the Quantity Surveyor.

Responsibilities of The Construction Specialist Includes:

Monitoring the work against the original estimate.

Signing the Subcontractor's day-work sheets for acknowledgement of the expended time, equipment and/or material.

Ensuring that for day-work executed, day-work sheets are submitted by the Subcontractor at the close of each working day.

Submittal of signed day-work sheets to the Subcontracts Administra­tor for further handling.

Responsibilities of the Quantity Surveyor Includes:

After receipt of a copy of the EWA's for work executed on day-work basis he will make routine checks of the work and advise the Cost Engineer of his findings.

6. Cost Analysis

6.1 Subcontract Cost Reports


For each subcontract a detailed cost report will be made by the Field Cost Engineer which will show for each pay-item on the form of tender the following: the form of tender value, additional to complete, estimated final cost, original budget, revised budget, over/underrun, value of work done. This report is for internal use for trending, analysis and progress monitoring.

The "bottom line totals" are reported in the formal monthly field cost report.

By Computer (Attachment 11)

If all subcontracts are administered by use of computer the subcon­tract cost reports become available automatically.

6.2 Subcontract Cost Analysis and Trending

Quantity analysis:

When subcontracts are administered by computer the monitoring of pay-item quantities executed versus the total quantities shown on the drawings is the responsibility of the Home Office Project Control Department. This is done by processing the Quantity of Work Done input sheets submitted by the field on a monthly basis. The output report is called Drawing/Actual Comparison. The purpose of this analysis is to update the form of tender in time so as to give the Subcontractor and the field early warning of possible changes in the amount of work.

Following receipt in the field of the Drawing/Actual Comparison report, the Field Cost Engineer will check on discrepancies (Attachment 12 and 13).

6.3 Time Cost Analysis:

The Field Cost Engineer in coordination with the Planner compares the value of the work done against the invoices and the cost of the actual manhours expended by the Subcontractor. Thus assessments are done to enable a reliable forecast of predicted final manhours, cost and completion dates.

Planned Cost Progress Curve

Before starting the work the Home Office Planning Department will prepare for each subcontract a cost progress curve in which the value of the pay-item is to be installed in order to meet the Subcontractor's schedule, plotted against the time as a percentage of the original budget for the subcontract ("planned progress curve").

For this analysis, the "planned" curves must be adjusted by the Field Planning or Cost Engineer to include EWA's and or Change Orders.

Actual Cost Progress Curve

The Field Cost Engineer must plot the value of pay-items actually installed into the same graph so that a trending of progress achieved (i.e. payments due to the Subcontractor) against the planned progress is possible. Subcontractor's Manpower Histogram Before starting the work, the Subcontractor must provide his man­power histogram. On the basis of this manpower histogram the Home Office Planning Department will prepare a cumulative manhour expenditure curve against which the Field Cost Engineer should plot the actual over manhour expenditure as reported by the Subcontractor and (spot) checked by Company.

6.4 Predicted Final Costs Analysis

The predicted final costs are reviewed by the Field Cost Engineer and if necessary adjusted to be in accordance with the results of other analyses, subcontract completion, etc. For all major adjust­ments the Home Office Cost Engineer must be advised. They must be reviewed with the Project Construction Manager and the Project Manager before formally reporting them.

6.5 Subcontract Administration by Computer

Relevant sections of the "user's manual" of the computerized subcon­tract control system have been attached (Attachment 14) to serve as a guide and to provide instructions for the preparation of input by the field.

6.6 Field Cost Report

The Field Cost Report forms part of the Monthly Progress Report. Description and contents of this report are given in Section VIII, Item 4.7 of the Construction Field Manual.

7. X, Y and Z Control

7.1 General

For the X, Y and Z accounts a control budget will be made available. The Field Cost Engineer will monitor the actual costs and manhours against the budget. He shall also determine the estimated final costs taking into account actual durations of assignments, schedule achievements, etc., as reviewed with and approved by the Project Construction Manager.

7.2 Monthly Analysis Cost Codes X, Y and Z

(Attachment 15)

The vellum of this report is sent monthly on the cut-off date to the Project Construction Manager. He will make further distribution as required.

The lower section of this form, "Specification of A-T Supervision and A-T Labor" will be used only on direct-hire type projects. The same applies for Cost Codes YG 0082 and YG 0084.

Cost Code XB through XY

All expenditures for temporary construction will be charged against the following accounts:

XB -Temporary Buildings and Shelters incl. Plumbing, Wiring, Fixed Furniture, Foundations (furnished with Buildings).

XC - Temporary Piping for Steam, Air or Water (not inside temporary buildings, then XB).

XE - Temporary Electrical (not inside temporary buildings, then XB).

XJ - Temporary Earthwork, Roads, Parking, etc.

XQ - Temporary Sanitary Facilities.

XY - Other Temporary Constructions (Fences, Signs, etc.).

Cost Code YC and YL

These cost codes cover all manhours and labor cost for field staff (see Section II, Article 1 of the Construction Field Manual).

YC - Field Staff - Permanent Contract (Labor only).

YL - Field Staff - Temporary Contract (Labor only).

YR - Relocation Costs for Field Staff (Material only).

YG - Field Office Expenses (Material only).

Labor costs include salaries and payroll burden.

The costs shall be obtained from the Home Office Construction Department. In principle an average cost per manhour for each cost code YC and YL will be given.

With each new assignment an adjusted average rate shall be obtained.

By using the field's record of manhours worked (from the weekly time reports) the periodical commitment can be calculated.

For the "Estimate to Complete" the above average rate plus estimated escalation and estimated manhours should be used.

Staff agency employees and "Y" labor hired from Subcontractors, e.g. Warehouse helpers are coded cost code YL.

In case YL employees are employed by the Home Office, the Home Office Construction Department should be contacted as to whether such YL employees should be coded YC or YL for the specific project. Cost

Code YR

Relocation Costs for Field Staff (no labor costs), which should include all expenses in connection with the relocation of an employ­ee to the field and return.

Cost Code YG 0010

Travel on behalf of job (business travel) incl. subsistence. Exclud­ing Daily Travel (YG 80) and Relocation Costs (YR).

Cost Code YG 0020

Costs for Reproduction and Office Supplies.

Cost Code YG 0030

Costs for Communications (telephone, telex and franking machine).

Cost Code YG 0040

Expenditures for all office equipment and furniture either rented or purchased. Also includes survey equipment.

Cost Code YG 00611

Costs for Electronic Data Processing for Field Payroll.

Cost Code YG 00613

Cost for EDP - MH - Budget Control.

These costs are to be obtained from the Home Office Cost Engineer if the Home Office computer is used.

Cost Code YG 0090

All other office costs, such as Field Office first aid kit, progress photographs and any other miscellaneous Field Office costs which cannot be allocated to other YG accounts.

Cost Code YG 0081

Costs for Daily Travel for Y Personnel from Home (Hotel) to field and return, by private automobile against kilometer allowance.

Cost Code YG 0083

Lodging Allowance (assignment allowance) for Y Personnel.

Cost Code YG 0082 and YG 0084

Will only be used on Direct Hire Type Contracts.


Telephone, Telex and Printing Costs

As costs for these items may cause confusion as to what cost code these costs are to be charged, the following break down is given:


a. Telex Paper and Punch Tape YG 0020

b. Monthly Subscription YG 0030

c. Rental Costs YG 0040

d. Installation Costs YG 0040


a. Costs for Calls and Telephone Directories YG 0030

b. Monthly Subscription YG 0030

c. Cost of Switch Board (Purchase or Rental) YG 0040

d. Installation Costs YG 0040


a. Rental or Purchase Cost of Printing Machine YG 0040

b. Labor Costs for Maintenance YG 0040

c. Costs for Printing Paper YG 0020

d. Costs for Chemicals (Toner, Developer, etc.) YG 0020

e. Costs for Prints Reproductions - copies YG 0020

Cost Code ZC 0010

Costs for Welding and Burning Supplies (usually only on Direct Hire projects).

Cost Code ZC 0020

Costs for Fuel and Lubricants (including Gas - Oil etc.) including those for job cars.

Cost Code ZC 0030

Costs of water consumption. A flagcode may be used to distinguish between potable and other water.

Cost Code ZC 0040

Costs for Electricity and Steam consumption.

Cost Code ZC 0050

Costs for Safety Equipment, such as warning lamps, ropes, warning signs, safety belts, gasmasks, etc.

Cost Code ZC 0090

Other Consumables, which cannot be allocated to other ZC codes.

Cost Code ZR 0010

Rental Construction Equipment and Major Tools from Third Parties. This includes costs for rental of Scaffolding.

Cost Code ZR 0020

Rental Construction Equipment and Major Tools - Company Home Office owned.

Cost Code ZR 0030

Job Purchased Equipment and Major Tools.

Cost Code ZR 0000M

Cost for Repairs and Maintenance of Construction Equipment.

Cost Code ZT 0010

Cost for Small Tools - Company owned/purchased. (Breakpoint between Major and Small Tools is fixed at approximately $ 350 Purchase Value).

Cost Code ZT 0020

Cost for Small Tools - Third Party Rentals.

Cost Code ZT 0030

Cost for Repairs and Maintenance of Small Tools.

Cost Code ZT 0040

Cost for Transportation and Freight for Small Tools.

Expenditures Curves Cost Codes X, Y and Z

Together with the Monthly Analysis - Cost Codes X, Y and Z updated Expenditures Curves should be issued to the Project Manager in the Home Office (these curves will only be made when requested by the Project Manager).

Expenditure Curves shall be prepared for the following cost codes:

a. Total X.
b. YC, incl. predicted and actual manpower curve.
c. YL, incl. predicted and actual manpower curve.
d. YR, YG 0081 plus YG 0083.
e. Total of all other YG codes.
f. Total Z.
g. Overall X, Y and Z.

Reporting will be done against the control budget incl. positive and negative Change Orders.

8. Field Purchase Order Control

If a significant amount of field purchase orders is expected it is worthwhile to establish a control budget in conjunction with the Home Office Cost Engineer. Actual commitments (= P.O. values) are then monitored against the budget. In any case the Field Cost Engineer must establish an estimated final, if not in detail, at least for the total of the field purchase orders.

9. Backcharges

9.1 General

There are times when defective materials or equipment are received at the job field. Sometimes the materials or equipment are obviously defective upon arrival, while at other times the defects do not become apparent until a later date. In both cases a backcharge should be prepared even though in the latter case, responsibility for the defect or damage may be difficult to establish and/or prove.

Also during the course of the construction it might be necessary to backcharge certain costs or services to a Subcontractor.

9.2 Backcharge to Vendor
(Attachment 16)

- The person, who identifies the damage or error advises the Site Engineer in writing (AVO) immediately.

- The Site Engineer will notify the Vendor or Subcontractor through the Home Office Procurement Department. In cases where it is expeditious for the Field to contact the Vendor or Subcontractor directly, copies of all correspondence and confirmations must be sent to the Project Manager, the Home Office Procurement and Accounting Department.

- The Vendor or Subcontractor must be given the opportunity to correct the deficiency either by replacement or field repair. It should be noted if and how much job progress is delayed. Vendors should always (except in obviously minor cases) be urged to send an authorized representative to field to ascer­tain firsthand the state of affairs and expedite prompt action, this minimizes costs and delays for all concerned.

- Many vendors consider only that portion of the field work required to remove and replace the defective part as the basis for a backcharge. They neglect to consider the other work involved, such as the disconnection of piping, controls, the removal of insulation, other mechanical interferences etc., which are consequential activities to the removal of a defec­tive part. This work has to be brought to the Vendor/Subcon­tractor's attention by means of a detailed cost estimate, advising him that these costs are also part of the backcharge.

- Backcharge to Vendor Form BN-UC 47 should be prepared by the Project Subcontracts Manager, and should contain a description of the deficiency and an itemized estimate of costs, if Company has the remedial work carried out by others.

9.3 Distribution of Backcharge Forms

- The Backcharge to Vendor form is a package consisting of three copies. All three copies are to be sent to the Vendor/Subcon­tractor for acceptance and signature. The Vendor/Subcontractor will return the original (yellow) and first copy (green) with acceptance signature to the Field Office.

- The Field Office keeps a xerox copy until the original has been returned by the Vendor/Subcontractor. The yellow copy is the Home Office copy and is to be forwarded to the Project Manager for further distribution.

- The green copy will remain with the Cost Engineer in the Purchase Order file after he has made copies for further distribution in the Field Office as per the Field Document Distribution List.

9.4 Vendor's Acceptance of Cost Incurred

- The field should have the Vendor's acceptance of backcharges in writing whenever possible, before any remedial work is per­formed in the field by others. The Home Office Procurement Department through the Project Manager should be contacted when work is delayed due to non-receipt of the acceptance of back­charge from the Vendor. If necessary, the Project Manager may authorize the field to perform the necessary work without the Vendor's approval.

- It is imperative that the aforementioned procedure for back­charge authorization is adhered to, to ensure that billings for backcharges are accepted by Vendor. All too often troubles arise in the field when everyone is under pressure to get the job finished and someone verbally authorizes a Subcontractor to make expensive remedial measures, without taking time to formally request the Vendor to make corrections, and/or to give him in advance an idea of the magnitude of the costs which will be backcharged.

- Where equipment is under guarantee, we are contractually bound to formally request the Vendor to make the corrections.

- The field will deal directly with the Vendor in connection with back charges for Field Purchase Orders.

- For back charges on indirect costs (X, Y, Z) see Section X.

9.5 Backcharge to Vendor Report
(Attachment 17)

As the repair work is proceeding, the Cost Engineer accumulates time and material charges on the Back Charge to Vendor Report, and the Vendor is requested to sign this form upon completion of the work.

These forms are packages consisting of three copies and handling and distribution are the same as for "Back Charge to Vendor" see Item 9.3 of this section.

9.5 Backcharge to Vendor Register
(Attachment 18)

The purpose of this register is to maintain a status record of all back charges and to ensure that Home Office is informed.

Final payment to the Vendor shall not be made by the Home Office until backcharges are finalized.

The register shall be maintained by the Cost Engineer.

All back charges are to be numbered sequentially using the prefix BX.

The register should be sent to the Home Office upon project comple­tion in accordance with the Job Close Out Procedure.

10. Attachment Summary

User's Manual Input Instructions Subcontract Control System

1. Scope

This "User's Manual" is a guide for the preparation of various computerized subcontract control reports, to be used for the Cost Control, Progress Control and Administration of subcontracts. Instructions and guides are given for the input preparation, selec­tion of output reports, and the interpretation of "error lists".

2. Introduction

For a full description and qualification of the subcontract control system, reference is made to the appropriate Engineering Procedures. The subcontract reports which are the subject of this manual form an integral part of the overall subcontract control system.

The fundamentals of this system are:

- The work to be done under a subcontract is broken down into a minimum but adequate number of measurable amounts of work called PAY ITEMS against which the subcontractor quotes his UNIT RATES.

- The work to be done, e.g. the SCOPE is quantified (= the pay items are taken off) per drawing before the work starts.

- Applying the unit rates to the pay item quantities which form the scope of work, results in the VALUE of the WORK to be done per drawing and for the whole subcontract. ·

- The amount and the value of WORK DONE at site is easily deter­mined in the field on a drawing by drawing basis and compared with the (pre-quantified) scope for scope -, progress - and productivity - monitoring.

- The same measurement of the "work done" is used for certifying PROGRESS PAYMENTS.

3. Program Description

The subcontract control system is applicable to both lump sum - and unit rate subcontracts.

The objectives of the computer system are:

- To provide the field with a work scope which is defined by quantity and value per subcontract, per drawing and per pay-item.

- To report the "work done" against total scope i.e. to establish progress gained.

- To provide a basis for approving subcontractors invoices (prog­ress payments). ·

- To monitor the total amount of work to be done (quantity and value) against the budget and/or against the formal subcontract amount (form of tender value).

These objectives are achieved by collecting input information in five categories, processing it and producing several output reports.

4. Input

The input consists of:

- General information concerning the subcontract of purchase order, such as P.O. number, subcontractors name, reporting currency, type of subcontract, transaction currency, etc. Source: Subcontract.

- Unit prices by pay-item and estimated pay-item quantities. Source: Form of Tender.

- Cost Control information such as: Predicted Final Cost, Origi­nal Budget, Revised Budget. Source: Cost Report. ·

- Engineering quantities, i.e. pay-item quantities taken off per drawing before the work is done. Source: either manual take offs from drawings or computer output from the piping material control system (PMC). The latter possibility only exists for piping, insulation and painting subcontracts.

- Actual quantities, i.e. pay-item quantities of work actually executed in the field. Source: field measurements.

The input forms have been designed for use either in the fully computerized subcontract control system or in a manual operation.

5. Processing

The processing basically consists of multiplying unit rates with the various relevant quantities in order to arrive at "value of work to be done" per subcontract, per drawing and per pay-item, and "value of work done" in the same breakdown. Furthermore, several sorts can be made.

6. Output

The above results in a number of output reports which allow for a monitoring of scope, subcontracts value, progress and performance of the subcontractor. Refer to Item 7.0 for more details.

7. Integration with the Piping Material Control System

For piping and piping related subcontracts (insulation/painting) the subcontract control system and the piping material control system have been integrated. In this case the procedure is slightly differ­ent from the above description. The form of tender information i.e. the unit rates per pay-item is entered into the PMC system. Using these unit rates and the material quantities contained in the PMC system itself, "lump sum" values are compiled by drawing (isometric) by the computer. Considering the drawing number as a basic element of a "computer compiled pay-item" number, the result is an output of lump sum compiled pay-items. This PMC output serves as input (compa­rable to the unit rates input from forms of tender) into the subcon­tract control system.

8. Output

8.1 Output Report Description

At present the following groups of output reports can be produced:

the "Form of Tender Reports"

the "Quantity-Value Reports"

and the "Subcontract Cost Reports".

The first group is only related to the subcontracts, i.e. forms of tender. The reports of this group primarily serve commercial purpos­es. The second and third group of reports shows the unit rates related to the design and actual quantities. These reports are primarily used for control purposes and for invoice checking.

Following is a brief rundown of the reports which can be produced at the present:

SC-2110, Form of Tender Report

Shows, sorted by pay item:
- Cost code
- Pay-item description
- Quantity shown on form of tender
- Unit rates, M, L, M + L
- Total value
- Transaction currency
- Entry date

Form of Tender Preliminary Contract Value Report

Shows, sorted by pay-item chapter:

- Pay-item chapter description
- Form of tender value
- Transaction currency

This report is a summary of the above report.

SC-2160, Drawing-Actual Comparison Report

Shows, sorted by drawing number:

- Pay-item (see note)
- Unit rate
- Drawing quantity and amount
- Total actual quantity and amount installed
- A "FINAL" indication
- Actual quantity and amount installed "this period"

Note: Isometrics already on file but re-entered are flagged *. The latest drawing amount will be printed out. If already work had been execut­ed on such an isometric, the work "Amount" will be printed in the description column. This is a flagging to the field for instance to adjust their progress calculations.

Drawing-Actual Comparison Report "Summary"
Shows, sorted by drawing number:
- Total mount on drawing
- Total amount actually installed
- Amount installed this period.
This report is a summary of the above report.

SC-2170, Quantity Report
Shows, sorted by pay-item:
- Area
- Pay-item description
- Form of tender quantity, drawing quantity, total actual quantity installed

SC-2190, Subcontract Cost Report
Shows, per Purchase Order, sorted by pay-item chapter in the transaction currency:
- Form of tender amounts
- Drawing take-off amounts
- Additional to complete amounts
- Predicted final costs
- Budget amounts - Original and revised
- Over ± Under - runs
- Amounts of actual work done
- Progress percentages

Subcontract Cost Report - Summary
Shows, per job number, sorted by purchase order, in the transaction currency:
- Form of tender amounts
- Drawing take-off amounts
- Additional to complete amounts
- Predicted final costs
- Budget amounts - Original and revised
- Over ± Under - runs
- Amounts of actual work done
- Progress percentages

SC-2191, Subcontract Cost Report

Shows, per purchase order, sorted by pay-item chapter in the reporting currency:

- Form of tender amounts
- Drawing take-off amounts
- Additional to complete amounts
- Predicted final costs
- Budget amounts - Original and revised
- Over ± Under - runs
- Amounts of actual work done
- Progress percentages

Subcontract Cost Report - Summary

Shows, per job number, sorted by purchase order, in the reporting currency:
- Form of tender amounts
- Drawing take-off amounts
- Additional to complete amounts
- Predicted final costs · Budget amounts
- Original and revised
- Over ± Under - runs
- Amounts of actual work done
- Progress percentages

MC-6000, Piping Labor Cost Calculation Report

This is an output report of the Piping Material Control System. It is the back-up of the Drawing-Actual Comparison report SC-2160.

Shows, sorted by isometric number: ·
- Line number
- Quantity
- Weight
- Labor cost
- Cost Code

8.2 Selection of Output Reports

The production of output reports should be requested on a selective basis so as to avoid unnecessary masses of paper and spillage of expensive computer time. Some guides are given below about the use of the reports and the required frequency of the updates.

The F.O.T. report SC-2110 and the F.O.T.-preliminary contract value report summary are only a representation of the form of tender as contained in the subcontract. The reports are used to check whether or not the drawing quantities and amounts tend to overrun the form of tender quantities and amounts (i.e. the formal commitments). Updates are recommended every time the subcontract is amended e.g. quarterly.

The drawing-actual comparison report SC-2160 is the actual control and monitoring document. It is the working document in the field. Recommended update: monthly.

The quantity report SC-2170 is of interest for retrieval purposes. Recommended updates: once, upon completion of the subcontract and further as required.

The subcontract cost reports SC-2190 and SC-2191 are the formal cost reports to be used for cost control purposes and to be included in the monthly field progress and cost reports. Recommended update: monthly.

Printing of the above reports is to be requested through form BN-US 388.1.

The piping labor cost calculation report MC-6000 shows (among others) in detail the cost breakdown for each isometric. It is used in the field as back-up document to settle possible arguments with the subcontractor about the total cost per isometric as shown on the SC-2160 report. Recommended updates: every time the piping material control runs are updated.

Printing of the MC-6000 report is to be requested through form BN-US 373-3.