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Which method more accurate for calculating the paments?

8 replies [Last post]
Basel Al-Jazzar
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Which method is more accurate for calculating the monthly payment?
using the updated schedule and multiplying the progress %age of each activity by its cost ?
or
using the detailed B.O.Q and multiplying the used quantities by its cost ?

i feel that if the updated %ages where not accurate the payment wouldn’t be also BUT calculating the quantities used every month would be more accurate

I just need to hear from you ...

Replies

Ernesto Puyana
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That was the ’precise’ word to use. sorry. That’s exactly what I meant.
But let me ask you: is my assumption correct?
Charleston-Joseph...
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Hello,

Generally the payment mehtod is stipulated in the contract.

When you say accurate then that is the final figure, then what is "more accurate".

I would prefer to use the word "precise".

For lump sum contract, progress percentage will be arrive at rough (less precise method of measurement) estimates of physical progress in place. At the end of the day, the actual quantities in place is immaterial whether you are 25% plus or minus with the tender BOQ. The final money you will get is the lump sum amount for individual items.

Regards,

Charlie
Ernesto Puyana
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Being in the aviation industry, where I guess man-hours needed to install items are not proportional to their cost, I’m sure percent complete should be base on activity cost, and not on labor resources assigned to activities.
Eckart Schenck
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The project I’m currently working on is lump sum.
Payment is calculated for quantitiy delivered/installed based on BOQ, but only after customers inspection.

In general payment conditions are defined in the contract and weighting method for progress %age should reflect that.

Christian Adrian ...
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Basel

Agree with Ernesto’s view in using BOQ’s for payment calculation...

In PM software like P3 there are numerous way to weight your %progress: Duration, Resource unit, Cost. The progress will vary depending on which factor you will use... %Prog. are only idicators as to whether the project is on-track or out-of-track (subject to evaluation too..)

Just an idea..

Cheers,

Christian
Ernesto Puyana
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I`ve always associated lump-sum contract payment to % complete evaluation, just as unit price contracts are paid by measuring quantities for each item. the second can be more accurate, but takes a lot more effort and time to prepare and document. Isn`t it better to compromise a little precision in order to get paid sooner?

Basel Al-Jazzar
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it is a lump sum contract
Ernesto Puyana
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What kind of contract are you working on. Payment methon depends on it: lump-sum, unit price, cost plus fee?