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Construction Site Handbook

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[English | 简体] Milestones and Forecasts

Milestones
This is a series of check points that are required by the Contract to determine the partial completion or substantial completion of the major work at intermittent time during the contract period . It lays out the extent of works required to be completed at a certain time interval ( with a key date ) after commencement of work in order to govern the programme and progress of the project .

In case there is any variation work instructed by the Engineer that interrupts the works progress of the critical activities to achieve these milestones , an application for extension of time ( EOT ) may be required ; or the Engineer should issue instruction to accelerate the affected works should he still wish to maintain the milestone works at the specified key date ( KD ) .

Cash Flow Forecast
Movements of cash either into or out of the project account are all regarded as cash flows . With reference of the above running costs schedule , cost centres and milestones , the estimator could then prepare a cash flow forecast on the basis of probable incomes ( valuation of workdone ) , retention money and predicted expenditures in accordance with the works programme . This forecast will help the commercial staff to determine the amount and time that are required for financial supports .

Fluctuation
Fluctuations are the changes in the price of wages and materials during the period of construction and are based on the monthly publication of “ Index of Wage Rates ” for the building industry by the Census and Statistics Department of the Hong Kong Government . These indices of wage rates are evaluated and averaged from the preceding 3 months wages return submitted by the main contractors of prevailing major projects in Hong Kong .

If the percentage of increase / decrease is less than 10% , no adjustment will be made to the contract sum ; but if the percentage of increase / decrease is more than 10% , the contract sum will then be adjusted by the net amount that exceeds 10% .

Previously most contracts , particularly for large sized project , are having a clause for fluctuations . However nowadays , the employer would rather shift the risk of wages and materials fluctuations to the contractor to consider at the tendering stage and remove this clause from the contract documents .

Auditing
For a large sized project , there are so many trades of works to be dealt with . Every issue existing on a construction site will affect the profit and loss of a contract , no matter it is huge or tiny . For instance the drinking water for the workers , it is crystal clear that the cost of provision of soft drinks is higher than bottled mineral water , in turn is higher than the bulk mineral water and in turn is higher than the boiled tap water being cooled overnight .

Thus , internal audits or independent audits are essential to keep the works and progress ( technical audit ) , the incomes and expenditures ( financial audit ) and the safety issues ( safety audit ) in good order and in an efficient manner . The sophisticated review of these audits will surely help to complete the project economically and efficiently .

Project Bonus / Penalty
For commercial projects , sometimes there is an offer of bonus stated in the contract if the whole of project is completed on time or earlier than the target date . This bonus clause may encourage the contractor to keep a close eye on the progress and coordination of the works , and even could make use of this clause to voluntarily accelerate the works to achieve an early completion should the contractor finds beneficial and profitable . On the other hand , the penalty clause is being used to push the contractor to finish the works on time .

Nowadays , these bonus / penalty clauses are also commonly applying to the safety issues on a construction site by which to encourage the main contractor to keep the site in a safe manner and without or with low accident frequency .

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