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BUILDING A HOUSE ?

MINIMUM PROCEDURES YOU SHOULD FOLLOW TO AVOID TROUBLE, DISPUTES AND UNNECESSARY COSTS.

Andrew McPhee - FRAIA

CONTENTS

SELECTING A SITE DESIGN SELECTING A BUILDER BUILDING CONTRACTS GUARANTEES, INSPECTIONS

3 4 6 7 8 9 11 11 12 No. 1 No. 2 Example Example 13 14 16 17 18 18 19 19 20

SCHEDULE OF WORKS CONSTRUCTION INSTRUCTIONS TO THE BUILDER CONTRACT VARIATIONS CONTRACT VARIATION ORDER CONTRACT VARIATION ORDER PROVISIONAL SUMS PROGRESS PAYMENTS RETENTION MONEY PRACTICAL COMPLETION DEFECTS LIABILITY DOCUMENT MANAGEMENT ESSENTIALS

SELECTING A SITE Before you set your mind on a design it is best to first select your site. When selecting a site check on any legal constraints such as Town Planning requirements, covenants, Heritage requirements and etc. The design of your house should be suitable for your site so that it makes the best use of :Sun Control The best aspect is to face all of the main glass to the North so that you can get good sun penetration into the main rooms in winter and the glass can be protected from sun penetration during summer by a calculated roof overhang. This is the most important consideration for comfort and energy efficiency. Do not discount a site where the back of the block faces North. It is good design to face your main glass areas to the back of the site where you can have good private outdoor living areas which will be nice and sunny in the winter. Often in Australia views are to the East or West which is a conflict with Sun Control. Remember that you do not have to face the glass directly at the view. You can often still get good views by facing the glass 45 degrees to the view and still get good sun control by clever design such as wing walls and roof overhangs. By observation or enquiry find out the direction of winds and cool breezes and incorporate means of blocking troublesome winds and catching cool breezes in your design. Sites with substantial falls can be interesting but you should be prepared to consider making your design suite the slope of the site by using split floor levels or high set on poles. Avoid a sloping site if you intend to bull-doze a large flat area to make it a flat site. Bulldozing a large flat area will cause extra costs in retaining walls, more complicated drainage and erosion control and is less environmentally friendly. If you want a flat building you would do better to get an almost flat site. Be very wary of low lying sites which may flood. Be sure that the site can be drained of storm water. Make sure that storm water from a neighbour will not run over your site. Make sure the site has the services you require such as electric supply, water supply, sewerage, telephone, gas, etc. If it does not have sewerage check what type of on site sewerage disposal you will be permitted to install.

Views

Prevailing Winds

Flat or Sloping

Drainage

Services

Suitable Foundation Check for areas filled. The filling may not be properly done and would not take the load of your building. Some natural soil foundations may not be suitable and would have to be dug out and replaced or piling may be required which is very expensive. Soil Test Some councils insist on a soil test being done by a qualified and registered soil engineer and if you are in any doubt get one done before you buy. Ask the Soils Engineer to just give you a classification saying you will require more details if you buy.

DESIGN. Since I am an Architect I should say Select an Architect. But it depends on your circumstances. If your site or your requirements are complicated, if you need design guidance or you want the best value for your money then commission an architect. But architects are not all the same and some are better at certain types of buildings than others. Generally but not always it is better not to go to a firm of architects that normally designs large buildings. They will give your house to an office junior to design and so you might as well go to a young architect yourself then you can develop a better relationship directly with them. You need to understand your architect and they need to be sympathetic to your particular tastes and peculiarities. Look at some of their previous work. You may know exactly what you want and perhaps all you need is a draughtsman to draw it but will it work?. Some draughtsmen will be able to guide you as to the practical functionality of your design but some will just draw what you ask whether it works or not. Functionality you should consider from two aspects, 1) Buildability and 2)How it works as a place to live. A draughtsman may or may not be cheaper than say an architect in a sole practice. When designing, plan your whole site. Your house plan may be affected by how you use the outdoors. In some areas of Australia, such as areas subject to cyclones, it is compulsory to have a structural engineer design the structural elements of your building. If you have an architect they can select a suitable engineer and co-ordinate the structural design with the building design. Some architects have good working relationships with an engineer and they can include the structural requirements on their architectural drawings and save you the cost of engineering drawings. Be sure to be totally up front with your architect. Tell them everything and dont delay informing them if they are on the wrong track for you. Put your most important requirements in a written brief and keep notes of decisions made at meetings. The design and construction of a house takes a long time, one to two or even three years, so different persons often remember different things in different ways. Being able to refer back to written notes often avoids costly misunderstandings and arguments. Be realistic about your budget, most peoples requirements and desires are well above their budget. Your architect should prepare a preliminary design drawing consisting of a plan and at least one elevation on which you can do fine tuning of the design or you may totally reject the first design concept. They should then present you with another preliminary design for your approval. When you are satisfied with the preliminary design the architect should prepare a developed design drawing which will consist of plans and four elevations and a diagrammatic sections if the building has a complex structure such as will be the case for a split level house. The Developed Design Drawings are what is normally submitted to the council for planning approval if it is required. When you have approved of the developed design drawings the architect will then proceed with the Working Drawings (sometimes called contract drawings) which you should look at and discuss during the process and pick up any areas where they may have strayed from your requirements. Try not to change your mind on previous decisions. The architect is entitled to charge you extra fees if they have drawn something in accordance with your instructions and you change your mind so that they have to redraw. It is wise to sign two prints (one for yourself and one for the architect to keep) of each stage so there is no confusion as to which drawing you have approved. Precede your signature with a note saying THIS IS THE DRAWING APPROVED TO PROCEED TO CONTRACT DRAWINGS or as appropriate. The architect should give you a scale of fees broken down into stages so that should you decide not to proceed to the next stage you know what you have to pay for work done:Be sure to agree on a fee before giving your architect the commission.

There is a lot of hype at the moment about sustainable design much of which is suspect. You need to get your priorities right. For example it is counter productive if you build using materials that take the least energy to produce if it results in your having to use more energy every day to maintain internal comfort. Timber floor construction is more sustainable to produce than concrete but concrete floors are better at retaining the warmth of the day into the night thus saving on heating energy. If you concentrate on good insulation but allow sun penetration during the summer your house will be hotter than if you used no insulation although it will be warmer in the winter. Sun protection has to be outside of the glass to be effective.

The Western sun is the hottest so it is good practice to have your garage or carport on the West but still shade the house from the West with trees. Glass traps heat from the sun inside the house a fact you can use to advantage during the winter. This saves energy every day of the life of the house.

SELECTING A BUILDER You can choose to be an Owner Builder which is in effect building by using sub-contractors. But you need to understand that it will take a great deal of your time and will probably disrupt your family life and your job for about a year. The best scenario would be to take a year off work but your loss of income has to be added to the cost of your house. It could be cheaper to employ a builder. I have known Owner builders to have a nervous breakdown and I have known marriages to break up caused by the stress of building their house. To be an owner builder you will need a licence and will have to do a short TAFE course to get one in most cases. Be very sure that you have all necessary insurances in place. You may have a friend or family member who is a builder and you will probably want them to build your house. If you do and you want to remain friends it is still important to keep notes and sign proper contracts and keep accurate records especially of costs otherwise their will be a falling out. I have known best friends who have fort each other in court about the final cost of the house. Also if you know who the builder is going to be it can be productive to get them involved in discussions during the design process. Ensure that your builder is currently licensed. If you have an architect they will advice you on the selection of a builder. The architect will probably call competitive tenders from three or four builders, they know the correct and ethical procedures. They will then analyse the tenders and interview the builder who submitted the lowest tender to make sure that they have included in their tender sum the cost of everything shown on the drawings and specified. Quite often the lowest tenderer is the lowest because they have left something out or not allowed for the quality specified. If the tenderer has omitted something then they should be given two choices. 1. To still build including the omission(s) for the tender sum submitted. 2. To withdraw the tender. If the tenderer decides to withdraw then the architect should negotiate with the next lowest tenderer. This is the ethical procedure otherwise it is not fair to the other tenderers who have spent a lot of time and money preparing their tender. Your architect should try to make sure that each tenderer is the right builder for your job otherwise it is a waste of every ones time getting a price from a builder you know is not capable of doing the job to your standards. This is the most important step in Quality Control. An architect on the job can not force an incapable builder to be capable. The architect will then recommend which builders tender you should accept and they will accept the tender on your behalf. The letter of acceptance is an important document in relation to the contract you will sign with the builder. If you are not using an architect for the construction stage of your job then you should ensure that the builder you choose can build the type of design you require. Many house builders always build in a conventional style and would do a bad job of building a contemporary design that employs methods of construction that are unique to that particular design. Look at previous jobs the builder has done and make your own judgement as to whether they could build your house to the standard you require. ACCEPTING THE BUILDERS PRICE If you dont have an architect then you must write the letter of acceptance to the builder. The date of the letter of acceptance is the date that the contract starts and will show the dollar value of the contract and the date for completion. The letter should refer to any negotiated agreements and to the relevant drawings. Keep a copy of that letter in a safe place.

In my experience there are two types of organizations that build buildings and my definitions to explain the difference are :1. 2. Builders Contractors

Builders are the traditional organizations that take the responsibility for and pride in their work and the work of their sub-contractors. Some employ their tradesmen and some employ mainly subcontractors but they would not employ a sub-contractor they know would not deliver the standard of work they require. Basically they take responsibility for quality. Contractors are organizations that organize the necessary sub-contractors to build a building. They usually just accept the lowest price of each sub-contractor and if their quality of work is bad the contractor will not take the responsibility. The result is that if you complain about bad workmanship the contractor will say well that is what the sub-contractor produced, what can we do about it. Contractors will only sign a contract that defines a SUPERINTENDANT as the person taking responsibility for quality control and the superintendent is not them, it could be you. But you will not have any say in which sub-contractors are employed and unless you do, it is impossible to control the quality of work. My strong recommendation is to ensure that you have a Builder build your house, not a contractor. To confuse you, these days some Builders call themselves Contractors. The main thing is that they superintend the works and take responsibility for quality. The ABI (Australian Building Industry) contract refers to the Contractor but defines their obligations the same as I define a Builders responsibility. So you need to look beyond the name. A Building Contract basically is an agreement between you and the builder which is broadly:The Builder will build the house for $1,squilion in accordance with the following drawings and specifications in a given time. List the drawings, specifications and schedules making sure they are identifiable from superseded drawings etc of which the builder usually has some. The Proprietor(s) will pay the builder $1,squilion at the following stages. List the stages which could be monthly. Sign two sets of drawings and specifications as well as a copy of the contract, one set for you, one for the builder. Then there are a lot of details about how certain things are handled. Read the contract well. Remember that Time is a component of the contract, as well as money. A delay in time has a dollar value and if you delay the builder he is entitled to charge you for it. There should be a clause that will cause the builder to be penalized if he does not finish on time but it is subject to a lot of conditions. Basically the builder can not be penalized if the delays were beyond his control. You need a penalty for late completion (Liquidated Damages) otherwise you might as well not have a date for completion. Do not try to insist on an unrealistic penalty, base it on realistic costs such as rent you have to pay because you can not occupy your new house. If you have an architect who is going to administer the contract it must be one that includes the architect as your agent and contract administrator. Many contracts dont. The architect will advise you on the best form of contract. There is a lot of confusion about the architects role as administrator of building contracts and for that reason it is advisable not to refer to it as supervision or superintendence.

Although the architect makes periotic inspections what he does is ensure that the builder is complying with the general requirements of the contract and the expected quality of construction and finishes. It is the builders job to supervise or superintend The Works The builder is qualified to and has to ensure that the right size and number of nails or bolts or pieces of timber etc are being used and that safety procedures are followed and he has a foreman on site all of the time to supervise this. Most house builders now prefer to use a contract produced by The Building Services Authority (BSA) which is alright if you are not using an architect. The Housing Industry of Australia (HIA) and the Master Builders Federation of Australia also produce some good basic contracts which you can buy from them. Before construction starts ask the builder for evidence that he has taken out insurance as prescribed in the contract and ensure it includes public risk. During the process of building establish a Joint Venture type of attitude with the builder and with his tradesmen and sub-contractors in preference to stand over/ superintendent type attitude but maintain a position that you are the one who has the final say. Tradesmen are usually proud of their work, recognize this and you will get the best from them. Get them to help you achieve what you want and to solve problems and they will usually be very cooperative and helpful. Although you will inevitably discuss ways and means with tradesmen and sub-contractors on site, unless you are the builder, official instructions should be given to the builder and not to the tradesman. You can decide what to do with a specific tradesman but the official instruction should go to the builder (see ,INSTRUCTIONS TO THE BUILDER). Good communication is important. Tradesmen are usually willing to do what you want but they need to understand what you want. They can get quite unco-operative if they build something wrong (not as you expected) and have to pull it down and rebuild. If you have a dispute with a builder or sub-contractor about quality you can resort to asking them if the work or materials comply with the Australian Standards. Every sub-contractor should be aware of the Australian Standard Code that applies to their trade. For example if you suspect that the window design or installation looks wrong ask is that done in accordance with the AS 2047 code for windows?. See www.standards.com.au. If you get into a serious dispute it will probably help you to buy the relevant AS Code. However the Australian Standards are minimum requirements. You may be looking for a higher standard in particular areas but you need to have spelt that out in your drawings or specifications otherwise you can not expect the trades or sub-contractors to deliver the higher standard. GUARANTEES Be sure to get from the builder or sub-contractors the guarantees that apply to all equipment built into your house. It is also good practice to rescue the installation instructions that usually get thrown out with the packaging. The Defects Liability Period is a guarantee on the house itself. Dont be misled by someone who tells you that there is no need for a defects liability period because the Building Services Authority (BSA) forces builders to guarantee your building for six years. The BSA guarantee is for the structure only and does not cover finishes and fittings. You have to fill in the details of the defects liability period in the contract. The period for a house is usually six months but for mechanical services, such as air conditioning and lifts, it should be twelve months.

Units of measurement
The Building Industry works with millimetres and you need to communicate in millimetres and not centimetres or there could be some serious misunderstandings.

INSPECTIONS Your council will require the building to be inspected and approved at prescribed stages before continuing to the next stage. Stages of inspection will vary slightly depending on the council. You can have private certifiers do the inspections in most areas of Australia but check with your council. It is your responsibility (or your builders) to notify the council/private certifier when the works are ready for inspections.

SCHEDULE OF WORKS Many builders prepare a schedule of works but small house builders often dont. If yours does, get a copy of it and follow it using a red pencil to record the actual progress. If they dont prepare a schedule then try to encourage him to do one. Every builder should prepare a schedule of work for his own guidance. Also record on it, times when you have to make selections of things like tiles, door furniture paint colours etc. in order not to delay the works. Ask your builder for the dates at which they want your selections. Be sure to allow time for delivery and/or importing your selected items. It is ideal to have everything selected before you request prices from builders.

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CONSTRUCTION You have your site and your design and your builder now someone has to get a building permit. You could leave that to your builder but you can save time if you get a building permit before you have selected a builder. Most councils will now accept private certification from qualified consultants. The builder clears the site and begins excavations for the footings but comes across a pocket of bad soil (bad for construction is often good for the garden) which has to be dug out and filled with good construction soil and compacted. If it is a substantial amount it will be a Variation to the contract sum called a CONTRACT VARIATION which may cause a delay in construction and therefore a variation to the date for completion. By the time the building is completed you will have forgotten about this little incident but the builder wont have. Many other little things like this will happen and at the end of the job the builder will present you with a long list of these EXTRAS, he will call them, adding up to many thousands of dollars. This is probably the most frequent cause for legal battles between builders and building owners. The answer is to keep good records and follow certain procedures that have been well tried and tested. Keeping good records as you go is little trouble but a mammoth problem if neglected. When the builder discovers this bad soil (which he could not have been expected to know about) he should tell you about it and ask for an instruction. You will usually say what do you recommend as the best and most economical solution. There could be other solutions. The builder might say that to dig out the bad soil and replace it with good is the best way. The builder should issue you with a Request for Information (RFI). (If you had an architect the builder would refer the problem to them who might say thicken the footings in that area and add two more R20 reo bars to span the bad soil but you probably dont have the qualifications to make that decision). Every RFI should be answered with an Instruction to the Builder. INSTRUCTIONS TO THE BUILDER You should issue the builder with a brief instruction for every such incident. Keep a little book, with carbon paper, write on the cover INSTRUCTIONS TO THE BUILDER, write one instruction per page, tear out the page and give it to the builder. You keep the carbon copy in the book. The instruction should show :The date Ref: RFI 12 Description of the work, eg. Dig out bad soil, replace with good soil and compact. Submit price before doing work OR Proceed with work and keep record of costs and submit price ASAP. Then initial or sign it. If you change your mind after issuing an Instruction, issue another Instruction Eg. This instruction cancels Instruction No. 42 dated . An Instruction to the Builder does not necessarily cause extra cost but if it does you then have to issue a Contract Variation Order which formalizes the increase to the Contract Sum. Naturally if your Instruction to the Builder causes extra work there will be an extra cost. If in doubt get the builder to agree that the instruction will not cause extra cost. Word your instructions carefully so they can not be construed as extra work or more expensive materials, unless they do.

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CONTRACT VARIATIONS No change to the contract should be made unless a CONTRACT VARIATION ORDER is issued to the builder. Make that clear to the Builder at the beginning, (at the signing of the contract). The main changes that should be monitored are :1. 2. 3. Change to the Work and/or the Extent of Work. Change to the Contract Sum Change to the Date for Completion.

Buy another book with carbon paper, A4 or A5 size and write on the coverCONTRACT VARIATION ORDERS And the builders name and name of the project. Eg. New House for Smith. This book would become important evidence should you finish up in court. A book with money columns down the side would be good or you could get one specially printed. See the next page. When you have received the price of the variation issue a CONTRACT VARIATION ORDER. You will probably have to pester the builder to give you the price of a variation. If it does not delay the progress of the building insist on getting the price before the work is done then if the work is delayed because he has not given you the price he can be blamed for the delay. One way is to tell them that you want the variation prices before you pay the next progress payment which you probably can not strictly enforce but you can try it. But whatever you do, do not allow the variations to accumulate without recording them and getting the builders agreement to them as you go.

UNCO-OPERATIVE BUILDERS There are some builders and contractors out there that will not want to co-operate with the above procedures. They prefer to allow things to get out of hand and then through bullying tactics extract as much money from you for any changes or delays that they can claim you have caused. These type of organizations are always ready and willing to go to court to get what they want and know how to manipulate circumstances that put you in the wrong. The larger such companies will have a lawyer on their staff for that purpose. Your best protection against this problem is to avoid such companies and the only way to do that is to ask people with experience in the building industry.

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When you have filled out the page it will look like this :__________________________________________________________________________

CONTRACT VARIATION ORDER Date Project New House for A & S Smith at Lot No._________ Builders Name ___________________________________ The contract between Proprietor and Builder is varied as follows :-

No. 001
22/06/2009

Excavate the bad soil, fill with good soil and compact to 75 % GST

$1,200.00 120.00

TIME DELAY Caused by this CV = Original completion Date New Date for Completion Cost of Delay = =

one week 30/06/2010 07/07/2010 (at the builders discretion) $0000000 _________ $1,320.00

TOTAL FOR THIS VARIATION

CONTRACT SUM PRIOR TO THIS CVO REVISED CONTRACT SUM INCLUDING THIS CV

$560,000

$561,320.00

Signed - Proprietor__________________________Builder__________________________

Make sure you both sign it.

When you follow this procedure whenever you want to know the final cost of your house all you have to do is look up the bottom line of your last Contract Variation Order.
Tear out the page and give it to the builder, keep the carbon copy in your book. The builder may not charge for small delays but at the end of the job, when he is running late, he may try to make outlandish claims about delays, so they need to be recorded as you go. If you are sub-contracting you need to follow these procedures for each sub-contract.

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Contract Variation Order No. 2 would be as follows You want to change the taps but because the taps have not yet been ordered there will be no time delay for this CVO. Check the delivery time or you might cause a delay. __________________________________________________________________________

CONTRACT VARIATION ORDER Date Project New House for A & S Smith at Lot No. Builders Name ___________________________________ The contract between Proprietor and Builder is varied as follows :-

No. 002
30/06/2009

Change all Taps Throughout to 24 carrot gold plated GST

$2,150.00 215.00

TIME DELAY Caused by this CV = Original completion Date New Date for Completion Cost of Delay = =

Nil 30/06/2010 07/07/2010 $0000000 _________ $2,365.00

TOTAL FOR THIS VARIATION

CONTRACT SUM PRIOR TO THIS CVO REVISED CONTRACT SUM INCLUDING THIS CVO

$561,320 $563,685.00

Signed - Proprietor__________________________Builder__________________________

Notice how the REVISED CONTRACT SUM on CVO No. 1 becomes the CONTRACT SUM PRIOR TO THIS CVO on CVO No.2. Should there be a time delay for reasons other than a change to the work, such as rain, then you should issue a CVO which will show the delay and the reason and a new completion date but no cost and therefore no change to the REVISED CONTRACT SUM. Such delays, especially if long, can cause a loss to the builder for which they can claim and will therefore cause an increase to the REVISED CONTRACT SUM. Some contracts provide for a contingent number of days delay due to rain if exceeded you have to pay for the cost of the additional delay.

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Maintaining a schedule of Contract Variation Orders (CVOs) can be useful and efficient especially when you are up to something like CVO No. 50. This schedule also serves as an Index to your book of CVOs. If you are into computer Spread Sheets it can be quick and efficient to produce these forms and a schedule on them.

AUSTRALIAN STANDARDS If you have a dispute with a builder or sub-contractor about quality you can resort to asking them if the work or materials comply with the Australian Standards. Every sub-contractor should be aware of the Australian Standard Code that applies to their trade. For example if you suspect that the window design or installation looks wrong ask is that done in accordance with the AS 2047 code for windows?. See www.standards.com.au to see a list of Standard Codes. If you get into a serious dispute it will probably help you if you buy the relevant AS Code. However the Australian Standards are minimum requirements. You may be looking for a higher standard in particular areas but you need to have spelt that out in your drawings or specifications otherwise you can not expect the trades or sub-contractors to deliver the higher standard.

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PROVISIONAL SUMS A Provisional Sum is an amount of money you have asked the Builder to include in his contract sum to pay for something that you have not decided on yet. These Provisional Sums will be listed in the contract. An example is The Kitchen Fit-out. You might want to get a kitchen contractor to help you work out the layout and to select types of and finishes to cupboards and work tops. Most Kitchen Contractors will also do the working drawings of the final Kitchen design. So you might have a provisional Sum in the contract for the Kitchen of say $20,000. When the Kitchen Contractor gives you a price of say $23,000 you need to give the builder a CONTRACT VARIATION ORDER (CVO) for $3,000 to make up the difference. If you got a price of $18,000 for your kitchen then you issue a CVO for minus $2,000. If the actual cost of a provisional sum item is substantially more than the provisional sum the builder may want to add his overhead costs and profit margin to the extra cost. You Instruct the builder to accept the price you have received from the Kitchen Sub-contractor. The builder pays the Kitchen Sub-contractor from the Provisional Sum which was included in his Tender Price. The builder is entitled to object to a nominated sub-contractor so be sure to get the builders agreement to the kitchen (or any other) sub-contractor before you approach them. Get your kitchen design finalized as soon as you can after you have selected your builder. Some people want to see the built kitchen walls before they decide on the design of the kitchen but this may cause changes to the plumbing and electrical services and possibly changes to window and door positions which will cause substantial extra costs.

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PROGRESS PAYMENTS TO THE BUILDER. The Builder will require payments during the period of construction. The period between payments will depend on the type of contract you sign with the Builder. Contracts produced by the Housing Industry of Australia (HIA) and the Building Services Authority (BSA) usually set out the stages of construction. After completion of each stage you pay the Builder the amount prescribed in the contract. Eg. There is usually a deposit or security paid before the Builder commences work. Then so many dollars after completion of the BASE which is defined in the contract. Then another amount after the completion of the walls and so on. The alternative method is to pay the Builder monthly which is usually done on large jobs but can be done on houses. To pay monthly the safest way is to get a TRADE BREAKDOWN of the Builders contract sum. See the example of PROGRESS PAYMENT EVALUATION which is a list of trades with the value of each. Small Builders are usually tardy at giving you this breakdown because they have to compile it from their costing sheets so you have to be persistent early in the job. Often the best way is to tell them that you will sign the contract when they deliver the Trade Breakdown. It may help to give them a copy of the following example. The Builder will send you an account each month for the value of work completed during the previous month but you need to check on it. If you have an architect they will check it and issue a Progress Payment Certificate. (See example) but if not you need to check it yourself. When you have this Trade Breakdown it is easy to take a blank copy on to the site, walk around and write the percentage complete in the % column of each trade. Eg. Concrete 75% complete, Block-work 50% complete and etc. then it is easy to calculate the value completed. It is very efficient to do this walk around with the Builder, before he makes his claim, and agree on percentages as you go. This will avoid arguments about the value of work completed. Example of the Trade Breakdown of the Contract Sum:___________________________________________________________________________ PROGRESS PAYMENT EVALUATION for PP No. 3 Project - New House for A & S Smith at Lot No. Date Trade Trade Value % Complete
100 25 0 75 50 75 25 0 0 60

Value Complete
2,000 750 0 8,625 6,000 26,250 3,750 0 0 1,920

PRELIMINARIES Establishment 2,000 Running Costs 3,000 Demobilization 1,000 EARTH WORKS 11,500 REINFORCEMENT 12,000 CONCRETE place & Finish 35,000 MASONRY To First Floor 15,000 To Roof 10,000 CARPENTRY 20,000 ETC Then at the bottom :CONTRACT VARIATIONS 3,200

__________________________________________________________________________________ TOTALS Contract Sum =$ Value Completed = $ __________________________________________________________________________________

To help with assessments of percentage complete it is a useful to break some trades into subsections as shown above with PRELIMINARIES and MASONRY. Treat the Contract Variations as a separate Trade.

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RETENTION MONEY Retention money is an amount that you can deduct from each progress payment, usually 5% that you hold in trust against the builder to encourage him to fix defects and to in fact properly complete the job. You fill in the amount in the contract. When the retention is above a certain amount (varies with the years) the builder can insist that it be paid into a joint account. Contracts often provide for you to deduct the retention money at the rate of 10% from each progress payment until the retention sum equals 5% of the contract sum. An alternative is for the builder to deposit a Bank Guarantee with the proprietor (or their architect) to the value of 5% of the contract sum. Because you have to release half of the retention at Practical Completion it is a good idea to get two Bank Guarantees each for 2.5% of the contract sum then you can surrender one Bank Guarantee at Practical Completion and the other at Completion. Should the builder fail to fix defects or to properly complete then the proprietor can (after prescribed procedures) use that money to do it.

PRACTICAL COMPLETION Practical completion is when the building has reached a stage when it can be used for its intended purpose and you can move in. Until then it is the builders site. Defects and minor unfinished work, unless they interfere with the function of the building, need not be fixed to classify the job to have reached the stage of Practical Completion. You must record and notify the Builder of every defect that is still outstanding before you move in. It is best to compile the list during a joint inspection with the builder otherwise they can claim that you did the damage while moving in. The correction of the defects can wait if you agree. When you reach the stage of Practical Completion you have to release half of the retention money to the builder. The other half is kept until the end of the Defects Liability Period. In some contracts the builder will claim Practical Completion but you have to agree or not usually within 5 days. You must record in writing to the builder The Date of Practical Completion. The important thing is that once Practical Completion is fact you are responsible for INSURANCE.

COST TO COMPLETE. Often your bank or lending institution will, during construction, request from you the Cost to Complete If you keep good records as described above to calculate the cost to complete all you have to do is subtract the Total Paid to the Builder, shown on your Schedule of Progress Payments, from the current Contract Sum which should be the bottom line on your last Contract Variation Order.

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DEFECTS LIABILITY PERIOD This is a period of time prescribed in the contract but usually six months for a house, after PRACTICAL COMPLETION has been granted. During this period you must record and notify the builder of any defects that occur. Most of the defects can usually be left for correction until after the Defects Liability Period but you must notify the builder of the defects before the Defects Liability Period has expired. It is best to occupy the house immediately after practical completion so that you will test the house for defects. Many defects do not expose themselves until the house is lived in. You can request the builder to fix a defect immediately if it prevents you from using the house as intended like, if no water comes out of the shower or the toilet does not flush, but it is best to live with minor defects until the end of the Defects Liability Period but list them. At the end of the defects liability period and after the builder has rectified all of the defects you now release the remainder of the RETENTION FUND or cancel the bank guarantee. This is the COMPLETION DATE and architects will issue a Certificate of Completion but it is my opinion that it is better if you dont unless the contract requires it. If the builder neglects to rectify the defects then you must follow a procedure of notifications, usually set out in your contract, before you can use the Retention Money (or Bank Guarantee) to get other tradesmen to rectify the defects. DOCUMENT MANAGEMENT Controlling Drawings, Schedules, and specifications.

Many problems arise on building sites because somehow superseded drawings, schedules or specifications are used on the site for construction. During the process of designing, calling tenders and negotiations with the builder things get changed and even when all of the above mentioned documents have been up-dated superseded ones can and often do find their way onto the site. The first procedure to put into place is to mark all documents with a red and obvious note (a stamp is good) which identifies each document for its purpose. For example documents used to call tenders should be marked with such a note which states FOR TENDER. Documents submitted to the council for Building Approval should be marked FOR APPROVAL and only those for construction marked FOR CONSTRUCTION. In the specification and/or the contract there should be a statement - only drawings marked FOR CONSTRUCTION shall be used for construction. Once For Construction documents have been issued you need a method of controlling them. FOR CONSTRUCTION documents will usually change during construction so you need a subsystem of identification usually called AMENDMENTS or REVISIONS which you will find next to the title block on architectural drawings. When a change is made to a FOR CONSTRUCTION drawing a note is added to the Amendment column which might be :- Amendment A -- Change to stairs. Date._____ If the drawing number of that drawing was C15 then it will be changed to C 15 A. When amendment B happens the drawing number becomes C 15 B You then need to make a schedule of drawings with a column for Amendments and another column for Date of Issue. When you issue an amended drawing to the builder you attach to it a copy of this schedule (which has the new amendment added to it) with this drawing highlighted. Every time you visit the site take a copy of the schedule with you and check that the tradespersons on site are actually using the latest drawings. The builder usually has your schedule pinned to his notice board in the site office, check that the latest schedule is displayed on top

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ESSENTIALS Dependant on the complexity and size of your house you should do at least the following :1. Get a fixed lump sum (tender) and sign a Lump Sum Contract. It is unwise and in some states, illegal to build a house by the Cost Plus method. Keep records of Instructions to the builder Keep a detailed record of Variations as described. Keep a Schedule of Progress Payments to the builder Keep records of defects. Control Documents.

2. 3. 4. 5. 6.

Avoid getting yourself into a situation where you have to resort to legal action which often costs more than the disputed amount. You or the builder can contact the BSA (Building Services Authority) to help resolve disputes between you and the builder. AND THE BEST OF LUCK

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