of the material, it is my pleasure to recommend the book strongly to every student and graduate of engineering. Engr. Prof. J. C. Agunwamba,. MNSE, MNICE ...
PROJECT MANAGEMENT, CONTRACTS AND
SPECIFICATIONS in in Agricultural and Bioresources Engineering ENGINEERING
Front Elevation A D
6 nos 100mm dia GI poles mounted on 300x300 mm concrete base
300
6 nos 300x300 mm reinforced concrete columns B
B
D C
150 mm thick block wall rendered on both sides and whitewashed
C
225mm thick block wall rendered on both sides and whitewashed
3600
3600 A
All internal walls of office and store 150 mm thick block rendered wall
360 0
3600
Store
12,000
600
3 nos alumaco windows
Office
3600 1 no double swing metal door 1200 wide
18,450
Foundation and Floor Plan
Emmanuel A. Echiegu i
Project Management, Contract and Specifications In Agricultural and Bioresources Engineering
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Project Management, Contract and Specifications In Agricultural and Bioresources Engineering
Emmanuel A. Echiegu
Immaculate Publications Ltd Publishing * Pre-press * Press * Post press Enugu, www.immaculatepublications.com.ng
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Copyright © 2018 by E.A. Echiegu All rights reserved. No part of this book may be reproduced or used in any form or by any means – graphic, electronic or mechanical, including photocopying, recording, taping, or infromation storage and retrieval system – without written permission of the publishers ISBN: 978 – 036 – 863 – 9 Typset in 11 pts Times Roman by E.A. Echiegu and printed by
Immaculate Publications Ltd 4 Aku Street, Ogui New layout, Enugu www.immaculatepublications.com.ng
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Dedication
To the sweet memory of Late Engr Prof. U.G.N. Anazodo (a mentor extraordinaire)
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Preface In recent times many agricultural and other young engineers are finding themselves in positions where they have to undertake jobs involving project management and contracts. Some have found themselves coordinating donor-assisted projects where procurement, for example, is a major issue. Without proper knowledge, even some basic things like bidding for contracts, preparation and/or interpretation of bill of engineering measurement and evaluation, etc. can be a task. This practical book is therefore designed to give the student the basic knowledge of project management, project cost estimation, public procurement, contract supervision among other things. Topics covered in the book include, engineering economics, project cost estimation, project implementation process, organizational form in project management, public procurement, fundamentals of contract law, stock procurement and control, project monitoring/supervision and cost overrun in project management. These topics are presented in a precise and logical form with many worked examples and practice exercises to make them very easy for students to follow. The book is written with students specializing in farm structures and environmental control engineering in the department of Agricultural and Bioresources engineering in tertiary institutions in mind. However students of engineering in general and civil engineering, in particular, as well as students of building technology and quantity surveying will find the book very useful. Supervising consultants and other engineers in the field will also find the book useful. It covers the scope of the course on Contract and Specification usually offered by many engineering departments in Nigeria. In the preparation of this book, a number of resource materials were consulted. Acknowledgement is due and is hereby made to all authors whose works have been freely consulted. For brevity, citing these materials as references within the text was avoided, except where the material is in form of a table or figure. However, most of the materials consulted are included in the Bibliography at the end of the book. vii
I also wish to thank Engr. Prof J.C. Agunwamba, an accomplished academics and experienced consultant who has had vast experience in consultancy services involving projects. He painstakingly went through the manuscript, made corrections, offered suggestions which helped in improving the quality and graciously agreed to write a foreword for the book. I am equally grateful to my colleagues in the department especially Dr. B.O. Ugwuishiwu, Dr. O.A. Nwoke and Engr. Samson N. Ugwu who have directly or indirectly been associated with this work. Also included are my HOD, Prof C.C. Mbajiorgu, Prof W.I. Okonkwo, Drs. S.L. Ezeoha, C. Anyanwu, O. Ani, G. Ezenne, C.C. Anyadike, C.J. Ohagwu, M. Okechukwu, O. Onyekwere, F.Asoiro,as well as Nneoma Aneke, V. Okonkwo, U.C. Abada and other colleagues in the department. The introduction of a new course on Contract and Specification in the recently revised curriculum of the department gave me the inspiration to write this book. My gratitude also goes to our graduate and undergraduate students who made some inputs in the course of teaching them with the manuscript. I am also grateful to my publishers for their considerable patience and cooperation throughout the course of production of this book. Above all, I wish to sincerely appreciate my dear wife, Nkechi, and children, Tochukwu, Chisom, Beluchi and Olisa who willingly endured certain hardships as a result of my preoccupation with this work. Finally to God the Almighty Father, who made this work possible, I owe all my gratitude always. To Him be all the glory! E.A. Echiegu, Ph.D, P.Eng University of Nigeria, Nsukka 22 May, 2018
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Foreword It is a great privilege to write a foreword for the book titled “Project Management, Contract and Specification” authored by Engr. Dr. Emmanuel A. Echiegu who I have known for about thirty years. During this period, my association with this meticulous, humble and amiable academics showed he is always eager to assist everybody. I benefitted from his kind spirit when he returned newly from his Ph. D studies in Canada and used his computer facilities to assist in typesetting my book. Engr. Dr. Echiegu served as the Chief Engineer, Enugu State Agricultural Development Programme (ADP) (1994 – 1996): Programme Manager, Ebonyi State ADP (1996-1997 and 19972005); and Hon. Commissioner for Agriculture and Natural Resources (1997 – 1999 and 2005 – 2011). During his service in the ministry, Engr. Echiegu acquired much relevant experience in public procurement, tender processes and general project management, which in addition to his academic background placed him at the vantage point of producing a good textbook. As such the book he has written on the above subjects is a welcomed addition to the exiting few titles. After graduation, engineers usually find themselves in positions where they undertake project design, supervision or procurement of private and public utilities. Effective implementation of these projects requires in-depth knowledge of engineering economics, contract and specifications and general project management. This importance is emphasized by the Nigerian Universities Commission (NUC) which demanded for a revision of the present undergraduate engineering curriculum to include topics in the above areas. The organisation of the book is superb, and offered a very good explanation of the subjects he treated. Vital information in engineering economics and contracting, well explained and illustrated with apt examples in simple, clear language, are within the grasp of every budding student of engineering. Besides, the text will not only be useful to undergraduates but also to practising engineers as a good reference material. ix
On account of the wide practical experience and strong academic status of the author; the relevance of the subject matter in the overall development of rounded engineering students in an era where project procurement has assumed an accelerated significance; in view of the succinct, clear manner of presentation of the material, it is my pleasure to recommend the book strongly to every student and graduate of engineering. Engr. Prof. J. C. Agunwamba, MNSE, MNICE, MNIEM, Chartered Waste Manager, FAS.
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Table of Contents Dedication v Preface vi Foreword viii Table of Contents 1.0
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Introduction1 Exercises 2
2.0
Engineering Economics 3 2.1
Interest 2.1.1 2.1.2 2.1.3
4 Simple Interest 4 Compound Interest 5 Interest Period and Nominal Interest Rate
7
2.2
2.1.4 Effective Interest Rate 8 2.1.5 Compound Interest Factors 9 Depreciation16 2.2.1 Straight Line Method17 2.2.2 Product Output or Service Hour Method
19 2.2.3 2.2.4 2.2.5 2.2.6 2.3
Sum-of-Year Digit Method 20 Declining Balance Method 21 The Sinking Fund Method 22 Comparison of depreciation Methods
Economic Comparison of Project Alternatives 2.3.1 Average Annual Fixed Cost Method 2.3.2 Depreciation Method 26 2.3.3 Capital Recovery Method 27 2.3.4 Present Worth Method 29 11
23 25 25
Exercises 31 Further Reading
3.0
33
Project Cost Estimation 3.1
34
Investment or Capital Cost – Bill of Engineering Measurement and Evaluation (BEME) 35 3.1.1 Components of an Estimate 38 3.1.2 Bill Production 46 3.1.3 Estimating Investment Costs 47 3.1.4 BEME for Building Projects 48 3.1.5 BEME for Road Projects 72 3.1.6 BEME for Bridges 72 3.1.7 BEME for Rural Electrification Projects 81 3.1.8 BEME for Rural Water Supply Scheme 81 3.1.9 BEME for Small Scale Irrigation Scheme 81
3.2 Annual Running or Recurrent Cost 3.2.1 Interest 92 3.2.2 Depreciation 92 3.2.3 Repairs and Maintenance 92 3.2.4 Insurance and Taxes 93 3.2.5 Machinery and Equipment Operating Costs 93 3.2.6 Total Annual Running Costs 93 3.3
3.4
Life of a Structure 95 3.3.1 Physical Life 95 3.3.2 Economic Life 95 3.3.3 Write-Off or Service Life Economic Rate of Return
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3.5 Optimum Investment on Farm Structures Exercises 99 Further Reading 100
4.0
Project Implementation Procedure 4.1
Preliminary Study
102 12
102
98
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4.2 Outline Proposal 103 4.3 Preparation of Standard Drawings 4.4 Final Detailed Drawings 103 4.5 Work Schedule 103 4.6 Procurement 104 4.7 Mobilization to Site 104 4.8 Project Execution and Monitoring 4.9 Post Construction 105 Exercises 105 Further Reading 105
5.0
103
105
Project Management Organizational Forms 106 5.1 Personal Management 106 5.2 Partial Contract 107 5.3 General or Whole Contract 107 5.4 Turn-Key Projects 107 5.5 Build-Operate-and-Transfer 108 Exercises 108 Further Reading 108
6.0
Public Procurement 6.1 6.2
109
Benefits of Good Procurement Practices 109 Institutional Arrangement for Procurement 110 6.2.1 National Council on Procurement 110 6.2.2 The Bureau of Public Procurement (BPP) 110 6.2.3 The Ministerial or Parastatal Tenders’ Board 111 6.2.4 Federal/State Tenders’ Board (formally F&GPC) 112 6.2.5 Technical and Financial Evaluation SubCommittee of the Tenders Board 112 6.2.6 Ministry’s or Parastatals Procurement Planning Committees 112 13
6.2.7 The Procurement Unit or Department 112 6.3 Tendering 113 6.4 Types of Bids 113 6.4.1 International Competitive Bidding (ICB) 113 6.4.2 Limited or Restricted International or National Bidding (LIB/LNB) 114 6.4.3 National Competitive Bidding (NIB) 114 6.4.4 Direct Contracting 115 6.4.5 National (or Local) Shopping 116 6.4.6 Force Account (Direct Labour) 117 6.5 Methods of Tendering 117 6.5.1 Open Tendering 117 6.5.2 Selective Tendering 117 6.5.3 Negotiated Tender 118 6.6 The Tendering or Bidding Processes 118 6.6.1 Preparation of Bid Documents 118 6.6.2 Invitation to Bid (Advertisement) 118 6.6.3 Pre-qualification of Bidders 119 6.6.4 Eligibility to Bid 120 6.6.5 Completion of Bid Documents 121 6.6.6 Submission of Bids 122 6.6.7 Opening of Bids 122 6.6.8 Bid Evaluation 123 6.6.9 Post Bid Evaluation 125 6.6.10 Selection of Contractors 125 6.6.11 Contract Award 125 6.6.12 Bid Security 126 6.6.13 Mobilization Fee and Retention Money 126 6.6.14 Publication of Contract Award 126 6.6.15 What is a Responsive Bid? 127 6.7
Factors that Affect Bid Price (Project Cost) 127 6.7.1 Geographical Consideration 127 6.7.2 Restricted Work Hours or Method of Work 127 14
6.7.3 6.7.4 6.7.5 6.7.6 6.7.7 6.7.8 6.7.9
Quantity Considerations 127 Availability of Materials 128 Standard Items vs Non-Standard Items 128 Lump Sum Based Estimates 128 Timing of Advertisement 129 Inflation 129 Expected Competition/Contractor Availability 129 6.7.10 Soil Condition 129 6.8 Contracts Exercises 130 Further Reading
7.0
130 131
Fundamentals of Contract Law 7.1
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Essential Elements for Contract Validity
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7.1.1 Offer 132 7.1.2 Acceptance 135 7.1.3 Consideration 138 7.1.4 Contractual Intention 141 7.1.5 Form 144 7.1.6 Contractual Capacity 144 7.1.7 Genuine Consent 146 7.1.8 Legality 147 6.2 The Contract Document 148 Exercises 149 Further Reading 149
8.0
Stock Procurement and Control
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8.1 The Simple Stock-Control Model 152 8.2 The Quantity Discount Stock-Control Model Exercises 156 Further Reading 159
9.0
Project Monitoring /Supervision 9.1
Purpose of Supervision 15
160 161
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9.2 9.3
The Supervision Consultant/Resident Engineer 161 Interim Payment Certificates 162 Exercises 167 Further Reading 167
10.0 Cost Overrun in Project Management 10.1 Causes of cost Overrun 10.2 Variation 171 Exercises 172 Further Reading 172
Index
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