Reconciliation

 

 

 

             All civil Engineering works invariably require various material for incorporation and completion of work. These materials could be procured by the Employer or the contractor. In some cases the employer stipulates that certain materials would be issued by him and the contractor should quote for the work accordingly. In other cases the employer may leave procurement of materials to the contractor.

              In both these cases, the material need to be accounted in the bills for payment. This is a very important function of quantity surveyors and executives. Non reconciliation will result in delay in clearance of bills as well as recoveries as per conditions of contract. Some organization may stipulate recoveries for non reconciled materials at penal rates of recovery

     

 

     What is Reconciliation?    

     It is the process of comparing the standard data with actual data after considering data relating to variances.

 

      E.g. Suppose 100 MT of  16mm dia. TMT steel bars of Fe-500 grade are procured.  Assume that the weight of the bar received  is 1.63 kg/ Rm. The  weight variation details of the consignment are as follows:

 

Total weight of steel received    1,00,000 kg

Standard weight of steel            1.58 kg/m

Length of steel received         1,00,000/ 1.63

= 61,349.693 m (Actual weight 1.63 kg/Rm.)

Length of steel as per standard weight  1,00,000/1.58 = 63,291.139m

Loss of weight  0.05/1.58 = 3.16%

Weight computed by measurement and std. wt.

=61,349.693 x 1.58 = 96,932.50 kg

Loss of weight = 3067.50 kg

 

Other aspects:

Ø Off cuts

Ø Scrap

Ø Improper bar bending

Ø Cutting loss

Ø Laps

Ø Chairs

Ø Spacers

Ø Miscellaneous usages

 

 

Issue of materials by Employer:

§ Estimate the sizes and quantities of materials

§ Procurement

§ Check on receipt from supplier with regards to correct size, quality and quantity and weight

§ Account these materials in the material ledgers with all the characteristics

§ Issue to contractor against indent specifying the quantity (Units, Tonnage, length etc.)

 

Procurement of Materials by contractor:

§ Estimate the sizes and quantities of materials

§ Get approval for the source of supply from Employer, and procure

§ Check on receipt from supplier with regards to correct size, quality and quantity and get them checked by employer

§ Account these materials in the material ledgers with all the characteristics

§ Issue to work site

 

Preliminary check of materials:

Ø Check for quality

Ø Check Size, unit weight, physical Characteristics and keep record

Ø In case of steel the unit weight of steel will be assessed by weighing random samples/ weighing a bundle and comparing with standard weight as per BIS and working out variance for conformity within tolerance

 

Incorporation of materials in work:

Ø Study the drawings and specifications and prepare method statements

Ø Prepare BBS/ shop drawings for steel items to conform to Architectural/ structural drawings

Ø Get them approved by Employer/consultants

Ø Check availability of material and examine how best cutting could be done to minimize wastage

Ø Fabricate and erect

Ø Correct the BBS on incorporation in the work before pouring concrete

 

Joint Measurements:

Ø  Preliminary check and approval by structural Engineer/ Architect/MEP consultant

Ø Preparation of joint measurements after checking the respective drawings and as provided at site

Ø Record any additional provisions  required at site but not shown in GFC drawings

Ø Assess the quantities in the respective units as per BOQ

 

Measurements for payment:

Ø  For completed items of work joint measurements will form the basis

Ø Joint measurements will be signed by both the parties

Ø For additional items of work not covered in BOQ a separate detail will be kept

 

   Issue of materials by Employer and Reconciliation in Running bills:

Ø Prepare the list of stores issued. If it is steel, the issue must show the weight of steel issued, the size, length, and number of bars

Ø Alternately, the unit weight of steel shall be assessed based on actual weight of random samples or bunch of bars. This weight need to be compared with standard weight as per BIS.

 

 

   Issue of materials by Employer and reconciliation in Running bills:

Ø The difference between actual weight and standard weight shall be kept in the issue register

Ø This procedure need to be repeated for each fresh consignment and for each size of bar

Ø The contractor/subcontractor must be charged at standard weight only

 

   Issue of Materials by Employer and Reconciliation in Running bills:

Ø The difference of weight has to be borne by the employer and written off from the materials ledgers periodically so that ground balances tally with ledger balances

Ø If the figures do not tally the matter should be investigated further and corrective action taken

  Issue of Materials by Employer and Reconciliation in Running bills:

Ø Contractor shall be asked to submit reconciliation statement with each bill or at periodicity as specified

Ø Off cuts/scrap should be defined. E.g. Steel bars above 1.5m can be considered as off cuts and below could be considered as scrap

Ø The off cuts and scrap shall be periodically verified jointly by rep. of employer and contractor.

 

 

   Issue of Materials by Employer and Reconciliation in Running bills:

Ø Other items like cement bags, pipes, fittings, shuttering plates, masonry blocks etc. could be counted in numbers and accounted

Ø If reconciliation statement is not submitted suitable amount needs to be withheld in the bills

 

   Issue of Materials by Employer and Reconciliation in Final bill:

Ø In the final bill all materials issued by the employer must be accounted. The bill can’t be progressed unless the reconciliation statement is not submitted

Ø Base percentages for wastages, scrap shall be specified in the contract Agreement

Ø For unaccounted materials penal recoveries shall be effected

 

   Materials Procured by contractor and Reconciliation in Final bill:

Ø For  material procured by contractor the contractor need to produce purchase vouchers, transport challans, test certificates, gate passes or any other proof required by the employer to satisfy that the materials conform to specifications and requisite quantity of material was brought to site and actually incorporated in the work

 

   Reconciliation of work done: Similar to accounting done for the materials, the work done need to be compared with the BOQ or the base estimate. The base estimate may consist of abstract quantities and rates. The actual work may consist of either sub contractor’s work or materials supplied by employer, labour rates, machinery charges, taxes, royalties and other miscellaneous charges.

 

 

   BOQ as a Base estimate: If the contract is based on BOQ it can be taken as base estimate and comparisons could be made with actual work done. If the contract is based on lump sum the estimate made subsequently will be taken as base estimate. The purpose of this comparison is to find out the variances from the base and to monitor and control the variances

 

 

 

 

 

   Actual work Done: The actual work could be carried out through a sub contractor or by the main contractor by supplying the main resources like materials, equipment, shuttering etc. and the sub contractor may be asked to provide necessary labour. In such cases the value of work done could be aggregated and other incidentals and taxes are added.

    Variances:

Ø Earned value of work done is assessed by measuring the quantity of work done. This is done item wise and compared with contract quantity. The difference is treated as quantity variance and converted into amount by multiplying with contract rates.

 

    Direct cost variance= Standard cost- Actual cost

Ø Work change orders are shown separately

    Variances:

Ø Material incorporated will be assessed and compared with standard quantity and rate

   Material cost variance= Standard cost- Actual cost (Material usage variance + Material price variance)

Ø Equipment used in the work will be assessed and compared with standard productivity cost

    Equipment variance = Standard cost- Actual cost

 

 

 

 

Cost for 4 Rafts		Std. Rate for one Raft		Std. Cost for 4 Rafts		Actual Cost for 4 Rafts
	Description	Unit	SR	Qty	Std. Cost	Qty	Actual Cost
1	Material	M³	5,000	326.4 M³	16,32,000	330M³	17,16,000
2	Labour	M³	400	-do-	1,30,500	-do-	1,40,250
3	Eqpt.	M³	80	-do-	25,112	-do-	25,112
4	shuttering	M³	200	-do-	65,280	-do-	60,000
	Total Cost				18,52,892		19,53,962
Note: Standard quantity of 4 rafts, each 80 M3 plus 25 WASTAGE = 4 X 80 X 1.02 = 326.40

COST DATA FOR CASTING FOUR RAFS

 

 

Category	Std. Cost	Actual Cost	Variance
Material	16,32,000	17,16,000	-84,000
Labour	1,30,500	1,40,250	-9,750
Equipment	25,112	25,112	0
Shuttering	65,250	60,000	+5,250
	18,52,862	19,41,362	-88,500 (-) 4.80%(Unfavourable)

                       Summary of Cost Data     

 

 

 

 

 

 

 

 

 

   Analysis of Earned value: From cost variances of work done, materials incorporated and equipment employed the earned value will be analyzed and corrective action taken to ensure profitability. This is basically the duty of quantity surveyor  to bring out possible loss of profitability to the Management at periodic intervals.

 

 

   Case Study: Reconciliation of steel issued in a Real Estate multistory building:

   Brief description of project: The project is 15 story residential RCC framed building having 10 flats in each floor. The building has sub cellar and cellar for parking. Various sizes of Fe 500 TMT steel was issued. The issues size wise are shown below. Reconcile the steel statement and offer comments. The work is still in progress.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Reconciliation Statement up to 12th RA bill: Unit: MT

Sl. No	Description	8mm	10mm	12mm	16mm	20mm	25mm	32mm
1	Total issue	314.3	180.36	30.93	222.3	339.0	193.9	28.86
2	Consumption	272.7	172.37	26.74	184.28	282.76	174.35	25.33
3	Work in progress	11.86	Nil	0.65	6.73	12.98	5.37	Nil
4	Full lengths	15.00	Nil	Nil	4.00	26.50	10.00	3.00
5	Cut lengths	1.00	Nil	0.50	3.00	3.75	3.00	0.17
6	Scrap Total	9.40 309.96	5.00 177.37	0.85 28.74	3.60 201.61	5.10 331.09	Nil 192.72	Nil 28.50

 

 

 

  Notes:

Ø   Total steel issued     1309.65 MT

Ø Total quantity of scrap  23.95 MT

Ø Lengths indicated are as actually measured or based on random  sample weight on receipt of steel from Visakhapatnam steel Factory against each consignment